The Business Times (08/09/2025) - [SINGAPORE] Singapore-listed plantation giants turned in a bumper first half of 2025 with double-digit profit and revenue gains. Analysts expect the growth streak to continue on the back of resilient crude palm oil (CPO) prices and healthy margins.

Major players such as Golden Agri-Resources, First Resources and Bumitama Agri led the charge, while smaller player Kencana Agri saw a dramatic improvement from a low base.

Agri-business group Wilmar International, whose palm oil operations are just one part of a broader agribusiness portfolio, also reported steady earnings.

SGX palm-oil players tables: https://datawrapper.dwcdn.net/T3N6F/2/

Upstream upside

Pure upstream player Bumitama Agri’s productivity and quality plantations position it to “capitalise on supportive long-term industry fundamentals”, prompting OCBC analyst Ada Lim to raise its fair value estimate to S$1.20 on a higher target price-to-earnings multiple.

Bumitama Agri recorded a 47.8 per cent increase in net profit to 1.3 trillion rupiah (S$994 million) for H1 from a year ago on better-than-expected average selling prices of both CPO and palm kernel, as well as a strong output growth in Q2.

Apart from the upbeat operational outlook on Bumitama Agri, analysts favour the counter for its attractive dividend yields of more than 7 per cent, supported by a higher dividend payout ratio of 60 per cent.

Maybank revised up its price target to S$0.94 post strong H1 showings, and attractive yields with a “buy” call.

OCBC’s Lim also expects “possibility of increased investor interest and positioning in this counter amid ongoing equity market reforms”, given the small-cap stock’s double-digit return on equity (ROE).

Vertically integrated players

Golden Agri-Resources reported a 56.5 per cent year-on-year rise in net profit to US$160.3 million, driven by stronger upstream growth amid higher CPO prices, despite pressured downstream margins.

Both OCBC and RHB expect Golden Agri-Resources’ earnings to weaken in the second half on lower fresh fruit bunches (FFB) production given dry weather in June and July, with target prices of S$0.27 and S$0.28 respectively.

First Resources posted a 43.6 per cent profit jump to US$149.2 million, underpinned by “significantly better” performances in both upstream and downstream, highlighted Maybank analyst Ong Chee Ting.

Besides higher prices and greater output boosting First Resources’ upstream performance, its biodiesel plants – supplying Indonesia’s B40 mandate – also delivered stable margins on the downstream side.

On its recent mandatory takeover of Austindo Nusantara Jaya, RHB expects cost synergies and earnings contributions from the complete acquisition of the Indonesian Stock Exchange-listed plantation company. The team has a “buy” call with target price of S$2.10 for First Resources.

Meanwhile, Kencana Agri – a smaller SGX-listed plantation company – posted a net profit of US$9.8 million in H1 2025, up more than 16 times year on year.

Wilmar International’s net profit inched up 2.6 per cent to US$594.9 million with the group’s plantation segment benefiting from higher CPO prices and improved FFB output.

Both OCBC and Maybank noted that Wilmar remains well-positioned to benefit from an improved macro environment in China, and gave the counter a “buy” call.

Their revenue gains mirrored the profit showing. First Resources and Golden Agri-Resources achieved top-line growth of 47.4 per cent and 19.6 per cent respectively, while Bumitama and Kencana Agri logged increases of 28.2 per cent and 59.8 per cent respectively.

Mewah International and Indofood Agri also registered improved results, with Mewah’s net profit doubling to US$37.6 million and revenue climbing 56.5 per cent.

Whither CPO prices

OCBC’s Lim highlighted “dynamics of constrained supply and growing demand” to continue supporting CPO prices.

CPO prices have risen on expectations of supply tightness early in the year due to 2024’s El Nino episode, on top of firm demand from key importers. Currency movements, including recent US dollar weaknesses, also provide additional short-term support.

The share price appreciation over a one-year period is supported by the rise in CPO prices from about RM3,880 to RM4,449 per tonne as at Sep 5, 2025.

BMI analysts expect prices to trade within the RM3,800 (S$1,155) to RM4,000 per tonne for the remainder of 2025, with an average annual price of RM4,150 per tonne.

OCBC’s global market research and strategy team forecasts CPO to trade at RM4,300 per tonne with a slight downside risk amid production rebound.

CPO’s recent price strength has been underpinned by policy developments, such as the US biofuel blending targets, “which are likely to provide a firmer floor for palm oil prices through the rest of 2025”, noted BMI’s team.

“That said, any further upside support is likely to be moderated by expectations of an improving supply outlook from Malaysia and Indonesia.”

The team expects global palm oil production to reach 80.6 million tonnes in the 2025/26 season, up 2.4 per cent on the year, on the back of an expected 0.5 per cent year-on-year increase in Malaysia, and a 3.3 per cent rise in Indonesia.

Downside risks

Palm oil players’ outlooks are still clouded by Jakarta’s ongoing land concession reviews, which Golden Agri-Resources noted is a painful process for long-term clarity.

Besides potential losses in their land banks, unpredictable weather conditions that affect production level directly, foreign exchange volatility and potential export levies could pose headwinds to the companies.

On the broader commodity complex, analysts said sharply lower crude oil prices, which make palm biodiesel demand not viable, and weaker competing oil prices such as soybean and rapeseed, could pose further downside risks to the sector.

Read more at https://www.businesstimes.com.sg/companies-markets/sgx-listed-plantation-firms-ride-output-gains-lure-dividends