Firm CPO prices to bolster plantation industry
19/01/2026 (The Star), Petaling Jaya - The plantation sector is expected to remain profitable in the year ahead, supported by still-firm crude palm oil (CPO) prices and healthy balance sheets, even as limited earnings growth and fading price momentum cap further upside for stocks.
Just as investors seek dividends in an uncertain market, plantation companies are turning their attention inward, focusing on boosting fresh fruit bunch (FFB) yields, analysts said.
On the forecast for CPO prices, Kenanga Research said it expects it to average RM4,000 per tonne this year, down from RM4,308 last year.
The research house said palm oil output should stay healthy even though global edible oil supply appears to still be tight.
“We stay ‘neutral’ as limited growth and upside catalysts are balanced by healthy profits and balance sheets with undemanding valuations,” the research firm said in a note to clients.
An analyst with another local research house said FFB yields have now reverted to pre-pandemic levels.
With average CPO prices ending firmer last year, he expects plantation companies to reinvest in mechanisation and replanting programmes to boost estate efficiency and maximise long-term planted acreage.
“While fundamentals remain stable, plantation equities have largely priced in the current CPO environment.
“With exports still soft and inventories elevated, we see limited upside for CPO prices in the near term, which supports a more tactical, profit-taking stance for the sector,” the analyst said.
According to Kenanga Research, plantation sector valuations have largely normalised and are now in line with the broader market after a late-year rally.
The research house said while larger integrated planters are trading at a premium to both the market and smaller peers, it sees this as justified given their growing earnings diversification into property, renewable energy and new businesses, which should help cushion earnings during periods of softer CPO prices and support stronger returns on equity.
However, it sees some cost uptick.
“But upstream margin is expected to stay contained. Downstream visibility remains poor but more meaningful non-plantation contributions from property and renewable energy can be expected.
“Hence, among integrated plantation groups, enhancing asset yields is now increasingly the focus,” it added.
Among Kenanga Research’s sector picks are Kuala Lumpur Kepong Bhd, supported by recovering FFB output, stronger property earnings, and declining gearing.
It also highlighted PPB Group Bhd benefiting from a recovering food and fast-moving consumer goods market, offering a brighter earnings outlook alongside decade-low valuations.
Meanwhile, it said TSH Resources Bhd offers rare exposure into organic upstream growth over the coming three to five years.
For those seeking income yields, it still likes Hap Seng Plantations Holdings Bhd, although it cautions that consensus earnings forecasts, which are around 20% higher than Kenanga Research’s own estimates, may be overly optimistic.