26/01/2018 (The Borneo Post) - KUCHING: Sarawak Oil Palms Bhd’s (Sarawak Oil Palms) financial year 2017 to 2018 estimate (FY17 to FY18E) fresh fruit bunch (FFB) output has been projected to grow 36 and seven per cent, respectively.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) forecast FY17 to FY18E FFB output to grow by 36 per cent to seven per cent to 1.37 billion to 1.47 billion metric tonnes (MT), lifted by higher FFB yields.

It noted that its FY17E output growth is supported by industry-wide production recovery, favourable weather and additional contribution from Shin Yang Oil Palm (SYOP).

“Meanwhile, FY18 forecast is premised on rising contribution from maturing hectarage,” it said.

Overall, the research arm expected to see FY17 to FY18E revenue rising by two per cent-four per cent to RM4.50 billion to RM4.68 billion.

Despite the high quantum of FY17 FFB growth, Kenanga Research noted that revenue has not increased as much due to a higher base after Sarawak Oil Palms refinery came onstream and boosted FY14 to FY15E revenue by 68 per cent to 28 per cent.

 “Furthermore, the higher internal FFB reduced buying requirements for the refinery, resulting in the lower share of external purchases.”

 Looking ahead, Kenanga Research expected net margins recovery from the FY16 low of three per cent to 4.9 per cent for FY17 to FY18E, respectively.

“This is supported by lower production cost due to higher FFB yield leading to cost efficiency,” the research arm said.

Kenanga Research’s model indicated that Sarawak Oil Palms achieved a low all-in cost of production at circa RM840 per MT in 2016, despite the group’s young age profile.

The research arm estimated FY17 crude palm oil (CPO) price of RM2,600 per MT, but lower assumption of RM2,400 per MT for FY18 on softer 2018 CPO prices outlook due to over-supply in production.

 This was given that most planters in Malaysia and the regions could see recovery from severe drought seen in 2015-2016.

 Overall, Kenanga Research expected FY17 to FY18 net profit to grow by 66 per cent-four per cent to RM220 million to RM230 million.