Sarawak Oil Palms shares test one-month high after 2Q surprise
30/08/2024 (The Edge Malaysia), Kuala Lumpur - Shares of Sarawak Oil Palms Bhd (KL:SOP) rose on Friday to their highest in one month, after the plantation company reported second-quarter results that beat estimates.
SOP rose as much as 3.5% or 10 sen to RM2.92, its highest since July 30. The stock was trading at RM2.89 at 10am, giving the company a market capitalisation of RM2.57 billion. Trading volume totalled 214,800 shares so far, slightly above the 200-day moving average.
“As production continues to ramp up and unit costs moderate, we expect the company to chart stronger numbers in the second half ending Dec 31, 2024 (2HFY2024)," RHB Investment Bank said in a note on Friday and maintained its ‘buy’ call on SOP.
The house, one of four covering the stock, also raised its earnings forecasts for SOP as net profit for 1HFY2024 was above both its forecast and the consensus estimate, accounting for 58%-62% of full-year forecasts.
Shares of SOP have climbed recently, racking up about 12% gain so far this year, as prices of crude palm oil (CPO) began to rise towards this year’s peak of RM4,336 on April 3. Output of the edible oil used in everything from lipstick to diesel is also expected to pick up seasonally ahead, driving sales.
Production of palm fresh fruit bunches (FFB) typically strengthens month-on-month in the second half of the year, and peaks in October. The benchmark palm oil contract for third month delivery was trading at RM3,990 on Friday.
Maybank Investment Bank (Maybank IB), however, in a separate note said it expects production of FFB at SOP to rise at a slower pace in 2HFY2024, due to a higher base of comparison. Output increased 11% year-on-year (y-o-y) in 1HFY2024.
For FY2024, output is expected to grow 5%, Maybank IB said. “We believe SOP’s refining outlook will remain resilient with higher availability of CPO to refine, boosting the refining utilisation factor and margins,” the house said and kept its ‘buy’ call on the stock.
On Thursday, SOP reported that its net profit more than doubled y-o-y to RM105.68 million in 2QFY2024, lifting 1HFY2024's total to RM185.14 million. The company achieved an average selling price for palm oil products of RM4,157 per tonne in 2QFY2024.