Too early to call top on plantation stocks, Kenanga stays ‘overweight’
07/07/2026 (The Edge Malaysia), Kuala Lumpur - Rising weather risk is set to keep palm oil prices elevated on top of geopolitics, providing further upside for plantation stocks, Kenanga Investment Bank said.
The edible oil supply is already looking tight with resilient demand from food and biofuel requirements, helping to drive demand beyond the spike in energy prices, the research house said and maintained its 'overweight' call on the sector.
“We believe the plantation sector’s valuations are still not demanding considering the defensive demand for edible oil, asset-rich balance sheets with palm oil prices staying elevated,” Kenanga said.
El Niño has developed and is shaping up to be a severe occurrence this year, which could spell drought and heatwaves in Malaysia and Indonesia. That could shrivel palm trees and lower the yield of the vegetable oil used in everything from soap to ice cream.
Demand for biodiesel, which is a mixture of methyl esters from palm oil and traditional petroleum diesel, has also risen due to the conflict in the Middle East. The benchmark palm oil futures were trading at RM4,571 on Tuesday, still up nearly 13% from the end of 2025.
Instead of moderating after a strong showing in the second quarter, palm oil prices are now expected to stay elevated and peak by June next year, Kenanga said. The house’s forecast is now prices per tonne to average RM4,400 this year and RM4,450 in 2027.
In terms of valuations, larger integrated players are currently at the year’s high but remain below or comparable to the past earnings multiples stretching back to a decade ago, Kenanga noted.
For strategy, the house’s top picks are IOI Corporation Bhd (KL:IOICORP), Kuala Lumpur Kepong Bhd (KL:KLK), PPB Group Bhd (KL:PPB) and TSH Resources Bhd (KL:TSH).