Hap Seng Plantations set for a richer harvest

PETALING JAYA: Hap Seng Plantations Holdings Bhd’s valuation is deemed attractive given its strong dividend yields, as well as its forecast earnings for financial year 2026 (FY26), which are expected to be supported by sector-leading fresh fruit bunch (FFB) production growth and higher year-on-year (y-o-y) crude palm oil (CPO) prices, says CGS Internation (CGSI) Research.

In a note to clients, the research house said the planter is the cheapest stock under its Malaysian plantation coverage, trading at an undemanding valuation of below 10 times of its forecast price-to-earnings ratio for FY26-FY27.

CGSI Research reiterated its “add” call on the stock, with an unchanged target price of RM3.35 per share.

“Our call is supported by Hap Seng Plantations’ sector-leading production growth in FY26 and higher y-o-y realised CPO average selling price (ASP),” it added.

Meanwhile, CGSI Research also expects Hap Seng Plantations’production costs to compare favourably with those of its peers in FY26-FY27.

The group secured its 2026 fertiliser requirements in April, with fertiliser costs expected to increase by only 5%-10% y-o-y, versus a 15%-25% increase anticipated for peers.

According to the brokerage, the planter may also benefit from priority access to fertiliser supplies through its parent company, Hap Seng Consolidated Bhd, which operates a fertiliser trading business.

Hap Seng Plantations’ estates are entirely located in Sabah, Malaysia’s largest palm oil-producing state, where CPO production grew 6% y-o-y in the first half of 2026 (1H26), the second-highest growth nationwide after Terengganu’s 17%.

In terms of production, CGSI Research noted that the planter has consistently achieved higher FFB yields than Sabah’s average, supporting its strong production track record.

Hap Seng Plantations’ management maintained its FY26 FFB forecast production guidance of 714,000-715,000 tonnes, implying 16%-17% y-o-y growth, which is the strongest among Malaysian upstream planters.

CGSI Research noted that it maintained a more conservative FY26 forecast FFB production growth assumption of 13% y-o-y, below management’s guidance.

On El Nino, the management noted that Hap Seng Plantations’ estates had yet to experience unusually dry conditions as of 1H26, with sufficient rainfall.

Nevertheless, the planter has increased water storage at its reservoirs in preparation for a potentially strong El Nino.

During the strong 2015-2016 El Nino, the lagged impact resulted in a 7% y-o-y decline in Hap Seng Plantations’ FFB production in 2016.

“Based on our sensitivity analysis, if Hap Seng Plantations’ FY27 FFB forecast production declines by 7% y-o-y due to the lagged impact of El Nino, a 6% increase in its realised CPO ASP would be sufficient to offset the resulting earnings impact, all else being equal,” CSGI Research noted.