CIMB Securities upgrades SD Guthrie to 'Buy' after 17pct share price correction
KUALA LUMPUR: CIMB Securities Sdn Bhd has upgraded SD Guthrie Bhd to "Buy" from "Hold" following a 17 per cent correction in its share price since August, despite expectations of weaker third-quarter earnings.
KUALA LUMPUR: CIMB Securities has upgraded SD Guthrie to a Buy rating, marking a shift from a Hold recommendation, after the plantation group's shares fell 17% since August. This downgrade, despite expectations of weaker third-quarter earnings, presents a more appealing entry point ahead of a potential crude palm oil price recovery in 2027.
The research firm lowered its target price to RM6.52, accounting for heightened regulatory risks in Indonesia. CIMB anticipates the core net profit to drop 32% quarter-over-quarter to RM645 million in Q3, as land disposal gains are overshadowed by weaker upstream earnings. The company is set to release its Q3 results on Nov 5, which would bring a nine-month core net profit of RM2.14 billion, or 69% of CIMB's full-year forecast.
Despite the revised earnings outlook, CIMB remains optimistic about SD Guthrie's land monetisation strategy, buoyed by the successful Bukit Kerayong and Kulai disposals. The government's decision to maintain a 30% Bumiputera equity requirement, rather than raise it to 50%, may broaden the investor base and streamline upcoming land disposals.
CIMB keeps its 2026 industrial development profit forecast at RM1.03 billion, contingent on the timely completion of land disposals. The rise of the minimum wage in June 2027 could slightly dent SD Guthrie's profits in future years, with a preliminary analysis indicating a potential 3% reduction in FY28 earnings if most Malaysian estate workers are affected. At this point, SD Guthrie's shares are trading at RM5.79, up 0.7% from yesterday's close of RM5.75.
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