Company Coverage
SD Guthrie (SDG MK): 1H26: Within Expectations; Land Monetisation Gaining Momentum
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
RM6.91
RM7.65
+10.7%
RM7.25
Analyst
Highlights
SDG’s 1H26 results were broadly in line with core earnings supported by stronger CPO prices and improved downstream performance.
The group has announced two proposed outright land disposals worth a combined RM500m, supporting industrial development’s earnings pipeline.
We raise our 2026-28 earnings forecasts by 10%/8%/8% as we think SDG is highly likely to meet its RM700m earnings target for the industrial division.
Maintain BUY with a higher target price of RM7.65 (previously RM7.25), pegged to 20x 2027F PE.
Analysis
Within expectations. SD Guthrie’s (SDG) 1H26 net profit of RM1,547m (+44% yoy) was broadly in line with expectations, accounting for 61%/65% of our and consensus full-year estimates, underpinned by a RM529m gain from land disposal in 2Q26. Excluding the disposal gain, 1H26 core net profit came in at RM948m (-0.7% yoy), representing 44% of our full-year core earnings forecast.
2Q26 net profit rose to RM533m (+7.5% yoy), driven by firmer CPO prices of RM4,283 per tonne (+3% yoy) and an improvement in downstream earnings (+8% yoy). This more than offset higher operating costs in Malaysia’s upstream operations, mainly due to accelerated upkeep and maintenance activities, which partly contributed to lower upstream EBIT (-5% yoy).
SDG declared a higher interim dividend of 11.8 sen per share (1H25: 10.35 sen), which translates into a 50% payout ratio.
Malaysia FFB production set for recovery in 2H26. The group’s FFB production declined 2% yoy in 1H26, mainly dragged by Malaysian estates (-4% yoy) affected by prolonged dry weather conditions earlier this year. However, management highlighted a strong recovery in Malaysian output in June, which is expected to sustain through the peak production season in Aug-Oct 26. Overall, SDG guided for a slight positive yoy growth in FFB production, with Malaysia expected to be the key growth driver in 2H26. This is broadly in line with our 2.5% FFB growth assumption for 2026.
Weather risk remains a key concern for 2027 production. Management remains cautious on the FFB production outlook for 2027, particularly for its Indonesian estates with the increasing likelihood of a strong El Nino. Indonesia’s rainfall outlook points to drier conditions in Aug-Sep 26 while Malaysia is still expected to receive adequate rainfall. SDG projects that the production hit will materialise in 2H27 or 1H28.
Mixed downstream outlook. The bulk and trading segments are expected to sustain their positive performance, supported by favourable market conditions and stronger margins. However, the differentiated segment is likely to remain soft in the near term amid margin pressure and weaker demand from key customers, particularly in the FMCG sector.
Accelerating land monetisation. SDG recognised a RM529m gain in 2Q26 from the disposal of 935 acres in Kulai to its Eco World JV (EBP8), bringing cumulative land disposal gains to RM689m in 1H26. We believe SDG could exceed its RM500m-700m annual industrial development earnings target in 2026 if it completes the disposal of the 1,000-acre Bukit Kerayong land, announced in Jul 26.
Strong pipeline supports visibility of recurring land monetisation gains. The group has announced two proposed outright land disposals: a) 557 acres in Kulai for RM418m to Sime Darby Property, and b) 170 acres in Kluang for RM82.8m to a private developer. The group has also earmarked more than 10,000 acres of land for this new venture, currently at various stages of planning and execution. Given the accelerating pace of land monetisation and the sizeable development pipeline, we believe SDG is well positioned to reach the upper end of its earnings target over the next two years. We have therefore raised our earnings assumption for the industrial development segment from RM500m to RM700m p.a..
Highlights
SDG’s 1H26 results were broadly in line with core earnings supported by stronger CPO prices and improved downstream performance.
The group has announced two proposed outright land disposals worth a combined RM500m, supporting industrial development’s earnings pipeline.
We raise our 2026-28 earnings forecasts by 10%/8%/8% as we think SDG is highly likely to meet its RM700m earnings target for the industrial division.
Maintain BUY with a higher target price of RM7.65 (previously RM7.25), pegged to 20x 2027F PE.
Analysis
Within expectations. SD Guthrie’s (SDG) 1H26 net profit of RM1,547m (+44% yoy) was broadly in line with expectations, accounting for 61%/65% of our and consensus full-year estimates, underpinned by a RM529m gain from land disposal in 2Q26. Excluding the disposal gain, 1H26 core net profit came in at RM948m (-0.7% yoy), representing 44% of our full-year core earnings forecast.
2Q26 net profit rose to RM533m (+7.5% yoy), driven by firmer CPO prices of RM4,283 per tonne (+3% yoy) and an improvement in downstream earnings (+8% yoy). This more than offset higher operating costs in Malaysia’s upstream operations, mainly due to accelerated upkeep and maintenance activities, which partly contributed to lower upstream EBIT (-5% yoy).
SDG declared a higher interim dividend of 11.8 sen per share (1H25: 10.35 sen), which translates into a 50% payout ratio.
Malaysia FFB production set for recovery in 2H26. The group’s FFB production declined 2% yoy in 1H26, mainly dragged by Malaysian estates (-4% yoy) affected by prolonged dry weather conditions earlier this year. However, management highlighted a strong recovery in Malaysian output in June, which is expected to sustain through the peak production season in Aug-Oct 26. Overall, SDG guided for a slight positive yoy growth in FFB production, with Malaysia expected to be the key growth driver in 2H26. This is broadly in line with our 2.5% FFB growth assumption for 2026.
Weather risk remains a key concern for 2027 production. Management remains cautious on the FFB production outlook for 2027, particularly for its Indonesian estates with the increasing likelihood of a strong El Nino. Indonesia’s rainfall outlook points to drier conditions in Aug-Sep 26 while Malaysia is still expected to receive adequate rainfall. SDG projects that the production hit will materialise in 2H27 or 1H28.
Mixed downstream outlook. The bulk and trading segments are expected to sustain their positive performance, supported by favourable market conditions and stronger margins. However, the differentiated segment is likely to remain soft in the near term amid margin pressure and weaker demand from key customers, particularly in the FMCG sector.
Accelerating land monetisation. SDG recognised a RM529m gain in 2Q26 from the disposal of 935 acres in Kulai to its Eco World JV (EBP8), bringing cumulative land disposal gains to RM689m in 1H26. We believe SDG could exceed its RM500m-700m annual industrial development earnings target in 2026 if it completes the disposal of the 1,000-acre Bukit Kerayong land, announced in Jul 26.
Strong pipeline supports visibility of recurring land monetisation gains. The group has announced two proposed outright land disposals: a) 557 acres in Kulai for RM418m to Sime Darby Property, and b) 170 acres in Kluang for RM82.8m to a private developer. The group has also earmarked more than 10,000 acres of land for this new venture, currently at various stages of planning and execution. Given the accelerating pace of land monetisation and the sizeable development pipeline, we believe SDG is well positioned to reach the upper end of its earnings target over the next two years. We have therefore raised our earnings assumption for the industrial development segment from RM500m to RM700m p.a..
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
RM6.91
RM7.65
+10.7%
RM7.25
Analyst
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