KUALA LUMPUR, March 19 — Sarawak Oil Palms Bhd (SOP) is expected to deliver better results for financial year 2021 (FY21) on the back of better upstream performance.

Maybank Investment Bank (Maybank IB) said in its note that the company’s performance would be supported by better crude palm oil (CPO) prices, higher output, absence of impairment loss and reversal of fair value losses recorded in the fourth quarter of 2020 (Q4 2020).

“We believe that the impairment loss of RM10 million recorded in Q4 2020 should not recur in FY21 estimates (FY21E) and the company aims to deliver 1.45 million- 1.5 million tonnes of fresh fruit bunches output in FY21E (+7-10 per cent year-on-year growth),” it said in a note today.

On the labour shortage faced by the company, Maybank IB noted that the Sarawak government has recently eased the restriction to allow hiring of foreign workers, adding that SOP’s first batch of new foreign workers will arrive in April.

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The investment bank also projected that the company would likely reach its peak output for FY21 in Q3 2021.

Nevertheless, the investment bank pointed out some key risk factors to its expectations, including weather anomalies which would result in poorer-than-expected output growth and lower-than-expected CPO price.

Other key risks were negative policies imposed by importing countries and unfriendly policies imposed by the Malaysian and Indonesian government on upstream or downstream segments.

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Additionally, sharply lower crude oil prices (which makes palm biodiesel demand not viable) and weaker competing oil prices (like soybean and rapeseed) could also affect its estimates.

At 11.40am, shares of SOP fell four sen to RM4.08 with 2,200 shares transacted. — Bernama