RHB Research has initiated coverage on Hap Seng Plantations Holdings Berhad (HAPL) with a BUY recommendation and a target price (TP) of RM2.60, citing strong prospects from the current elevated crude palm oil (CPO) price environment, improving fresh fruit bunch (FFB) production recovery and attractive dividend yields.
The target price, based on a 12 times FY26 forecast price-to-earnings (P/E) valuation, implies a potential upside of approximately 21% from current levels.
RHB Research said Hap Seng Plantations, as a pure upstream plantation player, is well-positioned to benefit from sustained CPO prices, while its improving FFB output outlook should further support earnings growth.
The research house highlighted that Hap Seng Plantations’ above-average dividend yields, estimated at 5% to 6% for FY26F-FY28F, could serve as a key catalyst for its share price performance.
“Maintaining a consistent dividend policy has been a key strength of HAPL, with the company mostly sustaining dividend payouts of at least 60% of profit after tax (PAT), above the industry average,” RHB Research said.
This translates into a historical dividend yield range of 3% to 8%, compared with the peer average of around 4%.
The company’s strong balance sheet also provides room for shareholder returns, with Hap Seng Plantations holding a net cash position of RM646.1 million (RM0.81 per share) as at FY25 and limited major capital expenditure requirements.
FFB output recovery expected to drive earnings growth
RHB Research noted that Hap Seng Plantations had experienced uncertain FFB production growth in recent years, with output increasing only 1.8% year-on-year in FY24 before declining by around 6% in FY25 due mainly to adverse weather conditions.
However, early 2026 indicators showed a strong recovery trend, with FFB production rising 11.4% year-on-year in the first four months of 2026, while CPO output increased 14.2%.
This compares favourably against Malaysia’s overall CPO production growth of only around 2% in the first five months of 2026.
RHB Research expects Hap Seng Plantations’ production to recover by 10% year-on-year in 2026, below management guidance of 16% to 17% as a more conservative estimate, supported by improved weather conditions.
Growth is expected to normalise at around 5% annually between FY27F and FY28F.
Plantation player to benefit from CPO strength
As a pure upstream plantation company, Hap Seng Plantations remains highly sensitive to CPO prices, with earnings estimated to change by 8% to 10% for every RM100 per tonne movement in CPO prices.
While its share price typically tracks CPO price movements, RHB Research noted that the stock has shown better resilience during periods of CPO weakness.
The research house expects CPO prices to remain supportive, forecasting prices to settle around RM4,200 to RM4,500 per tonne, driven by the strong correlation between crude oil and CPO prices as well as the implementation of the B50 biodiesel mandate from July 2026.
Attractive valuation despite earnings recovery
RHB Research expects Hap Seng Plantations’ earnings to record a five-year compound annual growth rate (CAGR) of 13% through FY28F, supported by higher CPO price assumptions and recovering FFB yields that could lower production costs.
The valuation also incorporates a 4% environmental, social and governance (ESG) premium, based on the company’s ESG score of 3.2.
Currently trading at around 10 times FY26F earnings, Hap Seng Plantations sits at the lower end of its peer valuation range of 8 to 13 times P/E and below its historical mean by one standard deviation.
RHB Research believes the valuation discount is unjustified given expectations of a 21% year-on-year earnings recovery in FY26F, stronger-than-national average CPO average selling prices, and the company’s full certification under Malaysian Sustainable Palm Oil (MSPO) and Roundtable on Sustainable Palm Oil (RSPO) standards.
However, key risks include a sustained decline in CPO prices and the possibility of an El Niño event emerging between November 2026 and January 2027, which could affect plantation output
