Brokers Digest: Local Equities – Plantations, SkyWorld Development Bhd, Gamuda Bhd, HE Group Bhd

This article first appeared in Capital, The Edge Malaysia Weekly on May 18, 2026 – May 24, 2026

CGS INTERNATIONAL (MAY 11): Malaysian Palm Oil Board’s (MPOB) data for April showed palm oil inventory rebounding to 2.31 million tonnes (+2% quarter on quarter; +24% year on year), marginally higher than the Bloomberg consensus forecast of 2.26 million tonnes.

We saw an inventory build-up in April due to a seasonal recovery in yields. Note that the January-April 2026 (4M26) total fresh fruit bunch (FFB) yield came in higher at 5.05 tonnes per hectare compared with the five-year average of 4.59 tonnes per hectare for January to April. Overall, crude palm oil (CPO) production rose 18% month on month (m-o-m) to 1.6 million tonnes. Besides the production recovery, the sharp increase in exports seen in the previous month was short-lived, given that CPO spot prices rose a further 5.7% m-o-m to RM4,568 per tonne in April amid the Middle East conflict.

We expect exports to remain muted in May as previous stockpiling and Middle East tensions weigh on demand, prompting buyers to take a wait-and-see approach. With production anticipated to continue rising, stockpiles are likely to build further, which would exert downward pressure on CPO prices, in our view.

Nevertheless, we believe the upcoming national B15 mandate starting June 1 should help absorb some of the additional supply domestically and offer CPO prices some support.

We maintain an “overweight” rating on the sector as we view any potential price pressure in 2Q26F as temporary. CPO prices should be structurally supported beyond 2Q26F as CPO supply could tighten due to: (a) higher biodiesel mandates in key producing countries like Indonesia and Malaysia, and (b) El Niño conditions and adverse weather risks, which stand at a 62% probability of occurring between June and August (source: NOAA).

With that, upstream players remain the key beneficiaries of sustained CPO strength. Names like Ta Ann Holdings Bhd (KL:TAANN) and Hap Seng Plantations Holdings Bhd (KL:HSPLANT) should continue to enjoy relatively stronger net CPO average selling prices versus their Indonesian peers, while SD Guthrie Bhd’s (KL:SDG) ongoing non-core asset monetisation initiatives could unlock dividend payouts from potential proceeds.

Sector rerating catalysts include potential El Niño conditions and tighter CPO supply. Downside risks include stronger-than-expected production growth in palm oil and oilseeds as well as rising input costs.

HONG LEONG INVESTMENT BANK RESEARCH (MAY 12): Penang is a potential game changer for SkyWorld Development Bhd (KL:SKYWLD), accounting for 61% of its remaining gross development value (GDV) through its Seberang Jaya and Batu Kawan projects. Seberang Jaya benefits from a mature catchment near Sunway Medical Centre Penang and Sunway Carnival Mall, while Batu Kawan is positioned in Penang’s industrial growth corridor and an underserved affordable housing segment. Beyond demand, the project offers strong return on investment potential through low land cost, staggered land payments and adoption of prefabricated prefinished volumetric construction (PPVC), which could shorten construction cycles, accelerate billings and improve cash recovery.

We initiate coverage on SkyWorld with a “buy” rating and a target price of 90 sen, based on 60% discount to our estimated RNAV of RM2.25. We believe the company is at an earnings inflection point, with FY26 marking the trough. With Penang emerging as a new growth driver, alongside a rebuilt launch pipeline and stronger unbilled sales, the group is entering a new earnings cycle. However, this recovery has yet to be reflected in the share price, with the shares trading at undemanding FY27/28 forward PER of only 6 times/3.1 times.

CIMB SECURITIES (MAY 12): On May 8, Gamuda Bhd (KL:GAMUDA) disclosed that the group’s 70:30 joint venture (JV) with Shang Ting Construction Co had won a RM3.3 billion contract to undertake civil works for the Xiaogang-Linyuan mass rapid transit (MRT) line in Kaohsiung (Gamuda’s effective share: RM2.3 billion). This represents the group’s 10th contract in Taiwan. We estimate the project’s pre-tax margins to be in the region of 8%. Crucially, the contract includes scope for cost pass-through elements. The Xiaogang-Linyuan project is independent of the RM10.8 billion worth of additional metro line works (Gamuda’s effective share: RM8.1 billion) that we believe the group is poised to secure from the New Taipei City government.

In Australia, Gamuda’s 100%-owned unit DT Infrastructure (DTI) won a A$200 million (RM568 million) contract to build Stage 1 of the Jinbi solar farm project. The latest wins lift Gamuda’s year-to-date FY26F job wins to RM21.8 billion — just 5% shy of our full-year forecast of RM23 billion. The group’s outstanding order book has risen to RM52.2 billion, placing the group firmly on track to meet its goal of maintaining a RM50 billion backlog until end-2026.

Target price: 54 sen OUTPERFORM

PUBLICINVEST RESEARCH (MAY 12): HE Group Bhd’s (KL:HEGROUP) wholly-owned subsidiary Hexatech Engineering Sdn Bhd has accepted a letter of award for the construction of a 132kV/33kV new substation project in Selangor valued at RM86 million. The project commences immediately upon acceptance and is slated for completion by Oct 31, 2027. Following this award, the group’s outstanding order book stood at about RM150 million as at May 11, 2026. We keep our earnings forecasts unchanged as this contract falls within our FY26F order book replenishment target of RM200 million. The group continues to progressively expand its exposure to industries, supported by long-term structural growth trends, particularly data centre (DC), semiconductor and renewable energy-related infrastructure. We maintain our “outperform” call with an unchanged target price of 54 sen, based on 14 times FY27F EPS.

We remain positive on HE Group’s outlook, supported by growing exposure to DC-related projects and a progressively higher-margin order book mix, which offsets softer semiconductor-related contributions. The group is also exploring diversification into the battery energy storage systems (BESS) segment and geographical expansion into Indonesia and Thailand to capture regional DC opportunities.

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