Malaysia's RM2,000 minimum wage to pressure plantation profits despite higher palm oil prices

CIMB Securities projects that Malaysia’s planned minimum-wage rise to RM2,000, effective June 2027, will reduce earnings for plantation companies, particularly those employing a large share of general estate workers at the minimum rate. Analyst Ivy Ng Lee Fang notes that stronger crude palm oil prices may partially cushion the cost pressure, but the earnings drag will be larger in FY28 than FY27 because the wage increase takes effect partway through the latter year.

Up-stream planters with significant Malaysian operations, including Johor Plantations Group Bhd, Ta Ann Holdings Bhd and Hap Seng Plantations Holdings Bhd, are expected to be most affected. Higher labour costs could accelerate mechanisation, benefiting equipment suppliers, while an expanded sales-tax refund on qualifying machinery may offer some relief. Despite these challenges, CIMB maintains an overweight stance on the sector, citing potential El Niño-related supply tightness that could support palm oil prices. Its top picks remain IOI Corp Bhd, Kuala Lumpur Kepong Bhd, Genting Plantations Bhd and Hap Seng Plantations Holdings Bhd.