- We maintain our NEUTRAL stance on the sector with a tactically positive trading strategy focusing on pure planters, as we continue to expect CPO prices to remain lofty in 1H24 on the back of tight supply and weak demand.
- Top Picks are pure planters Ta Ann, Sarawak Oil Palms, Bumitama Agri (SGX:P8Z), and PP London Sumatra Indonesia.
- - Read this at SGinvestors.io -
CPO prices are now at MYR4,300-4,400/tonne.
- As expected, CPO prices have risen past MYR4,000/tonne and are now at MYR4,300-4,400/tonne. This came on the back of supply tightness for palm oil due to the low output season and the impact of El Nino – as demonstrated by the decline in Malaysian palm oil (PO) inventory levels to below 2m tonnes and stock/usage ratios to below historical levels at end-Feb 2024.
- - Read this at SGinvestors.io -
Expect Malaysian PO inventory to remain below the 2m-tonne
- We continue to expect Malaysian PO inventory to remain below the 2m-tonne mark for the medium term, possibly until 3Q24 as the peak output season starts to ramp up from May/June onwards.
- In 3Q24, all eyes will be on the potential of La Nina occurring and its strength. Should La Nina eventuate and oilseed crops in the northern hemisphere be affected, we could see prices of other vegetable oils rise – that of soybean, rapeseed, and sunflower – and this would have a knock-on effect on PO prices. This could translate to PO prices staying higher for longer.
- Our current assumption is for prices to average above the MYR4,000/tonne mark in 1H24, before moderating in 2H24.
- We make no change to our average CPO price assumptions of MYR3,900/tonne for 2024 and MYR3,800/tonne for 2025.
Demand for PO has been relatively lacklustre over the last few months, despite the festive-heavy period in 1H24.
- Read more at SGinvestors.io.
Hoe Lee Leng RHB Securities Research | Singapore Research RHB Invest | Indonesia Research RHB Invest | https://www.rhbgroup.com/ 2024-04-12
More views on outlook of plantation sector:
Analyst Reports on Singapore Plantation Sector
Read also RHB's most recent report:
2024-08-15 Bumitama Agri - Expecting a Better 2H24; Still NEUTRAL.
Previous report by RHB:
2024-08-12 Bumitama Agri - Moderate ESG Score & Valuation.
Price targets by 2 other brokers at Bumitama Agri Target Prices.
Listing of research reports at Bumitama Agri Analyst Reports.
Relevant links:
Bumitama Agri Share Price History,
Bumitama Agri Announcements,
Bumitama Agri Dividends & Corporate Actions,
Bumitama Agri News Articles
