Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Plantation – Malaysia
Higher-than-expected Inventory Level

Malaysia’s palm oil stocks came in higher than expected at 1.45m tonnes, mainly due to
better-than-expected CPO production and higher imports from Indonesia.

Malaysia’s palm oil inventory is likely to continue building up as trees are entering the high crop season, while exports may not be as strong because Indonesia is offering more competitive pricing.

Palm oil prices are starting to see downside pressure from stock rebuilding. Maintain MARKET WEIGHT.

We maintain our CPO price assumptions of RM3,000/tonne and RM2,600/tonne for
2021 and 2022 respectively.

We expect CPO prices to continue trading at a high range in 1H21 as a result of current stock levels and the tight supply in 1H21.

Source: UOBKH

https://research.uobkayhian.com/content ... 4347483c91

[winston]

Plantation sector to face downside CPO price risk in 2Q21; Wilmar among top picks: RHB

by Atiqah Mokhtar

“We believe prices have already peaked at above RM4,000 ($1,296.86) per tonne, and the risk for prices is now on the downside".

Continue to advocate buying "Malaysian-centric names", as well as companies with downstream exposure in Indonesia that will be able to benefit from the current tax structure.

Source: The Edge

https://www.theedgesingapore.com/capita ... paign=FREE

[winston]

Plantation shares fall despite CPO prices hitting record high

by Tan Siew Mung

KUALA LUMPUR (April 21): Shares of plantation companies fell today despite the price of crude palm oil (CPO) hitting a record high of RM4,329 per tonne.

At noon break, the plantation index slipped 0.87% to 6,820.1 points.

Crude palm oil futures, meanwhile, extended their gains today, with the CPO futures contract for May rising by RM89 to RM4,320 per tonne.

Rakuten Trade head of research Kenny Yee said the fall in plantation stocks' prices might be due to many analysts believing that the high CPO price is not sustainable.

Meanwhile, Fortress Capital Asset Management chief executive officer Thomas Yong also said the high CPO price was a result of production supply disruptions due to the Covid-19 pandemic.

"Therefore, analysts do not expect the better pricing to translate into higher profits for CPO producers as output volumes are negatively impacted," he told theedgemarkets.com.

CGS-CIMB’s Ivy Ng, who foresees average CPO price to stay at RM2,900 per tonne this year, opined that the government policy and weather will determine CPO prices moving forward.

“If the two factors are normalized, we think the supply should improve, prices are likely to correct,” she told theedgemarkets.com.

Source: The Edge

https://www.theedgemarkets.com/article/ ... 4329-tonne

[winston]

Beware Of Supply-side Fluctuations

Palm oil prices rose 47.8% yoy and 16.3% qoq in 1Q21 with an average price of
RM3,933/tonne.

This is the highest quarterly average CPO price ever achieved for the palm oil industry and we expect it to be the peak for this year.

We foresee higher price volatility going into 2Q21 with a lower trading band as palm oil production is rising and soybean supplies are entering the global market now from South America and subsequently from the US.

Maintain MARKET WEIGHT

Source: UOBKH

https://research.uobkayhian.com/content ... 9a0f41254c

[winston]

Plantation counters see higher interest following rise in CPO prices

by Arjuna Chandran Shankar

In a note to clients, CGS-CIMB Futures Sdn Bhd noted that palm oil jumped the most in 11 months after soy oil powered to fresh highs since 2008 and traders weighed higher-than-expected supply in Malaysia.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/566361

[winston]

Plantation – Malaysia
Planters Face Major Issues

In our latest online seminar, Datuk Nageeb (CEO of MPOA) focused on the issues faced
by planters, which are mainly labour shortage, a high tax structure and losing market
access.

We understand that the government has approved the return of 32,000 foreign
workers to the estates. However, progress is slow due to the sudden surge in COVID-19
cases.

MPOA is also appealing to the government to review the heavy tax structure for
the planters. Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 6adae1094a

[winston]

April stockpile seasonally higher but still tight

Stockpile slightly above Bloomberg’s estimates

MPOB’s April 2021 stockpile of 1.55mt came in slightly above Bloomberg’s survey estimates of 1.5mt.

Overall, stockpile remains relatively low.

Barring any unforeseen weather disruptions in the Northern Hemisphere, we maintain our view that CPO spot price risk is on the downside in 2Q3Q21 as output picks up seasonally.

US summer plantings of corn and soybean are also progressing well, ahead of its 5-year average.

Maintain our POSITIVE view as 2021, in general, will be a relatively good year for
the sector.

Preferred BUYs are KLK, SOP and BPLANT.

https://www.kelive.com/KimEng/servlet/P ... &rid=54775

[winston]

“Palm” Priming

Malaysia’s palm oil stocks were higher than expected at 1.55m tonnes, due to lower
domestic consumption.

Plantation companies’ shares have started to take off with CPO prices soaring above RM4,500/tonne.

With high CPO prices, we prefer small-mid sized plantation companies where they sell products in the spot market.

We see potential earnings upside for companies with exposure to Indonesia due to the potential lowering of the export levy. Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 35d7a8cd22

[winston]

Plantation – Regional
Palm Oil Demand Outlook In China

In his discussion of the palm oil demand outlook in China, Mr Desmond Ng from MPOC
said China’s palm oil demand is expected to stay at the same level as 2020 due to:-
a) the wide discount between palm oil and soybean oil prices
b) recovery in the HORECA sector, and
c) palm products being substituted in animal feed (but not significantly).

Oleochemical demand from palm products is still strong. Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... d04200235c

[winston]

SOP, BPLANT, and TAH are prime beneficiaries

SOP, BPLANT, and TAH have the least forward sales as shown in their high CPO ASP achieved in 1Q21.

They are poised to benefit from even better CPO ASP thus far in 2Q21, in addition to better QoQ output.

Compared to 2Q20’s CPO ASP of MYR2,281/t, MY based pure upstream planters will
continue to show strong YoY EPS growth compared to integrated players and those with higher exposure in Indonesia. Stay POSITIVE on the sector.

Our top MY BUYs are KLK, SOP, and BPLANT.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/223625.pdf