Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Plantation Companies - Value emerging.

Raised Bumitama Agri, First Resources and Indo-Agri to BUY. Maintain HOLD call on Wilmar

The recent share-price drop for Plantation companies is attractive, as scattered dryness this year is long-term bullish.

However, near-term demand on palm oil may remain subdued on the back of:
(1) weak economic growth in China and Eurozone;
(2) negative biodiesel spread; and
(3) ample soybean oil supplies.

Having cut CY14F-16F Brent prices by 4-11%, we trimmed our CPO price forecasts by 1-4%. This resulted in 0-14% cut in fair values and 1-14% cut in FY15F earnings.

On this basis and 3Q14 average spot price of RM2,212, we expect planters to book stronger 3Q14 earnings (both y-o-y and q-oq).

These imply sequential decline in 4Q14 earnings; given lower prices (we expect c.RM2,100 average) and seasonally lower output.

For SGX-listed stocks, we raised Bumitama Agri (TP S$ S$1.21, Prev. S$1.23), First Resources (TP: S$ 2.14) and Indo-Agri (TP:S$ 0.98; Prev. S$0.97) to BUY, as recent drop more than reflects current weakness in CPO prices.

Maintain HOLD call onWilmar, TP: S$3.30.

Source: DBS

[winston]

Plantations (N) - Hit by several speed bumps

We are cutting our average CPO price forecasts by 5-11% for 2014-16 to reflect larger-than-expected global edible oil supplies as well as weaker demand for biodiesel usage in Indonesia.

The CPO price declines in 3Q14 were sharper than what we had previously expected, no thanks to stronger soybean supplies and weaker Chinese demand.

These factors, coupled with the recent sharp drop in crude oil prices, are likely to put a lid on near-term CPO prices.

We cut our EPS forecasts for regional planters by up to 41% to reflect our CPO price downgrade.

This lowers our target prices by up to 23% across the board. But we have upgraded six stocks as their valuations have improved.

Our sector rating remains Neutral, with First Resources as our key pick.

Source: CIMB

[winston]

Plantations - Preview of Oct palm oil stocks

A survey conducted by our futures team revealed that palm oil output was marginally lower in Oct, falling by an estimated 0.7% mom to 1.88m tonnes due
to weaker yields from Peninsular Malaysia estates.

Palm oil exports fell by c.2% mom due to lower demand from India.

Overall, we project Malaysian palm oil inventory to rise by 3% mom to 2.15m tonnes in Oct 14.

The CPO futures price has recently breached the top end of our near-term price range of RM2,300 per tonne due to higher soybean oil prices, concerns of dry weather in some key planting areas in Indonesia and the lagged impact of drought in Peninsular Malaysia on palm oil output.

We maintain our Neutral sector rating and preference for First Resources, Astra Agro and SIMP.

Source: CIMB

[winston]

Tactical Buy opportunity for plantations, says RHB Reserach

KUALA LUMPUR (Nov 11): RHB Research has maintained its Neutral rating on the plantation sector and said Malaysia’s palm oil inventory inched up further in October as production decline was marginal.

In a note Tuesday, the research house nevertheless said the production number was only held up by Sabah.

“We expect production to decline significantly over the next three months, driving palm oil price higher.

“Soybean has also stopped being a factor weighing on palm oil, while crude oil appears to have stabilised. Maintain Neutral,” it said.

On Tuesday morning at 10.33a, plantation-related stocks traded mixed.

Source: The Edge

[winston]

not vested

CPO price up on lower output prospects

KUALA LUMPUR: Malaysian palm oil futures rose on Friday following two days of declines to notch up a weekly gain as the rainy season was expected to curb yields, although sluggish export demand capped gains.

"For November we are seeing a drop between 8 and 10 percent in crude palm oil output," a trader with a local commodities brokerage in Malaysia said.

"But the bearish factors are the uncertainty of crude oil prices and a record crop in South America. And demand for palm olein is bad, especially in the month of December," the trader added. The tropical oil clouds in cold temperatures.

Exports of Malaysian palm oil products fell by 4.6 to 6.4 percent between Nov. 1-20 compared with the same period in October, cargo surveyors reported on Thursday.

The benchmark February contract on the Bursa Malaysia Derivatives Exchange was up 0.5 percent at 2,239 ringgit ($668) per tonne by Friday's close.

The weekly gain was 1.4 percent.

Total traded volume on Friday amounted to 33,736 lots of 25 tonnes, below the usual 35,000 lots.

Market players said average trading volumes had dropped this week, with most investors avoiding risky bets as they waited for a clearer market direction.

“It can't go down because of lower production," a second palm oil trader said.

"The fundamentals are mixed. We're waiting for new leads," said the trader, who is with a foreign commodities brokerage in Kuala Lumpur.

A close above 2,220 ringgit on Friday could pave way for prices to rise next week to test a resistance level at 2,280 ringgit, he added.

Elsewhere, Fitch Ratings said it expected crude palm oil prices to stagnate between $650 and $700 per tonne in the next 12 months due to stronger edible oil supplies, weaker demand from China and lower crude oil prices.

It added in a report, however, that demand would be underpinned by higher biodiesel mandates in Indonesia and Malaysia.

In other markets, Brent crude oil rose towards $80 a barrel on Friday on speculation OPEC could agree on output cuts at a meeting next week, with strong U.S. economic data also bolstering prices.

In other competing vegetable oil markets, the U.S. soyoil contract for December rose 0.1 percent in late Asian trade, while the most active May soybean oil contract on the Dalian Commodities Exchange rose 0.1 percent.

source: Reuters

[winston]

Palm Stockpiles in Malaysia Seen Advancing to 21-Month High

http://www.bloomberg.com/news/2014-12-0 ... gh-3-.html

[winston]

Plantations - Biodiesel demand risk

Malaysian palm oil inventories rose 5% mom to a 21-month high of 2.28m tonnes in Nov, 1% below our and consensus projections.

We view this as a neutral event, as this development is in line with our and market projections.

We project short-term CPO prices to remain range-bound and supported by the [b]seasonally-lower palm oil output [/b]in the coming months, higher biodiesel mandate of 7% in Malaysia, potential El Nino event and upcoming festival restocking activities.

However, we are concerned about biodiesel demand risk due to the sharp fall in crude oil prices, which makes biodiesel conversion uneconomical.

Our Neutral stance and top picks, First Resources, AALI and SIMP, are intact.

Source: CIMB

[winston]

CPO prices are at a crossroads as tighter supplies are supporting prices but the sharp drop in crude oil prices is pulling in the opposite
direction.

Crude palm oil prices are at a crossroads as prices seem to be supported by tighter supplies due to bad weather and yet the sharp drop in crude oil prices is pulling in the opposite direction.

We believe the CPO market has yet to find an equivalent point, waiting to gain clearer direction based on how tight supplies would be or how large nondiscretionary biodiesel demand could disappear.

The recent strength of the El Nino indicator could be an important price-supportive factor.

Maintain BUY on First Resources (FR SP/Target: S$2.80), Bumitama Agri (BAL SP/Target: S$1.40) and Sarawak Oil Palm (SOP MK/Target: RM6.75).

Maintain MARKET WEIGHT.

Source: UOBKH

[winston]

not vested

Plantation companies will be closely watched as crude palm oil prices may continue to rise if palm oil inventory declines amid strong demand.

Bloomberg reported Malaysian palm oil rose for a fifth straight session on Tuesday to its highest in more than one week with prices underpinned by expectations that excessive monsoon rains would derail supplies amid strong demand.

Investors in the palm oil market are keeping a close watch on the weather with forecasts calling for widespread rains and flooding in parts of Malaysia, the world's second largest producer.

"It is getting bad to worse on the production front as in some areas it has been raining continuously for days, which will disrupt production," said one Kuala Lumpur-based trader as quoted by Bloomberg.

A decision by the Malaysian government to keep exports of crude palm oil duty-free until end-February may also boost demand, it added.

Source: The Edge

[winston]

Plantations (N) - India raises import duties on edible oils

India’s move to hike the import duties on crude edible oils and refined edible oils by 5% pts to 7.5% and 15%, respectively, is negative for palm oil producers but positive for Indian farmers and refiners.

This decision does not come as a surprise to us as the oilseed industry has lobbied the government to raise the import duties for edible oils since the middle of this year.

The higher duties will reduce the competitiveness of imported palm oil in India against locally- produced edible oils.

We maintain our Neutral call on the sector as well as our preferred picks – First Resources, Astra Agro and SIMP.

Source: CiMB