Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Plantations - 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

[winston]

Plantations - Assessing the potential impact of Malaysian floods

Several northern states in Peninsular Malaysia are currently experiencing one of the most severe annual floods in 30 years.

This will negatively impact the harvesting, transportation and processing of palm oil from these areas.

As a result, CPO output for December 14 may post a larger mom decline.

It is too early to assess the exact impact of the flooding on CPO output as this will be dependent on the severity and length of the on-going monsoon.

However, we expect this event to lift CPO prices in the near-term.

Among the planters under our coverage, FGV has the highest estates exposure in the Malaysian states impacted by floods so far.

We maintain our Neutral rating on the sector and our preferred picks continue to be First Resources, Astra Agro and SIMP.

Source: CIMB

[winston]

Plantations - Update on flood impact on CPO

Indications by the Plantation Industries and Commodities Minister that CPO output will drop by a sharper 20% mom in Dec vs. our initial forecast of 9%
mom drop is no surprise given the severe flooding in the East Coast since mid-Dec.

We gather that 184k ha of oil palm estates were affected (or 3.5% of total planted areas in Malaysia) by the floods.

Our latest check with Felda Global Ventures revealed that 23,730 ha or 6.34% of its estates were affected and the estimated loss is ~RM21m or 6% of our FY14 net profit forecast.

We maintain our view that the floods will keep CPO prices firm in the near term due to the weaker supply from Malaysia but negative for the affected planters.

We keep our Neutral rating and sector picks First Resources, AALI and SIMP.

Source: CIMB

[winston]

Plantations - Preview of Dec palm oil stocks

A survey conducted by our futures team revealed that Malaysian palm oil output is likely to fall by 22% mom to 1.36m tonnes due to seasonally low
production and severe flooding in the East Coast states in Dec 2014.

Palm oil exports fell by 0.9% as stronger demand from India cushioned weaker imports by China.

Overall, we expect Malaysian palm oil inventory to decline by 12% mom to a 5-month low of 2m tonnes in Dec 2014.

The lower inventory is near-term positive for CPO prices. However, this is offset by the concerns about biodiesel demand risk due to the weak crude oil prices.

We maintain our Neutral sector call and prefer planters like First Resources, AALI and SIMP.

Source: CIMB

[winston]

Plantations - The flood and ringgit effect

Malaysian palm oil inventories fell 12% mom to a 5-month low of 2.01m tonnes as at end-Dec 14.

We view this as a neutral event as it is in line with our and consensus projections.

As such, our view that CPO prices will remain range-bound and supported by the seasonally-lower palm oil output, weaker ringgit and concerns over impact of flooding on palm oil output, is intact.

We remain concerned that palm oil exports may stay weak due to lower biodiesel demand as palm oil prices are now trading at a sharp premium over crude oil prices, making it uneconomical to convert CPO into biodiesel.

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

Source: CIMB

[winston]

Plantations - Biodiesel launch in E. Malaysia

We are positive on the commitment shown by the Malaysian government in pursuing its B7 biodiesel mandate with the launch of the biodiesel programme
in Sabah, Sarawak and Labuan on Friday, despite the recent sharp drop in crude oil price, which makes it more expensive to use biodiesel than
conventional diesel.

We estimate that this programme could lift domestic palm oil consumption by 323,000 tonnes in 2015 but this represents only 1.6% of the country’s total production.

As such, we do not expect the programme to move CPO prices significantly.

We maintain our Neutral call, with First Resources, AALI and SIMP as our top picks in the sector.


Source: CIMB

[winston]

not vested

Singapore Plantation- 2014 results preview:

BAL likely to report better-than-expected net profit while FR results are likely to be in line with our expectations.


Maintain MARKET WEIGHT.

CPO prices recovered lately due to heavy buying caused by concerns about crop damage by the above-average rainfall and flooding in Peninsular Malaysia.

But we view this as a short-term rally which is likely to subside once the low production season is over, i.e. Mar/Apr 15.

The rally would be sustainable if the floods continue to cause substantial crop damage and also if bad weather affects the soybean harvest in South America.

We maintain BUY on First Resources (FR SP/Target: S$2.80) and Bumitama Agri (BAL SP/Target: S$1.40).

Source: UOBKH

[winston]

Palm oil to see healthy growth

http://www.thestar.com.my/Business/Busi ... ?style=biz

[winston]

not vested

Plantations - Preview of Jan palm oil stocks

A survey conducted by our futures team with 17 planters revealed that Malaysian palm oil output probably declined 17% mom to 1.13m tonnes in Jan
15, the lowest since Feb 11, due seasonal factor and flooding in East Malaysia.

However, palm oil exports have also remained weak, falling by 14.8% mom due to competition from other edible oils and weaker demand for biodiesel usage.

Overall, we project stocks to decline by 13% mom to a 6-month low to 1.75m tonnes as at end-Jan 15.

The lower stock is near-term supportive of CPO price but our concerns over biodiesel demand risk remains.

We maintain our Neutral rating and preference for First Resources, AALI and SIMP.

Source: CIMB

[winston]

Plantations - New rules to help jumpstart Indonesia’s biodiesel industry

We are positive on reports that
(1) the House of Representatives has agreed to raise the biodiesel subsidy by 266% to Rp4,000 per litre; and
(2) the MEMR has proposed a new formula to calculate the price of biodiesel in Indonesia.

The new pricing index, which will be dependent on crude palm oil instead of MOPs, is favourable for biodiesel producers and will encourage them to participate in future biodiesel tenders.

We estimate that the biodiesel subsidy will be sufficient for Pertamina to carry out the government’s biodiesel mandate of 10%, at the current crude oil price of US$55 per barrel as long as CPO stays at or below RM2,366 per tonne.

Overall, we stick to our view that the proposals are positive for Indonesia’s biodiesel and CPO producers.

Our top picks are First Resources, AALI and SIMP.

Neutral maintained.

Source: CIMB