Palm Oil 02 (Jun 14 - Dec 26)

[winston]

Plantation – Regional
CPO Prices To Trade At High Levels In 1H21

We raise our CPO ASP for 2021 to RM3,000/tonne from RM2,600/tonne.

There has been a larger-than-expected increase in CPO price, and this is likely to stay firm at least in 1Q21 on the back of tight global vegoil supply.

However, we maintain our view that price will weaken as palm oil production stages for good recovery towards end-3Q21 and inventory will then start to rebuild.

Maintain MARKET WEIGHT. Our picks to ride on higher CPO price are HAPL MK, KLK MK, KIML MK, SOP MK, BAL SP, FR SP, AALI IJ and TBLA IJ.

Source: UOBKH

https://research.uobkayhian.com/content ... 47a32aa678

[winston]

2021: Expect another volatile year, and a year of two halves | POSITIVE

Sector Note

Under-investments in recent years and biological tree stress led to palm oil supply shock in 2020.

The short term tightness in global supplies and uncertainties of the La Nina impact on South American crop will continue to keep CPO price lofty at least in 1Q21.

Ongoing weather concerns presents upside risk to our MYR2,500/t CPO ASP forecasts for 2021.

Maintain POSITIVE call on the sector as SMID cap stock prices have lagged CPO price rally.

Preferred BUYs: FR, KLK, SOP and BPLANT.

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/2 ... dbb057.pdf

[winston]

Plantation – Malaysia
Low Inventory Levels To Continue To Support CPO Prices

Palm oil inventory level was at its 14-year low at 1.26m tonnes as at Dec 20.

We expect\inventory levels would remain low in 1H21 due to tight supply and a demand recovery in 1H21.

With these, we expect CPO prices would still continue to trade at high levels in
1H21.

However, we maintain MARKET WEIGHT on the sector as we remain cautious on
the strong CPO production recovery in 2H21 and demand rationing with the high CPO
selling prices.

Prefer companies with higher upstream exposure in Malaysia. We prefer pure upstream
players with only Malaysia-skewed operations, ie Hap Seng Plantations (HAPL), Sarawak Oil Palms (SOP) and Kim Loong Resources (KIML) as they would benefit more from higher selling prices vs peers with Indonesia exposure. Among the big caps in Malaysia, we have a BUY on Kuala Lumpur Kepong (KLK).

Source: UOBKH

https://research.uobkayhian.com/content ... 5fbd4a9313

[winston]

HLIB Research sees higher upside to mid-sized upstream planters

by Anis Hazim Sharudin

Mid-sized upstream plantation players such as Hap Seng Plantations Holdings Bhd, IJM Plantations Bhd and TSH Resources Bhd will likely see better share price performances in the near term.

Chye maintained her average CPO price projections of RM2,700 per tonne for 2021 and 2022.

She also maintained her "neutral" stance on the sector, and had "buy" calls on Hap Seng Plantations (target price [TP]: RM2.17), IJM Plantations (TP: RM2.29) and TSH Resources (TP: RM1.38).

Source: theedgemarkets.com

https://www.theedgemarkets.com/article/ ... m-planters

[winston]

MY: MALAYSIA PLANTATIONS

4Q20 results preview: Forward sales (if any) may dampen an otherwise excellent quarter | POSITIVE

4Q20 YoY profits are likely to be lifted by high CPO and PK prices, which should more than offset a marginally weaker YoY output.

For companies with US debts, FX translation gains will likely lift headline profits.

And those with forward sales (depending on the size and price) locked in before 31 Dec (to be delivered in 2021), we expect some accounting loss on FV of derivative FI. However, these accounting losses will likely reverse in 2021.

We prefer SMID caps in a strong CPO price environment.

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/2 ... 214212.pdf

[winston]

China’s pigs pose unexpected threat to palm oil rally

The crushing of beans produces not only meal, a component of livestock feed but also oil, palm’s top rival in the food and biofuel industry.

Those increased supplies now threaten China’s purchases of palm oil just two years after they surged to a record when a US-China trade war curbed imports of beans.

Palm oil has also been very expensive compared with soybean oil in global markets, trading around parity for a while in the final quarter of last year versus the usual discount.

Purchases may drop 8.8% to 6.2 million tonnes in 2020 to 2021, it

Source: Bloomberg

https://www.freemalaysiatoday.com/categ ... oil-rally/

[winston]

not vested

Plantation – Malaysia
Inventory Higher Than Market Expectation But Still Low

The palm oil inventory level came in slightly above market expectation due to lower
exports.

However, the inventory level is still at a relatively low level which wo ldcontinue to support CPO prices.

We observe that Malaysian plantation companies’ stocks are trading sideways, and we believe one of the key factors is the ESG concern.

We focus on companies which would have better earnings, benefitting directly from the
high CPO prices. Maintain MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 7dec4d1a50

[winston]

not vested

HLIB keeps 'neutral' on plantation sector as CPO prices expected to soften from 2Q

by Syafiqah Salim

KUALA LUMPUR (March 5): Hong Leong Investment Bank (HLIB) Research maintains its "neutral" call on the plantation sector, as the research firm believes the current high crude palm oil (CPO) price will not sustain over the longer term.

In a note today, the research firm named its top picks, namely Hap Seng Plantations Holdings Bhd with a "buy" call and target price (TP) of RM2.17, IJM Plantations Bhd (buy, TP: RM2.29), and TSH Resources Bhd (buy, TP: RM1.35).

At the time of writing, shares of Hap Seng Plantations were up three sen or 1.61% to RM1.89, valuing the group at RM1.51 billion. Meanwhile, IJM Plantations was unchanged at RM1.82 with a market value of RM1.6 billion, while TSH Resources was up one sen or 0.95% to RM1.06, translating into a market capitalisation of RM1.46 billion.

According to HLIB Research analyst Chye Wen Fei, the research firm maintains its CPO price assumption of RM2,700/metric tonne for 2020-2022.

"YTD (year-to-date), CPO price averaged at RM3,828/mt. We anticipate CPO price to soften from 2Q21 onwards, on the back of better supply outlook for major edible oils, which will result in more balanced demand-supply dynamics," added Chye.

Of the eight companies which reported their quarterly results in February, six exceeded HLIB Research's expectations while the remaining two came in within its expectations, noted Chye.

The six companies which performed above expectations were FGV Holdings Bhd, Hap Seng Plantations, IJM Plantations, Kuala Lumpur Kepong Bhd (KLK), Sime Darby Plantation Bhd and TSH Resources.

Meanwhile, the two that came in within expectations were Genting Plantations Bhd and IOI Corp Bhd.

"On a q-o-q (quarter-on-quarter) basis, companies with higher exposure in Malaysia operations (particularly FGV, IOI and Sime) clocked in lower FFB (fresh fruit bunch) output in 4Q20, due mainly to labour shortfall (resulted from Covid-19 pandemic, which restricted the entry of foreign labour into the country)," said Chye.

Moving forward, Chye believes labour shortage issues in Malaysia will persist into the first half of 2021, and this will continue to drag planters with higher upstream exposure in Malaysia operations.

"During the quarter, most integrated players under our coverage (namely IOI, KLK and Sime) saw their downstream margins improving on a q-o-q basis, and this was due mainly to improving demand sentiment for downstream products (particularly, in European markets).

"Genting Plantations, on the other hand, saw its downstream earnings contract further in 4Q20 (on a q-o-q basis), due mainly to weak demand for biodiesel products," Chye added.

Source: The Edge

https://www.theedgemarkets.com/article/ ... -soften-2q



https://www.theedgemarkets.com/article/ ... -soften-2q

[winston]

Maintain MARKET WEIGHT

Our CPO price assumption is RM3,000/tonne for 2021, but we remain concerned about potential price weakness due to the strong production recovery in 2H21 and demand rationing due to high CPO prices.

In addition, we are also concerned about the earnings leverage of CPO prices where the high CPO prices may not be reflected in the companies’ earnings if they locked in forward sales at lower pricing towards end-20.

Having said that, we expect CPO prices to still trade at a high range in 1H21 as a result of stock levels and the tight supply in 1H21.

Source: UOBKH

https://research.uobkayhian.com/content ... c290fe6b2f

[winston]

B20 biodiesel mandate in Malaysia expected to absorb one million tonnes of CPO, says industry expert

by Arjuna Chandran Shankar

The implementation of the mandate to roll out B20 — biofuel with a 20% CPO component — for the transport sector has been delayed to December 2021 in Peninsular Malaysia.

It has already been implemented in Sarawak since September 2020 and is scheduled to be rolled out in Sabah in June 2021.

Indonesia may be implementing the B40 mandate as funding for biodiesel in the republic grows following a revision in export taxes. The taxes rose to as high as US$348 (RM1,435) per tonne this month. Indonesia has so far implemented a B30 biodiesel mandate.

Source: theedgemarkets.com

https://www.theedgemarkets.com/article/ ... try-expert