MARKET DEVELOPMENT
Three Research Houses Maintain 'Neutral' Rating On Plantation Sector
Three Research Houses Maintain 'Neutral' Rating On Plantation Sector
12/09/2014 (Bernama) - Three research houses have maintained a 'neutral' rating on the plantation sector as Malaysia's palm oil inventory surged to 2.05 million tonnes in August 2014 after record-high production and lacklustre export growth.
Kenanga Research said the country's palm oil stocks of 2.05 million tonnes in August 2014 was above expectation and five per cent higher than the consensus estimate of 1.95 million tonnes.
"The higher-than-expected inventory is likely due to surprisingly strong production, which surged 22 per cent, month-on-month, to 2.03 million tonnes, making it the highest ever monthly production in Malaysia," said the research house in a note Thursday.
It also said the peak production period may have arrived earlier than expected in Aug-Sept this year instead of the usual Oct-Nov period.
Kenanga Research house said its top pick was Sime Darby Bhd with the target price of RM10.10 due to the potential spin off exercise within the latter's business divisions.
It maintained a 'Market Perform' on IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Felda Global Ventures with the target price of RM5.30, RM23.80 and RM4.00, respectively.
Affin Investment Bank opined that the prospects of further increases in inventory and record-high US and South American soybean crops should cap any rebound in crude palm oil (CPO) prices in the short-term.
"Long-term fundamentals remain in place, however, we believe investors who are willing to look beyond the first half of 2015 will see reasonable returns on their investments," it said.
Meanwhile, Maybank Kim Eng Research said strong palm oil production and high August inventories may lead to uninspiring CPO price movement till November.
"Zero export duty and present low CPO price vis-a-vis gas oil prices can help stimulate demand over the next two to three months.
"CPO price recovery to RM2,400 per tonne may only be seen from November 2014," it said, maintaining its neutral view on the sector.
It, however, recommended a selective 'Buy' call on Wilmar International Ltd, Sime Darby Bhd, Boustead Plantation Bhd, Sarawak Oil Palms Bhd and advocated a 'Sell' on IOI Corp Bhd and TH Plantations Bhd.
Kenanga Research said the country's palm oil stocks of 2.05 million tonnes in August 2014 was above expectation and five per cent higher than the consensus estimate of 1.95 million tonnes.
"The higher-than-expected inventory is likely due to surprisingly strong production, which surged 22 per cent, month-on-month, to 2.03 million tonnes, making it the highest ever monthly production in Malaysia," said the research house in a note Thursday.
It also said the peak production period may have arrived earlier than expected in Aug-Sept this year instead of the usual Oct-Nov period.
Kenanga Research house said its top pick was Sime Darby Bhd with the target price of RM10.10 due to the potential spin off exercise within the latter's business divisions.
It maintained a 'Market Perform' on IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Felda Global Ventures with the target price of RM5.30, RM23.80 and RM4.00, respectively.
Affin Investment Bank opined that the prospects of further increases in inventory and record-high US and South American soybean crops should cap any rebound in crude palm oil (CPO) prices in the short-term.
"Long-term fundamentals remain in place, however, we believe investors who are willing to look beyond the first half of 2015 will see reasonable returns on their investments," it said.
Meanwhile, Maybank Kim Eng Research said strong palm oil production and high August inventories may lead to uninspiring CPO price movement till November.
"Zero export duty and present low CPO price vis-a-vis gas oil prices can help stimulate demand over the next two to three months.
"CPO price recovery to RM2,400 per tonne may only be seen from November 2014," it said, maintaining its neutral view on the sector.
It, however, recommended a selective 'Buy' call on Wilmar International Ltd, Sime Darby Bhd, Boustead Plantation Bhd, Sarawak Oil Palms Bhd and advocated a 'Sell' on IOI Corp Bhd and TH Plantations Bhd.