MARKET DEVELOPMENT
CIMB Research Expects Plantations to Report Weaker Earnings
CIMB Research Expects Plantations to Report Weaker Earnings
05/08/2015 (The Star) - CIMB Equities Research expects plantation companies to report weaker earnings on a year-on-year basis in the upcoming results season due to lower crude palm oil (CPO) prices.
“We advise investors to be selective and we like First Resources and Genting Plantations for long-term growth,” it said in a report on Tuesday.
CIMB Research said a survey of 20 Malaysian planters by the CIMB Futures team suggests that CPO production in July 2015 was 2.6% higher on-month and 7% on-year at 1.81 million tonnes.
It said the rise in output compared to a year ago was due to improving fresh fruit bunches (FFB) yields as estates recovered from biological tree stress, flooding in late-2014 and drought in early 2014.
The survey indicates that Sarawak estates posted the strongest jump in output of around 10% on-month. Peninsular Malaysia posted a 4% on-month increase in output.
Sabah estates were the weakest performer, registering a 7% decline in output, possibly due to the lower rainfall in the state. Malaysia palm oil exports fell by 6-9% on-month based on cargo surveyors, Intertek and SGS estimates. This was due mainly to weaker demand from India and the EU.
“We have assumed domestic consumption of 262,000 tonnes (the six-month average) and flattish mom imports for July 2015. Based on these assumptions, we estimate that Malaysian palm oil inventories could rise by 4% on-month and 33% on-year to 2.4 million tonnes as at end-July 2015,” said the CIMB Research.
“We advise investors to be selective and we like First Resources and Genting Plantations for long-term growth,” it said in a report on Tuesday.
CIMB Research said a survey of 20 Malaysian planters by the CIMB Futures team suggests that CPO production in July 2015 was 2.6% higher on-month and 7% on-year at 1.81 million tonnes.
It said the rise in output compared to a year ago was due to improving fresh fruit bunches (FFB) yields as estates recovered from biological tree stress, flooding in late-2014 and drought in early 2014.
The survey indicates that Sarawak estates posted the strongest jump in output of around 10% on-month. Peninsular Malaysia posted a 4% on-month increase in output.
Sabah estates were the weakest performer, registering a 7% decline in output, possibly due to the lower rainfall in the state. Malaysia palm oil exports fell by 6-9% on-month based on cargo surveyors, Intertek and SGS estimates. This was due mainly to weaker demand from India and the EU.
“We have assumed domestic consumption of 262,000 tonnes (the six-month average) and flattish mom imports for July 2015. Based on these assumptions, we estimate that Malaysian palm oil inventories could rise by 4% on-month and 33% on-year to 2.4 million tonnes as at end-July 2015,” said the CIMB Research.