16/10/2015 (Borneo Post) - The dry spell which hit Sabah in the past five months could have a negative impact on the production of fresh fruit bunch (FFB) by plantation players with exposure in the state.

Following a visit to several oil palm estates in Lahad Datu recently, RHB Research Institute Sdn Bhd (RHB Research) in a report yesterday said there were many palm oil trees which have unopened spears.

Besides, the research firm noted there were water shortages at Lahad Datu and Sandakan as well as the state which has experienced minimal rainfall in the past few months.

Given the unfavourable weather conditions, RHB Research believed the phenomenon could affect the productivity in particular the production of FFB of large plantation players in Sabah from first half of 2016 (1H16) onwards.

The research firm further believed that if the dry spell prolonged, it could trigger an upward movement for the crude oil palm (CPO) price.

RHB Research observed plantation players such as Genting Plantations Bhd, IJM Plantations Bhd, IOI Corporation Bhd, Felda Global Ventures Holdings Bhd and Hap Seng Plantations Holdings Bhd – among others – could encounter less-than-favourable FFB production from their Sabah estates next year.

In spite of this development, the research firm outlined IJM Plantations as its top pick in the plantation sector due to the company’s strong FFB production growth, which should offset the effects of the current sober CPO price environment.

Nonetheless, RHB Research maintained its neutral rating on the plantation sector at this juncture.

The research firm also reiterated its CPO price assumption of RM2,350 per tonne for 2015 and RM2,500 per tonne for 2016.