MARKET DEVELOPMENT
Planters expected to post better 1Q performance — CGS-CIMB
Planters expected to post better 1Q performance — CGS-CIMB
09.05.2022 (www.theedgemarkets.com) - KUALA LUMPUR (May 9): Malaysian plantation companies are expected to enjoy higher year-on-year (y-o-y) earnings for the first quarter of 2022 (1Q22), on the back of higher crude palm oil (CPO) prices, said CGS-CIMB Securities Sdn Bhd.
It said the average CPO price increased by 55%, while CPO output grew by 4%.
“On a quarter-on-quarter (q-o-q) basis, the 20% rise in CPO prices to RM6,051 per tonne could be offset by lower production (-20% q-o-q) and higher windfall tax,” it said in a note on Monday (May 9).
The research house said a survey of planters by the CGS-CIMB Futures team revealed that Malaysia’s CPO output had likely increased by 2.9% month-on-month (m-o-m) to 1.45 million tonnes in April 2022.
“Meanwhile, palm oil exports likely fell 15% m-o-m and 20.4% y-o-y to 1.08 million tonnes, based on export statistics by cargo surveyors Intertek (-16% m-o-m) and AmSpec Malaysia (-14% m-o-m),” it added.
CGS-CIMB opined that the lower exports could be due to higher palm oil shipments from Indonesia after the country abolished its domestic market obligation ruling on March 20, 2022, where exporters were required to sell 30% of their planned exports in the domestic market.
“We estimate that Malaysia’s palm oil inventory probably grew by 12.6% m-o-m and 7.3% y-o-y to 1.66 million tonnes at end-April 2022.
“The likely m-o-m rise in the stock level is greater compared to historical trends of Malaysia’s April palm oil stock movements,” said CGS-CIMB.
The research house's estimate of the April 2022 palm oil stock level in Malaysia of 1.66 million tonnes is 15% below the 10-year historical April average of 1.96 million tonnes, suggesting that supplies remained tight as of end-April. The official figures will be released on Tuesday.
On Indonesia’s palm oil export ban, CGS-CIMB said the move may only last for a month due to potential storage and logistic issues in the country as fresh fruit bunches harvested from estates cannot be stored.
“A prolonged ban on Indonesian palm oil [exports] could lead to demand destruction caused by higher palm oil prices, as well as insufficient supply of palm oil in the global market,” it said.
It added that another key event to watch is the speed of foreign worker recruitment by Malaysian palm oil producers post Hari Raya holidays, a move that would help raise productivity of Malaysian estates.