21/04/2012 (The Star) - Plantation stocks dominated Bursa Malaysia gainers' list yesterday on strong expectations that the price of crude palm oil (CPO) will jump as global reserves of edible oils dwindle to a 35-year low.

At 5pm yesterday, CPO for third-month delivery was down RM21 to RM3,456 per tonne, marginally lower than the day before. However, CPO prices have been on an uptrend since early this year, recording more than 7% increase year-to-date.

“Futures will rise to RM4,000 a tonne by June 30 as availability tightens,” Bloomberg quoted Dorab Mistry, director at Godrej International Ltd, as saying.

He added that production in Malaysia would slow in the first half, compared with a year earlier, while drought in South America curbs soybean crops, also used in cooking oils.

Mistry: ‘Futures will rise to RM4,000.’

The newswire said Mistry had correctly forecast last year that prices would bottom at about RM2,800.

Mistry said Palm oil may gain 15% by the end of June, restating a year-long call for a rally to RM4,000 a tonne after prices dipped.

“My price forecasting is based on fundamentals of supply and demand and these have not changed. In fact, CPO production is underperforming more than my model had suggested,” he said.

Jaya Tiasa Holdings Bhd shares rose 29 sen to close at RM9.97 yesterday, the highest level in almost 15 years. Kuala Lumpur Kepong Bhd jumped 32 sen to RM24.12, and Ta Ann Holdings Bhd ended 6 sen higher at RM6.56 after hitting an intra-day high of RM6.74.

However, there was little excitement shown by some plantation stocks. IOI Corp Bhd fell two sen to RM5.34 while Genting Plantations Bhd dipped one sen to settle at RM9.59. Sime Darby Bhd remained unchanged at RM9.89.

“We are upgrading our 2012 CPO assumption from RM3,000 per tonne to RM3,200 a tonne due to the negative South American soybean supply situation and the estimated reduction in North American planted acreage and potential tree stress that might affect Malaysian production in 2012,” ECM Libra Investment Research said.

The research house, however, said it was maintaining its 2013 CPO assumption of RM2,800 a tonne. “We expect strong prices to continue in second quarter of 2012, before correcting slightly in the second half of 2012.”

ECM Libra also pointed out that 2012 could see potential tree stress where yields are generally lower.

Separately, Maybank Investment Bank said Ta Ann was its top pick among the plantation stocks and maintained a buy call on the counter.

It said Ta Ann's proposed a one-for-five bonus issue not only helps to improve liquidity but it would help to “recapitalise” its share base as its seeks to achieve sustainable growth in the long run.