MARKET DEVELOPMENT
Plantations Sector Sees Mixed Bag of 1Q13 Performance
Plantations Sector Sees Mixed Bag of 1Q13 Performance
08/06/2013 (Borneo Post) - Plantation sector players saw a mixed bag for recently concluded first quarter 2013 (1Q13) results season, with marginally higher outperformers.
According to Maybank Research, the research arm of Maybank Investment Bank Bhd, the outperformance was largely due to higher property and downstream earnings.
Going forward, stronger 2H13 earnings was expected in anticipation of higher crude palm oil (CPO) average selling price (ASP) at RM2,600 per tonne and seasonally higher fresh fruit bunch (FFB) production.
Outperformers to underperformers ratio was two to one with outperformers include players such as KLK, IOI Corp and Genting Plantations.
The three performed better than expected contributions from either their property development activities (due to strong demand of Klang Valley and Iskandar properties) or downstream divisions (oleo-chemical and specialty fats).
“Their downstream operations benefited from low feedstock costs which boosted operating margins. Amongst the purer upstream players, only TSH Resources outperformed on stunning 43 per cent year on year (y-o-y) recovery in FFB output,” noted the research house.
Underperformers however were TH Plantations Bhd (TH Plant) and Sarawak Oil Palm Bhd (SOP) with TH Plant’s results dragged by higher-than-expected cost of production (per tonne) following aggressive acquisition of young estates from Lembaga Tabung Haji and Weida at lofty prices while generating little returns in the short term given their relatively low oil yield per hectare.
SOP under-performed on lower-than-expected CPO ASP, relatively higher cost of production (per tonne), and significant new planted areas that came into maturity.
In general, purer upstream plantation players suffered a double blow from weak CPO ASP achieved and seasonally low FFB output in 1Q13.
Nonetheless, this weak upstream earnings were largely within expectations, the research house highlighted.
Relatively higher cost producers like Felda Global (with its high percentage of old trees and annual lease payment to the government), Ta Ann and TH Plant (given their relatively high percentage of young trees) had an overall weak set of results.
According to Maybank Research, the research arm of Maybank Investment Bank Bhd, the outperformance was largely due to higher property and downstream earnings.
Going forward, stronger 2H13 earnings was expected in anticipation of higher crude palm oil (CPO) average selling price (ASP) at RM2,600 per tonne and seasonally higher fresh fruit bunch (FFB) production.
Outperformers to underperformers ratio was two to one with outperformers include players such as KLK, IOI Corp and Genting Plantations.
The three performed better than expected contributions from either their property development activities (due to strong demand of Klang Valley and Iskandar properties) or downstream divisions (oleo-chemical and specialty fats).
“Their downstream operations benefited from low feedstock costs which boosted operating margins. Amongst the purer upstream players, only TSH Resources outperformed on stunning 43 per cent year on year (y-o-y) recovery in FFB output,” noted the research house.
Underperformers however were TH Plantations Bhd (TH Plant) and Sarawak Oil Palm Bhd (SOP) with TH Plant’s results dragged by higher-than-expected cost of production (per tonne) following aggressive acquisition of young estates from Lembaga Tabung Haji and Weida at lofty prices while generating little returns in the short term given their relatively low oil yield per hectare.
SOP under-performed on lower-than-expected CPO ASP, relatively higher cost of production (per tonne), and significant new planted areas that came into maturity.
In general, purer upstream plantation players suffered a double blow from weak CPO ASP achieved and seasonally low FFB output in 1Q13.
Nonetheless, this weak upstream earnings were largely within expectations, the research house highlighted.
Relatively higher cost producers like Felda Global (with its high percentage of old trees and annual lease payment to the government), Ta Ann and TH Plant (given their relatively high percentage of young trees) had an overall weak set of results.