MARKET DEVELOPMENT
Weak Plantation Results Seen on Low Palm Oil Price
Weak Plantation Results Seen on Low Palm Oil Price
14/04/2015 (The Star) - Malaysian palm oil players are expected to release weak quarterly results for the period ended March 31, as companies like IOI Corp Bhd and KL Kepong Bhd struggled with production setbacks and lower crude palm oil (CPO) selling prices, analysts said.
In line with the dim expectations, most research houses have a “neutral” call on the sector.
CPO output in March jumped 7% to 1.87 million tonnes, faster than what most analysts had expected, on higher fresh fruit bunches (FFB) production that surged 33% month-on-month.
CIMB Research said the larger-than-expected palm oil inventory could put a lid on near-term upside for CPO price.
“However, this is partially negated by the higher-than-expected jump of 24% in palm oil exports for the first 10 days of April against the same period in March despite the higher export tax.
“The key takeaway from the statistics is that investors will need to brace for weaker first quarter 2015 results from the palm oil producers due to the negative effect of weaker output and selling prices,” said CIMB Research in a sector update.
In terms of price, average CPO price declined 16% to RM2,250 per tonne in the first quarter.
For this month, the research house projected that palm oil stocks would be flattish.
“We believe that the progress of Indonesia’s biodiesel implementation, crude oil price and weather will be the key price determinants in the near term.
“We maintain our average CPO price forecast of RM2,460 per tonne for this year and advise investors to be selective in their stock picks,” it said with top picks including First Resources, PT Astra Agro Lestari Tbk (AALI) and SIMP.
Echoing the sentiment, Kenanga Research believed the news of higher-than-expected inventory in March would further depress CPO price sentiment, although the market had likely priced in the expectation of better CPO production over the last few days.
“Given our expectation of higher inventory for this month, declining soybean prices and low crude oil prices, we think that CPO prices could continue to trade in the RM2,100-RM2,200 range in the near term.
“However, while crude oil prices remain low, we note that prices have recently rebounded and appear to be stabilising. Hence we are comfortable with our average estimates of RM2,200 per tonne in 2015,” it said.
Updating Indonesia’s palm oil sector, Public Investment Bank (IB) said the main global exporter of CPO would implement a US$50 per tonne export levy to be imposed on CPO shipments, and a US$30 per tonne export levy on processed palm oil products starting this month to nurture biodiesel growth and usage.
It explained that these levies would be used to fund biodiesel subsidies (compensating the price differences between regular diesel and biodiesel), replanting as well as research and human resources development in the palm oil industry.
And this new policy is in addition to the CPO export tax.
“However, when the reference CPO price surpasses the threshold – implying that the CPO export tax tariff rises from 0%, then the new levy will be taken from the export tax that is paid by palm oil exporters.
“As such, exporters will not face additional costs when the export tax returns,” it said.
Public IB’s top picks are Genting Plantations and Ta Ann.
In line with the dim expectations, most research houses have a “neutral” call on the sector.
CPO output in March jumped 7% to 1.87 million tonnes, faster than what most analysts had expected, on higher fresh fruit bunches (FFB) production that surged 33% month-on-month.
CIMB Research said the larger-than-expected palm oil inventory could put a lid on near-term upside for CPO price.
“However, this is partially negated by the higher-than-expected jump of 24% in palm oil exports for the first 10 days of April against the same period in March despite the higher export tax.
“The key takeaway from the statistics is that investors will need to brace for weaker first quarter 2015 results from the palm oil producers due to the negative effect of weaker output and selling prices,” said CIMB Research in a sector update.
In terms of price, average CPO price declined 16% to RM2,250 per tonne in the first quarter.
For this month, the research house projected that palm oil stocks would be flattish.
“We believe that the progress of Indonesia’s biodiesel implementation, crude oil price and weather will be the key price determinants in the near term.
“We maintain our average CPO price forecast of RM2,460 per tonne for this year and advise investors to be selective in their stock picks,” it said with top picks including First Resources, PT Astra Agro Lestari Tbk (AALI) and SIMP.
Echoing the sentiment, Kenanga Research believed the news of higher-than-expected inventory in March would further depress CPO price sentiment, although the market had likely priced in the expectation of better CPO production over the last few days.
“Given our expectation of higher inventory for this month, declining soybean prices and low crude oil prices, we think that CPO prices could continue to trade in the RM2,100-RM2,200 range in the near term.
“However, while crude oil prices remain low, we note that prices have recently rebounded and appear to be stabilising. Hence we are comfortable with our average estimates of RM2,200 per tonne in 2015,” it said.
Updating Indonesia’s palm oil sector, Public Investment Bank (IB) said the main global exporter of CPO would implement a US$50 per tonne export levy to be imposed on CPO shipments, and a US$30 per tonne export levy on processed palm oil products starting this month to nurture biodiesel growth and usage.
It explained that these levies would be used to fund biodiesel subsidies (compensating the price differences between regular diesel and biodiesel), replanting as well as research and human resources development in the palm oil industry.
And this new policy is in addition to the CPO export tax.
“However, when the reference CPO price surpasses the threshold – implying that the CPO export tax tariff rises from 0%, then the new levy will be taken from the export tax that is paid by palm oil exporters.
“As such, exporters will not face additional costs when the export tax returns,” it said.
Public IB’s top picks are Genting Plantations and Ta Ann.