MARKET DEVELOPMENT
January Stockpiles Will Support Q1 2017 CPO Prices At RM3,000
January Stockpiles Will Support Q1 2017 CPO Prices At RM3,000
13/02/2017 (The Star) - The Malaysian Palm Oil Board’s (MPOB) January 2017 stockpile, which was the lowest January levels in six years, will continue to be supportive of 1Q17 CPO prices at around RM3,000 per tonne, said Maybank Investment Bank Research.
The research house said on Monday that while its 12-month fundamental view for the sector remained Neutral, it advocates a trade in 1Q17 as the release of upcoming 4Q16 results, which is expected to be strong, is set to lift overall investment sentiment.
“We prefer Indonesia planters over Malaysia given their cheaper valuations and faster yield recovery,” it said in a note.
The research house has a Buy call on Boustead Plantations Bhd (BPLANT), Sarawak Oil Palms Bhd (SOP), Bumitama Agri Ltd (BAL), Astra Agro Lestari (AALI), London Sumatra Indonesia Tbk (LSIP) and Tunas Baru Lampung Tbk PT (TBLA).
MPOB’s January 2017 inventory was also lower on-month at 1.54 million MT, representing an 8% decline, but came in above street’s estimates of 1.49 million MT, it noted.
The lower stockpile came amid a seasonal decline in January’s production to 1.28 million MT while absolute production matched exports at 1.28 million MT.
Meanwhile, domestic consumption fell 22% on-month to 0.19 million MT, down 9% on-year, but was higher than imports of 0.07 million MT, which resulted in a drawdown of inventories.
The research house maintained that yields will likely normalise from 2Q17.
“We continue to advocate taking a trade in 1Q17 ahead of the release of planters’ 4Q16 results as investors’ sentiment could be briefly lifted by the anticipated relatively good earnings, boosted by high CPO and palm kernel prices.
“But we will be cautious from 2Q17 in anticipation of strong yield recovery which will take CPO price to a bottom sometime in 3Q17,” it said.
The research house expects the outlook for 2017 to largely be a mirror image of 2016 with a year of two halves.
The anticipated strong yield recovery in 2H17 should lead to lower CPO price, it said.
The research house said on Monday that while its 12-month fundamental view for the sector remained Neutral, it advocates a trade in 1Q17 as the release of upcoming 4Q16 results, which is expected to be strong, is set to lift overall investment sentiment.
“We prefer Indonesia planters over Malaysia given their cheaper valuations and faster yield recovery,” it said in a note.
The research house has a Buy call on Boustead Plantations Bhd (BPLANT), Sarawak Oil Palms Bhd (SOP), Bumitama Agri Ltd (BAL), Astra Agro Lestari (AALI), London Sumatra Indonesia Tbk (LSIP) and Tunas Baru Lampung Tbk PT (TBLA).
MPOB’s January 2017 inventory was also lower on-month at 1.54 million MT, representing an 8% decline, but came in above street’s estimates of 1.49 million MT, it noted.
The lower stockpile came amid a seasonal decline in January’s production to 1.28 million MT while absolute production matched exports at 1.28 million MT.
Meanwhile, domestic consumption fell 22% on-month to 0.19 million MT, down 9% on-year, but was higher than imports of 0.07 million MT, which resulted in a drawdown of inventories.
The research house maintained that yields will likely normalise from 2Q17.
“We continue to advocate taking a trade in 1Q17 ahead of the release of planters’ 4Q16 results as investors’ sentiment could be briefly lifted by the anticipated relatively good earnings, boosted by high CPO and palm kernel prices.
“But we will be cautious from 2Q17 in anticipation of strong yield recovery which will take CPO price to a bottom sometime in 3Q17,” it said.
The research house expects the outlook for 2017 to largely be a mirror image of 2016 with a year of two halves.
The anticipated strong yield recovery in 2H17 should lead to lower CPO price, it said.