13/10/2022 (The Edge Markets), Kuala Lumpur - CGS-CIMB Securities has maintained its “Neutral” rating on the Agribusiness  sector and said Malaysian palm oil stocks climbed to 2.31 million tonnes as at end-Sep 2022 —highest since Oct 2019 — spot on against house forecast but above consensus’.

In a note on Tuesday (Oct 11), the research house projected palm oil stocks to rise 8.2% m-o-m to 2.5 million tonnes by end-Oct 2022F, due to Indonesia’s more competitive export tax versus Malaysia

The research house’s Ivy Ng Lee Fang said she believes crude palm oil (CPO) prices could trade in the RM3,500-4,500/tonne range in Oct 2022F.

She said CPO prices is likely to stay weak in Oct due to competition from higher Indonesian palm oil exports.

“However, CPO price downside will be capped by its attractive discount against competing edible oils.

“We project upstream planters in Malaysia to post weaker q-o-q and y-o-y 3Q22F net profits due to lower CPO prices,” she said.

Ng said the average Malaysian Palm Oil Board (MPOB) CPO price fell 39.1% q-o-q and 9.6% y-o-y in 3Q22 to RM3,990/tonne, which more than offset the 13.5% q-o-q and 2.7% y-o-y rise in CPO production achieved by Malaysian estates in 3Q22.

“These, coupled with higher operating costs due to the hike in the minimum wage in Malaysia to RM1,500 per month effective May 1, 2022, higher fertiliser costs, as well as the windfall/Cukai Makmur tax, are likely to

dent planters’ 3Q22 earnings.

“The downside risks for planters are supported by the sector’s dividend yields of 5.2% and low P/E valuations of 11.8x for 2022,” she said.

https://www.theedgemarkets.com/article/cgscimb-expects-malaysian-planters-post-weaker-3q-earnings