05/10/05 (The Star) - A steady uptrend in crude palm oil (CPO) pricesfrom last month has lifted sentiment on plantation stocks. Also, there arehopes that palm oil-based biodiesel - new demand in the making - willsupport CPO prices at a high level in the future.

Spot CPO prices touched RM1,480 a tonne yesterday after a sustained risefrom RM1,340 early last month. Current prices offer optimism that if theyhold, plantation companies will be able to post strong earnings in thefourth quarter.

Stemming from that, plantation stocks have climbed in the last one monthto their year's highs or are hovering close to such levels.

Golden Hope rose six sen to regain its year's high of RM4 yesterday, alevel it had briefly touched last month. It rose from around RM3.40 inAugust.

It is expected that Golden Hope would be selected as a partner of theMalaysian Palm Oil Board (MPOB) to set up a plant to produce biodiesel.Kumpulan Fima was also expected to become a partner of MPOB in a similarproject, industry sources said.

Asiatic climbed four sen to its year's high of RM2.37 yesterday. It hadspent several months at around RM1.70 early in the year until last month,when a foreign brokerage report on it led to a surge of demand for thestock.

Other stocks that are also at or close to their year's highs, but whichdid not go up yesterday, include IOI Corp and Kuala Lumpur Kepong.

Among penny stocks, TH Group declined to 59.5 sen from around 70 sen earlyin the year. This is not surprising as demand for stocks has generallyshifted to big caps. Even so, it is profitable. TH Group earned anoperating profit of RM29mil in its plantations division in the first halfthis year and it paid a gross dividend of three sen a share, a gross yieldof 5%, last year.

"I've turned bullish on plantation stocks," said a fund manager, adding:"Palm oil prices have been steadily going up. It could soon hit RM1,500and it may even go up to RM1,600."

Palm oil can be used for a wide range of consumer products from cookingoil to oleochemicals. Now, new demand for it as biofuel will sustain itsprices.

A caveat in all these is that the costs for plantation companies have goneup.

These higher costs include fertilisers as well as diesel used by trucks inthe plantations.