KUALA LUMPUR: Research firms are taking a neutral stance on the plantation sector, given that share prices in the sector have not moved much despite the recovery in crude palm oil (CPO) prices in recent weeks.
In its note, RHB Research said it continues to expect a gradual improvement in the Malaysian CPO stocks in the coming months, as productivity increases amidst expectations of a moderate El Nino phenomena.
“Our CPO price assumption of RM3,900 per tonne for 2023 is unchanged. We are, however, in the midst of revising our 2024 price assumption of RM3,500 per tonne, depending on severity of El Nino.
“While a higher CPO price environment would benefit purer planters more than integrated players, the purer Malaysian players would stand to benefit more than those with Indonesian estates, given the widening price gap,” it said, naming Kuala Lumpur Kepong (KLK), IOI Corp and Wilmar International as its top picks.
At the same time, Maybank Investment Research said the market is still anticipating improving CPO production prospects as the industry enters into its seasonal peak output period in the second half of the year.
The anticipated production recovery is also premised on the recent influx of guest workers since end-2022.
It also noted that weather development in the United States (US), Malaysia and Indonesia would be closely monitored by the market as it would continue to drive price volatility and fresh price discoveries for CPO and other vegetable oils.
“Currently, CPO is trading at a huge discount to US soybean oil, but still slightly below historical averages against Argentina’s soybean oil and Germany’s rapeseed oil.
“The fragile global macroeconomic outlook will continue to be seen as a headwind for CPO price in the immediate term, capping the upside of CPO price,” said the research firm, naming KLK, First Resources and Bumitama Agri as its top picks for the sector. – BERNAMA
