East Malaysia-based planters benefit from CPO rally, lower production


THE recent spike in crude palm oil (CPO) prices, backed by low production numbers, are set to benefit plantation companies with assets located in East Malaysia.

In November, Malaysia’s CPO production fell 16.6% year-on-year and 14.4% month-on-month (MoM) to 1.54 million tonnes.

The decline was seen in palm oil-producing states including Sarawak, whose product ion dropped 17.8% MoM to 355,625 tonnes. Peninsular Malaysia and Sabah saw declines of 14.6% and 10.7% respectively.

“We believe the bullish outlook in CPO price is a reflection of the anticipated lower palm oil production and stockpiles, compounded by a rally in soybean oil prices and healthy demand,” BIMB Securities Sdn Bhd wrote in a recent note. The research house forecasts CPO prices for the first half of 2020 (1H20) to trade higher between RM2,700 per tonne and RM2,900 per tonne, compared to a range of RM1,853 per tonne to RM2,153 per tonne in 1H19.

“In our view, near-term price increases could be capped by the narrowing of the price differential between CPO and soybean oil, but the anticipation of tight supply of global vegetable oil dictates potentially higher prices going forward, with CPO prices possibly averaging about RM2,480 per tonne in 2020,” it said.

The Bursa Malaysia Plantation Index rose 1.8% yesterday to 7,849.64, the biggest move since Dec 9, when the gauge increased 1.8%, while the benchmark FTSE Bursa Malaysia KLCI added 0.3% to close at 1,615.67.

Sarawak Plantation Bhd
Sarawak Plantation jumped 3.4% or seven sen to RM2.11 at market close yesterday, bringing its market capitalisation to RM590.8 million.

The stock has advanced 24% in the past 52 weeks, witnessing a 7.7% increase in the past five days and 24% in the past 30 days.

Analysts surveyed by Bloomberg have a consensus one-year price target of RM2.42 on the counter, having raised the target by 47% in the past three months.

Sarawak Oil Palms Bhd
At 5pm yesterday, Sarawak Oil Palms advanced 4.7% or 19 sen to RM4.21 as its trading volume doubled the average. The group’s market capitalisation stood at RM2.04 billion.

The stock has advanced 108% in the past 52 weeks and rose 16% in the past five days. The analyst consensus on the one-year price target for the company is RM3.40.

Rimbunan Sawit Bhd
Rimbunan Sawit surged 13.9% or five sen to 45 sen yesterday, as trading volume of the stock was double the average for that time of the day.

The counter has gained 200% in the past 52 weeks and risen 36% in the past five days.

Ta Ann Holdings Bhd
Ta Ann ended yesterday’s trading 2% or seven sen higher at RM3.56, valuing the group at RM1.58 billion.

The stock has advanced 34% in the past 52 weeks and 9.5% in the past five days. Analysts have a consensus one-year price target of RM3.53 on the counter and have raised the target by 38% in the past three months.

Jaya Tiasa Holdings Bhd
Jaya Tiasa climbed 7.5% or seven sen to RM1.07 at 5pm yesterday. The stock has advanced 130% in the past 52 weeks and 23% in the past week.

IJM Plantations Bhd
IJM Plantations leaped 7.9% or 18 sen to RM2.45 yesterday, valuing the group at RM2.16 billion.

The stock has advanced 88% in the past 52 weeks. The analyst consensus one-year price target for the company is RM1.95.