Plantation, O&G and consumer sectors to close FY21 with strong financial performance

The tech sector will see continued strong demand for semiconductors as shortage of chips is expected to continue into next year 

By NUR HANANI AZMAN / Pic By MUHD AMIN NAHARUL

ANALYSTS expect plantation, oil and gas (O&G), consumer and technology sectors to have better financial performance for the rest of 2021 (FY21) as the economy moves into recovery mode. 

MIDF Research VP and head of research Imran Yassin Md Yusof said the strong rise in crude palm oil price is expected to benefit the plantation players this year. 

“However, we should also note that this will be slightly moderated by the lower production. Nevertheless, demand continues to be robust domestically and from India and China. 

“This is especially as the economy starts to reopen globally which is expected to increase demand from the hospitality industry,” he told The Malaysian Reserve (TMR). 

Imran Yassin stressed that production will eventually normalise as the factors such as low supply of workers will gradually dissipate as the economy and border reopens. 

For O&G, he said the high crude oil prices where Brent has surpassed the US$85 (RM353.60) per barrel mark will be the main driver for the industry. 

“In addition, natural gas prices have also continued to be on the uptrend. This is expected to lead to higher capital expenditure from oil majors which will benefit the support services players. We expect the number of jobs will increase next year. 

“But the high demand could be short term due to the coming winter months. Demand could normalise sooner than expected. Meanwhile, more supply could potentially come on stream which may limit the price increase in the medium term,” he added. 

He believed the technology sector will see continued strong demand for semiconductors especially as the global economy recovers. 

“Shortage of chips which is well known is expected to continue into next year and this will keep demand to be strong. Meanwhile, technology adoption continues to be at a very fast rate, accelerated by the pandemic. 

“At the moment, the question is whether supply can be expanded fast enough to meet the growing demand. Other than that, we do not believe that there will be an overcapacity problem next year,” he reckoned. 

Imran Yassin said demand for gloves had been robust especially in the first half of this year and this had been matched with high average selling price (ASP). 

“The challenge is ASP is normalising and this may make the ability to repeat this year’s performance difficult. 

“The sector is also becoming more competitive with a slew of new entrants.” he said. 

Echoing the same sentiment, Malacca Securities Sdn Bhd head of research Loui Low noticed that the healthcare sector will still be good. 

But for gloves, he opined that it will be quarter-on-quarter down and it should not perform better than previously. 

“Commodity sectors related include steel, cement and aluminium may be benefitted as the property market cycle scenario. 

“Consumer sector is quite scattered. Automotive may be recovering because people are starting to buy cars,” he told TMR. 

Low said reopening of more economic activities in controlled and careful manner among the factor contributors.