KUALA LUMPUR – Led by stronger crude palm oil (CPO) prices, plantation companies are expected to post another impressive earnings quarter, especially the small-mid cap players given their CPO sales are done at spot prices, said Public Investment Bank Bhd.
It said all plantation companies with the exception of TSH Resources have posted a decline in the third quarter fresh fruit bunches due to the acute labour shortage situation in the harvesting fields.
“Our palm oil industry currently requires about 75,000 foreign workers in the harvesting fields, but with the Malaysian government’s approval of 32,000 foreign plantation workers to be brought in gradually, we expect to see positive impact somewhere in the first quarter of 2022,” it said in a note today.
In the meantime, it said the plantation companies are expected to see strong quarterly earnings report cards.
Yesterday, industrial regulator Malaysian Palm Oil Board released its monthly data, which saw Malaysian palm oil inventories in October rising more than expected as exports tumbled and production increased to a 14-month high.
CPO futures retreated to the current level of RM4,932 per month after hitting last month’s peak at RM5,017 per month.
Commenting on the lower exports data, CGS CIMB said it could be due to less competitive pricing against Indonesian palm products.
“Palm oil exports fell 11% month-on-month (m-o-m) and 15% year-on-year (y-o-y) to 1.4 million tonnes in October 2021.
“The decline arose from weaker exports to India (-17% m-o-m), European Union (-22% m-o-m), Pakistan (-6% m-o-m) and the United States (-58% m-o-m),” said analyst Ivy Ng Lee Fang.
Both Public Investment and CGS CIMB set a “neutral” call on the plantation sector.
Maybank Kim Eng, however, set a “positive” call on the sector.
“CPO price will stay relatively lofty till the first quarter of 2022 on supply concerns as the industry is likely to enter into low production cycle for the next three months.
“Given better-than-expected CPO average selling price (ASP) in recent months, we now raise our 2021 CPO ASP forecast to RM4,300 per tonne (from RM3,500 per tonne), and 2022 ASP to RM3,200 per tonne (from RM2,800 per tonne),” Maybank Kim Eng said in a note today. – Bernama, November 11, 2021
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