PLANTATIONS : CIMB Research retains Neutral outlook on plantations
KUALA LUMPUR: CIMB Equities Research is maintaining its Neutral sector rating for the plantations sector and continues to prefer planters that offer strong output growth prospects to offset weaker prices.
It said on Wednesday CPO prices have fallen by 2% in the past month to RM2,136 per tonne due to the weaker demand for crude palm oil (CPO).
“The average CPO price achieved in the January-November of 2014 (RM2,402.5 per tonne) was in line with our full-year projection of RM2,390 per tonne,” it said.
CIMB Research said its futures team carried out a survey of 19 Malaysian planters and the findings revealed that CPO production in November probably fell 5% on-month to 1.8 million tonnes.
This could be due to: (1) seasonal factors, and (2) tree stress from the drought experienced in Peninsular Malaysia in 1Q14.
CIMB Research said the survey revealed that Peninsular Malaysia estates posted the biggest decline in CPO production (-16% to -6% on-month) while Sabah may be the best-performing region for output (-9% to +8% on-month).
Malaysian palm oil exports were weak, falling by around 10% on-month in Nov, based on cargo surveyor reports by Intertek (-9.8%) and SGS (-10.5%). This was due to weaker exports to India, Pakistan (lower post-festival demand and competition from other oilseeds) and Europe (due to the onset of winter).
“We have assumed domestic consumption of 294,000 tonnes and imports of 83k tonnes in November. Based on the above assumptions, we project that palm oil stocks at end-November will rise by 7% on-month to 2.3 million tonnes," it said.
MPOB is set to release the official figures on Dec 10.
CIMB Research said the variance in its survey from actual MPOB stock figures since it started producing the monthly stock preview in August has been 0% to 5%.
“The key takeaway from our survey is the smaller-than-expected drop in output. This, combined with weaker-than-expected exports, is likely to lift end-November Malaysian palm oil inventory to a 21-month high of 2.31 million tonnes.
“We view this as negative for CPO prices in the short term as it indicates ample stock in the producing palm oil market.
“Malaysian palm oil stocks are likely to fall in Dec due to the seasonal drop in output while exports are likely to be relatively stable in view of the upcoming Chinese New Year festivities.
“Our key concern is the recent sharp decline in crude oil prices (Brent) to US$72/barrel, which has significantly reduced CPO’s competitiveness as a source of energy in the form of biodiesel,” it said.
CIMB Research said CPO prices have remained relatively resilient against the fall in crude oil price so far due to concerns over weaker palm oil output, higher biodiesel mandates and adverse weather effects on key planting areas due to potential El Nino event.
The Australian Government Bureau of Meteorology in its latest update revealed that most climate indicators remain close to El Nino thresholds, with climate model outlooks suggesting further intensification of conditions likely.
http://www.thestar.com.my
KUALA LUMPUR: CIMB Equities Research is maintaining its Neutral sector rating for the plantations sector and continues to prefer planters that offer strong output growth prospects to offset weaker prices.
It said on Wednesday CPO prices have fallen by 2% in the past month to RM2,136 per tonne due to the weaker demand for crude palm oil (CPO).
“The average CPO price achieved in the January-November of 2014 (RM2,402.5 per tonne) was in line with our full-year projection of RM2,390 per tonne,” it said.
CIMB Research said its futures team carried out a survey of 19 Malaysian planters and the findings revealed that CPO production in November probably fell 5% on-month to 1.8 million tonnes.
This could be due to: (1) seasonal factors, and (2) tree stress from the drought experienced in Peninsular Malaysia in 1Q14.
CIMB Research said the survey revealed that Peninsular Malaysia estates posted the biggest decline in CPO production (-16% to -6% on-month) while Sabah may be the best-performing region for output (-9% to +8% on-month).
Malaysian palm oil exports were weak, falling by around 10% on-month in Nov, based on cargo surveyor reports by Intertek (-9.8%) and SGS (-10.5%). This was due to weaker exports to India, Pakistan (lower post-festival demand and competition from other oilseeds) and Europe (due to the onset of winter).
“We have assumed domestic consumption of 294,000 tonnes and imports of 83k tonnes in November. Based on the above assumptions, we project that palm oil stocks at end-November will rise by 7% on-month to 2.3 million tonnes," it said.
MPOB is set to release the official figures on Dec 10.
CIMB Research said the variance in its survey from actual MPOB stock figures since it started producing the monthly stock preview in August has been 0% to 5%.
“The key takeaway from our survey is the smaller-than-expected drop in output. This, combined with weaker-than-expected exports, is likely to lift end-November Malaysian palm oil inventory to a 21-month high of 2.31 million tonnes.
“We view this as negative for CPO prices in the short term as it indicates ample stock in the producing palm oil market.
“Malaysian palm oil stocks are likely to fall in Dec due to the seasonal drop in output while exports are likely to be relatively stable in view of the upcoming Chinese New Year festivities.
“Our key concern is the recent sharp decline in crude oil prices (Brent) to US$72/barrel, which has significantly reduced CPO’s competitiveness as a source of energy in the form of biodiesel,” it said.
CIMB Research said CPO prices have remained relatively resilient against the fall in crude oil price so far due to concerns over weaker palm oil output, higher biodiesel mandates and adverse weather effects on key planting areas due to potential El Nino event.
The Australian Government Bureau of Meteorology in its latest update revealed that most climate indicators remain close to El Nino thresholds, with climate model outlooks suggesting further intensification of conditions likely.
http://www.thestar.com.my
