KUALA LUMPUR, Jan 13 — Kenanga Research house has maintained its “neutral” view on the price outlook on crude palm oil (CPO), saying the peak production season from April onwards would weaken in the second half of 2015, coupled with weak oil prices and the ringgit.
It also pointed out the high number of big-cap planters and scarcity of Shariah-compliant stocks. It said Malaysia’s palm oil stocks at 2.01 million tonnes at end-December 2014 came in within expectations, almost spot on with consensus estimate of 2.02 million tonnes but 8 per cent below its estimate of 2.19 million tonnes.
This was primarily due to the heavy flooding in the peninsula’s East Coast, which resulted in lower-than-expected production, it said.
“Despite lower-than-expected year-end closing stocks, we maintain our financial year estimates (FY15E) CPO price at RM2,200 per tonne due to the minimal impact on our planters’ earnings estimates,” it said in a note today.
It said the lower production would likely persist into January 2015 in line with historical trends. Exports are also likely to decline, with higher December 2014 exports to India a one-off “stocking up” event prior to import duties being imposed, it said/
January 2015 closing inventory would decline another 12 per cent to 1.77 million tonnes.
Kenanga Research’s top pick is Sime, whose motor division is expected to go for an initial public offering (IPO) in July or August 2015.
“We believe that the catalyst for Sime would be news-flow resulting from its auto division IPO, and the effect would surpass the corporate earnings’ impact,” it said.
The research house maintains a market perform rating on KLK, PPB, FGV, IJMP, TSH, TAANN, UMCCA and CBIP, while retaining its underperform rating on IOI Corp and GENP. — Bernama
