KUALA LUMPUR, Dec 13 — MIDF Research has maintained a ‘Positive’ stance on the plantation sector with a target price for crude palm oil (CPO) of RM3,300 per tonne in calendar year 2022 (CY22).
In a research note, it said for November 2021, the average CPO spot price increased 4.7 per cent month-on-month (m-o-m) to RM5,331.60 per tonne from RM5,094.42 per tonne in the previous month.
On year-on-year (y-o-y) basis, the average CPO spot price jumped 55.0 per cent from RM3,440.83 per tonne in November 2020. The CPO price hit the highest on Nov 19, 2021 at RM5,444.00 per tonne.
“We believe the palm oil supply tightness situation will likely ease in CY22 due to higher production. In tandem, we expect stockpiles to slightly improve and eventually back to pre-pandemic level.
“Demand will still be resilient given the higher consumption locally and globally,” it said,
Despite the easing concerns, MIDF Research does not expect any drastic decline in CPO price in CY2022, which it said would remain favourable.
“Nonetheless, we are concern on the possibility of Malaysia’s palm oil to experience lower demand from key exporters due to the lower price of soybean oil and higher production cost,” it added.
This may be influenced by costs, including vaccination and quarantine costs, of bringing in foreign workers as well as the higher price of fertilisers.
It also noted that the current high price of CPO might dampen demand going forward, predicated on lesser demand for palm oil-based biodiesel due to its current premium over Brent crude oil.
“It should be noted that the spread between palm oil and gas oil has widen significantly, possibly making palm oil a less appealing feedstock for biodiesel.
“Besides that, we have already revised our financial year (FY2022) earnings forecast and target prices to account for the one- off ‘Cukai Makmur’ as proposed in Budget 2022 recently.
Meanwhile, CGS-CIMB Securities Sdn Bhd has made no change to its ‘Neutral’ recommendation on the agribusiness sector with CPO prices forecast at RM4,270, RM3,600, RM3,240 per tonne for 2021, 2022 and 2023 respectively.
It viewed that the CPO prices could likely remain high till the first quarter (Q1) of 2022 before trending lower when palm oil supply recovers and crushing activities of oilseeds improve.
“The strong CPO price and expectations of a gradual return of foreign workers are positives. However, these are offset by concerns over rising fertiliser costs in 2022.
“As such, we reiterate our ‘Neutral’ rating. Our key picks in Malaysia are Kuala Lumpur Kepong Bhd, Hap Seng Plantations Holdings Bhd, and Genting Plantations Bhd,” said CGS-CIMB Securities.
RHB Investment Bank Bhd meanwhile maintained an ‘Underweight’ call for the plantation sector and raised the CPO price assumptions to RM4,000, RM3,700 and RM3,000 per tonne for 2021, 2022 and 2023, respectively.
It believed valuations would be held back by environment, social and governance (ESG) concerns, resulting in plantation stocks trading significantly below their historical valuations. — Bernama
