Plantation Sector
FIRST RESOURCES LIMITED
EB5.SI
BUMITAMA AGRI LTD
P8Z.SI
GOLDEN AGRI-RESOURCES LTD
E5H.SI
Plantation - RHB Research 2015-10-13: Record Stockpile a Buying Opportunity
- While inventory hit a new high, we believe a decline is now imminent as the production down-cycle has already begun. We expect the El Nino drought impact on production to become very evident in the months ahead.
- Global dependence on palm is at a record high, which should amplify the effects of El Nino on edible oil price. Hence, any weakness in reaction to stockpile number will represent a buying opportunity.
Production peaks.
- Malaysia’s palm oil production started easing in September, falling by 4.5% MoM to 1.959m tonnes. West Malaysia led the decline, down 8.2% MoM, while Sabah was down 1.4% MoM. Only Sarawak managed to eke out a gain of 1.7%. We believe production would now continue its decline into February or March. Oil yield for the first nine months stood at 2.8 tonnes/ha vs 2.84 tonnes last year.
Exports commendable.
- Exports rose 4.4% to 1.678m tonnes, which was a commendable level and the highest September exports ever recorded. The increase was mainly driven by a rebound in shipments to India to 356,000 tonnes, while China’s imports remained flat.
Record stockpile.
- Stockpile rose by 5.5% MoM to a record high of 2.628m tonnes, marginally surpassing Dec 2012’s level by 799 tonnes. Other than the still-high production, factors contributing to this were an increase in imports and a drop in local consumption. Given the steepness of West Malaysia’s production decline and the likelihood of Sabah following suit soon, there is a high possibility that inventory has indeed reached its peak.
Soybean factor.
- Soybean crop in the US is now 69% harvested, with 89% of crops being rated good to excellent. As full harvest could be seen as early as end-October, this should remove the soybean overhang factor and allow palm oil price to resume its recovery.
Stock picks.
- First Resources continues to be our top sector pick. We also like Genting Plantations and Astra Agro Lestari.
Alvin Tai CFA
RHB Securities
|
Hoe Lee Leng
RHB Securities
|
Hariyanto Wijaya CFA, CFP, CA, CPA
RHB Securities
|
http://www.rhbgroub.com/
2015-10-08
RHB Securities
SGX Stock
Analyst Report
2.54
Same
2.54
1.44
Same
1.44
0.48
Same
0.48
