Highlights

PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 11 Jun 2021, 10:56 AM

 

Plantations - CPO Prices Soared Despite Easing Concern

Author:   |    Publish date:


Malaysia’s palm oil inventories jumped more-than-expected to a 5-month high in April as production continued to expand. Despite the rising inventory level, CPO futures surged to a record level of RM4,332/mt, tracking the rally in soybean oil. We also note that stock-to-usage ratio was stable due to higher exports. YTD, CPO prices averaged at RM4,045/mt, rising more than 59% compared to a year ago. Pending our CPO price forecast review, we maintain Neutral on the sector and our top picks are Sarawak Plantation, Ta Ann and TSH.

  • Inventory continued to see higher. Palm oil inventories extended its gain for a second straight month, up 7.1% MoM to 1.55m mt, the highest level in 5 months. The inventory level beat consensus forecast, which was expecting 1.50m mt. Nevertheless, stock-to-usage ratio was slightly down from 8.5% to 8.4% as export outpaced the production growth.
  • Strong India’s demand pushed exports to 4-month high. Exports extended its gains for second straight month, up 13.2% MoM to 1.33m mt. The stronger exports were mainly led by India (+52.7%), China (+52.8%), Pakistan (+2%) and US (+107%). We believe the strong palm oil exports data due to buyers stocking up ahead of Muslim festival celebration. For the first 4 months, exports fell 7.4% YoY to 4.37m mt, mainly dragged by weaker demand from China (-44%), EU (-37%), Pakistan (-45%) and US (-52%).
  • Another rise for production. CPO production expanded by 7% MoM to reach 1.52m mt, the highest level since Nov. Production in Peninsular Malaysia and East Malaysia rose 3.6% and 11.5%, respectively. The positive data sends a signal that production has been picking up.
  • Widest palm oil-soybean oil spread since 2008. China’s surging soy bean demand collided with bad weather in global growing areas stoked fears of shortages, sending the palm oil-soybean oil spread to USD429/mt, the widest level in 12 years. CPO futures have jumped more than 118% in the past year while soybean oil, palm’s closest substitute, has rocketed 150%. The relentless rally in the soybean oil is increasing palm oil’s appeal as the cheapest edible oil.
  • Anticipating a strong set of quarterly results for 1QCY21. 1Q21 CPO prices averaged at RM3,925/mt, a significant increase of 47% YoY compared to 1Q20’s RM2,664/mt. Amongst plantation stocks under our coverage, only Genting Plantations, IOI Corp and Ta Ann registered weaker CPO production during the quarter.

Source: PublicInvest Research - 11 May 2021

Share this

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Earn MQ Points while trading with MQ Traders Group
MQ Affiliate
Earn side income from MQ Affiliate Program
 
 

438  423  589 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 DNEX 0.86+0.005 
 AVI 0.17+0.06 
 SERBADK 0.605-0.035 
 ITRONIC 0.21+0.03 
 DNEX-WD 0.325+0.02 
 VIZIONE 0.195-0.01 
 PWF-WA 0.055+0.005 
 SCOMI 0.05-0.005 
 YGL 0.27+0.01 
 SERBADK-WA 0.085-0.015 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS