Analysts neutral on plantation sector, maintains CPO 2023 price forecast to RM3,800 per tonne

11 May 2023 11:59am
Image for illustrative purposes only. - FILE PIX
Image for illustrative purposes only. - FILE PIX

KUALA LUMPUR - Analysts are maintaining their neutral stance on the plantation sector with a full-year crude palm oil (CPO) price forecast of RM3,800 per tonne.

In a research note today, Public Investment Bank Bhd (PIVB) said despite seeing a dip in palm oil exports, inventories shrank to the lowest level in more than a year as production surprisingly posted a decline owing to shorter harvesting days due to festive celebrations.

At the point of writing, CPO futures retraced by RM82 to RM3,725 per metric tonne, it said.

"Despite the potential impact of the El Nino weather pattern on production, we are not seeing CPO prices increasing in the near term in view of Indonesia’s plan to flush out three million tonnes of CPO while demand for biodiesel remains muted due to unfavourable palm oil-gasoline spread,” PIVB said.

As for Hong Leong Investment Bank (HLIB), it maintained 2023-2024 CPO price assumptions of RM4,000 per tonne and RM3,800 per tonne for now.

"The neutral rating on the sector is given due to the absence of notable earnings growth catalyst.

"While Indonesia’s recent move to relax its palm oil export quota (from 1:6 to 1:4, effective May 1, 2023) will ease palm’s near-term supply pressure, this will likely be offset by the potential return of El Nino phenomenon by the second half of 2023,” the research firm said.

Kenanga Research said it is staying neutral on the plantation industry as earnings are still bottoming even as the landscape is stabilising with palm oil prices trading range bound, cost inflation beginning to plateau and fresh fruit bunches production is seen inching upwards.

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"Poor quarterly earnings are still likely due to strong prices last year.

"However, low price-to-book value ratio ratings suggest that much of the bad news is already priced in with cost looking toppish and output to improve.

"The only missing ingredient is a strong rebound in selling prices, hence our neutral view,” it added. - BERNAMA

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