Kenanga Research is bullish on the plantation sector and believes that the worst should be over for crude

palm oil (CPO) prices as a sustained inventory decline should lend the prices strong support. It said in a research note yesterday that Malaysias palm oil stocks declined 12 per cent month on month to 1.93 million tonnes, six per cent lower than the consensus estimation of 2.06 million tonnes. Production turned out to be lower than expected as well, as it rose only three per cent month on month to 1.37 million tonnes due to an unexpected decline in Sabahs production, it said. Looking ahead, the research house expected the May 13 inventory to decline by five per cent month on month to 1.84 million tonnes as the total demand of 1.59 million tonnes should exceed the total supply of 1.5 million tonnes. Hong Leong Research in a separate note said lower imports and higher domestic consumption had aided the palm oil inventory, bringing the level down by 11.3 per cent to 1.93 million tonnes in April 13. However, it said, the inventory downtrend was unlikely to spur CPO prices significantly as the peak production cycle starting in October would likely bring the inventory level back up. The research house maintained its average CPO price assumption of RM2,500 per tonne this year and RM2,600 per tonne next year on the back of higher palm oil production this year and demand risk due to uncertainties in the European Union and China. Meanwhile, Alliance Research in another note said it remained cautious on export data in the coming months despite industry fundamentals improving in April. China has recently reported record-high palm oil inventories, and this together with news of India looking to cut back on cooking imports will keep CPO prices subdued in the interim, it said. The research house had maintained a CPO full-year average selling price at RM2,600, expecting prices to pick up late in the third to fourth quarters, citing a risk of tree stress setting in after a long period of strong production.

Kenanga Research had upgraded the plantation sector to a neutral view while Hong Leong Research and Alliance Research maintain an underweight valuation on the sector. Bernama

: http://www.theborneopost.com/2013/05/14/kenanga-research-bullish-onplantation-sector-outlook/#ixzz2vtUBirtP
Sarawakian planters FY13 results affected by CPO prices by Yvonne Tuah yvonnetuah@theborneopost.com. Posted on March 3, 2014, Monday KUCHING: Sarawaks major plantations stocks were generally affected by the volatility in average selling prices for crude palm oil (CPO) and palm kernel (PK), but analysts remain optimistic that 2014 will be a year of growth for the plantations sector. To recap results for the financial year 2013 (FY13), Sarawak Plantation Bhd (Sarawak Plantation) reported a slightly lower revenue at RM362 million for the FY13 (12 months ended December 31, 2013), compared with RM430.2 million reported in the fourth quarter fo 2012 (4Q12). The groups oil palm operations decreased by RM67.7 million, principally due to lower realised average selling prices, which was partially offset by higher sales volume of CPO and PK. In its 4QFY13 financial result announcement on Bursa Malaysia, in line with the decrease in revenue, the company said its gross profit and profit before tax for the oil palm operations decreased by RM31.5 million, and RM25.1 million, respectively for FY13. BLD Plantation Bhd (BLD Plantation) also saw its revenue impacted by lower average selling price products as it recorded a revenue at RM1.63 million in FY13, compared to RM1.91 million seen in FY12. Meanwhile, Rimbunan Sawit Bhd (Rimbunan Sawit) saw its revenue drop by a slight 10.1 per cent to RM282.2 million on a 12 months basis in 2013. Its gross profit had also declined 42.2 per cent to RM37.8 million in 2013, as a result of the decline in CPO prices which fell 21.6 per cent in the period under review. Similarly, Sarawak Oil Palms Bhd (SOP) clocked in a lower FY13 at RM98.5 million, a RM57.6 million decline from RM156.1 recorded in FY12. RHB Research said SOP saw a lower than expected realised palm oil price of RM2,168 per tonne, which was about RM100 lower than the research houses assumed price. The decline in yield, coupled with the 18 per cent drop in realised palm oil price, had also resulted in a 37 per cent slide in its net profit, it added. Nevertheless, the research house opined that SOPs performance to should improve substantially this year, driven by higher palm oil prices and a turnaround in its percentage of prime mature areas, which has declined for two consecutive years but will rise significantly this year to 46 per cent compared with 41.7 per cent last year. Meanwhile, quasi-timber and plantation entities Jaya Tiasa Holdings Bhd (Jaya Tiasa) and Ta Ann Holdings Bhds (Ta Ann) FY13 were buoyed by their plantations divisions, which helped offset the weaker-than-expected performances of their timber segments. Jaya Tiasa saw its core net profit jumped more than 100 per cent year-on-year (y-o-y) at RM44.4 million from despite reporting a drop in revenue by 7.7 per cent y-o-y driven by weak performances in its log plywood sales volume respectively, and as well as a 17 per cent drop in CPO selling price. Ta Ann, on the other hand, reported a core net profit at RM58 million in 2013 from RM72 million, weighed down by lacklustre log and plywood average selling prices (ASPs). However, analysts viewed that the companies plantation division will be their main growth driver in the medium term as CPO prices are expected to increase and the companies have reported strong fresh fruit bunches productions.

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