Lots have been written on I3 forum recently about why plantation companies have been dropping precipitously despite CPO prices hitting new highs and staying at elevated levels. Just as a disclaimer I do own and trade plantation stocks too so it is NOT in my interest to see the respective stocks dropping. So I will share some thoughts and observation on what is going.
Plantation stocks peaked end April 2022
Across the board we saw most plantation stocks peaking at end of Aug 2022. From big caps like KLK to mid caps like TSH and Hapseng Plant all saw their prices topping out by 1st week of May 2022. What are the possible reasons for this?
1) Possible peak earnings cycle
Markets tend to be forward looking and tend to look 6 months ahead. This has been true in all markets worldwide including Interest rate cycles, recession forecast etc. So to further reinforce this market view, there was further evidence of this when most plantation stocks reported blockbuster earnings in the last couple of days. Take TSH Plantation for example which I know there is lots of retail interest and a much touted stock in this forum. It reported a stellar set of results last week and look at the price reaction!
2) Is it really the fault of Investment Bankers?
The clear and simple answer to me is NO. Why not? The role if the IB in issuing the call warrants is not to profit directly from the rise or fall of the instruments as argued by some commentators on I3. Their role is merely to provide derivative instruments for investors to trade in. They have to actively market make the products and provide liquidity to both the bid and offer side based on the underlying asset. Their profit is derived more from the market making and spread activities.
3) Why blame Investment Bankers?
i shall use an analogy from World War 2. What did Hitler do to gain power and use as his propaganda? All the financial problems that the country was facing were the fault of the Jews. To find a common enemy and convincing the population that eradicating them would solve all the country's problems.
So Investment Bankers are not the enemy here. Nobody is BIGGER than the markets and even if one can claim manipulation in markets, it will only be in the short term. Long term trends will always prevail at the end.
4) What can retail investors do?
I could give you 2 solutions to this question. If you do not think peak earnings is upon us yet, just go buy plantation stocks outright and hold it with a 6 month minimum view. Do not touch the call warrants since they have expiry dates. Just put a stop loss on your trade idea just in case you are proven wrong by the markets.
A second more radical solution would be to gather all the retail investors and form a Reddit revoultion like what retailers did in the USA. Go look up how they squuezed Gamestop stock and for once the little guy managed to put the big hedge fund Melvin Capiltal out of business!
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Furthermore why is Jtiasa at RM0.87 despite it not having any call warrants? who is manipulating it then? please
Calvin not even an iota bit angry
Calvin only post the facts why Malaysia palm oil shares behave so differently compared to all other palm oil producing countries
Every one must decide what is true and not true
if palm oil prices are artificially suppressed they cannot last as fundamental will dictate prices
over a short term it can be manipulated and distorted but over a longer term it's intrinsic value will surface and no one can stop it's rise
that is exactly what the article is saying!
Most palm oil stocks are severely undervalued now due to whatever wrong reasons prices correction lately,
so it's a matter of time palm oil stocks will burst like volcano eruption to historical price level with
unprecedented historical high CPO 6,000-8,000 in Palm Oil Super Bull Run 2022-2023.
Furthermore, high food inflation & weaker ringgit will expedite market forces to buy palm oil stocks crazily...
Ghana Benso Palm oil up 200% in 52 weeks
See it went up from $2.00 to $6.00 (Up 200%)
Is Ghana better than Malaysia? Malaysia pride itself as World 2nd Biggest Producer of Palm OIl
Why then Benso Palm oil up 200% and Malaysia Palm oil co prices all falling down if not artificially press down by Manipulation??
23 minutes ago
Nigeria Okomu Oil up 114% in one year
Why still holding up firmly while in Malaysia people are thinking of downtrend?
Is Nigeria better than Malaysia? Or Malaysia palm oil share prices are purposely suppressed by unseen dirty hands?
18 minutes ago
Singapore Goldenagri palm oil we bought at 14 sen also up by more than 100% to 28.5 sen now
Singapore listed Palm oil Co operates in Indonesia
Singapore got no palm oil estates & Indonesia got palm oil export ban can do so well then what is happening in Malaysia??
14 minutes ago
Thailand Univanish OIl Palm also gone up all time high & remain elevated
So what are Malaysian Palm OIl Co shares correcting with Analysts downgrading unless there is some hidden agenda?
8 minutes ago
So from all real life - real time evidences all over the World's Palm oil producing nations of Ghana (Benso palm oil), Nigeria (Okomu Palm oil), Singapore/Indonesia (Goldenagri palm oil) & Thailand (Univanish Palm Oil)
All are rising up in Total Unison & growing from stength to strength as we type now in Singapore
Yet in Malaysia people who own palm oil shares see prices weakening with IB Bankers plus Analyst giving neutral & underweight call
THIS CANNOT BE!!
SOMETHING VERY VERY VERY WRONG DUE TO STOCK MANIPULATION
THE AUTHORITIES MUST WAKE UP!!!
Analysts repeatedly given wrong projection of CPO price and even though they have admitted their off track prediction and still continue to do it. It is hard not to believe they have bad intentions.
At time big chunk of valuable plantations stocks may fall into foreigner's hands at substantially discounted price.
nice article @skoh888 ... i like ur2 suggestions, and im taking the first suggestion, and have already gone in, but on your point about IB, im sure u know that they issue 15 CWs and then someone will issue 1 PW... where is the fairness in this? Naturally it will be in their interest to push the mother share down, thats just their strategy, just like short selling, the strategy is clear, but you mentioned JTiasa has no CWs and yet not doing well.... thats a good point, how about hibiscus? any opinion?
Fed yields coming down means comodities going up again..in a few months u will see hyperinflation as US cant increase rates too much cos of too much debt.its nothing tp do with being cyclical its about excess money n fiat currency.
In a few months we will know...
No need argue lerr..
Palm oil going up....no more cyclical...as you can see...
I buying klk sop taann lots of it. .
Cant blame ibs as this is something new...
Just like they got gloves wrong as no ib person really understood wat we mrna vaccines..
They will just say sorry did not see it coming..
Ur money ur call..
Unless u pay for advice which we dont.
Yes... oil palm trees will take like 7 years to mature to start bearing FFB.... but the Ukraine war won't last like 7 years.. so palm oil bull may just last 1 or 2... like gloves
Short live bull... weary wary wary
Over in Ghana etc ppl were not burned by gloves
Unique Malaysian experience
The ghosts of gloves....... weary wary wary
Weary wary wary
To take profit early
Actually mkt is bearish & mkt is also skeptical of the commodity bulll run of;
3. Crude Oil
4. Crack spread
5. Aluminum, Tin and Copper
Thus mkt is taking a cautious approach to its sustainability mah!
If say CPO continue to perform at above Rm 5000 going fwd and the management has good corp governance & pays good div to reward shareholders, I m sure the Plantation share price will continue to go up mah!
Even if the CPO price come down to Rm 4000, I m sure the impact on plantation share price is minimal as currently it is not overvalue mah!
Currently with all food inflation in the world plus limited land available for future cultivation due to the environment concern, plantation valuation & its land will be valuable loh!
@raymond...thanks for your comment. I never liked Jtiasa and would never buy their shares as I am familiar with their hedging policies and previous excessive futures speculation. So even with high spot prices, they are not likely to enjoy the high prices or even lose money through bad short bets in the futures market
Aiyo yo, climate change, vegetable oils shortage is expected to continue for many years. Why want to shun plantation stocks?
the best way to boost the price of plantation companies is to either thru M&A or give generous dividend
IB discourage retail investors to buy plantation companies is a Fact.
IB forcast CPO price is wrong since 2 years ago until now is a Fact.
IB forecast CPO price is wrong even until end of this year. Most of them forecast the price around $4500.
A sensible article with a practical piece of advice in conclusion.. Buy a portfolio of plantation stocks and hold for minimum 6 months if you think current high CPO prices can sustain. No conspiracy theories, no digging for treasure, no giving excuses of one kind or another for erroneous conjecture.
@berlin...thanks for the compliment. Love the last bit about erroneous conjecture haha. Love it!
Posted by Beltland > 5 minutes ago | Report Abuse
On market financial theory, Calvin is 100% correct. i3 gambler is totally wrong ! IB bank issues cw for the purpose to gamble with ikan billis. In gambling world ,the bankers must make sure they are on the advantage to make money from customers .So simple !!! Like that also don't know ! Pasar old lady selling kuih also know the secret !
I don't even leave a comment here, why did you want to mention me here?
skoh888 have also explained that "profit is derived more from the market making and spread activities".
The Youtube video link that I put to Calvin post also explain IBs would not earn money that way.
What to do with the Pasar old lady selling kuih? You look down on them?
What an arrogant person you are.
Telling what financial theory?
You are joker?
all thanks to Andy Hall
what’s really obvious was when bankers has skin in gloves, they punt for gloves like no tomorrow. I still remember got one IB put market valuation of RM100B for topglove. But when comes to counters they have no skin in the game or worse, they issued SCW at low price, NEUTRAL or UNDERWEIGHT
Palm oil Bull run very intact as Very high Cpo prices sustained by high sunflower oil, canola and soyoil prices
Huge cash inflows will still push palm oil prices higher for many more excellent quarters yet ahead
Welcome to the prison. Lets share bull news for a few more days and we will see the bottom very soon.
Don't talk like that lah. CPO price is still very high mah. If CPO come down to RM3,000 or below let me know ok?
@startofthebull....the definition of peak earnings DOES not mean that the companies are not profitable. They can still make super profits but may not see any profit growth. That's the definition of peak earnings.
To get an idea what the average price of CPO will be in the next 6 to 12 months you look at the futures prices of the future contracts for FCPO
For example based on yesterday's settlement price, the Dec2022 settled at RM5894 while the Feb2023 contract settled at RM5874. So If is no where near the spot price which is the Jun 2022 contract, currently trading at RM6710
However with so many variables in play especially the ongoing war in Russia, it is anybody's guess what the prices will be in 6 months! The futures just gives us an idea but it is not definitive
My way of valuation.
I copy the market FCPO prices, AUG 2022 to FEB 2023, to my spreadsheet.
But for MAR 2023 and beyond,
I do not take the market prices because sometime the volume is thin, and therefore not meaningful.
What I do is to apply a formula so that from MAR 2023, the prices would converge to 10 years average price.
The latest 10 years average CPO price is RM2761, no need to adjust to inflation, as my calculation is also assume the production cost remain the same.
Now we can estimate the EPS for the next 5 years (20 quarters),
Discount all the future EPSs back to today by a rate.
Then the furthest quarterly EPS x 4, will be multiply with reasonable PE ratio, again discount it back to today.
I prefer PE Ratio for: BKAWAN=12, KLK=20, SWKPLNT=12, TAANN=15, SIMEPLT=25
Sum up all the above and there I get the today's fair value for the companies.
@i3gambler...very impressive! you are obviuosly a student of econometrics haha
By my metrics I also derived that SWK is my best bet followed by TSH
Swk is good but tsh is so so loh!
Tsh has twin engines
1. from palm oil current high prices
2. longer term got Very high assets prices to be unlocked in Kutai / Nusantara lands appreciation
see the total picture
Thailand Univanich Palm Oil PE=10 while Sarawak oil palm PE=5 only
SOP is very cheap and undemanding
more than 220,000 acres out of 300,000 acres are matured with high Ffb yields
Reading the article and calvin's conjecture on price suppression provide both logical and reasonable points.
Market maker's spread that we read on internet is only the tip of iceberg on how these cindy kate works, many of the mechanics may be hidden and never be known to outsiders forever. (esoteric readers may also tell you the same, many of the real world truth is hidden beyond the common veil of what we see and know)
Also, I always believe cindy kate usually works in groups, coz if they are individual groups fighting amongst each other all the time, cannot imagine the bloodshed if one group causes the other group to lose tens or hundreds of millions dollar.
To : supersinginvestor
From : SEE_RESEARCH issued on 5.30 pm., 20 September 2022 /
1. You , supersinginvestor , are right as the Plantation Stocks with its theme is game over . Enclosed : with further extraction from the official data from KLSE / not from the Big Blower / Prof Kevin on the Plantation stocks , a cross section of 14 stocks showing its downtrends mode Plantation Stocks in KLSE / a cross section of 14 stocks that are well traded in KLSE Technical Analysis as at 15 September 2022 / closing at 5.00pm.,
For this year from January 2022 to current / 15 September 2022 With low / high / closed in RM
You have clearly put targets of JTIASA at RM3.00 by year end and TSH at RMM3.00 by year end. These are clearly your words and prediction. So let's see, the market will decide and the good people if i3 will see