KUALA LUMPUR (Dec 13): Analysts remain "neutral" on the plantation sector, amid palm oil stockpile data indicating a dip of 1.1% month-on-month (m-o-m) to 2.45 million metric tons (MT) due to lower production and a drop in exports, marking the first decline after six consecutive months of increases.

In a sector update on Wednesday, Hong Leong Investment Bank (HLIB) maintained its crude palm oil (CPO) price assumptions for 2023 at RM3,850 per MT, and RM4,000 per MT for 2024.

The research house expects stockpiles to remain flattish in December 2023, as seasonally low production will be offset by weak near-term demand sentiment arising from weak demand sentiment in China and price competition from other competing oils.

“We maintain our ‘neutral’ stance on the sector, given the absence of a notable demand catalyst. For exposure, our top picks are IOI Corp Bhd (buy; target price or TP: RM4.66) and Hap Seng Plantations Holdings Bhd (buy; TP: RM2.06),” HLIB said.

Likewise, TA Securities expects the low-yielding season to persist until the first quarter of 2024 (1Q2024), before production picks up again in 2Q2024.

The research house maintained its average CPO price estimate at RM4,000 per tonne for 2024, following price fluctuation ranging between RM3,600 and RM3,800 per tonne.

The research house put "buy" calls on TSH Resources Bhd (TP: RM1.41) and Wilmar (S$4.58), followed by a "hold" stance on Sime Darby Plantation Bhd (RM4.67), IOI Corp (RM4.27) and Kim Loong Resources Bhd (RM1.95), and "sell" calls on Kuala Lumpur Kepong Bhd (RM21.50), FGV Holdings Bhd (RM1.41) and United Malacca Bhd (RM4.01).

“Cargo surveyors estimated that palm oil exports for the first 10 days of December 2023 decreased by 7.38% m-o-m to 369,000 tonnes (Intertek Testing Services), and 4.09% m-o-m to 387,000 tonnes (AmSpec Agri),” TA Securities said.

“In terms of fresh fruit bunch (FFB) yield, the average FFB yield in Sarawak decreased the most by 9.8% m-o-m to 1.38 tonnes/hectare, followed by Sabah (-5.5% m-o-m to 1.56 tonnes/ha) and Peninsular Malaysia (-5.2% m-o-m to 1.63 tonnes/ha),” the research house added.