Ahead of the Feb 2021 results reporting season, we attempt to deduce the key winners or losers under our coverage. We discovered that Peninsular Malaysia (-23% QoQ) and Sarawak (-17% QoQ) were the main culprits, while Sabah’s decline was smaller (-7% QoQ). Drawing a parallell, we expect the losers to be planters with high concentration of production in the two regions–FGV (69%), and TAANN (100%). Based onproduction data, FGV, IOICORP andTAANNwith CPO productiondeclines (of 12-19% QoQ) are the clear losers. However, we believe the industry-wide decline in production should be overshadowed or mitigated by higher CPO price for the quarter (MPOB 4QCY20: +21% QoQ). Stay NEUTRAL on the plantation sector. Consistent with our strategy in positioning for a decline in CPO price, we advocate building positions in integrated players such as KLK (OP; RM26.00), and IOICORP (OP; RM4.95). Meanwhile, our pick as the clear winner in 4QCY20 isHSPLANT (OP; RM2.15) premised on its: (i) decent CPO output (merely -2% QoQ), and (ii) estates which are 100% located in Malaysia allowing the group to fully capitalise on higher CPO prices (vs. Indonesian upstream planters’ realised price cap due to the biodiesel levy and tax structure).

Source: Kenanga Research - 10 Feb 2021