The Malaysian Palm Oil Board’s (MPOB) Dec 2014 inventory dipped 12% MoM to 2.01m MT (+1% YoY), below market estimates of 2.05m MT. The lower MoM stockpile was due to (i) a seasonal decline in production (1.36m MT; -22% MoM, -18% YoY), exacerbated by the flood which hit parts of Peninsular Malaysia; (ii) flattish exports (1.52m MT); and (iii) lower imports (0.09m MT; -9% MoM, +268% YoY) which more than offset a decline in domestic consumption (0.198m MT; -12% MoM, +20% YoY).
CPO and crude oil (Brent) prices have decoupled of late due to the recent flood in Peninsular Malaysia, and not so favourable weather in parts of South America over the past month which may affect soybean development there. It is also important to note that global vegetable oil prices have traditionally traded at a premium to crude oil prices.
Coupled with tight palm oil supply expectation in 1H15 after a relatively good harvest in 2Q-3Q14 (and potentially aggravated by two distinct periods of dryness in 2014 which affected Sumatra, Peninsular Malaysia and Central Kalimantan with a lagged impact on production), we expect CPO price to make its seasonally recovery in 1Q15. While the sector call remains Neutral, we maintain our view that there is still a short term trading opportunity in 1Q15. This, however, assumes that crude oil (Brent) price bottoms out at ~USD55/bbl.
Our top BUYs in the region are Bumitama Agri, First Resources, Genting Plantations, Sarawak Oil Palms and Sime Darby. We advocate SELL on IOI Corporation for its steep valuation.
Key swing factors in 2015 are weather (like a return of El Nino), crude oil price, further Ringgit and Rupiah weakness, changes in government policies, and lackluster enforcement of biodiesel mandates in Indonesia and Malaysia.
Source: Maybank Research - 13 Jan 2015
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lotsofmoney
You are talking about CPO tradings. You have completely forgotten about the damage by the recent massive flood on the companys' plantation and tons of compensation to the workers, equipment and fertilisers which can run into millions of RM. People like you are simply not fit to recommend any plantation companies to the public without in depth analysis.
2015-01-13 13:58