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5 comment(s). Last comment by Asia88 2021-12-06 17:29


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Posted by stockraider > 2021-12-05 12:40 | Report Abuse



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Posted by Johnzhang > 2021-12-05 16:47 | Report Abuse

Likewise, most plantation companies listed in Bursa are seriously undervalued by their mark-to-market asset values, earning prospect and dividend yields.

Without real understanding of the supply/demand dynamics for the oil and fats market, many critics argued that current palm oil price (RM5,000+) is unsustainable. The same critics voiced same argument when CPO price was at RM3,000+ more than a year ago . So what is new?

Down to earth investors shall expect CPO price uncertainty in the next 1-2 years which largely hinge on demand growth vs supply growth. Nobody can possibly pinpoint the numbers into the future, just like how miserably wrong the critics/analysts were in the past one year.

Why should critics be alarmingly negative EVEN IF CPO price correct down to $4,000 (ie 20+ % from today's level}? I am not concern at all. The average realized CPO price for Q1 to Q3 2021 for Bplant was $4,072, THplant $3,478, SOP $4,263, MHC $4,167, Cepat $4,149. At these avg realized prices, these companies already making record earnings.

I am bullish that average CPO price for 2022 will stay above $4,000/-

On supply side :
(1) There will be minimum production growth from Malaysia and Indonesia in 2022 due to continuing labor constraint (Malaysia), lower fertilizer application in 2018/19 when CPO price was low, lower fertilizer application in 2020/21 due to supply/application constraint caused by lockdowns and acute labour shortage, poor upkeep of fields, minimum new planting and replanting in past 3-4 years etc.

(2). Relentless attack from NGOs, ESG pressure, 3 years new planting moratorium (Sept 2018 to sept 2021) in Indonesia, zero expansion in Malaysia since 2017 , delayed replanting activities etc, not to mention climate havoc, are going to seriously limit production growth for the next few years.

On the demand side,
(1). Strong demand recovery expected in 2022 due to minimum lockdowns, low inventory level in importing countries, demand for biofuels (especially Indonesia B30 mandate) , increasing usage of oleochemicals etc.

(2). Global palm oil consumption growth from 2011 to 2020 is averaging 5% annually. I think consumption growth rate shall resume from 2022 onwards with covid's impact subsiding

Where are we going to get 5% production growth (ie 3.7 to 4.0 mil MT of increase per year ) to match the demand growth in the next few years? Will there be significantly higher production of other edible oils (soya, reepseed, sunflower, canola etc) to replace palm oil ?

It's a million dollar question. I think there is reason why CPO price shot up significantly above the previous high.

Just sharing my thought.

Posted by Fabien _the efficient capital allocator > 2021-12-05 20:03 | Report Abuse

The market is not fair. That's pretty obvious.

For oil palm estates that are RSPO-compliance, no premium was accorded while ESG risks were heavily punished. I believe SimePLT valuation was heavily discounted due to the ban by the US CBP.

Two companies with low EV/ha are SimePLT and GenP.


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Posted by deMusangking > 2021-12-05 20:11 | Report Abuse

aiyah! where got fairness anywhere?


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Posted by Asia88 > 2021-12-06 17:29 | Report Abuse

After i read your article, my comment "so"?

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