CPO prices expected to be lower in 2022, say market analysts (The Star - Saturday, 16 Oct 2021)
UOB Kay Hian Research maintains its “underweight” rating on the plantation sector
The research unit is keeping its CPO price forecast for 2021 and 2022 at RM3,300 and RM2,800 per tonne respectively
CPO prices may sustain at the current levels due to the continued disappointing palm oil production as yield recovery from the previous drought is taking longer than expected
It also notes that risks include rising fertiliser costs due to supply constraints. As fertiliser cost (30% of ex-mill cost) is one of the biggest components besides labour cost, the surge in fertiliser prices could lead to a cost increase of at least 15% to 20%
RHB Research also maintains its “underweight” rating on the plantation sector
It advises investors to ride the wave and look for opportunities to sell into strength, with CPO prices currently at a peak, and some strength being seen in share prices.
“The main risk to this thesis is weather abnormalitie. Share prices have, for the first time this year, started moving in tandem with CPO prices. We believe now is the time to ride the wave, and wait for a good opportunity to lock in some profits, adding that environmental, social, and governance (ESG) concerns will still impact sector valuations”
What we can observe market behaviour now is most of the fund managers start to revise outlook for CPO in the upcoming season, most of experts had expected the CPO prise shall be normalised in tandem.
Fund managers strongly believe that plantation companies shall be adjusted lower heading Trailing Twelve Months (TTM), that’s why most of the research houses given underweight outlook.
This is the reason why plantation sector not so fancy like year 2020 glove sector, fund managers strongly believe that once the CPO price normalise so ASP also simultaneously adjusted lower.
One of the good example to review is glove sector, what happen for the year 2020 compare with year 2021. Once most of the fund managers revise neutral or underweight outlook, we all can see the respective sector (or respective stocks) will start decelerating.
Despite glove sector still handsomely profitable for the next few years but most of the share traders more bias to ASP will be adjusted accordingly. This scenario is same with plantation sector as well.
If we want to enjoy fancy profit from the share price margin at this moment, we need to thoroughly consider is it the right time to challenge current circumstances since market had given cognitive lesson for the past of glove sector.
If we want to enjoy dividend yield (only selective planters), it’s fine to accumulate rather than putting your funds at the banks but now not aware current share price is it wisely to enter since plantation sector bias to neutral or underweight.
The share prices of palm stock are undervalue as it is still at covid era. With high price of cpo the stocks should appreciate to certain levels to reflect the future higher price of cpo. Yes, 5000 per mt will not be sustainable next year but the price will still be in 3000 plus. Thus the current valuation is not justifiable. Most analysts are not competent. We reflect back to glove era where they put much lower TP but once the retract of of stock prices happen, they are still having high tp for the glove stocks. A lot of them are not forward looking and just use PE as guidance in their analysis reports.
Palm oil producer Golden Agri-Resources has reported earnings of US$115 million for 3QFY21 ended Sept 30, up 580% y-o-y from a loss of US$5 million. Revenue in the same period was up 76% y-o-y to US$2.8 billion, The company notes that the on-going La Nina weather pattern will impact supply. Yet, demand has not been “significantly affected” despite the high prices. “Notwithstanding the more conducive market environment, we remain cautious of any uncertainties from the lingering global Covid-19 pandemic,” the company states. “Looking forward, industry prospects continue to be positive given palm oil’s important role in supplying the growing global vegetable oil demand.” Golden Agri-Resources closed Nov 11 at 27 cents, down 1.85% for the day and up 65.63% year to date.
IOI : Jul-sept qtr EPS 4.45 sen Jan-sept qtr EPS 16.59 sen share price now : $3.77
I think the performance of this giant is disappointing compare to many mid cap and small cap plantations like TAANN, SWKPLTN, MHC . Even GLCs counters like BPlant and THPLANT is comparatively a lot more undervalued than IOI based on their FY2021 EPS.
Maintain BUY with unchanged TP of RM4.80 based on average 5-yr low P/B of 3.1x and BV/share of RM1.55. Following the results, we changed our FY22/23 earnings forecast to RM1.24bn and RM1.20b respectively from RM1.39bn and RM1.03bn previously as we revisit our assumptions on ASP of palm products, margins, cost and expenses including tax and levy.
PUTRAJAYA (Jan 5): The palm oil industry, being the fourth largest contributor to the Malaysian economy, is expected to maintain its 2021 performance in 2022, backed by various marketing and promotional efforts to be conducted by the Ministry of Plantation Industries and Commodities and its agencies.
As of November 2021, total exports of Malaysian palm oil and its derivatives stood at 22.14 million tonnes and due to high palm oil prices, total revenue increased by 40% to RM91.4 billion as compared to 2020. This morning Mabel's collection of BioFuel Plantation continue to rise..
@Mabel....heard the same "old song tune" after leaving the industry since 2010!!! The people in the industry seem to run out of ideas in "moving" the palm oil industry.
U see why plantation is the best safe value investment leh ?!
Why leh ??
1. It is traded at attractive price with big discount & margin of safety mah!
2. Plantation land are good hedge of inflation loh!
3. Plantation generate good steady cash flow & earned big forex for the country mah!
4. Plantation give food to the people, thus is a very essential economic sector loh!
5. Plantation are not affected by the risk of very fast technology changes that will make the industry obsolete and disrupt the prospect...This plantaion industry & predictable mah!
6. If u believe long term sustainable cash generating business go for plantation loh!
KUALA LUMPUR (Jan 6): The Employees Provident Fund (EPF)’s Chief Executive Officer, Datuk Seri Amir Hamzah Azizan ,in the statement on EPF’s 2020 annual report highlighted the environment, social and governance (ESG) assets are expected to generate between 5% and 7% in the long-term.
Meanwhile, Amir added that the provident fund also plans to play a more active role in encouraging its investee companies to uphold their ESG principles.
“Key for us is engagement, and a lot of our voting guidelines were developed to ensure investee companies uphold their principles of corporate governance, such as having a good balance between independent and non-independent directors,” he elaborated.
Comment: Yes! The key is engaging with the plantation companies to improve their ESG standards, not by irrational selling down plantation counters that generate good earnings and contributing greatly to government’s coffers! Continuous sell down is destroying value to all others investors and capital market at large. EPF must act responsibly . Stop the irrational sell down!
Maintain OVERWEIGHT stance on the (plantation) sector, underpinned by good near term earnings prospects (arising from high CPO prices) and commendable valuations.
Top picks are IOI Corp (BUY; TP: RM4.35), KLK (BUY; TP: RM25.62), Sime Darby Plantation (BUY; TP: RM5.03), and TSH Resources (BUY; TP: RM1.35).
IOI Corp (BUY; TP: RM4.35)
Source: Hong Leong Investment Bank Research - 11 Jan 2022
Plantation stock rally has just begun in Feb 2022. It appear to me that there is a lot more steam for this rally to continue for months. Like many other stock rallies, we may see some plantation's share price surge pass triple digit % increase. I will just lock up my plantation stocks to enjoy the once in a lifetime superb return.
GLOVE rally lasted 4 months to reach its peak (Apr 2020 to Aug 2020). Supermax share price was around $1.63 (2/4/2020) to around $23.00 (7/8/2020), increase of 1,311% Topglove was $6.40 (2/4/2020) to $28.00 (7/8/2020), increase of 338% Harta was $6.80 to $21.00 , increase of 209%
STEEL rally lasted about 6 months to reach its peak(Nov 2020 to May 2021) Anjoo share price was $0.60 (2/11/2020) to $3.10 (10/5/21), increase of 417% SSteel was $0.42 to $1.20, increase of 186% Melewar was $0.20 to $0.72 , increase of 260%.
TECHNOLOGY stock has longer runs and many stocks price surged multi folds .
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
alvin5588
474 posts
Posted by alvin5588 > 2021-11-05 11:13 | Report Abuse
Bought some at 3.83..