KUALA LUMPUR (Nov 11): OSK Research continues to have a Neutral stance on the sector with average crude palm oil (CPO) price assumption of RM2,700 for CY12.
It said on Friday, it believes investors should make use of the price lull to accumulate good growth stocks, which tend to be illiquid but are good to have as they provided the alpha.
“These stocks should have less earnings reduction as production growth will help to mitigate the effects of lower price,” it said.
OSK Research said inventory numbers continued to stay above the 2.0 million tonne-level but is starting to ease with shipment rising 19.0% month-on-month while production only grew by 2.1%.
“We believe the stockpile level will continue to ease in the coming months as we believe the upcoming low season will be one with very weak output,” it said.
The research house said it believed palm oil price will enter a very dull phase in the first two to three quarters next year.
“This is because palm oil price appears to have bottomed out but yet due to ample supply and unexciting demand growth, prices have limited upside.
“After this lull period, we could see the start of a new upcycle, which will be driven by a potential peak in Indonesia’s palm oil production in the not too distant future. A peak in palm oil supply will also mean that global edible oil supply also peaks. This will have very serious implication for edible oil price overall,” OSK Research said.
It said on Friday, it believes investors should make use of the price lull to accumulate good growth stocks, which tend to be illiquid but are good to have as they provided the alpha.
“These stocks should have less earnings reduction as production growth will help to mitigate the effects of lower price,” it said.
OSK Research said inventory numbers continued to stay above the 2.0 million tonne-level but is starting to ease with shipment rising 19.0% month-on-month while production only grew by 2.1%.
“We believe the stockpile level will continue to ease in the coming months as we believe the upcoming low season will be one with very weak output,” it said.
The research house said it believed palm oil price will enter a very dull phase in the first two to three quarters next year.
“This is because palm oil price appears to have bottomed out but yet due to ample supply and unexciting demand growth, prices have limited upside.
“After this lull period, we could see the start of a new upcycle, which will be driven by a potential peak in Indonesia’s palm oil production in the not too distant future. A peak in palm oil supply will also mean that global edible oil supply also peaks. This will have very serious implication for edible oil price overall,” OSK Research said.
