KUALA LUMPUR (Jan 11): RHB Research Institute said Malaysia’s crude palm oil (CPO) production fell by 8.2% on-month in December, while exports fell by a slightly smaller 4.5% on-month.
It said on Wednesday that on a year-on-year basis, production rose by 21.3% on-year in December (+11.3% 2011), while exports rose by 23.1% on-year in December (+7.9% 2011).
RHB Research said as a result, closing CPO stock levels fell by 1.5% on-month to 2.04 million tonnes in December (from 2.07 million tonnes in November).
“We are now well and truly in the low season for CPO, although we suspect the slowdown in production was exacerbated by the wetter-than-usual weather patterns.
“As a result of the lower CPO stock levels, the stock/usage ratio in December fell to 10.36% (down from 10.5% in November and up from 8.7% in December 2010),” it said.
RHB Research said it had examined a lot of the supply risks in our previous reports, in particular from the onset of La Niña.
“We maintain our CPO price assumptions of RM3,100 a tonne for CY12 and RM2,900 a tonne for CY13.
“Due to the continued strength in liquidity in the market, we believe the PLANTATION [] sector will continue to benefit from these liquidity flows and are therefore upping our PER valuation targets by 1.0 times for all the stocks under our coverage.
“Our Overweight call on the sector is maintained, with five Outperforms (Genting Plant, Sime Darby, TH Plantations, First Resources and CBIP), two Market Performs (IOIC and IJMP) and one Underperform (KLK). Our top picks remain upstream players like Genting Plantations and TH Plantations, as we believe the risks faced by more integrated players are rising, due to the new disadvantageous Indonesian export tax structure,” it said.
It said on Wednesday that on a year-on-year basis, production rose by 21.3% on-year in December (+11.3% 2011), while exports rose by 23.1% on-year in December (+7.9% 2011).
RHB Research said as a result, closing CPO stock levels fell by 1.5% on-month to 2.04 million tonnes in December (from 2.07 million tonnes in November).
“We are now well and truly in the low season for CPO, although we suspect the slowdown in production was exacerbated by the wetter-than-usual weather patterns.
“As a result of the lower CPO stock levels, the stock/usage ratio in December fell to 10.36% (down from 10.5% in November and up from 8.7% in December 2010),” it said.
RHB Research said it had examined a lot of the supply risks in our previous reports, in particular from the onset of La Niña.
“We maintain our CPO price assumptions of RM3,100 a tonne for CY12 and RM2,900 a tonne for CY13.
“Due to the continued strength in liquidity in the market, we believe the PLANTATION [] sector will continue to benefit from these liquidity flows and are therefore upping our PER valuation targets by 1.0 times for all the stocks under our coverage.
“Our Overweight call on the sector is maintained, with five Outperforms (Genting Plant, Sime Darby, TH Plantations, First Resources and CBIP), two Market Performs (IOIC and IJMP) and one Underperform (KLK). Our top picks remain upstream players like Genting Plantations and TH Plantations, as we believe the risks faced by more integrated players are rising, due to the new disadvantageous Indonesian export tax structure,” it said.
