GENP, IJMPLNT, TSH, United Malacca to gain from CPO price rise

by **Cals** Tue 25 Feb 2014, 01:36

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Monday, 24 February 2014 14:18

KUALA LUMPUR (Feb 24): Genting Plantations Bhd, IJM Plantations Bhd, TSH Resources Bhd, and United Malacca Bhd are seen as gainers from an expected rise in crude palm oil (CPO) prices in the near term.

The current dry weather is expected to curb Malaysian oil palm output and provide a fillip to CPO prices, according to JF Apex Securities Bhd.

JF Apex analyst Jessica Low Jze Tieng wrote in a note today CPO prices may even surpass RM2,850 a tonne in the near term.

"CPO price jumped above RM2700/mt in the past few days to the highest level since September 2012 on concern over lower CPO and soybean supply and rising palm oil demand.

"Meanwhile, we maintain our average CPO price forecast of RM2850/mt for 2014 and expect CPO price to breach RM2850/mt in the coming months if the negative impact of dry spell on CPO production becomes increasingly apparent, as there will be less CPO to be supplied to refiners amid recovering demand." Low said.

Today, Bloomberg data shows that CPO for April 2014 delivery rose RM18 to RM2,795 a tonne at 12.29pm.

Low said JF Apex was also eyeing sector proxies like Kuala Lumpur Kepong Bhd (KLK) and IOI Corp Bhd in the current backdrop.

JF Apex has target prices of RM23.36 and RM4.45 for KLK and IOI respectively.

Rival soybean is being closely watched.

"Soybean price has been soaring in the past few weeks amid concern that heat wave in Brazil will hurt soybean crops. The rally of soybean was supportive to the price of palm oil, which is the substitute for soybean, as pricier soybean would prompt more demand switching to palm oil.

"We believe the low CPO supply concern arising from the dry spell and the recovery of palm oil demand would support CPO price in the coming months.

"In addition, the acceleration of biodiesel mandates in Malaysia and Indonesia is well poised to increase the global CPO consumption," Low said.

In Malaysia, Low said JF Apex maintained its positive view on the local plantation sector as the firm expected CPO prices to recover and industry players' earnings to turnaround this year.