Hot Stocks GENP, Sime, Boustead Plantations fall as palm oil futures hit 5-year low

by **Cals** Wed 20 Aug 2014, 22:24

Hot Stocks GENP, Sime, Boustead Plantations fall as palm oil futures hit 5-year low

Business & Markets 2014

Written by Wei Lynn Tang of theedgemalaysia.com

Wednesday, 20 August 2014 15:50

KUALA LUMPUR (Aug 20): Malaysian plantation stocks like Genting Plantations Bhd (GENP), Sime Darby Bhd, and Boustead Plantations Bhd fell as domestic crude palm oil (CPO) futures dropped to a five-year low.

At 12.30pm, GENP fell 10 sen or 0.97% to RM10.22, Sime Darby slipped three sen or 0.31% to RM9.52, and Boustead Plantations Bhd edged down one sen or 0.63% to RM1.59.

At about 3.45pm, GENP was traded at RM10.24 while Sime Darby changed hands at RM9.51. Boustead Plantations was flat at RM1.60.

Reuters had earlier reported that Malaysian palm oil “lost more ground” today, falling for a sixth consecutive session to its lowest since October 2009 due to falling exports, and as prospects of near-record US soybean production weighed on the market.

It cited cargo surveyor Intertek Testing Services data which showed exports of Malaysian palm oil products for the August 1-20 period fell 5.39% to 822,026 tonnes from the 868,843 tonnes shipped during July 1-20.

"It is all the negative news which is pulling prices lower. Exports are down and global commodity prices are under pressure," a Kuala Lumpur-based trader was quoted as saying.

According to Bloomberg data, the October CPO contract on the Bursa Malaysia Derivatives Exchange fell 0.4% to RM2,058 a tonne by midday break. The price hit an intraday low of RM2,049, which is also a five-year low.

CPO spot prices stood at RM2,096 a tonne currently. This compares to a low of RM2,026.50 on Dec 12, 2012, and a high of RM3,927 on Feb 14, 2011.

Today, a plantation analyst with a bank-backed research house told theedgemalaysia.com over the phone that the fall in plantation share prices was not a major concern, unless CPO fell below RM2,000, which is a historical low.

“Most plantation stock prices have fallen, so it (the fall) is priced in, as production is priced in for the next three months…. Most people would expect CPO to recover slightly by year-end.

"If that disappoints, we may see further correction in the stock prices,” he said.

The analyst opined that while Malaysian palm oil production is likely to peak from August to October, production should fall by year-end due to the low production season.

As such, he expects CPO prices to bounce back by year-end, as the fall in production will provide support to CPO prices.

In terms of earnings, the analyst notes that companies with young estates of between six years to eight years such Jaya Tiasa Holdings Bhd and Ta Ann Holdings Bhd could be affected the most by lower CPO prices.

Also seen affected by lower CPO prices are planters with lower-than-average fresh fruit bunch yields, such as Felda Global Ventures Holdings Bhd and Boustead Plantations.