‘Bearish’ plantation sector, say industry experts

by **Cals** Sun 08 Mar 2015, 20:21

‘Bearish’ plantation sector, say industry experts

By PublicInvest Research / PublicInvest Research | March 6, 2015 : 10:54 AM MYT

Plantation sector
(March 5)
Maintain neutral with an unchanged crude palm oil (CPO) price of RM2,550 per tonne. We are keeping our “neutral” call on the plantation sector with an unchanged CPO price forecast of RM2,550 per tonne for the calendar year 2015 (CY15) and CY16 respectively.

We like [size=14]Genting Plantations Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) and Ta Ann Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) for their (i) pure plantation upstream focus; (ii) double-digit growth in fresh fruit brunch production; (iii) young age profile of plantation; and (iv) cheaper valuations.

We attended the three-day Palm and Lauric Oils Conference 2015, organised by Bursa Malaysia.

With a huge turnout of about 1,500 participants including 12 prominent speakers, and in contrast to last year, the general sentiment among all was more bearish given the current low performance of CPO prices.

In general, industry experts are looking in the range of RM1,650 to RM2,800 per tonne.The average consensus forecast of RM2,200 per tonne is significantly lower compared with RM2,850 last year.

Industry players generally view that CPO prices will continuously be under pressure, attributed to high soybean supplies coming from the United States and the weak crude oil price outlook.

The most bullish speaker was well-known industry speaker Thomas Mielke (ISTA Mielke GmbH executive director), who sees CPO prices touching RM2,800 per tonne this year.

On the other hand, Harald Sauthoff (BASF Group, global procurement natural oils and oleochemicals vice-president) has the most bearish view as he foresees CPO prices averaging RM1,940 per tonne this year.

Interestingly, the most notable speaker, Dorab Mistry (Godrej International Ltd director), sees a trading year for CPO prices which he expects to touch RM2,500 per tonne between now and May before coming down to RM2,100 per tonne after July, a trading spread of 20% in five months.

Industry players are also generally not so positive on the downstream business mainly due to: (i) excessive capacities due to too much coming on stream from Indonesia at one time; (ii) lower margins due to stiff competition; (iii) crude oil prices remaining weak; and (iv) European demand remaining sluggish. — PublicInvest Research, March 5

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This article first appeared in The Edge Financial Daily, on March 6, 2015.
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