Firms upbeat about plantation sector

KUALA LUMPUR: MIDF Research has maintained its “positive” rating on the plantation sector, with a crude palm oil (CPO) target price of RM3,300 per tonne this year.

In its research note, it believed the tight palm oil supply situation would ease in the second half of this year due to higher production.

“In the intermediate term, we expect Malaysia’s palm oil stockpiles to remain on a downtrend, mainly due to the seasonally lower production cycle of palm oil.”

Export demand is expected to improve, backed by upbeat restocking activities from key destinations and higher demand from Middle Eastern countries following the “Malaysian Palm Oil Full of Goodness” global consumer campaign, it said.

Despite the easing concerns, the research firm is not expecting a drastic decline in CPO price next year and anticipate that CPO price would remain favourable in financial year 2022.

“On another note, we opine that the current high price of CPO will normalise going forward, but at a slow pace, given the resumption of economic activities globally,” said MIDF Research.

Meanwhile, Maybank IB Research also maintained its “positive” call on the plantation sector, and expects February’s exports figures to be encouraging despite the current record palm oil prices and lesser working days during the month following the long Chinese New Year holiday.

Its view was based on upside risks such as weaker-than-expected production recovery of palm oil and other vegetable oils this year, higher Brent CPO and weather anomalies at major palm oil and oilseeds producing regions.

However, it noted that the labour shortage is worsening by the day and that the foreign workers’ rehiring deadline has been pushed back by several months.

The research house also noted that downside risks to its call include the reversal of Brent crude oil prices to below US$80 per barrel, negative policies by importing countries, unfriendly policies at producing or exporting countries, weaker competing oil prices like soyabean and rapeseed, weaker global demand and stronger-thanexpected production this year.

Meanwhile, CGS-CIMB has placed a “neutral” rating on the sector, and is keeping its 20232024 CPO forecasts unchanged at RM3,240 per tonne.

However, it raised its Malaysian CPO price forecast for this year by 14 per cent to RM4,100 per tonne from RM3,600 per tonne.

“The upgrade in our CPO price is to reflect slower-than-expected supply response due to the delay in resolving the foreign worker shortage issues in Malaysia, the drought in South America and tighter-than-expected global palm oil supply due to Indonesia’s new export ruling,” it said.