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Tuesday, December 11, 2018

Affin Hwang Research retains Neutral on plantations

Tuesday, 11 Dec 20189:04 AM MYT

KUALA LUMPUR: Affin Hwang Capital Research is maintaining its “neutral” rating on the plantation sector with Ta Ann Holdings Bhd  as its top picks.

The research house said in a report Tuesday, Malaysia’s CPO production in November declined by 6.1% month-on-month to 1.85 million tonne, partly due to the seasonal monsoon factor.

Meanwhile, exports dropped by 12.9% month-on-month to 1.38m MT as major buyers such as China, the EU, Pakistan and the Philippines bought less of Malaysian palm oil products.

Affin said as palm oil exports and consumption in November were below production, palm oil inventory increased further to a record high of 3.0m MT.

The average MPOB locally-delivered CPO price in November stood at RM1,830.50 per tonne, down by 12% month-on-month.

For 11M18, the average CPO price was RM2,267 per tonne against RM2,817 a tonne for 11M17.

“We believe the current CPO price pressure emanates from large palm oil stocks in Malaysia and Indonesia coupled with reserved consumer buying,”Affin said.

Nevertheless, Affin said the current low CPO price was unlikely to be sustainable in 1Q19 when seasonal production declines and world palm oil consumption would likely be in excess of production thereby reducing stocks.

“Overall, we maintain our ‘neutral’ rating on the plantation sector. Our top sector pick is Ta Ann,” Affin said.

The research house said it like Ta Ann as it expected an increase in earnings contribution from both timber and plantation divisions as production and prices for timber products and palm oil products improve.

Affin has a “buy” ratings on Ta Ann and WTK and “hold” ratings on FGV, IOI Corp, Sime Darby Plantations, Genting Plantations and Jaya Tiasa. It has a “sell” on KL Kepong, IJM Plantations and Hap Seng Plantations.


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