KUALA LUMPUR: PublicInvest Research is maintaining its Overweight outlook on the plantation sector with an unchanged CPO price forecast of RM2,500/mt and RM2,600/mt for 2016 and 2017 respectively, and a preferred exposure to upstream players.
It expects CPO prices to hit around RM2,800/mt once the inventories fall below psychological level of 2m mt. It likes Genting Plantations, Ta Ann, TSH Resources and TDM for their pure plantation upstream focus, double-digit growth in FFB production, young age profile of plantation and being less affected by El Nino’s impact.
PublicInvest attended the three-day Palm and Lauric Oils Conference 2016 (POC2016), organised by Bursa Malaysia. In contrast to the previous year, the general sentiment among all was more bullish given the CPO supply concerns, it said in a note on Thursday.
In general, industry experts are looking at a range of RM2,200-3,000/mt with an average of RM2,500/mt, significantly higher compared to RM2,200/mt last year. Industry players generally view that CPO prices will be driven by the supply risk concerns, mainly due to the El Nino’s impact in Southeast Asia, the worst since 1997/1998.
The most bullish speaker was Dorab Mistry, who sees CPO prices touching RM3,000/mt this year. On the other hand, Harald Sauthoff was the most bearish, forecasting CPO prices averaging at RM2,300/mt this year.
Another speaker, James Fry, sees a trading year for CPO prices which he expects to touch RM2,870/mt between now and June before coming down to RM2,562/mt after July, a trading spread of 12% in 4 months.
Despite unrealistic biodiesel target set by Indonesian government due to the bigger spread between gas oil and biodiesel prices and limited fund size, industry still views the biodiesel mandate as an encouraging tool to help stabilise the palm oil prices and create new demand.
The estimated domestic biodiesel consumption is around 2.5m kiloliter. For Jan-Feb, total consumption was 418,000 mt (0.5m kiloliter).
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