PETALING JAYA: Analysts, who are mostly neutral on the plantation sector, still expect the average crude palm oil (CPO) prices to hold steady between RM3,800 and RM4,000 per tonne in 2024-2025.
This was despite the newly released Malaysian Palm Oil Board (MPOB) August palm oil stockpile of 1.88 million tonnes, hitting a six-month high since February due to seasonally higher production and lower exports
Hong Leong Investment Bank (HLIB) Research in a report said the palm oil inventory would likely remain on the uptrend this month on the back of the continuation of the seasonal uptick in the cropping pattern.
Furthermore, exports will likely weaken arising from palm’s weakened price competitiveness against seed oils and gas oil.
The research house noted the average CPO price discount to soyoil had also narrowed to US$24 per tonne in August from US$161 per tonne in July.
According to data published by cargo surveyor Intertek Services, palm oil exports in August were pulled by lower shipment to China, India, the Middle East and the European Union (EU).
But during the first five days of September, Intertek said Malaysia’s palm oil exports rose 9.2% month-on-month to 214,000 tonnes on the back of higher shipment to Asia Oceania, China, the EU, India and the Middle East.
On the CPO price, HLIB Research has maintained the price assumptions of RM4,000 per tonne in 2024 and RM3,800 per tonne in 2025. Year-to-date, the CPO price has averaged at RM4,011 per tonne.
For exposure, the research house’s top buy picks are IOI Corp Bhd
with a target price (TP) of RM4.22 and Hap Seng Plantations Holdings Bhd with a TP of RM2.21.
Meanwhile, TA Research said the MPOB’s latest August palm oil data indicates a neutral market outlook for the sector with no major catalysts to boost demand in the near term.
All eyes are on the Federal Reserve’s rate cut and the impact on crude oil prices in September, it added.
TA Research, which made no changes to its CPO average of RM4,000 in 2024 and RM3,800 in 2025, said, “We will review our assumptions if the global soybean supply turns out to be lower-than-market expectations.”
Also, a more promising demand recovery, lower-than-expected palm oil production and significant reductions in production costs. The brokerage firm has maintained a “buy” call on both IOI Corp (TP: RM4.17) and Wilmar International Ltd (TP: S$3.56).
Following recent conversations with industry players, CGS International (CGSI) Research said Malaysia’s palm oil production is expected to peak in September-October, and “we also expect a slowdown in 4Q24”.
Recent news also indicates that the Indonesian government is considering lowering export levy rates for palm oil products.
“If this policy change is implemented, we expect a short-term decline in CPO prices.
“Despite this, we still expect the CPO price to trade within the range of RM3,800 to RM4,000 per tonne given the limited supply, particularly from Indonesia.
“Note that most of the Indonesian companies have revised their fresh fruit bunch (FFB) production growth guidance from a single-digit increase to flat or negative growth for 2024,” it said.
A potential reduction in the export levy could also improve margins for downstream players in the palm oil sector, it added.
“We still favour pure Malaysian upstream players such as Hap Seng Plantations, Ta Ann Holdings Bhd and Sarawak Plantation Bhd, while SD Guthrie Bhd is also relatively attractive with its diversification into renewable energy and land monetisation plans,” CGSI Research noted.
Having said that, the research house remains cautious about larger-cap companies such as Kuala Lumpur Kepong Bhd and IOI Corp due to volatile, low-margin downstream exposure.
