KUALA LUMPUR (March 8): The plantation sector received a mixed outlook from local analysts, following the recent Palm and Lauric Oils Price Outlook Conference & Exhibition 2018 (POC), where industry experts had shared forecasts of crude palm oil (CPO) prices, going forward. 

MIDF Amanah Investment Bank Bhd Research maintained a positive view on the sector, with IOI Corp Bhd as its top pick, with a target price of RM5.50. 

“We reiterate our positive view on the sector due to improved demand outlook for palm oil in 2018. We believe that the good global economy growth in 2018 should lead to higher consumption per capita,” the research house said in a report today.

On the supply side, consensus estimate of huge supply growth may not be fully realised due to ongoing labour shortages and the potentially high replanting activity in Indonesia, MIDF added.

In the same report, MIDF said leading vegetable oil analyst Thomas Mielke is "short term Neutral" on CPO prices and that he  believes that Indonesia Palm Oil Prices should average at US$630 per tonne between the period of April to September.

"On the production side, he estimated Malaysia production at 20.8 million tonnes. As for Indonesia, he is expecting palm oil production of 38.8 million tonnes. On the demand side, the biggest demand growth is seen occurring in Indonesia (to increase by 800,00 tonnes this year due to biodiesel) as well as in India and China (incremental 400,000 tonnes each). Key reason for his neutral view is due to strong production expected between April to September," it said.

Meanwhile in another report, Hong Leong Investment Bank (HILB) analyst Chye Wen Fei said HLIB maintained an average CPO price assumption of RM2,500 per tonne for 2018 to 2019, and names CB Industrial Product Holding Bhd (CBIP) as its top pick.

“We maintain a Neutral stance on the sector, due to the lack of strong demand catalyst for palm oil,” Chye said.

While La Nina and the government’s recent move to suspend CPO export taxes will lend support to near-term CPO prices, Chye said these are just short-term catalysts.