Thursday 28 Mar 2024
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KUALA LUMPUR (Nov 10): JF Apex Securities Research has maintained its Marketweight rating on the plantation sector, and said it sees no major catalyst at the moment that could drive the meaningful recovery of crude palm oil (CPO) prices to above RM2500/mt level.

“We maintain our Buy call on Genting Plantations Bhd with a target price of RM11.40, as we like its young tree age profile.

“Meanwhile, we have Hold calls for Kuala Lumpur Kepong Bhd (target price: RM23.95), IOI Corporation Bhd (target price: RM5.00), and IJM Plantations Bhd (target price: RM3.50),” it said jn a note Monday.

The research house said CPO production was little changed in October by easing a marginal 0.21% to 1.89 million tonnes.

“However, the quantum of decline in CPO production was lower than expected as indicated by a Reuters pool. Meanwhile, CPO production eased for second consecutive months, which we think could be attributed to the lag impact of drought in the early of 2014.

“We reckon that CPO production has peaked in August and expect production to be lower in the coming months,” it said.

JF Apex Research said that for the upcoming 3QFY14 results, it was expecting the earnings of planters to be generally flattish on quarterly and yearly basis, as the adverse impact of falling CPO prices would be cushioned by the modest CPO production growth.

“Yet, we reckon that planters with young tree age profile would be able to report decent earnings growth, underpinned by the robust CPO production growth that could outweigh the negative impact of softening CPO prices,” it said.

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