Plantation stocks down on weak prospects for palm oil prices



-A +A

KUALA LUMPUR (Aug 6): Plantation-related stocks failed to weather the weak prospects palm oil prices, with most palm oil players declining today following RAM Rating Services Bhd’s lower projection of the commodity’s prices for 2015.

At 11.27am, Sime Darby Bhd led the pack, being the fourth top decliner on Bursa Malaysia. The stock declined 25 sen or 2.84% to RM8.54, with 509,500 shares done.

IJM Plantations Bhd was the seventh top decliner, shedding 12 sen or 3.43% to RM3.38, with a thin volume of 2,000 shares traded.

PPB Group Bhd, which owns a 18.3% equity interest in major palm oil player Wilmar International Limited, dropped 12 sen or 0.79% to RM15.06 on a thin volume of 900 shares traded.

It was the 12th top decliner on Bursa Malaysia today.

IOI Corporation Bhd declined 6 sen or 1.4% to RM4.22, with a volume of 895,500 shares done.

Kuala Lumpur Kepong Bhd (KLK) and Felda Global Ventures Holdings Bhd (FGV) remained unchanged at RM21.80 and RM1.67 respectively. While KLK had a thin volume of 1,000 shares traded, FGV saw 210,700 of its shares done.

Genting Plantations Bhd, however, bucked the trend, rising 2 sen or 0.2% to RM10.08, with 13,100 shares done.

The digitaledge Daily had reported today that RAM Ratings had trimmed its 2015 forecast for crude palm oil (CPO) price to RM2,100 to RM2,300 per tonne from RM2,200 to RM2,400 per tonne, as the commodity’s price came in at the lower end of its earlier expectations and averaged RM2,219 per tonne in the first half of this year (1H15).

The ratings agency said the commodity’s upside potential is limited by the feeble price of crude oil, which palm oil’s trajectory tends to track, amply supply of edible oils and seasonal increase in production of CPO as oil palms enters peak production cycle.

RAM Ratings said CPO production in Malaysia had been flat year-on-year (y-o-y) in 1H15, reflecting disruptions attributable to the severe floods early this year, and less productive trees affected by the dry weather last year.

Depending on the severity of the El Nino weather phenomenon in the coming months, the impact on production will typically only be felt in the longer term, it added.

The agency said inventory stood at 2.15 million tonnes as at end-June, about 30% higher y-o-y amid slowing demand growth for the commodity.

CPO export volume declined 4% y-o-y in 1H15, as demand in China, Netherlands, Pakistan and the United States declined 15% y-o-y.

India remained Malaysia’s strongest palm oil importer, where strong domestic demand for vegetable oil drove a 34% spike in the purchase of Malaysia’s palm products.

The CPO futures November contract is currently trading at RM2,048 per tonne.

However, RAM Ratings said that the weaker ringgit may provide some support.

The ringgit touched a 17-year low today, trading at 3.8905 against the greenback, as official data on the unexpected 5% increase in June exports failed to lift the currency.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)