The house says this is due to a lack of moisture after less-than-normal monsoon rainfall, while oil palm trees look stressed. It expects 2011 new add from Malaysia of 600,000-700,000 tons vs 800,000 tons earlier.
Morgan Stanley says market “now accepts that the 2H10 CPO production recovery will be weak, but may underestimate the persistent weakness in 1H11, which in our view will be followed by a supply rebound in 2H11.”
OCBC downgrades Golden Agri-Resources (E5H.SG) to Hold from Buy, given limited upside, keeps $0.78 fair value, according to Dow Jones.
OCBC says CPO price rally, strong 21% on quarter recovery in CPO output boosted 3Q10 results; also notes company maintains positive CPO outlook, citing growing consumption of edible oils, fats, particularly by bulging middle classes in China, India, Pakistan.
Adds however, “management does not expect any increase in production this year (vs +5% previously), attributing the shortfall to the heavy rainfall over the past few months.”
Singapore plantation stocks strong on firmer CPO futures. “We think tighter supply/demand fundamentals for vegetable oils, higher crude oil prices and increased fund flows into the commodities space should provide support for higher CPO prices,” says Nomura.
Golden Agri-Resources (E5H.SG) +7.1% at $0.750, Indofood Agri (5JS.SG) +3.3% at $2.82, First Resources (EB5.SG) +3.7% at $1.42, Kencana Agri (F9M.SG) +2.3% at $0.44, Wilmar (F34.SG) +0.3% at $6.71.
Most of these companies yet to report 3Q10 results, guidance, which could take share prices even higher in coming days if performances favourable. Wilmar reports November 10, Golden Agri Nov 11.
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Indofood Agri Resources (5JS.SG) off 5.3% at $2.51 after opening in positive territory; 3Q10 consolidated revenue +9.7% on-quarter, net profit +13.3% on-quarter, helped by higher CPO selling prices, says Dow Jones.
High beta stock (weekly beta at 2.01) likely falling back after +19% vs $2.22 August low; despite bullish 4Q outlook for CPO, prices expected to moderate in 2011. Credit Suisse has Neutral rating, says palm oil prices usually peak December-March, but remains bearish in 2011.
Singapore plantation stocks sharply higher as CPO futures rally, says Dow Jones.
UOB KayHian analyst Leow Huey Chuen notes CPO prices at new high of MYR2,661/tonne ($1,140/tonne) for 3-month forward contract, attributes spike to potential disruption to production in Sabah, which accounts for one third of Malaysia’s total output, due to La Nina weather effect, as well as spill-over effect of rising wheat and corn prices following Russia’s ban on grain exports.
Wilmar (F34.SG) +3.2% at $6.42, Indofood Agri Resources (5JS.SG) +5.4% at $2.53, Kencana Agri (F9M.SG) +7.6% at $0.355, First Resources (EB5.SG) +2.6% at $1.18, Golden Agri-Resources (E5H.SG) +1.7% at $0.605. All actively traded as of 4:21 p.m.
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Asian plantation stocks, including those in Singapore, lack catalysts to head higher over next 12 months as industry fundamentals not supportive, says Macquarie, according to Dow Jones.
Macquarie says CPO prices may face pressure given record soybean inventories (palm oil is substitute for soybean oil), narrow price discount between CPO and soy oil, increased CPO inventories due to seasonal recovery in production.
Overall edible oil supply may continue to lag demand, helping push down stocks-to-usage ratios of all edible oils well into 2011, auguring well for crude palm oil (CPO) prices, says Deutsche Bank according to Dow Jones.
Singapore plantation stocks, which outperformed rest of market yesterday, are notably lower today as investors pocket gains amid uncertainty over outlook for crude palm oil prices.
“We continue to believe that CPO price is unlikely to stay above MYR3,000 per ton for long, as inflation worries may prompt the governments of China and India to release their stockpiles,” says CIMB.
Indofood Agri Resources, the manufacturer of leading brands of edible oils and fats in Indonesia, reported a positive set of results for FY09 with attributable profit surging 92% to Rp1,527 billion ($213 million), from Rp795 billion ($111 million) for FY08.
Given the unprecedented high CPO prices in the first half of 2008, the group reported FY09 revenue of Rp9.0 trillion ($1.3 billion) which was 23.6% lower compared to Rp11.8 trillion ($1.6 billion) in FY08 as a result of lower average selling prices of plantation crops and edible oil products, as well as lower cooking oil sales volume. This was offset partially by higher sales volume of CPO, palm kernel and margarine.
