AM Investment Bank (AM) downgrades the plantation sector to Neutral from Overweight. Although the three-month pause in USA’s tariffs would give time to customers to stock up on inventory, AM reckons that the oleochemical industry would face challenges after that.
“We believe that downstream companies especially oleochemicals will be hit by slower demand from consumer and industrial companies and their customers,” said AM in the recent AM Watch Report.
Also, there is competition from Indonesia, which has a competitive advantage not only due to a lower cost of feedstock but also because the Rupiah has fallen by about 11% from the peak.
AM further points out the competition from China as the country sells more of its products overseas. Then there is the oversupply in the oleochemical industry.
“We prefer purer planters to the large integrated companies. As such, we downgrade KL Kepong and IOI Corporation to Hold from Buy,” said AM.
Their new target prices are RM21.71 for KLK and RM4.05 for IOI. SD Guthrie is a Hold with a target price of RM4.28.
AM maintains Buy on Genting Plantations (TP: RM5.84), Johor Plantations (TP: RM1.67) and TSH Resources (TP: RM1.38). —Apr 15, 2025
Main image: The Edge
