MAYBANK IB Research is maintaining its neutral call on the plantation sector on the back of sustained crude palm oil (CPO) prices.
The CPO stockpile had decreased faster than exports and consumption last month, leading to high selling price, but upside would be capped by competing vegetable oils and diesel prices, Maybank IB Research analyst Ong Chee Ting said in a Dec 11 note.
“High CPO prices may be supported till 1Q20 as we expect an even lower month-on-month output till February 2020,” he added.
But discretionary demand for palm biodiesel had “likely disappeared” as palm oil had been trading at a US$169 per tonne premium (Dec 9) to diesel, Ong said. “This will likely cap near-term upside to CPO price.”
He is expecting a CPO price correction to happen sometime in 2Q20. “We are keeping our 2020 CPO average selling price forecast of RM2,300/t and RM2,400/t for 2021.”
Ong has buy calls on Sarawak Oil Palms Bhd, TSH Resources Bhd and TH Plantations Bhd.
