Bumper earnings seen for plantation corporations

PETALING JAYA: The plantation sector is more likely to see report earnings for the January to March quarter as crude palm oil (CPO) costs keep elevated.

Costs are more likely to common between RM4,000 and RM4,500 per tonne this yr earlier than declining in 2023 to common between RM3,500 and RM4,000 per tonne, based on Kenanga Analysis.

“Be ready to see report quarterly earnings for the January to March quarter and we anticipate the CPO costs to remain larger and longer than we had anticipated a couple of months earlier,” it stated in a report yesterday.

Nonetheless, with the CPO costs beginning to commerce under the latest peak in addition to considerations over ESG-compliance, the sector just isn’t more likely to commerce at premium to the broad FBM KLCI.

The plantation sector accounts for 9.6% of the load within the FBM Shariah Index and 9.4% of the weightage on the FBM KLCI.

“The Bursa plantation index trailed the broad marketplace for most of 2021 regardless of the strengthening CPO costs as a result of considerations over ESG,” Kenanga stated.

As such, the analysis home stated it has a “impartial” advice on the plantation sector.

“We consider that ESG is essential when investing. We additionally consider that palm oil is right here to remain regardless of the sector’s ESG overhang as it’s the most generally used edible oil on the planet with a 35% share of the worldwide edible oil and fats market of about 250 million tonnes a yr,” Kenanga stated.

It added that 70% of all palm oil is consumed straight or used as components from cooking oil to baking shorteners in addition to a cocoa butter substitute. It’s the most efficient oil crop on the planet.

“It’s aggressive and leaves a a lot smaller environmental footprint in contrast with different oil crops,” Kenanga stated.

Whereas the oil palm fruits are harvested all year long, month-to-month outputs are topic to a yearly cycle.

“The height manufacturing month is in September or October. Thereafter, the month-to-month harvest begins to pattern all the way down to backside out in March earlier than manufacturing picks up once more month-on-month,” it stated.

“Because the second quarter usually sees the beginning of rising palm oil output, the CPO costs are anticipated to start out easing,” the analysis home added.

It stated the CPO costs had been more likely to stay excessive this yr as a result of tight provide scenario within the edible oil market globally.

“Nonetheless, we consider that the worth draw back for 2022 might be restricted,” the analysis home stated.


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