RHB raises outlook on KLK on higher CPO price assumption

KUALA LUMPUR: RHB Research has raised its earnings forecasts on Kuala Lumpur Kepong Bhd (KLK) after revising higher its crude palm oil (CPO) price assumption.

"We are raising our 2021-2022F CPO prices to MYR3,200 and MYR2,800 per tonne (from MYR2,650 and MYR2,600).

"With the increase in our price forecasts, we lift FY21-22F earnings by 10-21%," it said in a note.

It added that it expects prices to head lower from hereone and thus advocates stocks that should perform in a lower-price environment.

Following the adjustment to its estimates, RHB kept its "buy" call and raised its target price to RM28.25 from RM27.80, representing 29% upside with a 2.5% FY22 forecast yield.

Based on Oil World’s and the US Department of Agriculture’s (USDA) latest forecasts, supply and demand of oils and fats and CPO are expected to be relatively tight in 2021, but this should be somewhat balanced by softer demand, said RHB.

"For 2022, despite no official forecasts yet from Oil World or USDA, we believe soybean and other oilseed prices will moderate, along with CPO prices.

"This is from oilseeds seeing increased planting activities, to take advantage of current high prices," it added.

RHB expects CPO stock-usage ratios to improve in 2022, which will keep CPO prices above the 20-year historical average of RM2,500 a tonne.

However, given the rising stock-usage ratio trend, it believes CPO prices will decrease year-on-year in 2022.
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3

Next In Business News

MEF: Stricter MCO in Selangor crucial but don’t impose full lockdown
Grab Malaysia introduces programme to assist small food businesses
Gold extends rally as weak dollar, inflation jitters lift appeal
Oil rises as US, Europe reopen economies
Tuju Setia secures RM189mil construction contract
SCIB accepts RM120mil Prima housing contract
Overwhelming response to Cagamas’s RM1.04b issuances
FBM KLCI slides on fears of stricter lockdown
Aditya Laroia new CEO of Maybank KE Singapore
China close to kicking off long-awaited REITs market

Stories You'll Enjoy