KUCHING: Sarawak-based plantation companies made good recovery in their share prices as industry experts and analysts have generally turned bullish on the plantation sector on several positive factors.
The country’s palm oil inventory fell sharply by 31.6% to about 1.66 million tonnes last month from a year ago, and was lower by 14.2% month-on-month from January, according to monthly figures released by the Malaysian Palm Oil Board on Monday
The current dry spell has affected production of oil palm fruits and the looming El Nino weather phenomenon is expected to further reduce production volume.
Besides, rising biodiesel demand in Indonesia is another plus factor to drive crude palm oil (CPO) prices from current level.
Ta Ann Holdings Bhd, Jaya Tiasa Holdings Bhd, Rimbunan Sawit Bhd, Sarawak Plantation Bhd and Sarawak Oil Palms Bhd (SOP) continued to attract investors’ interest as their share prices trended higher.
Ta Ann, which gained 12 sen to RM4.24 last week, rose to intra-day high of RM4.50 yesterday. However, it closed off-high at RM4.45 for a gain 8 sen on volume of more than 900,000 shares. Jaya Tiasa added 4 sen to RM2.74, having appreciated nearly about 30% year-to-date from 2013 close of RM2.13.
Both Ta Ann and Jaya Tiasa, whose other key businesses are in logging and manufacturing of timber products, like plywood, are benefiting from the sustained firm tropical log prices due to prolonged tight supply.
Miri-based SOP, Sarawak’s most established plantation company which owns six palm oil mills and a palm oil refinery, was up 18 sen at RM6.61, making the counter one of the 15 top gainers on Bursa Malaysia.
Rimbunan Sawit and Sarawak Plantation gained 2 sen and 3 sen to 88 sen and RM2.78 respectively.
Renowned commodity trader Dorab Mistry had forecast CPO would hit RM3,000 to RM3,500 per tonne if the EL Nino weather phenomenon occurred. Even if that does not happen, he has anticipated CPO prices would still trade higher at RM2,600 to RM2,900 per tonne this year.
RHB Research, which has maintained an “overweight” rating on the plantation sector, expects CPO price to continue strengthening in the second quarter due to weak production and still stable demand.
It listed positive factors as tight supply and rising biodiesel demand in Indonesia, the world’s top CPO producer, and a potential El Nino event.
The research house has projected CPO to hit close to RM3,000 per tonne during the first half-2014.
Its top picks include Jaya Tiasa with target price of RM2.80.
However, Hong Leong Investment Bank (HLIB) Research is less bullish, retaining its “neutral” call on the plantation sector, citing the diminishing price attractiveness of CPO and pricey valuations for the sector for its rating.
“We are keeping to our average CPO price projection of RM2,700 per tonne in 2014 to 2015 for now, pending more convincing evidence that supports the potential El Nino event,” it added in a March 6 report.