Plantations in the spotlight

Plantations in the spotlight

Kuala Lumpur: Plantation stocks are in the limelight this results season as companies, large and small, almost double profits on higher crude palm oil (CPO) prices.

Tradewinds Plantation Bhd closed 23 sen higher at RM4.05 on Friday, after almost doubling profits for the quarter ended March 31 2011, while PPB Group Bhd closed at RM17.28, up by 16 sen.

The Plantation Index closed at 7,732.07 points last Friday, up 23.03 points, as investors drove up plantation stocks, especially those which have not announced their results.

Batu Kawan Bhd is yet to release its results as associate company Kuala Lumpur Kepong Bhd is only expected to release its second quarter results on Wednesday.

IJM Plantations Bhd, Sime Darby Bhd, Genting Plantations Bhd, Hap Seng Plantations Bhd, Kwantas Corp Bhd, Rimbunan Sawit Bhd, Sungei Bagan Rubber Company, Sarawak Plantation Bhd and TDM Bhd are also yet to announce their quarter ended March 31 2011 results.

While CPO prices are not expected to dip below RM3,000 per tonne for the rest of the current quarter, the shine on plantation stocks is likely to pall in the second half of the year as most analysts forecast that CPO prices will then weaken.

MIDF Research Sdn Bhd said, in its note to investors, higher CPO inventory would likely put downward pressure on CPO prices in the second half of the year, especially with no spike in exports.

CPO inventory inched up to 1.67 million tonnes in April. This is a 3.5 per cent increase month-on-month and a three per cent increase year-on-year.

ECM Libra Sdn Bhd concurred with this view.

"With stock levels rising in Malaysia, CPO prices should trend weaker as we go into third quarter of 2011," it said in its note last week.

Factors to watch in the coming weeks include soyabean planting progress in the US, Malaysian exports, recurrence of unfavourable weather and crude oil prices, which are getting more volatile.

"For stock picks, we have no preference for any plantation play at the moment and only like Boustead Holdings Bhd due to catalysts from their other business segments as well as merger and acquisition activities," ECM Libra said.

The research house has a "neu-tral" call on the sector, taking the view that there will be no major shocks (supply or demand related) to cause extreme CPO price swings in the near term.

MIDF Research reiterated its RM3,400-per-tonne average CPO price forecast for 2011.

Its top big capitalised picks are Sime Darby an d Kuala Lumpur Kepong Bhd because of their sizeable young plantation areas that provide higher potential earnings growth.

For small caps, it continues to like TSH Resources Bhd because of the company's large immature areas and TH Plantations because of its stable dividend payout.

Read more: Plantations in the spotlight http://www.btimes.com.my/Current_News/BTIMES/articles/pplant/Article/index_html#ixzz1N8mXDIlX

All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.