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P H
Sep 12,2017 18:29:14

Plantation – Is The Current CPO Price Strength Sustainable?

Malaysian inventory levels are now at 1.94m tonnes, translating to an annualised stock/usage ratio of 10.3%. This is above the historical average of 9.5%, signalling that stock levels are officially in a surplus. With demand continuing to disappoint, with most of the main markets in negative territory YTD, we do not expect the current strength in CPO prices to persist. This would coincide with an anticipated softening of soybean prices once the initial impact of hurricanes in the US wear off and weather normalises. No change to our UNDERWEIGHT stance on the sector.

  • Malaysia’s CPO production rose 13.6% YoY in YTD-Aug, although August’s output was down by a slight 0.9% MoM from July. We believe production would pick up in the next couple of months, as most planters are expecting peak output to be in September/October. For the whole of 2017, we expect Malaysia’s CPO output growth to moderate to 10-12% YoY. 
     
  • Exports rose by 6.4% MoM in August, bringing YTD exports to a 2% increase YoY. In YTD-Aug, exports saw a rise to Pakistan (+14% YoY) and Philippines (+6%). This was offset by a decline in exports to China (-4% YoY) India (-29%) and the US (- 20.5%), while exports to the EU was flat YoY.
     
  • Inventory rose 8.8% MoM to 1.94m tonnes in August, despite a dip in output. Annualised stock/usage ratio for August is now at 10.3% (up from 9.5% in July), which is now above the 15-year historical average of 9.5%. This means that stock levels are now officially in a surplus situation. We expect to see a continuation of rising inventory levels, as production resumes its recovery during the peak seasonal period. 
     
  • 2Q17 results disappointed, as six companies (IOI Corp, Genting Plantations, TSH Resources, Kuala Lumpur Kepong, IJM Plantations and Felda Global Ventures) reported results that were below expectations. Two (Sime Darby and Sawarak Oil Palms) reported results above expectations, with only CB Industrial Product in line. We continue to see strong YoY FFB output growth in 2Q17, although most companies saw lower QoQ production growth. We observe Indonesia continuing to drive this growth, despite most companies guiding for growth to start moderating in 2H17. In Malaysia, while the growth recovery has not been consistent throughout the country, most companies are guiding for output to pick up more strongly in 2H17, with the peak output slated to be in September/October for Malaysia. Most companies continued to guide for strong double-digit FFB growth in 2017, coming from a low base in 2016. For those with downstream operations, we saw stronger QoQ margins, as feedstock prices fell. Most companies continue to guide for stronger margins at their downstream divisions, as selling prices have risen, while feedstock prices continue to weaken.
     
  • We maintain our UNDERWEIGHT rating on the sector, on the back of a strong output recovery and weak demand dynamics. Catalysts include a positive change to global demand and any extreme weather occurrences that would have an impact on global vegetable oil output. Our Top BUY is Sarawak Oil Palms while our Top SELL is London Sumatra. (Hoe Lee Leng)

$AALI $ANJT $BWPT $DSNG $GOLL $GZCO $LSIP $MAGP $PALM $SGRO $SIMP $SMAR $SSMS $TBLA $UNSP

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P H
Feb 22,2017 11:24:39

Indonesia market update: Here comes the rain
 
Ahok, floods & stocks

Bad news for Ahok in the lead-up to the Jakarta Governor race: In spite of efforts by Jakarta’s governor, Basuki “Ahok” Tjahaja Purnama, to prepare for and prevent flooding, 54 areas around the capital were paralyzed as water prevented travel (exhibit 3-4) given the water depth of up to two and a half meters in some places on the back of around 180mm rain intensity (2016: 157mm) in the past 24 hours. The weather bureau (BMKG) predicts the peak intensity of La Nina to stay until March 2017.  
   
2nd round Jakarta Governor campaign has started early: Dressed in a red parka (exhibit 2), Anies, Ahok’s competitor in the final round of the Jakarta Governor race, has managed to capitalize on the floods to raise his popularity ahead of the planned campaign scheduled for 6-15 April 2017.

Demonstration still took place despite flooding: The Jakarta floods did not deter an estimated 10,000 protestors (although much lower than the 100k participants previously forecast) from turning up in front of the parliament (exhibit 1), asking the government to remove Ahok from his Governor post. The rally was reportedly headed by Muslim forum FUI.    

Positively affected stocks: While all distribution channels are adversely affected by the floods, we believe there are sectors and stocks that could perform better than others under these conditions. Siloam Hospitals ($SILO) should see increased traffic as people get sick while the pharmaceutical sector is also likely to see some uptick from higher purchases of medicine to treat wide-ranging illnesses such as flu and skin diseases, benefiting Kalbe ($KLBF) and Sido Muncul ($SIDO). Additionally, during floodings, households and evacuation centers typically stock up on staple foods such as noodles, which would benefit Indofood Consumer Branded Products ($ICBP). During these times, smokers also have the propensity to smoke more, so we could see increased stick sales for Sampoerna ($HMSP). Within the commodities space, assuming continued downpours at Sumatra’s plantation estates, higher CPO prices might occur due to decreased output. This would benefit our favored plantation plays: Eagle High ($BWPT) and Tunas Baru ($TBLA).  

Adversely affected stocks: With the rains, cement, construction and coal companies could face operational delays. We also expect bread maker Nippon Indosari ($ROTI) to suffer (c.70% of sales in Greater Jakarta), as spoilage may be an issue due to the fresh nature of its products. Retailers could also be affected by the reduced traffic, particularly Ramayana ($RALS) whose low-end target customers lack cars for commuting. Traffic jams caused by flooding should spell bad news for transportation, adversely affecting both Blue Bird ($BIRD) and Express ($TAXI), as well as Garuda Indonesia ($GIAA), as flights may be delayed or cancelled.   

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P H
Jun 17,2016 08:46:18
We attended BWPT’s public expose and below are the takeaways:

· BWPT guided for 6% production growth in 2016F.

· The company still recorded earnings loss of IDR69bn in 1Q16  after consecutive earnings loss in the past 2 quarters due to lower palm oil price, El Nino effect, and high interest payment.

· The average age of its plantation is 6.4 years with details 32% Prime (>8 years), 43% Young (4-8 years), and 25%Immature (<4 years) as at end December 2015.

· The company allocates IDR400-500bn for capex in 2016 (IDR250bn to build factory and the rest for immature plantation expense). Until 1Q16, company has invested IDR100bn.

· BWPT plans to build two new factories in West Kalimantan and Papua to boost capacity to 3m tons per year in 2017. The factories in East Kalimantan and Papua will be done in 4Q16 and 2017 respectively.

· About the acquisition issue from Felda, Malaysia's plantation company, the management said that the deal is only between its major shareholder Rajawali Capital International, thus  BWPT has nothing to do about it.

· The company also mentioned that its subsidiary's (Sawit Sukses Sejahtera) creditor has revoked its bankruptcy lawsuit.

· BWPT currently trades at 51x 2016F P/E. The stock price has rallied 58% Ytd. We see that the acquisition issue from Felda has already priced in. The positive catalyst will be 1) the increase plantation prime age (>8 years) percentage to 75% in 2017, 2) the company's decision to slow down land expansion activity.

(SOURCE : TRIMEGAH)

$BWPT

Bull
P H
Apr 12,2016 11:19:17
Plantation: Inventory Drops Below 2m Tonnes

Malaysia’s inventory level has dropped below the all-important 2m tonne psychological mark to 1.89m tonnes. We expect it to hover around these levels for the next few months, as CPO production may remain flattish until end-2Q16/early-3Q16. We also expect strong CPO prices to persist until the start of the run-up of the next seasonal peak. Maintain OVERWEIGHT. First Resources, Genting Plantations and London Sumatra are our Top Picks for Singapore, Malaysia and Indonesia respectively.

¨ Malaysia’s CPO production rose 16.9% MoM in March, coming from a short month in February and an improvement in rainfall. YoY production was still down 18.4% in March, while YTD production declined 10.2%. We expect FFB output to remain flattish over the next few months, before starting the run-up to the next seasonal peak at end-2Q16/beginning-3Q16.

¨ Better exports in March. Given the shortened February (a festive month), March’s exports recovered 22.9% MoM and brought YTD (Mar 2016) exports to an increase of 10.5% YoY. This was due to higher exports to India (+10% YoY) and the EU (+23% YoY), offset by lower exports to China (-27% YoY).

¨ Inventory fell below 2m tonnes, dropping by a steep 13.1% MoM to 1.8m tonnes. We highlight that stock/usage ratios are now at 10.9% (down from 13.2% in February) and close to the 12-year average of 10%. We expect inventory levels to hover around these levels for the next few months.

¨ Recent developments:
i. US Department of Agriculture’s (USDA) planting intentions survey results show that soybean planting to decline 0.5% to 82.24m acres in 2016, while corn planting is set to rise 6.4% YoY to 93.6m acres;

ii. China’s edible oil imports rose YTD Feb 2016 (+35.6% YoY) while palm oil imports rose 5.7% YoY (vs soybean import decline of 8.7%);

iii. India saw strong 21.8% YoY growth in edible oil imports in YTD Feb 2016, with palm oil imports up 11%. We expect this growth rate to be maintained, as India expects to import 10-15% more edible oil in 2016;

iv. Malaysia’s reinstated export tax levy of 5% for April (for CPO price above MYR2,400/tonne) should see downstream players record better margins as this translates to a USD30-35/tonne discount for CPO feedstock. Although it is still smaller than Indonesia’s USD50/tonne discount, it does make Malaysian refiners slightly more competitive.

¨ Still OVERWEIGHT. We expect more upside for plantation stocks, as most still only reflect CPO prices of MYR2,300-2,500/tonne. YTD, Malaysian CPO production is down 10% but CPO prices have risen 22%. Our Top Pick for the region remains First Resources, while Genting Plantations and London Sumatra Indonesia are top choices for Malaysia and Indonesia respectively.

$AALI $LSIP $SIMP $SMAR $BWPT $SGRO $GOLL
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P H
Mar 21,2016 08:28:32
Plantation - All In Agreement For Higher Prices In 1H16

The general tone of the speakers at the 2016 Palm and Lauric Oils Conference (POC) was bullish. It was a rare occurrence to witness the three “stars” of the POC unanimously bullish on the CPO price direction. Their CPO price forecasts, up to 1H16, had ranged between MYR2,700-3,200/tonne. This is in line with our view that 1H16 would see stronger prices vs 2H16, on the back of the delayed impact of the El Nino. We maintain our MYR2,700/tonne average price for the year and our OVERWEIGHT recommendation. Top Picks include First Resources, Genting Plantations and London Sumatra.

$AALI $LSIP $BWPT $GOLL $SMAR SG:EB5
Bull
P H
May 11,2015 12:57:13
Indeks Harga Saham Gabungan (IHSG) menguat +0,1% (+3 poin) di level 5184,45 poin pada penutupan perdagangan sesi 1, Senin (11/5). Indeks LQ45 naik +0,15% ke posisi 900. Jakarta Islamic Index (JII) naik +0,27% ke posisi 699 poin. Indeks Kompas 100 naik +0,19% ke level 1.134 poin. IDX30 naik +0,15% ke level 466 poin. Pemodal asing membukukan transaksi net sell (jual bersih) -Rp37 miliar. Transaksi yang tercapai Rp2,136 triliun dengan volume trading sebanyak 5,755 miliar saham. Sektor: Agri +2,07% Mining +1,70% Properti -0,69% Infrastruktur +0,16% Finance +0,04% Trade -0,14% Manufaktur -0,17% Consumer -1,17% Basic ind -0,07% Misc-ind -0,25% Kini sektor agro dan mining menjadi penopang utama laju IHSG pada perdagangan sesi siang awal pekan ini. Saham agri ditunjang oleh naiknya AALI +3,07%. BWPT ++3,75%. DSNG +1,41%. GZCO +1,12%. SIMP +2,34%. SSMS +1,01%. Adapun saham-saham mining yang bergerak naik antara lain: ADRO +5,23%. ANTM +0,63%. ARTI +4,44%. HRUM +2,97%. INCO +1,24%. ITMG +5,51%. Kelompok saham properti bergerak negatif seiring terbitnya Revisi PMK No 90 /PMK.03/2015 tentang pengenaan pajak barang super mewah (PPh 22) untuk properti. Saham-saham properti yang melorot adalah: APLN -1,73%. BSDE -0,28%. CTRA -2,92%. JRPT -7,34%. LPCK -0,90% . LPKR -1,19%. Adapun sektor yang turun paling dalam adalah consumer -1,17%. Koreksi consumer dimotori saham: DVLA -1,11%. KAEF -0,84%. GGRM -0,16%. TSPC -1,67%. ULTJ -2,35%. UNVR -0,06%. Bursa Asia Sentimen kebijan Tiongkok yang memangkas suku bunga menjadi sentimen utama bagi market regional. Bank Sentral Tiongkok (People`s Bank of China (PBOC) menurunkan suku bunga kredit dan deposito bertenor 1 tahun sebesar 25 bps. Indeks Nikkei naik +1,27% (+245,32 poin) ke posisi 19.624,51 poin. Indeks Hang Seng naik +0,50% (+132,29 poin) ke level 27.714,63 poin Indeks Shanghai naik +1,18% (+49,62 poin) ke posisi 4.255,54 poin Indeks Straits Times +0,46% (+15,72 poin) ke level 3.467 poin (pukul 12.00 WIB).
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