Based on our estimates, most planters will likely report flattish/weaker performance on QoQ basis, as higher realised palm product prices will be weighed down by seasonally lower FFB output and higher fertiliser costs. Maintain 2022-24 CPO price assumptions of RM5,500/4,500/4,500 per tonne. Earnings forecasts, TPs and ratings of individual planters (to reflect high CPO price and production costs), on the other hand, will be reviewed in upcoming results season. Maintain Overweight stance on the sector. Top picks are FGV (BUY; TP: RM2.43); IOI Corp (BUY; TP: RM5.09), KLK (BUY; TP: RM32.43) and Sime Darby Plantation (BUY; TP: RM5.95).
Results preview. Plantation companies will start reporting their quarterly financial results starting from 20 May 2022.
QoQ: Seasonally weaker FFB output was partly mitigated by higher CPO prices. Planters will likely register flattish or weaker performance, due mainly to seasonally weaker FFB output (during the quarter, 6 out of 7 planters under our coverage clocked in lower FFB output) and higher fertiliser costs, but partly mitigated by higher realised palm product prices.
Zooming in on selected individual planters:
Genting Plantations (GENP). GENP will likely report flattish QoQ performance, as higher palm product prices and improved JV contribution will be offset by (i) higher fertiliser cost, (ii) a 15.2% QoQ decline in FFB output, and (iii) potentially weaker downstream performance (arising from high feedstock costs).
Sime Darby Plantation (SDPL). SDPL will likely report flattish QoQ performance in 1Q22, as higher palm product prices and sustained performance at downstream segment will likely be moderated by (i) higher fertiliser cost, and (ii) lower FFB output (-10.1%, due mainly to lower output from Malaysia estates, we believe).
TSH Resources. TSH’s core earnings will likely come in lower in 1Q22, as marginally higher FFB output (+0.8%) and better palm product prices will likely be offset by higher production cost and muted performance at cocoa segment.
YoY: Higher CPO price to to drive 1Q22 performance. Planters will likely register higher YoY upstream earnings in their upcoming results, on the back of significantly higher CPO price (>50%), which more than mitigated (i) higher production cost (arising mainly from higher fertiliser prices), and (ii) mixed FFB output (with 4 out of 7 planters under our coverage clocked in YoY growth in their FFB output). As for the integrated players, we believe volatile feedstock prices, coupled with elevated freight cost will likely hinder profitability at downstream segment.
Forecasts. YTD, CPO price averaged at ~RM6,300/tonne, and we expect palm oil prices will remain at elevated levels for a while, supported by supply disruption of major vegetable oil arising from less favourable weather conditions, geopolitical tension, and protracted fertiliser supply. We maintain our 2022-24 CPO price assumptions of RM5,500/4,500/4,500 per tonne. Earnings forecasts, TPs and ratings of individual planters (to reflect high CPO price and production costs), on the other hand, will be reviewed in upcoming results season.
Maintain OVERWEIGHT. We maintain our OVERWEIGHT stance on the sector, underpinned by (i) high near term CPO prices (which will in turn translate to good near term earnings prospects), (ii) easing ESG concerns, and (iii) decent valuations. Top picks remain FGV (BUY; TP: RM2.43); IOI Corp (BUY; TP: RM5.09), KLK (BUY; TP: RM32.43) and Sime Darby Plantation (BUY; TP: RM5.95).
Source: Hong Leong Investment Bank Research - 18 May 2022
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GENPTq sifu Calvin for your extensive explanation on Tsh. Hope we can prosper together till next year on this gem. Cheers!!!
2022-05-19 00:05
Superdaddy
If anyone can buy and hold till next year the fantastic gain of 31 sen profit from Bulugan Regency Rm712 million lands sale will propel Tsh much much higher
2022-05-19 00:54
Correctloh Palmoil plantation is the best way to hide mah!
U r effectively involve with food production mah!
2022-05-19 08:41
In time of recession, safe your capital. Other than bank fixed deposits, plantations stocks is one of the safe havens for investments.
2022-05-19 09:19
he whole world is facing food shortage including cooking oils (including palm oil) and why worry as long as FCPO is in excess of RM6K/ton, and all individual oil palm smallholders & oil palm listed companies are reaping tons of profits which go directly into their pockets/banks, why worry about the movement of the share prices.
Dow Jone drops like bombs affecting tech. companies, cryptocurrencies and "Growth" companies where else oil palm list cos. are "Value" companies are holding very well and stable.
This is my opinion and for critical analysis.
2022-05-19 11:37
Correct mah!
One of your best plantation agst inflation is farmland/plantation mah!
2022-05-19 14:23
Correct mah!
One of the best protection agst inflation is farmland/plantation mah!
2022-05-19 14:25
Calvin, I think is time to move on from palm oil shares promoted since 2021. With some palm oil shares already rally 100% you have already proven your point and now time to let go. Waiting for you to promote next hidden gem.
2022-05-19 20:44
FCPO night trading session just opened: Aug2022 Contract RM 5,967 -105( -1.7%)
2022-05-19 21:03
FGV average CPO price Q121 rm3172, Q221 rm3268, Q321 3798, Q421 rm4194.... Q122rm5+++, eps???
2022-05-20 11:51
Good vibes loh!
Despite indo lift export ban which mean cpo price will fall......but the cpo price still shoot up mah!
2022-05-20 12:35
calvintaneng
Post removed.Why?
2022-05-18 23:25