Recently all plantation stock prices have been dropping despite CPO just hit a new record high price as shown on the price chart below. The reason is because too many investors over sold to take profit. The more they sold, the price continued to drop which is affecting investors who used margin finance to buy more shares. Margin finance is a double edge sword. It cuts both ways.

At the current price level, no sensible investors would sell. Unfortunately, many investors are forced to sell to meet margin calls. In fact, clever investors should take advantage of the situation to buy at the cheap sale price level.    

There are a few reasons why CPO price continues to shoot higher and higher.

1) Malaysian Ringgit is depreciating as shown on the chart below. All plantation companies will gain additional profit due to the foreign exchange advantage.

2) The Ukraine-Russia conflict has affected Sunflower oil export as Ukraine and Russia produces about 80% of Sunflower oil in the world. In fact, they have missed the planting season for the year.

3) Recently the Indonesian government-imposed CPO export restriction which will continue to push up CPO prices in the world market as shown on the CPO price chart below.  

Based on FFB production of each company in the last 3 months is the most accurate method for comparison.  

The table below shows the comparison of each company’s 3 months FFB production ÷ current market capitalisation. Subur Tiasa and Jaya Tiasa are the 2 best stocks.  

At the current price level, no sensible investors would sell. Unfortunately, many investors are forced to sell to meet margin calls. In fact, clever investors should take advantage of the situation to buy at cheap sale price level.