KUALA LUMPUR (March 5): UOB Kay Hian has maintained its “overweight” rating on the regional plantation sector and said crude palm oil (CPO) prices are expected to trade in the range of RM3,800-RM4,200/tonne for 2024, higher in 1H2024 (tight vegoil supply) but seeing some softness in 3Q2024 with more vegoil supply coming into the market.

In a note on Tuesday, the research house said the impact from El Nino would be minimal on Malaysia’s production and mild on Indonesia’s production.

“Demand would still remain sluggish and the market only expects huge imports when CPO prices are lower.

“Maintain ‘overweight’; prefer efficient upstream players with good production growth,” it said.

The research house said panellists at its UOB Kay Hian Palm Oil Event 2024, held on Monday (March 4), highlighted that Malaysia’s CPO production is expected to be slightly positive, as the impact from El Nino is minimal on Malaysian estates.

However, it said Indonesia may register a flat or negative palm oil production growth in 2024, given the impact from the mild El Nino.

It said increasing biodiesel mandate in producing countries would result in lower overall global vegoil supply in the market, which would support CPO prices indirectly.

“Demand may be sluggish, but there may be a huge stock up once CPO prices are low enough,” it said.

“If investors are keen on this sector, we recommend pure Malaysian plantation companies, as they are able to leverage on high CPO prices with better production growth, without being affected by policy uncertainties.

Among companies with substantial exposure in Malaysia, we highlight IOI Corporation Bhd and Hap Seng Plantations Bhd as our top picks,” it said.

Read also:
Plantation Ministry mulls smallholders’ consolidation to increase palm oil yield
World’s biggest palm oil exchange on Bursa to launch soyoil futures
Growth seen in Malaysian palm oil industry this year due to positive outlook — Bursa chairman
Sime Darby Plantation sees higher 2024 output as labour situation eases
Palm oil supply woes to bolster prices this year, Mistry says
United Plantations sees palm oil prices ranging between RM3,850 and RM4,250 in 2024
Oleochemicals industry to grow in the near term with Asia-Pacific leading
Malaysia sees Asia, Africa taking palm oil that Europe doesn’t want