KUALA LUMPUR, Aug 17 — Hong Leong Investment Bank Bhd (HLIB) has maintained its ‘neutral’ stance on the plantation sector as planters are expected to report a mixed set of performance for the second quarter of 2023.
The research house said the expectation was premised on mixed fresh fruit bunches output growth and slightly lower crude palm oil prices.
“Despite the second quarter being a seasonally higher productivity quarter with Malaysia’s crude palm oil production rising by 6.1 per cent quarter-on-quarter, three out of six planters under our coverage, namely FGV, Hap Seng Plantations and Kuala Lumpur Kepong clocked in a lower fresh fruit bunch output in the second quarter of this year,” it said in a note today.
HLIB opined that most planters will likely register a decline in their upstream earnings, mainly on the back of significantly lower crude palm oil prices and higher production costs arising from minimum wage hikes, elevated fertiliser prices and higher diesel prices.
“Despite easing labour shortage in Malaysia estates, only four out of six planters under our coverage registered higher fresh fruit bunch production, while FGV and Sime Darby Plantation still registered year-on-year declines in their 2Q 2023 fresh fruit bunch output at -18.6 per cent and -1.9 per cent year-on-year, respectively.
“This is due to less favourable weather conditions at FGV’s estates and below-potential harvester’s productivity,” it said.
The research house noted that year-to-date, crude palm oil price averaged at RM3,916 per tonne, thus it has maintained its crude palm oil price assumption of RM4,000 per tonne for 2023.
The arrival of El Nino, coupled with potentially stronger demand arising from palm oil’s improved price competitiveness, weak ringgit and low stock levels among major palm oil-consuming countries would support crude palm oil prices during the second half of 2023, it noted.
“Moving into 2024, we maintain our projected crude palm oil price of RM3,800 per tonne, based on the assumption that El Nino will turn out to be a moderate one and would dissipate by end-2023,” it added.
— Bernama
