Plantation companies set to laugh all the way to the bank

KUALA LUMPUR Feb 4 - Malaysia's plantation companies are set to rake in insane profits in the financial years ended December 2021.

Analysts said some of the oil palm firms are set to register double digit growth due to the robust crude palm oil (CPO) prices.

"If you remember in November last year, CPO prices surged to an all-time high of more than RM5,000 a tonne.

"This translates to astronomical profits for most of the plantation firms.

''We will know more details when they announce their results to Bursa Malaysia in the next few weeks," a source from the Malaysian Palm Oil Council told DagangNews.com.

CPO prices hit the roof last year due to COVID-19 which has crimped demand.

The closure of international borders has also constricted the supply of some 30,000 workers thus hampering harvesting activities at plantations.

Due to these factors, the Malaysian Palm Oil Board remains optimistic on CPO prices forecasting it will average RM3,800 a tonne this year.

"I expect companies like IOI Corp, PPB Oil Palm United Plantations and Chin Teck to make handsome profits," said an analyst at a local brokerage.

CPO prices are also expected to be strong in the near term due to low national production amid strong demand.

Hong Leong Investment said last week the La Nina phenomenon (heavy rains) in Argentina and Brazil are expected to dampen soyabean prices and strengthen further CPO prices.

Strong demand in China and India is also expected to lend support to CPO prices," said Hong Leong Invest.

However Felda Global Ventures might be under pressure due to its aging oil palm trees and high cost of production.

However, not all oil palm companies will laugh to the bank.

Indonesia had imposed a regulation requiring local palm oil producers there to sell 20% of their production to domestic refiners at fixed prices starting from yesterday (February 3).

This will negatively impact upstream palm oil producers which have a significant presence in Indonesia.

They are TSH Resources Bhd, Kuala Lumpur Kepong Bhd, Sime Darby Plantations Bhd and Genting Plantations Bhd.

PublicInvest Research said these four companies will not be able to take full advantage of current high CPO prices.

“Coupled with the hefty CPO export tax and excise levy in Indonesia, the latest trade policy will likely further widen average CPO prices between Malaysia and Indonesia,” said the research firm in a note to investors.

The analyst said shareholders are set to benefit greatly when the companies distribute their dividends.

"The high CPO prices will definitely ease my living cost," said smallholder Halim Abbas who is a menber of Koperasi Permodalan Felda.

"I hope that strong prices will continue to hold as we have suffered for so long," Halim told DagangNews.com.

Let's hope it will continue to rain palm oil in the next year or so. - DagangNews.com