Malaysia’s CPO production continues its post-seasonal peak decline, while exports are also on its fourth consecutive month of decline. We maintain our Neutral call on the plantation sector on the regional basis, continuing to prefer the more integrated players in Malaysia, and the strong growth companies in Singapore and Indonesia. Top picks are Sime, SOP, First Resources, Golden Agri and Astra Agro.
Malaysia’s CPO production fell 19.2% mom in Feb, while exports fell 14% mom. As a result, closing palm oil stock levels fell by 5.2% mom to 2.44m tonnes in Feb (from 2.58m tonnes in Jan). Production is expected to continue to decline as we come off the peak season, while the weaker exports were likely as a result of the shortened month due to Chinese New Year festivities. Annualised stock/usage ratios rose slightly again in Feb to 12.76% (from 12.59% in Jan), and are still above the historical 10-year average of 9.3%, but below the 10-year historical peak of 14%.