CPO production rose slightly to 1.86m tonnes (+2.3% MoM). Despite the modest August growth, production may peak again in Sep–Oct before tapering, supported by favourable weather conditions.
Palm oil exports remained largely unchanged in August (-0.3% MoM) due to a narrower CPO discount to soybean oil.
Maintain neutral rating with unchanged CPO price assumption at RM4,250 for CY25. Top pick: SDG (FV: RM5.50).
CPO production grew marginally to 1.86m tonnes in August. CPO production rose 2.3% MoM in August as stronger yields from Sabah and Sarawak (+9.5% MoM) outweighed the decline in Peninsular estates (-1.8% MoM). On a YTD basis, output inched up 0.2% YoY to 12.6m tonnes. Despite the modest August performance, we believe production could still register another peak in Sep–Oct before tapering off, thanks to the favourable weather condition that should drive stronger fruit formation in the months ahead.
Tepid palm oil demand. Palm oil export was flattish in August at -0.3% MoM, likely attributable to importing countries switching to other oils as CPO trading discount to soybean oil narrowed to c.RM607/tonne in August vs c.RM976/tonne in July (Figure 3). We opined export demand may stay subdue in September, as China and India’s palm oil inventories were already elevated in July due to aggressive restocking activities. Reflecting this, Intertek/Amspec data show palm oil exports in the first ten days of Sep-25 fell 1.2% MoM and 8.4% MoM respectively.
Palm oil inventory still swelling. Malaysia palm oil inventories climbed 4.2% MoM to 2.2m tonnes in August from 2.1m tonnes in July, marking the highest level in 20-months. The build-up was driven by stronger production coupled with subdued demand during the month. The elevated stockpile poses a headwind to CPO price recovery as it raises concerns of potential oversupply. Looking ahead, we reckon that palm oil inventory could climb further in the coming months amid ample CPO production.
CPO price was up 5.3% MoM in August. CPO prices increased to RM4,329/tonne, bolstered by a favourable CPO discount to soybean oil in early August, which stayed close to c.RM800/tonne. The rise in palm oil prices was also influenced by gains in other vegetable oils, such as sunflower and rapeseed oil during the month. While CPO prices overshot our expectations, we believe further upside is capped by weaker soybean oil prices and rising supply. With this, we maintain our CY25 CPO price assumption at RM4,250/tonne. YTD, CPO prices currently stand at RM4,348/tonne.
Soybean prices slid ahead of the upcoming US harvest season. Soybean oil prices dropped 8.5% MoM in August as traders turned their attention to the upcoming US harvest in September. Earlier gains led by the biodiesel mandate were completely erased as traders recalibrated their positions to account for the looming increase in supply, leading to a sharp late-month decline.
Keeping neutral stance. We maintain our neutral stance on the sector as we expect CPO prices to soften in the near term amid the hefty inventory. We continue to prefer integrated players such as Sime Darby Guthrie (FV: RM5.50) as a laggard play, underpinned by potential upside from landbank monetisation and its industrial park. We reiterate our HOLD calls on Kim Loong Resources (FV: RM2.10), Sarawak Plantations (FV: RM2.30), Kuala Lumpur Kepong (FV: RM19.90) and United Plantations (FV: RM21.60). Although Hap Seng Plantations (FV: RM2.10) is now technically trading at a level that would justify a BUY, we maintain our HOLD call, as the shift reflects only recent share price weakness while fundamentals remain unchanged.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.189564 | 4.225840 |
EUR | 4.930937 | 4.944344 |
CNY | 0.590125 | 0.591709 |
HKD | 0.538841 | 0.543525 |
SGD | 3.269557 | 3.298024 |