13.08.2020 (www.nst.com.my) - KUALA LUMPUR: Pure upstream plantation companies under Hong Leong Bank Bhd's coverage will likely report better year-on-year (YoY) performances in their upcoming quarterly financial results.
This was due to higher fresh fruit bunch (FFB) production and crude palm oil (CPO) selling prices, HLIB said today.
The companies under HLIB are FGV Holdings Bhd, Hap Seng Plantations Holdings Bhd, IJM Plantation Bhd and TSH Resources Bhd.
"On quarter-on-quarter (QoQ) basis, most plantation companies under our coverage are likely to report weaker performance, as higher FFB output was insufficient to mitigate lower CPO selling prices," the bank said.
Plantation companies will start reporting their quarterly financial results from next week.
For the integrated players such as Kuala Lumpur Kepong Bhd, IOI Corp Bhd and Sime Darby Plantation, HLIB believes stronger performance at upstream segment would be offset by potentially weaker performance at downstream segment, arising from lower margin and demand.
It expects Genting Plantations Bhd to report weaker results in the second quarter as higher CPO selling prices may be more than offset by weaker FFB output (-2.9 per cent YoY), and performance at property segment and premium outlets on the back of the Movement Control Order.
HLIB kept its average CPO price projections of RM2,350-2,400 per tonne in 2020-21, and "neutral" stance on the sector.
For exposure, its top picks are IJM Plantations with a target price of RM1.78 and TSH Resources with RM1.12 target price.