CIMB Equities Research is maintaining its underweight recommendation on Malaysian plantations due to their expensive price to earnings (P/E) valuations and unexciting earnings prospects.
“The average forward P/E of the three big cap planters in Malaysia of 16 times is 33% higher than our target market P/E of 12x and 51% higher than regional plantation P/E of 10.6 times,” it said in a report issued on March 5.
It expected crude palm oil (CPO) price to be range-bound in short-term. Most planters are more upbeat on CPO price compared to the last quarter with most expecting CPO price to trade range-bound of between RM1,800 and RM2,000 per tonne in the short-term.
The more positive tone was due to concern of weaker soybean crops from South America, biological tree stress and heavier rainfall in parts of Malaysia leading to lower palm oil yields, lower palm oil stockpile in Malaysia and measures announced by the government to lower supplies and boost domestic consumption in the form of replanting incentives and biodiesel mandates. more...
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