Plantations December MPOB Data

January 14, 2009 at 3:46 am Leave a comment

· December production dips by 10.6%.
Given the start of rainy seasons in December, production numbers came off significantly as expected during the month and this signifies the start of the seasonal production down cycle. It is this down cycle, we believe, that will bring health back to the industry after a year of intense production that led to excess supply problems. For 2008, full year production closed at 17.7m mt (slightly higher than our 17.5m fcst.) which was 12.1% higher than FY07.
· Exports surged by 18.2%.
M-o-m exports surged ahead during the quarter driven by India which saw some 197% increase in exports. We believe this to be due to pre-stocking activities towards the implementation of import tax on palm oil. This is also in reaction to the import tax imposed on soy that was put into place in November. That said, we consider export numbers over December to be a bit of an anomaly and continue to expect choppy export numbers throughout 1H09 given slowing growth in major importing countries. In fact, cargo surveyor Intertek has already reported a drop in exports for the first 10 days of January. Exports for 2008 vs. 2007 have seen growth of 12% to 15.4m mt and totalled a value of RM65.1bn compared to RM45.1bn achieved last year.
· Stocks down by 12%.
Correspondingly, stock levels eased by 12% during the month given the rise in exports and dip in production. The industry closed the year with some 1.99m mt of CPO stocks. We expect a further easing of stocks in months to come given that production should continued decreasing progressively in coming months.
· Maintain Overweight. Things are moving in the right direction.
While some companies have run ahead of their fundamentals in the near term, likely pricing in the positive changes in CPO fundamentals (IOI, KLK, Boustead and Kim Loong), we believe there to still be trading opportunities ahead due to uncertainty in exports. Also, we have remaining BUY calls on Sime, Asiatic and TSH of which we still see significant upside.

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Plantations Weekly Review: 5th – 11th January 2009 14 January 2009 Newz Bits

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