Maybank Kim Eng Maintains 'Neutral' Call On Regional Plantation Sector

KUALA LUMPUR, July 7 (Bernama) -- A leading investment broking and securities group in Asia, Maybank Kim Eng has maintained its "neutral" call on the regional plantation sector, taking into consideration the El Nino effect and below average rainfall forecast. In a research note, it said the total oil palm area in Malaysia and Indonesia that could be affected by below-average rainfall forecast is estimated at 5.01 million hectares (ha). This represents 32 per cent of the total planted area. In terms of production, the said area produced about 14.2 million tonnes or 30 per cent of production in the region. "Although the affected areas appear relatively large, a mild El Nino is likely to have a muted impact on production. A severe one can possibly bring down fresh fruit bunch yields by up to 20 per cent," said Maybank Kim Eng. The intensity of the El Nino phenomenon has yet to be established. But, there are early indicators that this could be substantial, adding the occurrence is generally positive for the crude palm oil (CPO) price. Still, the present ample supply of soybean will water down overall optimism, capping any near term CPO price upside, and unless the El Nino phenomenon impacts major soybean producing nations as well. The research house maintained its average selling price forecast for 2015 at US$629 (RM2,400) a tonne. It said the top "buy" for the region are Bumitama Agri, First Resources, Genting Plantations, and Sarawak Oil Palms, for their growth propositions and the embedded deep landbank values. --BERNAMA