CPO prices expected to rebound by year-end: RHB
KUALA LUMPUR: RHB Investment Bank Bhd (RHB IB) expects crude palm oil (CPO) prices to recover towards year-end as seasonal production comes off its peak.
In a note today, RHB IB acknowledged that geopolitical risks have led to a decline in CPO prices over the last couple of months.
"Our price assumption of RM4,300 per tonne for the year is unlikely to be achieved (year-to-date price: RM4,400 per tonne) based on the current trajectory," it said.
However, RHB IB said planters continue to deliver earnings-wise, while valuations remain depressed at this juncture.
RHB IB said its top picks are Johor Plantations Group, Sarawak Oil Palms, SD Guthrie, Bumitama Agri and PP London Sumatra Indonesia.
The investment bank also said that the expanded sales and service tax (SST), effective July 1, is expected to weigh on the sector.
"This is due to the five per cent tax on fresh fruit bunches, palm kernel oil and related products, with an estimated earnings impact ranging between 0.3 per cent and 11 per cent per annum for Malaysian companies under coverage, excluding Felda Group Venture," it said.
RHB IB added that its earnings forecasts for the plantation sector remain unchanged for the time being, pending further clarification.
"We are still collating information and clarification from the companies we cover on their estimates of the impact of this change. As such, we will leave our earnings estimates unchanged for now," it said.
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