Beware of weak Rupiah
• May12 palm oil exports continued to recover by 4.8% m-o-m, but was still 0.6%
• Palm oil inventory fell 4.5% m-o-m as seasonally higher output may be
backloaded in June
• Jump in Wilmar’s refining capacity in 3Q12 (by 3m MT) may shift demand to
2H12, supported by weak Rupiah
• Top BUYS: Astra A., Sampoerna A., Genting P., Sime, TSH R., Bumitama A., and
May12 palm oil production slightly below forecast. Output for
the month grew 8.7% m-o-m to 1.383m MT, but remained 21% lower y-o-y and was
below our forecast of 1.67m MT.
M-o-m growth was driven by improving FFB yields
in Sabah, Sarawak and Johor, which accounts for 61% of
Malaysia ’s total output YTD. We
expect strong 26% growth in June output to 1.746m MT in anticipation of
backloaded FFB yield recovery. A possible onset of El Nino in Jul-Aug should
not impact near term FFB yields, but 18-24 months after.
Lower inventory is bullish, but beware of shift in exports.
Malaysia ’s May12 palm oil exports grew 4.8%
m-om to 1.398m MT, led by stronger demand from the EU,
Pakistan , and
Bangladesh , but offset by lower
Chinese and Indian imports. Increasing exports coupled with slower-thanexpected
FFB yield recovery had resulted in further inventory drawdown to 1.765m MT
(-4.5% m-o-m) by end May, below our 1.944m MT forecast. However, Malaysian palm
oil inventories may increase again from here on premised on the following: (i)
output will recover strongly in June, (ii) Wilmar will complete additional c.3m
MT refining capacity, and (iii) aweaker Rupiah could shift international demand
towards Indonesian refined products. Thus far, we understand the bottleneck has
’s limited refining capacity.
More headwinds for Malaysian refiners in 3Q12. This is premised on
the projected significant increase in
Indonesia ’s refining capacity. We
expect processors in Indonesia
– led by Wilmar – to progressively deplete CPO inventories and consume more
3Q12 output there. For this reason, refining capacity utilisation in
drop in the near-term, and reverse the inventory downtrend observed thus far.
BUY Sampoerna A., Bumitama and First R.They should benefit from the
expected shift in demand. We also like Genting P., TSH and Sime, which continue
to offer upside from Indonesian output and/or consistent dividends.
Kamis, 21 Juni 2012
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