What headwinds are expected to affect the oil palm crop, according to Kenanga Research?

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Headwinds Expected to Affect Oil Palm Crop by Kenanga Research

Kenanga Research anticipates that the oil palm crop will encounter significant challenges, primarily driven by price volatility and persistent environmental, social, and governance (ESG) concerns. These factors are projected to exert continuous pressure on the sector, influencing its performance and outlook.
Price Volatility as a Key Challenge

The projection of crude palm oil (CPO) prices fluctuating between RM3,000 and RM4,000 per tonne underscores the inherent price volatility that the sector is expected to face. This variability can impact profitability and investment decisions for companies within the plantation industry.
Continuous Weighing of ESG Factors

Environmental, social, and governance (ESG) considerations are identified as ongoing headwinds for the plantation sector. These factors are increasingly influencing market sentiment and operational strategies, requiring companies to adapt to evolving sustainability standards and stakeholder expectations.
Potential Catalyst from Withheld Release Orders

A potential catalyst for plantation companies listed on the local stock exchange could be the resolution of withheld release orders (WRO) by the US Customs and Border Protection. Such resolutions could have a positive spillover effect on the broader sector, potentially boosting share prices.
Specific Company Recommendations

Kenanga Research has identified Kuala Lumpur Kepong Bhd (KLK) as a preferred pick due to its defensive margins against CPO price fluctuations, assigning a target price of RM24.00. Sime Darby Plantation Bhd (SIMEPLT) is also favoured, with a target price of RM4.95, as its earnings are considered relatively shielded by forward sales agreements.

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What headwinds are expected to affect the oil palm crop, according to Kenanga Research?

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