Affin Daily Insight (LV) - 11 June 2014 - PLANTATION

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Sector Update � Plantation (OVERWEIGHT, maintain) - Palm oil inventory trended higher to 1.84m MT Palm oil exports grew by a faster 10.7% MoM to 1.40m MT in May 2014 on the back of strong growth in exports to India and the EU. However, further recovery in FFB and oil yields contributed to a 6.5% MoM increase in CPO production to 1.66m MT. As a result, palm oil inventory trended higher to 1.84m MT. YTD, total CPO production amounted to 7.49m MT, 7.4% higher YoY and 5.2% ahead of MPOB�s forecast of 7.12m MT. Total palm oil exports however declined 10.6% YoY to 6.64m MT. Prospects of rising palm oil inventory and another bumper US soybean crop are a drag on CPO prices, as the market await the widely-anticipated El Ni�o event. The weaker CPO price has however narrowed the CPO premium over Brent crude to around US$95/MT. YTD, MPOB locally�delivered prices averaged RM2,664/MT but current weaker prices have raised the downside risk to our forecasts. We maintain our 2014-16 CPO ASP forecasts and sector OVERWEIGHT rating.

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