AmWatch - Plantation Sector : Palm oil inventory up 2.5% MoM in May OVERWEIGHT, 11 Jun 2015

SECTOR FOCUS OF THE DAY

Plantation Sector : Palm oil inventory up 2.5% MoM in May          OVERWEIGHT

Palm oil inventory in Malaysia rose by 2.5% from 2.19mil tonnes in April to 2.24mil tonnes in May. This was above consensus estimates of 2.12mil tonnes for the month of May. This was due to a decline in domestic disappearance and growth in production, which could not be offset by a surge in exports.

Domestic disappearance decreased from 194,620 tonnes in April to 142,080 tonnes in May. In the first five months of the year, domestic disappearance amounted to 917,960 tonnes. This was 8.3% lower than the one million tonnes recorded in the same period last year.

Average price discount between soybean oil and CPO widened from 11.7% in April to 15.7% in May. On average, CPO was 12.6% cheaper than soybean oil from January to May 2015. This was close to the five-year average of 13.9%. The large price discount between the two commodities should encourage more buying of palm oil from China and India.

CPO production expanded by 6.9% MoM and 9.3% YoY to 1.81mil tonnes in May. Peninsular Malaysia recorded a CPO output increase of 4.2% MoM in May while CPO production in Sabah climbed by 11.5%. CPO output in Sarawak increased by 8.1% from 284,518 tonnes in April to 307,473 tonnes in May.  

In the first five months of the year, CPO production amounted to 7.28mil tonnes in Malaysia. This was 2.8% weaker than the 7.49mil tonnes recorded in 5M2014.  

Palm oil exports from Malaysia surged by 37.3% MoM to 1.61mil tonnes in May. Palm oil exports to China jumped by 36.9% from 262,713 tonnes in April to 359,660 tonnes in May while India imported 292.3% more palm oil. USA received 41.3% fewer palm oil shipments in May while Netherlands’ palm oil imports expanded by 211%.

Others :

Malaysia Marine Heavy Engineering : Multiple contracts secured to date               HOLD

TSH Resources : Earnings recovery in FY16F          BUY

NEWS HIGHLIGHTS

Malaysia Airports Holdings : To beef up non-aeronautical ops

Media Sector : HyppTv to focus on offering more local content

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