Malaysian crude palm oil (CPO) futures dropped a 4th week amid concern increased supplies from the biggest producers of the vegetable oil will damp prices. Palm oil futures for Oct delivery dropped 100 ringgit, or 3.3%, to 2,950 ringgit (US$904) a ton on the Bursa Malaysia Derivatives (BMD) Exchange.
Supply from Indonesia and Malaysia, which control 90% of the world's output of the commodity, is seasonally high this quarter, said Ben Santoso, a plantation analyst at DBS Vickers. Stockpiles in Malaysia reached a record 2.04 m tons in Jun, the Malaysian Palm Oil Board said.
Prices fell 15% in Jul as "fears intensified over Malaysian palm oil inventory build-up," said Santoso. "These concerns are being priced. As market participants take short positions, the negative sentiment is feeding on itself."
Palm oil closed below 3,000 ringgit a ton on Jul 29 for the first time since Dec after a drop in crude oil reduced the appeal of biofuels made from vegetable oils.
"We could go down a bit further from here," said Chris de Lavigne, a vice president at consulting firm Frost & Sullivan Inc Jul 29. "I see 2,700 ringgit as a floor."
Vegetable oils, used mainly in food, often track crude oil prices. Crude fell to US$122.10 a barrel today and is 17% below its Jul 11 peak of US$147.27.
Palm oil historically trades at a discount to soybean oil.
Soybeans declined on speculation rainfall forecast for the US Midwest will ease heat stress on plants, and as imports from China, the largest buyer, may slow after a possible state sale of soybean oil. Midwestern states in the US may get as much as 1 inch of rain next week, Meteorlogix LLC said in a report yesterday.
In China "domestic vegetable oil supply is very sufficient, so the market will remain weak in the short run," the China National Grain and Oils Information Center said in a daily report.
Soybean oil prices dropped 12% in Jul. Still, soybean oil costs 43% more than palm oil. The premium was as high as 46 % on Jul 28, the most since Jul 17 '06, according to data on the Bloomberg. The two commodities are substitutes.
Showing posts with label CPO. Show all posts
Showing posts with label CPO. Show all posts
Friday, August 1, 2008
Tuesday, July 29, 2008
Kencana Agri
Kencana Agri is an Indonesian crude palm oil (CPO) and crude palm kernel oil producer.
Kencana has crude palm oil and crude palm kernel oil plantations in Sumatra and Kalimantan. It also operates a bio-mass power plant on Bangka Island, Sumatra that sells most of the electricity generated to state-owned utility PLN. The group counts India, China, Malaysia and Vietnam among its customer areas. Its crude palm oil and crude palm kernel oil are also sold in Indonesia.
For FY2007, net profit was US$39.2m, more than doubling from US$14.84m the year before. Revenue was US$69.28m, up 69.7% from US$41.1m previously, on increased contributions from plantation and bio-mass business. Most revenue (99.7%) came from plantations, as the bio-mass power plant only started operating in 2007.
The group aims to capitalise on expected strong demand for crude palm oil and crude palm kernel oil by expanding its plantations, building more processing facilities and relying on new technology. It aims to increase its planted oil palm area from 24,349 hectares to over 80,000 ha in the next 5 years. It is also looking to develop complementary businesses. A second bio-mass power plant with generating capacity of 7.5 megawatts is under construction and expected to come on stream in 2009.
On potential risks, Kencana Agri says expansion plans could be scuppered by events beyond its control, such as government policies limiting its ability to obtain adequate rights to land suitable for plantations or an inability to obtain certification. Kencana is in the final process of obtaining certification for 42,640 hectares of land - close to 50% of its total land bank.
Kencana has crude palm oil and crude palm kernel oil plantations in Sumatra and Kalimantan. It also operates a bio-mass power plant on Bangka Island, Sumatra that sells most of the electricity generated to state-owned utility PLN. The group counts India, China, Malaysia and Vietnam among its customer areas. Its crude palm oil and crude palm kernel oil are also sold in Indonesia.
For FY2007, net profit was US$39.2m, more than doubling from US$14.84m the year before. Revenue was US$69.28m, up 69.7% from US$41.1m previously, on increased contributions from plantation and bio-mass business. Most revenue (99.7%) came from plantations, as the bio-mass power plant only started operating in 2007.
The group aims to capitalise on expected strong demand for crude palm oil and crude palm kernel oil by expanding its plantations, building more processing facilities and relying on new technology. It aims to increase its planted oil palm area from 24,349 hectares to over 80,000 ha in the next 5 years. It is also looking to develop complementary businesses. A second bio-mass power plant with generating capacity of 7.5 megawatts is under construction and expected to come on stream in 2009.
On potential risks, Kencana Agri says expansion plans could be scuppered by events beyond its control, such as government policies limiting its ability to obtain adequate rights to land suitable for plantations or an inability to obtain certification. Kencana is in the final process of obtaining certification for 42,640 hectares of land - close to 50% of its total land bank.
Friday, July 11, 2008
DMG report on First Resources
The present macro environment as still being conducive for high cude palm oil (CPO) price. High crude oil price around US$140/bbl, high soybean oil prices (around 65 US¢/lb) as well as forecasted growing global demand for palm oil should help support current CPO price at around RM3,400-RM3,500/tonne. USDA estimates global consumption of palm oil to be 40.18m tones for 2007/08, up from 37.17m tones the previous year.
First Resources (FR) is focused on the upstream portion of the industry's value chain and hence can capture the upside of current high CPO prices. This is as evidenced by FR's gross and EBITDA margins of approximately 73% and 70% respectively in 1Q08. EBITDA grew at a CAGR of 56.6% between '04 and '07 and was up 220.2% yoy in 1Q08.
Being relatively new to the oil palm plantation scene, FR has an attractive maturity profile of oil palms. Their weighted average age of plantings is 7 years in FY07, which is classified under the peak production age group. 61% of FR's planted area is in the "prime" category (7 to 18 years) and 11% is in the "young" category. As these "young" trees mature over the next few years, fresh fruit bunch (FFB) and CPO production will rise with minimal increases in costs or capital expenditure.
With the global trend of higher consumption and usage of palm oil and the present high CPO price of about RM3,500/tonne, FR will continue to enjoy the present conducive environment, with its young weighted average age of trees. DMG are reiterating their BUY call and fair value of $1.43 (13x FY08 PER).
First Resources (FR) is focused on the upstream portion of the industry's value chain and hence can capture the upside of current high CPO prices. This is as evidenced by FR's gross and EBITDA margins of approximately 73% and 70% respectively in 1Q08. EBITDA grew at a CAGR of 56.6% between '04 and '07 and was up 220.2% yoy in 1Q08.
Being relatively new to the oil palm plantation scene, FR has an attractive maturity profile of oil palms. Their weighted average age of plantings is 7 years in FY07, which is classified under the peak production age group. 61% of FR's planted area is in the "prime" category (7 to 18 years) and 11% is in the "young" category. As these "young" trees mature over the next few years, fresh fruit bunch (FFB) and CPO production will rise with minimal increases in costs or capital expenditure.
With the global trend of higher consumption and usage of palm oil and the present high CPO price of about RM3,500/tonne, FR will continue to enjoy the present conducive environment, with its young weighted average age of trees. DMG are reiterating their BUY call and fair value of $1.43 (13x FY08 PER).
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