could be a beneficiary of investors turning to plantations as their next play as they offer a relatively safe haven, says RHB Investment Research.According to the research house, apart from the positive surprise of the recently released Malaysian platation statistics, much of the recent rally in CPO prices could have been a result of the current liquidity in the market.
RHB expects demand to continue as vaccine developments instil confidence in businesses while smaller cap planters like Sarawak Oil Pams will perform well owing to its decent valuation.
"This liquidity has cut across all asset classes – not just for equities, but also for fixed income and commodities.
"That said, we believe CPO prices are likely to hold relatively steady in 3Q20, given that CPO production only started ramping up in June, while pent-up demand is likely to continue until at least August or September, in light of the Deepavali festival in November," it said.
CPO prices should retreat in 4Q20 owing to the impact of the seasonal peak production, which will end in the quarter and lower post-festive demand, it added.
RHB expects CPO prices in 2020 to be 13% higher than in 2019 with production for most planters, especially in Indonesia, to be higher.
The research house expects stronger year-on-year earnings in 2020 as well as in 2021 on its higher CPO price assumption of RM2,500 a tonne.
RHB maintained its "buy" call on Sarawak Oil Palms with a new target price of RM4.20.