KUALA LUMPUR: Crude palm oil (CPO) prices could have bottomed, fuelling expectations that existing large inventory of the commodity in Malaysia would not have substantial downward pressure on its prices. But current stock levels might limit the appreciation of the commodity’s rates in the next six months.
In a note today, OSK Research Sdn Bhd analyst Alvin Tai said palm oil prices were expected to “remain sideways” until inventory declined. “We can only expect a new upcycle to begin once it is clear that inventory is on a sustainable downtrend.
“Our preference is for companies with strong downstream operations as their earnings are more defensive in a weak CPO price environment,” said Tai, who who kept his “neutral” rating on the sector.
Notable downstream players here include IOI Corp Bhd and Kulim (M) Bhd. OSK rates both firms “trading buys” with fair values of RM4.22 and RM6.90 respectively.
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