KUALA LUMPUR (Nov 11): CGS-CIMB Securities has maintained its “neutral” rating on the agribusiness sector and said Malaysian palm oil stocks climbed 3.8% month-on-month (m-o-m) to 2.4 million tonnes at end-October 2022, and was 3-5% below house and consensus’ forecasts.

In a note on Thursday (Nov 10), CGS-CIMB’s Ivy Ng Lee Fang and Nagulan Ravi cut their 2022 average CPO price forecasts to RM5,122/tonne (from RM5,600/tonne) but maintained RM3,800/tonne for 2023.

The analysts said the cut is to reflect the sharper-than-expected fall in CPO price in 3Q22, when Indonesia aggressively boosted exports to clear palm oil stocks and concerns over slower global growth.

Ng and Ravi said the revised price assumes CPO price averaging RM4,000/tonne in November-December 2022.

“We expect planters’ share prices to stay range-bound in the absence of catalysts.

“However, downside risks for planters could be mitigated by the sector’s dividend yields of 5.5% and low P/E valuations of 8.6x for 2022.

“We predict Malaysian palm oil stocks could peak in November and trend lower in December.

“We maintain our 'neutral' rating as the sector lacks near-term catalysts,” they said.