KUALA LUMPUR: Malaysia's crude palm oil (CPO) production is expected to be relatively flat compared to the 2021 production of 18.1 million tonnes, Affin Hwang Capital said.
The research house said Malaysia's palm-oil inventory in September increased further to 2.32 million tonnes given the strong CPO production that outweighed consumption.
If heavy rain continued to be seen at the estates, the Malaysian palm-oil production might peak in September 2022, the firm said.
"But if there is good weather that allows the harvesting process to continue into October 2022, Malaysia could see another small increase month-on-month (mom) in production.
"For the full 2022 season, we expect Malaysia's CPO production to be relatively flat as compared to the 2021.
"We also expect production to be on a downtrend towards December 2022 as we enter the monsoon season," it said.
Affin Hwang is still cautious on the economic outlook going into fourth quarter (Q4) 2022 given uncertainties amid the rising inflationary pressure and prolonged Ukraine- Russia conflict.
The firm is keeping its CPO average selling price (ASP) assumptions of RM4,900 per tonne for 2022 and RM3,100-3,200 per tonne for 2023.
"We maintain our Underweight stance on the plantation sector.
"Across our coverage, we have Hold ratings on Kuala Lumpur Kepong Bhd, Jaya Tiasa Holdings Bhd, FGV Holdings Bhd and Genting Plantations Bhd; and SELL ratings on Ta Ann Holdings Bhd, Hap Seng Plantations Bhd, IOI Corp Bhd and Sime Darby Plantation Bhd.
"Our top sells for the sector are Ta Ann and Hap Seng Plantations as we think upstream plantation companies would be more sensitive to any changes in CPO prices," it added.