RHB Bank Singapore analysts have raised their crude palm (CPO) oil assumptions for 2025 to RM4,300 ($1,297) per tonne from RM3,800 previously, following rising prices over the past month.
According to the analysts, the run-up is due to four catalysts — the spike in crude oil prices due to heightened geopolitical tensions; weather issues in South America causing slower-than-expected soybean planting progress; Thai government’s ban on palm oil exports until year-end; and Donald Trump’s win which had caused soybean and palm prices prices to rally post-2016 elections.
The rest of 2024 will be susceptible to speculative activities, RHB says. “We believe prices are unlikely to decline to below RM4,000 per tonne in the near future as geopolitical risks remain very much in play, which would also keep crude oil prices elevated and speculative forces active. In addition, once Trump’s 2.0 policies are made known, prices may settle down and come off their highs,” they add.
Although fundamentals for next year are improving, the analysts believe the culmination of the low output and stock levels in Indonesia, increasing biodiesel mandate in Indonesia and tightening supplies of sunseed and rapeseed will lead to a more apparent deficit in global oils and fats in 2025.
This will, in turn, lead to stronger vegetable oil prices next year, with stock to usage ratio for the 17 oils and fats failing to a 15-year low of 12.4% in 2025 versus the historical average of 13.6%.
RHB’s CPO price assumptions for 2024 and 2026 is raised to RM4,100 per tonne from RM3,900 and RM3,800 respectively. Overall, the analysts expect prices to stay higher in 1H2025, trading at RM4,400 to RM4,800 per tonne before moderating in 2H2025 to RM4,000 to RM4,400 per tonne during the seasonal peak.
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To this end, RHB has upgraded Bumitama Agri P8Z to “buy” from “neutral”, with a higher target price of 95 cents from 70 cents previously. The analysts raise their earnings estimates by 14%, 22% and 28% respectively for FY2024 to FY2026, adding that the company would benefit from the CPO price movements and Indonesian Rupiah appreciation, being a pure planter.
For Golden Agri-Resources E5H , RHB has maintained “neutral” with a higher target price of 30 cents from 25 cents previously. The analysts’ earnings estimates are raised by 8%, 20% and 16% for FY2024-FY2026 respectively.
Lastly, RHB has also maintained “neutral” on First Resources EB5 with a higher target price of $1.65 from $1.45 previously. Its earnings estimates are raised by 11%, 14% and 14% for FY2024-FY2026 respectively.
As at 2.43pm, shares in Bumitama, Golden Agri and First Resources are trading at 84 cents, 28.5 cents and $1.59 respectively.
