UOB Kay Hian analysts Leow Huey Chuen and Jacquelyn Yow believe that the 2Q20 results for the Malaysian plantation sector are likely to be mixed as the impact from better production would be partially mitigated by lower crude palm oil (CPO) prices q-o-q.
Hence, the analysts are keeping their “market weight” rating on the Malaysian palm oil sector as CPO prices may soften in the near-term. The research house also does not have any “buy” calls on any of the palm oil stocks under its coverage.
“Plantation stocks under our coverage do not have depressing valuations, and are mostly trading at +1SD above their 5-year mean PE. With the possibility of earnings disappointment from weaker production and potential lower ASP due to forward selling, a share price retracement is possible,” says the analysts.