Maybank IB Research recommended investors to look beyond seasonally weak Q1 2019 as valuations of small-mid caps such as Ta Ann Holdings Bhd and Sarawak Oil Palms Bhd are low on an enterprise value/planted hectare basis and present accumulation opportunity. — Reuters pic
The research house said the 10 per cent year-on-year output growth to 4.95 million tonnes recorded in Q1 2019 was insufficient to offset the 19 per cent declined in spot CPO ASP to RM2,007 per tonne. Meanwhile, downstream players may see improved yoy earnings in the quarter, with IOI Corp Bhd and Kuala Lumpur Kepong Bhd likely to record decent margins in Q1 2019, benefiting from cheap raw material costs.
The research house also expected companies such as TH Plantations Bhd and Boustead Plantations Bhd to post quarterly losses following their relatively higher cost of production.