KUALA LUMPUR: RHB Research expects plantation sector's earnings to decline quarter-over-quarter (QoQ) and year-over-year (YoY) in the fourth quarter of 2023 as production eases post-peak season.
The downtrending crude palm oil (CPO) prices should have a higher leverage on earnings, the firm added.
"Nevertheless, these factors should be largely reflected in the sector's
performance. We expect companies to post mostly in-line results this
quarter, based on fresh fruit bunches (FFB) output estimates," RHB Research said in a note today.
The firm maintained its neutral stance on the sector with its top picks being Ta Ann Holdings Bhd, Sarawak Oil Palms Bhd, Bumitama Agri, Golden Agri and PP London Sumatra Indonesia.
RHB Research said the Q4 earnings will likely fall QoQ for both Malaysian and Indonesian planters. The FFB output would have been lower, post-peak season while spot CPO prices would have contracted slightly.
In Malaysia, FFB output of the companies would have dipped by an average of 0.6 per cent QoQ, while spot CPO prices would have contracted by 2.6 per cent QoQ in 4Q23.
In Indonesia, it estimated that 4Q23 FFB output for stocks under its coverage to have fallen by a much larger 11.9 per cent QoQ (based on seasonal trends) while CPO prices net of taxes decreased by 2.2 per cent QoQ.
"We believe the larger decline in output in Indonesia was due to the dry weather seen in Kalimantan and South Sumatra in Q3," it added.
Conversely, Malaysian downstream counterparts may see slightly better QoQ margins due to the decrease in competition from Indonesia, said RHB Research added.