Proxy To Palm Oil?

Since 1979, CB Industrial Product Holdings Bhd has been equipping palm oil mills in Malaysia and around the world with high quality processing equipment and replacement parts. Over the years, the products have gained a reputation in the industry for excellent workmanship, consistent high quality and unsurpassed reliability.
As a result, the products enjoy a healthy market share in Malaysia as well as foreign markets including Indonesia, Papua New Guinea, West Africa, and Central and South America. Today, CBIP much more than just an equipment and parts manufacturer. Expanding on in-depth industry knowledge, experience and expertise in this area, CBIP successfully established as a full-fledged turnkey contractor for palm oil mills.

Is CBIP a good proxy to the palm oil industry?

CBIP_Corr.jpeg

Correlation appears to be strong prior to year 2014. Since then, in terms of share price change, CBIP has outperformed other listed Malaysian-palm oil companies.

Technically Speaking

CBIP_TA.jpeg

One may consider a potential entry at support zone of around $2.00, with a possible target stop loss of $1.87 and a possible exit of $2.36.

  • Risk = $0.13
  • Profit = $0.36
  • Expected Return-to-Risk ratio = 2.77x

Fundamentally Speaking 

P/E looks decent for the past few years:

CBIP_PE.png

P/NTA is currently lowest in 5 years:

CBIP_PNTA.png

ROE has been double digits:

CBIP_ROE.png

Further, current balance sheet position appears to be ‘clean’ (negligible gearing & high current ratio).

Some support for long position based on target price by analysts:

CBIP_TargetPrice.png

Some buyback support by the company in 2016, but nevertheless do take note of recent disposal by major shareholders:

CBIP_BBCBIP_Insiders

Cautious Industry Outlook : Palm Oil

KUALA LUMPUR: Global palm oil production is forecast to increase by 6 million tonnes in 2017, says leading vegetable oils analyst Thomas Mielke.

Last October, Mielke had estimated global palm oil output for 2016/2017 to grow by 5.5 million tonnes.

He expects Malaysian palm oil output to increase to 19.85 million tonnes this year from 17.32 million tonnes, a year ago, while production of Indonesian palm oil will rise to 35 million tonnes in 2017 from 32.10 million tonnes last year.

Palm oil prices have peaked, but the decline in the past four weeks was overdone.

“Some recovery is likely in the next three to six weeks because of insufficient supplies and a prospective strong world import demand,” he said when presenting his paper on World Supply, Demand and Price Outlook of Vegetables Oils at the 28th Global Palm and Lauric Oils Conference yesterday.

He expects yields to recover, but remain below average, adding that last year, the average annual oil yield fell to a 19-year-low.

Replenishment of vegetable oil stocks will take time and will not be possible in 2016/2017 as we need a better year of good weather and high production.

However, palm oil would stay below soy bean oil in coming weeks and also for the rest of the year.

Last year, Mielke said that the benchmark Malaysian crude palm oil prices were expected to climb to RM2,900 to RM3,000 per tonne in the fourth quarter of 2016 or in early 2017.

He, however, did not disclose his CPO price projection for this year.

In the meantime, he said world imports of vegetable oils have to increase by at least 3.3 million tonnes to 3.6 million tonnes in January/September 2017, to ensure sustainable supplies to meet the current demand.

Palm oil production took a hit last year on strong effects of the El Nino weather in 2015, resulting in lower fresh fruit bunch yields.

Read more at http://www.thestar.com.my/business/business-news/2017/03/09/global-palm-oil-output-forecast-to-increase-by-6-million-tonnes/#iSIhjcXbHcQwOjZf.99_at_one-month_peak_on_weaker_output_growth.aspx

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Author: Ken Utau

Markets Observer + Food Lover

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s