JAKARTA. Price of crude palm oil (CPO) on Wednesday (21/9) hit the highest level at RM2,708 per metric ton. Whereas, during previous weeks until 15 September 2016 CPO price dropped by 1.53% to RM2,558 per metric ton. Since the beginning of the week, CPO price always stood at above of RM2,600.

Analyst at MNC securities Yoshua Zhisoki explained that the price rise was driven by speculation that Malaysia is running low the CPO stocks.

It is predicted that the price will continue to grow until the end of the year. The CPO price is predicted to hit the peak in December 2016, following the increase in CPO demands. “The price for delivering CPO in December 2016 has stood at RM2,800 per metric ton”, Yosua said.

Despite the price rise, issuers still prefer to not increase the revenues target, on the grounds that the CPO price will continue to fluctuate until the end of 2016.

According to Investor Relations at PT Sampoerna Agro Tbk (SGRO) Michael Kusuma, CPO price in this year is much more stable  compared to 2105. The price rise was also driven by the decrease in CPO stock as the effect of El Nino weather anomali. During the first semester of 2016, SGRO’s CPO production volume dropped by 37% to 98,728 ton on year on year (yoy)  basis.

The drop in production volume has led CPO price to increase to IDR8,000 per kilogram. Whereas, SGRO’s CPO price during the first semester of 2016 always stood at below of IDR7,000 per kilogram.

“We have cycle of increase in production volume in the fourth quarter. Combined with the price rise, this will improve our performance” Michael said.

Yosua also assumed that the price rise will give positive sentiment to CPO’s issuers. He assumed that some analysts tended to give neutral recommendation for palm oil sector due to limited chance for the sector to further increase the price.

For an example, at the close of trading on Wednesday (21/9), the share price of PT PP London Sumatra Indonesia Tbk (LSIP) was closed at the price of IDR1,570 per a share. Whereas, the share price of LSIP was predicted to reach IDR1,710 per a share. In other words, LSIP only has 8.9% of potential to increase the share price.

On 19 September 2016, analyst at UOB Kay Hien Securities Yasmin Soulisa through her research suggested investors to hold LSIP shares. She predicted that LSIP share price would only stand at IDR1,400 per a share due to its lack of expansion in planted land.

LSIP intended to expand its planted land by 1,000 ha - 2,500, or only 3% of LSIP’s total planted land by 2017. “However, we predict a 28% of increase in LSIP net income in 2017, following a 7% of increase in CPO sales volume and 4% of increase in CPO price”, Yasmin wrote.

(Muhammad Farid/Translator)

Editor: Barratut Taqiyyah Rafie