Palm hits 15-week high on weather fears

MALAYSIAN crude palm oil futures rose as much as 0.9 per cent today to hit a near-fifteen week high on fears that more rainy weather would cut into production.

Palm oil scaled its highest since Aug 14, largely ignoring weaker crude oil prices and slightly higher export data released by cargo surveyor Intertek Testing Services.

Malaysian planter Genting Plantations has given guidance of lower November and December output due to heavy rains and flash floods for its estates in Sabah — a top oil palm growing state in Borneo island, Kenanga Investment Bank said in a note.

The benchmark February contract on the Bursa Malaysia Derivatives Exchange rose as much as RM23 to RM2,501 (US$740.8). By midday, the most-active contract was trading up RM15 at RM2,493.

“The 2,500-ringgit level is a tough nut to crack,” said a trader with a foreign commodities broker.

“Weather is a great concern and the earlier export data was not so fantastic. We are waiting for Societe Generale de Surveillance data to confirm this.”

Cargo surveyor Intertek Testing Services reported today that Malaysian palm oil exports for Nov 1-25 only rose 1.2 per cent to 1.13 million tonnes from the same period a month ago. SGS will give its estimates later in the day.

Expectations of higher exports come as heavier rains sap palm oil yields in the central state of Pahang and the prospect of floods could complicate the transport of the vegetable oil to refineries and ports.

Oil prices slipped below US$76 a barrel on Tuesday, weighed by the slower-than-expected U.S. growth, although most vegetable oil markets priced in demand-supply factors instead.

U.S. soyoil for Dec. Delivery rose 0.5 per cent in Asian trade on strong import demand and the most-active September soybean oil contract on China’s Dalian Commodity exchange inched higher.

This is certainly a good news for plantation stocks. Personally, I like KLK-CH.

Previous related posts
http://cathoon.blogspot.com/2009/10/klk-ch-50-unrealised-profit.html
http://cathoon.blogspot.com/2009/11/palm-up-on-rising-oil-price-weather.html

KLK-CH 50% unrealised profit

Kuala Lumpur Kepong Berhad (KLK) is engaged in the business of producing and processing palm products and natural rubber on its plantations. The Company’s subsidiaries are engaged in the business of plantation, manufacturing, retailing, property development and investment holding. The Company has a plantation land bank of more than 210,000 hectares in Malaysia (Peninsular and Sabah) and Indonesia (Belitung, Sumatra and Kalimantan). It operates in six business segments: plantation, manufacturing, retailing, property development, investment holding and others. In April 2009, the Company, via one of its subsidiary, acquired a 17% equity interest in PT Sekarbumi Alamlestari (PT SA) from Forever Green Venture Ltd., which increased its interest in PT SA to 65%. During the fiscal year ended September 30, 2008, the Company acquired Ladang Perbadanan-Fima Berhad, and disposed of a 60% stake in Barry Callebaut Malaysia Sdn Bhd, formerly KL-Kepong Cocoa Products Sdn Bhd.

To be frank, I am not really very interested in plantation stock. After looking through Sime, IOICorp and KLK stock performances, I have to admit that these plantation companies' share price are stable and consistently climbing up. There are hardly any big corrections for their share prices. I guess I will start to study plantation sector too.

On 8 September 2009, I bought KLK call warrant (KLK-ch) at RM0.205. I can remember it was trading at 2-3% discount with gearing of 3-4. I really like warrants/call warrants with discount.

Basically my strategy is very simple, i just try to look for those low premium (if not discount) warrant/call warrant with its mother trading near its resistance. At the same time, the fundamental of the company must be Ok. The fundamental of the companies do not have to be very good.

Now KLK-ch is trading at RM0.295. This trade provides me with unrealized profit of almost 50% in 6 weeks of holding period.

Ok, good luck.

GOon