Palm oil inventory is expected to end the year below the 2 million-tonne mark, as the production peak is over and exports set to improve in the upcoming festive season, according to RHB Investment Bank Bhd (RHB Research).

Nevertheless, the plantation sector has been awarded an OVERWEIGHT rating by RHB Research which favours SD Guthrie Bhd, Johor Plantations Group Bhd, and Sarawak Oil Palms Bhd as the sector's top picks.

Notably, two regional planters Bumitama Agri Ltd and PT Perusahaan Perkebunan London Sumatra Indonesia (LSIP) are also top picks for the sector in a wider context.

SD Guthrie has been awarded a BUY call with a target price of RM5.55, reflecting a 57 sen premium over the prevailing market valuation. As at 12:20pm Dec 11, SD Guthrie traded at RM4.98. (Stock updates from Bursa Malaysia)

Johor Plantations has been given a BUY call with a target price of RM1.55 which translates to a premium of 26 sen over market valuation. As at 12:20pm Dec 11, Johor Plantations traded at RM1.29. (Stock updates from Bursa Malaysia)

Sarawak Oil Palms has been awarded a BUY rating with a target price of RM4.15. The target price awards a 72 sen premium above the market pricing. As at 12:21pm Dec 11, Sarawak Oil Palms's share price stood at RM3.43. (Stock updates from Bursa Malaysia)

Bumitama Agri has been given a BUY rating with a target price os SG$0.95 while LSIP has been awarded a BUY call with a target price of IDR1,540. According to online real-time data, Bumitama Agri's stock price stood at RM0.905 as at 11:52am Dec 11, whereas LSIP's shares traded at IDR1,100 as at 11:34am Dec 11.

• Inventory levels declined 2.65% to 1.84 million metric tonnes (MT) in November 2024, compared to 1.89 million MT in Oct 2024, mainly due to production which decreased 9.8% month-on-month, partially offset by lower exports which declined 15% month-on-month.
• Stock levels are likely to stay below the 2 million-MT mark in 2024, as production continues to moderate and exports gradually improve. Analysts see stronger fundamental prospects for ASP in 2025 on tighter global supply, increased biodiesel demand and low stock levels.

The Q3 2024 reporting season saw mostly in-line results from plantation operators. Analysts expect stronger financial performance in the last quarter of 2024 owing to higher average selling prices (ASP).

The results of eight planters were in line, two were above and four below estimates. The upside surprise came from FGV Holdings Bhd on higher FFB output and lower unit costs. Downside surprises came from SD Guthrie Bhd and TSH Resources Bhd on factors like weak FFB output, thin downstream margins and higher tax rates.