We are unsure if the surge in CPO prices is sustainable due to the speed and magnitude of the increase. Our average CPO price assumptions are RM2,100 per tonne for 2019 and RM2,200 per tonne for 2020. KLK is currently trading at FY20F PE of 26.5 times versus IOI Corp Bhd’s financial year ending June 30, 2020 PE of 28.2 times and Sime Darby Plantation Bhd’s financial year ending Dec 31, 2020 PE of 40.2 times. Recall that in the second half of 2018, CPO prices slumped as there was a glut in Indonesia, especially in Kalimantan. Based on current prices, the CPO price is US$18 (RM74.70) per tonne higher than the gas oil price.

Source: The Edge Markets November 05, 2019 01:52 UTC