Sector - Plantation
Research by Kenanga
NEUTRAL


"Nibble Selectively "

The plantation sector performed poorly in CY21 despite strong CPO prices and earnings upgrades following two strong quarters of earnings that surpassed expectations. Attributing this disconnect to the sector’s generally poor ESG credentials and the consensus view that CPO prices have peaked and likely to decline in 2HCY22, we maintain a NEUTRAL call on the sector. Accounting for 9.6% by weight in the FBM Shariah Index (and 9.4% in the FBMKLCI), investing in the sector is unavoidable for Shariah funds that are benchmarked against the Shariah Index. For outperformance, we recommend KLK as our top large cap pick for its integrated structure that lessens its sensitivity to CPO prices, and attractive PER that is 1.5SD below mean.

Koh Huat Soon
E hskoh@kenanga.com.my