Boustead: CPO will rebound in first-half 2009

The major owner of the plantation Al-Hadharah REIT expects palm oil prices to trade between RM2,000 and RM2,200 a tonne

BOUSTEAD Holdings Bhd (2771) believes palm oil prices will bounce back to between RM2,000 and RM2,200 a tonne in the first six months next year, boosted by shipments to China and the government's effort to cut stockpiles.

Prices of the commodity have already fallen 66 per cent from their peak of RM4,486 a tonne in March, to RM1,510 for February delivery, yesterday.

The major owner of the plantation Al-Hadharah REIT is, however, convinced that prices will improve in the first half next year.

"Crude palm oil (CPO) is mainly used for food. We believe the buyers from China will continue to use palm oil because of the price difference - it's now at a US$300 discount to soya oil. That's quite attractive," Boustead group managing director Tan Sri Lodin Wok Kamaruddin said at a press conference in Kuala Lumpur yesterday.
He blamed the current weak CPO prices on excess stocks due to high production, as well as the falling crude oil price which has dropped drastically from nearly US$150 (RM545) a barrel not too long ago to below US$45 (RM163) currently.

CPO prices have been tracking that of crude oil because it can be used to produce biofuel.

The government has also announced plans to boost the usage of palm oil, which will help to cut stockpiles, Lodin Wok said.

This includes getting government vehicles to switch to biofuel for power, a plan that will later involve industrial vehicles, he said.

The government has also set aside RM200 million to speed up the replanting of oil palm trees that are more than 25 years old.

Boustead is selling two more estates into the Al-Hadharah REIT, boosting the world's first Islamic plantation property trust to RM805 million.

The REIT, 60.5 per cent held by Boustead after the asset sale, is paying RM188.8 million for both the Malakoff and Bebar estates.

With a low gearing of 15 per cent, Lodin Wok said, the REIT aims to buy more assets to expand its size. A REIT cannot exceed 50 per cent gearing under the Securities Commission's rule.

NST