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Three Largest Agriculture Stocks Averaged 8% Total Return in 3Q18

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  • SGX lists six stocks with a market capitalisation above S$1 billion that maintain a significant agriculture business. The six – Wilmar, Olam, Golden Agri-Resources, First Resources, Japfa and Bumitama Agri – have a combined market capitalisation of more than S$30 billion.
  • In 3Q18, the best-performing agri stocks were Bumitama Agri (+9.2%), First Resources (+8.5%) and Wilmar (+6.4%). These three plays averaged a total return of 8.0% over the quarter, reversing their negative returns in 1H18. Japfa was the only stock that registered positive total returns of +3.1% and +25.8% for 3Q18 and 1H18 respectively.
  • Five of the six billionaire agri plays – Wilmar, Olam, Golden Agri, First Resources and Bumitama Agri – also have substantial exposure to the crude palm oil (CPO) market, which analysts suggest is on the cusp of a seasonal upturn.

Singapore Exchange lists six stocks with a market capitalisation above S$1 billion that maintain a significant agriculture business. The six – Wilmar International, Olam International, Golden Agri-Resources, First Resources, Japfa and Bumitama Agri – have a combined market capitalisation of more than S$30 billion.

In the July-September quarter, these six stocks have averaged a total return of +0.9%, compared with an average total return of -1.8% for the January-June period.

In 3Q18, the best-performing agriculture stocks were Bumitama Agri (+9.2%), First Resources (+8.5%) and Wilmar (+6.4%). These three plays averaged a total return of 8.0% over the quarter, reversing their negative returns in the first six months of the year. Japfa was the only stock that registered positive total returns of +3.1% and +25.8% for 3Q18 and 1H18 respectively.

agri-returns

For a previously published Market Update on Billionaire Stocks with an Agriculture and ASEAN focus, click here.

The table below details SGX’s six largest agriculture plays, sorted by market cap size. Click on the stock name to view its profile in StockFacts.

agri-table

Five of the six billionaire agriculture plays – Wilmar, Olam, Golden Agri-Resources, First Resources and Bumitama Agri – also have substantial exposure to the crude palm oil (CPO) market, which analysts suggest is on the cusp of a seasonal upturn.

According to a strategy report published by DBS Group Research last month, CPO stocks tend to track the underlying commodity’s price trends – bottoming out in October after peaking in March, before recovering over the November-December period. The October-December rebound coincides with the low production cycle starting in November, and ahead of the Christmas and New Year holidays when demand typically rises, the report noted.

cpo-chart

Over the longer term, the global palm oil market is forecast to grow at a compound annual rate (CAGR) of 7.2% between 2016 and 2021, reaching a market value of US$92.84 billion in 2021 from US$65.73 billion in 2015, according to data from Zion Market Research.

Growth drivers include improving economic conditions, higher living standards, and changing eating habits in emerging countries, as well as growing demand for vegetable oil as a feedstock for biodiesel production. The low price of palm oil, as well as stringent regulations on trans-fat foods in US and Europe, has spurred consumers to switch to palm from soybean and other vegetable oils, Zion Market Research said in a report published last month.

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