Catalyst!
January 21st 2019
⏰ 2 minute read
⏰ 2 minute read
If I had $1
If I had $1 for every time... this famous phrase would make me a millionaire based on number of times people have told me I’ve been 100% wrong on our share price. Even if they do believe we are undervalued, highly profitable & operationally strong (not many do) they say there’s no catalyst... well here’s 3 urgent catalysts.
Demand supply
Surplus
The first catalyst is what’s happening in the supply & demand for palm oil. 2018 was a nasty year. While production was low at the beginning compared to demand, in the 2 & 3Q production jumped up much faster than demand & there was a temporary surplus. This caused the price to decline to 10 year lows by October.
Supply
But supply reached its highest level in late July & did not increase further from there. Since then it has started to decline. According to Oil World, the sharp rise in supply during 2018 did not mean supply was growing fast & by the end of the year, it was not significantly changed compared to levels in 2017.
Deficit
Oil World predicts that in the first quarter of 2019, supply will drop sharply. From 19 million tons, supply is forecast to slow to just 17m tons which is back below the level at the end of 2017. Demand will continue to rise & reach almost 19m tons meaning there will be a 1Q deficit of 2m tons of oil.
If I had $1 for every time... this famous phrase would make me a millionaire based on number of times people have told me I’ve been 100% wrong on our share price. Even if they do believe we are undervalued, highly profitable & operationally strong (not many do) they say there’s no catalyst... well here’s 3 urgent catalysts.
Demand supply
Surplus
The first catalyst is what’s happening in the supply & demand for palm oil. 2018 was a nasty year. While production was low at the beginning compared to demand, in the 2 & 3Q production jumped up much faster than demand & there was a temporary surplus. This caused the price to decline to 10 year lows by October.
Supply
But supply reached its highest level in late July & did not increase further from there. Since then it has started to decline. According to Oil World, the sharp rise in supply during 2018 did not mean supply was growing fast & by the end of the year, it was not significantly changed compared to levels in 2017.
Deficit
Oil World predicts that in the first quarter of 2019, supply will drop sharply. From 19 million tons, supply is forecast to slow to just 17m tons which is back below the level at the end of 2017. Demand will continue to rise & reach almost 19m tons meaning there will be a 1Q deficit of 2m tons of oil.
Price
10 year low
In 2018 the palm oil price fell to a decade low. In ringgit it was below 1,800 on the Malaysian futures exchange. On the ground in Indonesia with added transport difficulties, prices were even lower. In recent years we have sold as high as Rp10m per ton, in November our average selling price was only Rp4.5m.
Breakout
The second catalyst therefore could be the market price. Futures prices & our selling prices, rebounded in December & reached RM2,200 & just under Rp5.9m for us: In early January the price consolidated for a while, but last week it broke above the RM2,200 level at the third attempt.
10 year high
In 2018 when supply increased faster than demand there was an oversupply of 1.3m tons in the 3Q & 1.1m tons in the 4Q. This was enough to push prices down to 10 year lows. In the 1Q of 2019 as supply slows & demand rises, the shortage will be an amazingly huge 1.6m tons. Shouldn’t we then expect the price to now rise to a 10 year high...!
10 year low
In 2018 the palm oil price fell to a decade low. In ringgit it was below 1,800 on the Malaysian futures exchange. On the ground in Indonesia with added transport difficulties, prices were even lower. In recent years we have sold as high as Rp10m per ton, in November our average selling price was only Rp4.5m.
Breakout
The second catalyst therefore could be the market price. Futures prices & our selling prices, rebounded in December & reached RM2,200 & just under Rp5.9m for us: In early January the price consolidated for a while, but last week it broke above the RM2,200 level at the third attempt.
10 year high
In 2018 when supply increased faster than demand there was an oversupply of 1.3m tons in the 3Q & 1.1m tons in the 4Q. This was enough to push prices down to 10 year lows. In the 1Q of 2019 as supply slows & demand rises, the shortage will be an amazingly huge 1.6m tons. Shouldn’t we then expect the price to now rise to a 10 year high...!
Attention
Market attention
The third catalyst is attention for our BWPT shares. This can come in 2 ways. The first is when the market does well. The Indonesian stock market fell in 2018 & foreign investors sold, but in 2019 they’re coming back. As BWPT shares have quite high liquidity & can trade 1 to 2 billion shares a month, some index investors buy our shares:
Palm oil attention
The second way to get attention is when local investors start to look at the Palm oil sector. The sector has underperformed the market for a long time. In 2018 there was some attention from the biodiesel program, but that didn’t last as the price fell. But now the price is rising again, local attention is rising too:
Record
One clear way we can see attention is through our EHP investor emails & the number of subscribers we get. This has tracked the movement of the share price quite well since we started in January 2018. We had a small surge in subs in July, August last year when BWPT rose above Rp200. This month we are on track for record 103 sign ups so BWPT should jump too.
Catalyst
In recent weeks we’ve written about how undervalued BWPT share are, how surprisingly profitable we are compared to the sector & how well our operations are now doing. The missing link after years of poor sentiment is a catalyst. Now we have momentum from a palm oil shortage resulting in a rising palm oil price which is attracting more attention.
Market attention
The third catalyst is attention for our BWPT shares. This can come in 2 ways. The first is when the market does well. The Indonesian stock market fell in 2018 & foreign investors sold, but in 2019 they’re coming back. As BWPT shares have quite high liquidity & can trade 1 to 2 billion shares a month, some index investors buy our shares:
Palm oil attention
The second way to get attention is when local investors start to look at the Palm oil sector. The sector has underperformed the market for a long time. In 2018 there was some attention from the biodiesel program, but that didn’t last as the price fell. But now the price is rising again, local attention is rising too:
Record
One clear way we can see attention is through our EHP investor emails & the number of subscribers we get. This has tracked the movement of the share price quite well since we started in January 2018. We had a small surge in subs in July, August last year when BWPT rose above Rp200. This month we are on track for record 103 sign ups so BWPT should jump too.
Catalyst
In recent weeks we’ve written about how undervalued BWPT share are, how surprisingly profitable we are compared to the sector & how well our operations are now doing. The missing link after years of poor sentiment is a catalyst. Now we have momentum from a palm oil shortage resulting in a rising palm oil price which is attracting more attention.
