PETALING JAYA: Shares in plantation companies, led by IOI Corp Bhd, surged to their highest in weeks on rising crude palm oil (CPO) futures prices.

Kenanga Research expects falling palm oil inventory to push prices higher, at least in the near term.

“We reiterate our view that CPO prices should continue to appreciate up to RM2,900 per tonne by end-March as we expect sustained inventory downtrend throughout the first quarter of the year,” Kenanga Research told clients.

Shares in plantation counters like Genting Plantations Bhd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK) ended up by 0.95%, 5.75% and 3.81% to RM10.60, RM4.60 and RM24.50 respectively.

Another planter TSH Resources Bhd also finished the day 1.35% higher to RM3.

CPO futures surged convincingly to break its psychological level of RM2,700 on Tuesday, reaching their highest level in 17 months since September 2012, according to a note by Kenanga.

At yesterday’s close, forward three-month CPO futures were at RM2,708 per tonne.

Kenanga said its top picks for the sector were IOI Corp and TSH.

“We believe IOI Corp’s valuation should re-rate higher post its demerger exercise with IOI Properties as it has emerged as the biggest and most efficient integrated palm oil players,” it said.

It noted that IOI Corp’s fresh fruit bunch yield at 24.46 tonnes per ha was also the highest among big-cap planters.

It also said it liked TSH due to its high FFB growth, noting that for the period of January to September 2013, its FFB output was already showing 34% growth (year-on-year) to 379,673 tonnes (strongest growth among its peers).

Kenanga in its note added that Indonesian state-owned energy firm Pertamina had recently completed its second tender of biodiesel and that this should bode well for CPO prices too as it created additional sustainable demand for CPO.

StarBiz reported recently that market sentiment was well supported by the lower-than-expected palm oil stock figures by the Malaysian Palm Oil Board (MPOB) and tight supply in the soybean-producing countries of Brazil and Argentina.

MPOB said the palm oil inventory in January had fallen 2.63% to 1.93 million tonnes, the lowest in three months, while CPO production eased 9.6% to 1.50 million tonnes from a month earlier.