Thursday, April 7, 2011

CIMB Research maintains Underperform on IOI Corp

KUALA LUMPUR: CIMB Equities Research said the Roundtable on Sustainable Palm Oil's (RSPO) suspension is a negative surprise and is maintaining an Underperform on the stock.

It said on Thursday, April 7 that the RPSO has suspended its certification process for all of IOI group's activities with immediate effect, following land dispute complaints and charges of deforestation.

'This is a negative surprise and may tarnish the group's image as a sustainable palm oil producer as well as its sales of sustainable palm oil to Europe. For now, we do not expect the suspension to affect the group's operations as it will merely delay the certification of new estates,' it said.

CIMB Research said given the group's willingness to work with RSPO, it believes this issue will be resolved amicably in due course.

'We retain our earnings forecasts and target price of RM5.95 (16x CY12 P/E). Also intact is our UNDERPERFORM rating in view of its below-peers FFB output growth and our view that the CPO price is close to peaking. For exposure to the sector, we prefer Sime,' it said.

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