Thursday, October 13, 2011

CPO futures dip, but value emerging in sold down plantations

KUALA LUMPUR: Crude palm oil (CPO) futures for December dipped RM7 to RM2,871 per tonne at the midday break on Thursday, Oct 13, snapping a short-term rally.

However, UOB Kay Hian Research Malaysia said it saw value emerging in selected PLANTATION []s after recent selldown, though it maintained its CPO price assumption of RM2,900 per tonne for 2011 and RM2,700 for 2012.

At 12.30pm, IOI Corp was up 15 sen to RM5.15, while KLK added 14 sen to RM20.72 and Sime Darby nine sen higher at RM8.64.

UOB Kay Hian Research said the CPO price was likely to start trending up as supply risks ease in 2012.

'We upgrade the regional plantation sector to Market Weight from Underweight. CPO price corrected 29% due to an inventory build-up on the back of higher supply growth. However, we believe the inventory drawdown will start in 1Q12 as production growth tapers,' it said.

For big-cap plays, the research house said it preferred Sime Darby (Target: RM9.80) for the turnaround of its plantation operation which will deliver higher yield performance and also potential support coming from its motor and industrial divisions.

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