Tuesday, January 3, 2012

RHB Research maintains overweight on plantations sector

KUALA LUMPUR (Jan 3): RHB Research Institute is maintaining its Overweight on the PLANTATION []s sector, with five Outperform calls and three Market Perform calls.

It said on Tuesday that it has Outperform calls on Genting Plantations, Sime Darby, TH Plantations, First Resources and CBIP while the three Market Perform calls are IOI Corp, KLK and IJM Plantations.

'Our top picks remain upstream players like Genting Plantations and TH Plantations, as we believe the risks faced by the more integrated players are rising, due to the new disadvantageous Indonesian export tax structure,' it said.

RHB Research said recently, several developments have led it to believe that the risk of CPO prices rising above market expectations is increasing, particularly in 1H2012.

It said the weather is now officially in La Ni''a territory; 2) Impact of La Ni''a on soybean supply is a high risk factor; 3) Any crop losses would have knock-on effects on CPO demand and prices; 4) Rising crude oil price and its close correlation with CPO prices; and 5) Continued narrowing of the price discount between CPO and other competing vegetable oils.

'We maintain our CPO price assumptions of RM3,100 a tonne for CY12 and RM2,900/t for CY13. For CY11, our price projection remains unchanged at RM3,100 even though YTD average price is RM3,274. We are not revising our forecasts for 2011 to be conservative, as we believe most plantation companies would not necessarily be able to achieve prices so close to the spot price,' it said.

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