MARKET DEVELOPMENT
CIMB Research Top Plantation Picks: First Resources, Wilmar, IOI Corp
CIMB Research Top Plantation Picks: First Resources, Wilmar, IOI Corp
11/07/2013 (The Star) - CIMB Equities Research’s preferred stocks for exposure to the plantation sector are First Resources, Wilmar and IOI Corp.
It said on Thursday that First Resources has one of the youngest and most profitable estates while Wilmar is a prime beneficiary of higher palm oil supplies and stocks and IOI Corp has upside from the listing of its property arm.
CIMB Research expects palm oil stocks to increase in July due to higher production and weaker exports.
“Furthermore, weak palm oil export data in the first 10 days of July and the expectation of higher soybean supplies from the US are dampening factors for the bullish stock figure.
“Our average CPO price forecasts of RM2,530 in 2013 and RM2,700 in 2014, and Neutral sector call remain unchanged. First Resources, Wilmar and IOI Corp are our top picks,” it said.
Palm oil stocks in Malaysia fell for the sixth month straight in June to reach a 27-month low. Malaysia's stocks at end-June were down 9% on-month at 1.65 million tonnes, which was 4-5% below its forecast and consensus. The stocks were below expectation due to lower-than-expected palm oil output in Sabah.
“The lower palm oil stock is positive for CPO price. However, this is offset by the 15.9% on-month fall in palm oil exports in the first 10 days of July, and concern that stocks will rise again during the peak production season that is expected to start in September.
“On the demand front, the recent decline in soybean oil prices has narrowed the discount gap between CPO and soybean oil prices. There is concern that India's demand for edible oil may be negatively impacted by the recent weakness in the rupee currency.
“We think that palm oil stocks may have bottomed-out in June and stocks could rise by 4% to 1.7 million tonnes by end-July. We expect CPO prices to trade in the range of RM2,200 to RM2,600 per tonne in the near term,” said CIMB Research.
It said on Thursday that First Resources has one of the youngest and most profitable estates while Wilmar is a prime beneficiary of higher palm oil supplies and stocks and IOI Corp has upside from the listing of its property arm.
CIMB Research expects palm oil stocks to increase in July due to higher production and weaker exports.
“Furthermore, weak palm oil export data in the first 10 days of July and the expectation of higher soybean supplies from the US are dampening factors for the bullish stock figure.
“Our average CPO price forecasts of RM2,530 in 2013 and RM2,700 in 2014, and Neutral sector call remain unchanged. First Resources, Wilmar and IOI Corp are our top picks,” it said.
Palm oil stocks in Malaysia fell for the sixth month straight in June to reach a 27-month low. Malaysia's stocks at end-June were down 9% on-month at 1.65 million tonnes, which was 4-5% below its forecast and consensus. The stocks were below expectation due to lower-than-expected palm oil output in Sabah.
“The lower palm oil stock is positive for CPO price. However, this is offset by the 15.9% on-month fall in palm oil exports in the first 10 days of July, and concern that stocks will rise again during the peak production season that is expected to start in September.
“On the demand front, the recent decline in soybean oil prices has narrowed the discount gap between CPO and soybean oil prices. There is concern that India's demand for edible oil may be negatively impacted by the recent weakness in the rupee currency.
“We think that palm oil stocks may have bottomed-out in June and stocks could rise by 4% to 1.7 million tonnes by end-July. We expect CPO prices to trade in the range of RM2,200 to RM2,600 per tonne in the near term,” said CIMB Research.