24/03/2014 (The Star) - Small-capitalised plantation stocks which have been under the radar for much of the past one year are poised to play catch-up with their larger peers moving forward.

Analysts said the smaller capitalised plantations stocks had not caught up with the crude palm oil (CPO) price rally in terms of valuation yet and that bottomline growth might be seen should the CPO prices continue their climb.

PublicInvest Research’s plantation analyst Chong Hoe Leong told StarBiz that CPO prices, which were on the uptrend would benefit both big and small cap planters which had a “salient growth profile”.

“I have seen some good small-cap plantation companies but there are some where their growth profile may not be strong enough while their trees may also not be so young any more, such companies may not be so exciting.

“Unless of course if they have some unplanted landbank and/or have some expansion plans in mind.

“Then some of these small-caps may be worth a second look to reassess and re-justify their valuation and earnings base,” he added.

On CPO prices, Chong had an “outperform” call, noting that prices for the first half of 2014 was expected to be strong due to tightening in production partly induced by the drought in the past two months.

“The year-to-date average in CPO prices was at RM2,630 per tonne while my average forecast for the year is RM2,750.

“Should El Nino develop then buyers may eventually lock in demand and buy forward,” he said.

Meanwhile, RHB Research’s plantations analyst Hoe Lee Leng said her average forecast for CPO prices for the year was RM2,700 and that it did not take into consideration the possibility of El Nino returning in July.

“I think premised on this, there are certainly opportunities in small caps provided their valuations have not yet moved up.

“Among the bigger caps, my top picks are Sarawak Oil Palms Bhd, Jaya Tiasa Holdings Bhd and IOI Corp Bhd,” Hoe said.