08/01/2008 (The Star Online), Petaling Jaya - Plantation stocks, which have been drawing investor interest in the past one week, continued to hog the limelight yesterday, as rising crude palm oil (CPO) prices drove plantation counters to the top gainers' line-up.

Kulim (M) Bhd was the day's star performer among plantation players, surging RM1.05 to a 52-week high of RM9.05 yesterday, after touching an intra-day high of RM9.10.

An analyst said small-mid cap stocks such as Kulim offered higher value compared to bigger ones such as KL Kepong Bhd (KLK), noting that small-mid caps including Kulim were catching up with KLK, which was trading at 20 times earnings per share currently.

An analyst from a local research house expects Kulim to perform better for the financial year ending Dec 31, on higher crude palm oil selling prices of RM2,800 to RM3,000, compared with last year's average price of RM2,400.

OSK Research said Kulim could be this year's “star performer” as its underperformance last year had widened its discount to sector valuation.

In a report, OSK upgraded the stock to “buy” from “trading buy” previously, at a revised target price of RM12.60.

The listing of Kulim's associate, New Britain Palm Oil, on the Alternative Investment Market of the London Stock Exchange last month would create upward pressure on the stock price, it said.

The research house said there was a high possibility that Kulim's local plantation would turn profitable in the fourth quarter ending Dec 31, adding that the stock was currently “undervalued”.

Meanwhile, most of the plantations stocks were fairly valued at present, said the analyst with a local research house.

“The uptrend in CPO prices would be able to sustain for the next three to six months,” he said, adding that there was speculation that prices could taper down to prices based on fundamentals.

KLK, United Malacca Bhd, Batu Kawan Bhd, Negri Sembilan Oil Palms Bhd and Sarawak Oil Palms Bhd were among the top gainers yesterday.

Big caps such as Sime Darby Bhd and IOI Corp Bhd attracted heavy volume of 19.98 million shares and 14.04 million shares respectively yesterday.

Aseambankers has asked investors to switch their shareholding of large caps to small-mid caps for their relatively “decent and defensive'' valuations.

The research house prefers exposure to small-mid caps such as CB Industrial Product Holding Bhd, Tradewinds Plantation Bhd, TH Plantations Bhd, TSH Resources Bhd, Hap Seng Consolidated Bhd, Kim Loong Resources Bhd, Glenealy Plantations (M) Bhd and Kwantas Corp Bhd.

It maintains a “neutral” call on the sector and is retaining its CPO price forecasts for 2008 and 2009 at RM2,500 per tonne and RM2,300 per tonne respectively.

According to Bloomberg, palm oil futures for March delivery rose RM68 to a new high of RM3,188 per tonne on the Malaysian Derivatives Exchange yesterday while spot CPO closed RM50 higher to a new high of RM3,200 per tonne.