13/09/2011 (The Edge Malaysia) - CIMB Equities Research has downgraded the Malaysian plantation's sector from Neutral to Underweight.

It said on Tuesday, Sept 13 palm oil stocks dropped for the second month to 1.89 million tonnes at end-August, 5.5% short of its forecast and 3% below consensus projections due to lower production.

“Although this is good news for planters, we downgrade the Malaysian plantation sector from Neutral to Underweight in view of its unattractive valuations relative to regional peers, slower earnings growth momentum and risks to downstream earnings stemming from more competition from Indonesian players,” it said.

CIMB Research said it maintained its Hold rating on Hap Seng Plants and Sell call on IOI Corp, KL Kepong and Genting Plantations.

“Investors should switch to our top pick in the region, Wilmar or planters like Golden Agri and SIMP which offer more attractive valuations and growth prospects,” it said.