OSK Plantation Sector Stock Picks, Aug 2011

Despite stockpile rising above the 2m-tonne mark, OSK is not overly concerned as they believe that most of the contributing factors are already known and may have been factored into the decline in palm oil price from RM3,963 per tonne in Feb 2011 to a low of RM3,016.

OSK suspects that inventory may fall back promptly due to supply disruption in 2H. With palm oil now trading at a significant USD210 per tonne discount to soybean oil, there is plenty of room for palm oil price to move higher when supply disruption materializes in the months ahead. Maintain Neutral on the sector, with a positive near term outlook.

Below are the target prices and ratings for selected plantation stock.

Stock Price (RM) Target (RM) Market Cap (RM million) Rating
Genting Plant 7.85 8.26 5,972.1 Neutral
IJM Plant 2.75 3.14 2,188.7 Neutral
KL Kepong 20.76 20.55 22,207.6 Neutral
Sime Darby 9.15 8.47 54,986.6 Sell
SOP 4.25 5.22 1,869.0 Buy
IOI Corp 5.18 4.39 33,043.3 Sell
Kulim 3.75 4.77 4,644.3 Buy
TSH 3.14 3.83 1,308.4 Buy
Glenealy 5.80 6.40 669.1 Buy

Source : OSK Research

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