Malaysia’s palm oil inventory started to decline last month as production began on a seasonal downcycle. This, plus the still tight supply in 1H next year, should keep prices relatively firm and give plantations stocks the opportunity to appreciate further.
However, with recent rainfall seeming ordinary, we believe a bumper crop is in the making and we would see strong production from mid-2011 onwards. This may put an end to the current palm oil price upcycle, which is already more than 2 years old. Maintain Neutral on the sector.
Below are the target prices for selected plantation stock.
| Stock | Price (RM) | Target (RM) | Rating |
|---|---|---|---|
| Sime Darby | 8.66 | 8.84 | Neutral |
| IOI Corp | 5.72 | 5.14 | Sell |
| KL Kepong | 21.50 | 20.50 | Neutral |
| Genting Plant | 8.46 | 8.00 | Sell |
| IJM Plant | 2.96 | 3.01 | Neutral |
Source : OSK Research