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.
June TIV continued to fall although OSK had earlier anticipated it to have hit bottom in May, largely due to amendments to the HP Act. TIV for June dived 22.6% y-o-y, 12.4% q-o-q and 9.2% m-o-m, dragging the cumulative numbers into negative territory for the first time this year, for a 1.3% contraction YTD.
OSK expect to see poor earnings q-o-q and y-o-y across the board, notably for UMW, Tan Chong and MBM Resources as margins would be pressured by plant underutilization. OSK reiterate our NEUTRAL stance on the AUTOMOTIVE sector.
Below are the target price/fair value and rating for selected stocks in automotive sector.
With M&As in the Malaysian steel sector reaching a feverish pitch and a few parcels of iron ore mining concessions potentially coming up for grabs soon, OSK is warming up to this sector, which has long been left out in the cold.
OSK has Trading BUY calls on Lion Industries, Ann Joo and Perwaja, and also upgrade Kinsteel to a NEUTRAL as these 4 companies are potential winners from these fresh theme plays. However, OSK maintain our NEUTRAL rating on Southern Steel and Malaysia Steel Works (Masteel).
Below are the target price/fair value and rating for selected stocks in steel sector.
ECMLibra Investment Research continue to be Overweight on the sector as news flow continue to be strong. But ECMLibra see that bigger caps like MMHE and even SapuraCrest hitting peak cycle valuations.
As such, ECMLibra pay more attention to small cap laggards like Wah Seong, Alam Maritim and even Perdana Petroleum. The only big cap ECMLibra favour now is Petronas Gas due to the upside potential from the new re-gasification terminal.
Selected Oil & Gas Stocks Fair Value, Target Price & Dividend Yield
OSK expect will better in 2H and maintain OVERWEIGHT to the sector. Despite the weak numbers on domestic contract flows in 2Q, OSK remain bullish on the sector. The KLCON has underperformed the KLCI by 4.3% YTD as investors have probably gotten impatient on the momentum of awards.
OSK views this as an opportune time to load up on the sector as contract awards should pick up in 2H as major projects such as the MRT, LRT and River of Life kick off.
The sector should also benefit from a potential early General Elections which we expect to be held this year.
Below are the target price for selected stocks in construction sector.