OSK Plantation Sector Stock Picks, Sep 2011

OSK believe that palm oil price is set for a counter trend rally and its price action in the past weeks supports their view. At the very least, the bearish forces which had caused palm oil price to dip below RM3,000 appear to be spent for now as inventory continues to ease.

The bullish soybean market has yet to help push up palm oil price but should eventually give it a lift if the former continues to move up in the next 2 months.

Malaysia’s weakening palm oil production is also supportive of higher palm oil prices in the immediate term, especially given its large USD246 discount to soybean oil

OSK continue to like the sector as a short term tactical play but wary of stronger production in 2012, especially with the possible resurgence of the La Nina weather conditions.

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

Stock Price (RM) Target (RM) Market Cap (RM million) Rating
Genting Plant 7.27 7.87 5,972.1 Buy
IJM Plant 2.65 3.22 2,188.7 Buy
KL Kepong 21.50 22.09 22,207.6 Neutral
Sime Darby 8.68 9.21 52,162.2 Neutral
SOP 4.25 5.67 1,844.2 Buy
IOI Corp 4.63 4.64 29,706.9 Sell
Kulim 3.66 4.45 4,619.1 Buy
TSH 3.12 3.81 1,296.0 Buy
Glenealy 5.65 7.25 651.8 Buy

Source : OSK Research

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