Stock Picks – Plantation Sector – March 2011

Palm oil price continued to weaken with the improved production outlook in 2H thisyear. At the same time, exports have been weak, suggesting that the current palm oilprice is excessive and will inevitably lead to demand destruction.

OSK believes that palmoil price already hit a peak in the 2008 – 2011 upcycle and is now in a downcycle, whichwill last some 6 to 9 months at the very least. As there have been no fresh catalysts tospur palm oil price further, prices have to correct to a level where demand starts tokick in. Maintain Neutral on the sector with selective Buys.

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

Stock Price (RM) Target (RM) Market Cap (RM million) Rating
Genting Plant 7.90 8.26 5,994.9 Sell
IJM Plant 2.82 3.07 2,259.8 Neutral
KL Kepong 20.88 20.55 22,289.5 Neutral
Sime Darby 9.10 7.90 54,686.1 Sell
SOP 3.52 5.22 1,523.0 Buy

Source : OSK Research

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