CPO price outlook is improving and we revise up our CPO price assumption from a bedrock price of US$300/ton to US$500/ton. This lead to 165-215% earnings upgrade in plantations stocks (from a low base) as Indonesian plantations are highly geared to CPO price.
Palm oil price has seen a strong support from food demand and lower supply, which has supported prices in 1Q09. Malaysian palm oil inventory has fallen 31% from the peak in Nov08 and export in the first 15 days of Mar09 still up 16% mom.
We upgrade Indo plantation sector from Underweight to Overweight and believe bad news is largely priced in. Our preferred plantation stocks are Lonsum, Sampoerna Agro, and Astra Agro.
AALI sell to OPF TP 13500, LSIP UPF to Buy TP 5000, UNSP sell to Buy TP 500
Source: CLSA Asia-Pacific Markets
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