We prefer Indonesian plantation companies given their less demanding valuations. The Malaysian plantation companies are trading at a 41% premium to the Indonesian plantation companies. The Indonesian plantation companies are still trading at a discount to the Indonesian market P/E and P/B averages.
Our top pick for the sector remains IFAR given less demanding valuations and as the majority owner of LSIP, it will benefit from LSIP’ fundamental recovery. We maintain our OUTPERFORM rating on IFAR, LSIP and SGRO. We maintain NEUTRAL on AALI as it is trading at the higher end of the historical trading range.
We increase our target price for IFAR from S$0.9 to S$1.15, LSIP from Rp4,200 to Rp5,400, SGRO from Rp1,620 to Rp2,000 and AALI from Rp13,900 to Rp16,200, given the 30% re-rating in the Indonesian market over the past two months.
Our preference for the Indonesia palm oil sector is in the following order: IFAR, LSIP, SGRO and AALI.
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