We are raising our CPO price forecasts by 18% for 2009 and 8% for 2010 to US$710 per tonne for both years to account for Argentina's lower soybean crops, the slower decline in demand growth from key consumers and a slower-than-expected recovery in palm oil output. In view of our higher CPO price forecasts and recent changes in our rupiah assumptions, we are upping our FY09-10 earnings forecasts by as much as 30%. This, along with higher target P/Es following our upgrade of regional stockmarkets, bumps up our target prices by 3-53%. Following the revision, we are raising our rating for the Malaysian plantation sector from Underweight to Neutral but maintaining our regional plantation sector rating at NEUTRAL as the share prices of most planters in our universe have done well YTD and CPO price is likely to correct in 3Q. Our top picks in the region are Wilmar, Sime Darby, Indofood Agri and London Sumatra.
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