CS is forecasting average CPO price of RM2,600/t for 2010F and RM2,300/t for 2011F. Dec-2010 CPO Futures is currently RM2,700/t. We continue to recommend Take Profit AALI (@Rp21,700- 21.7x 2011F PER), while maintaining Hold SGRO (@Rp2,700- 13.6x 2011F PER), LSIP (@Rp9,950- 16.2x 2011F PER) and IFAR SP (@SGD2.26- 15.5x 2011F PER).
· Teddy Oetomo (Daily attached): While Indonesian CPO stocks have delivered positive absolute performance, they have exhibited negative relative performance in the past one-three months. With the exception of SGRO, most Indonesian CPO producers are trading in line or above their Malaysian counterparts.
· We are seeing rapid recovery in CPO production. While 2010 production is unlikely to show strong growth due to low base effect in early 2010, we believe the recovery trend may continue, resulting in strong 2011 CPO output. In turn, we foresee risk of softer CPO price in 2011. We are starting to see CPO prices flatten in the past two months, potentially reflecting anticipation of stronger output in 2011, combined with relatively soft demand due to global economic conditions.
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