● Palm oil prices in USD have risen 16% YTD. However, palm oil prices in MYR and IDR are up only 6% and 9%, respectively, simply because the MYR and the IDR have appreciated 11% and 5%, respectively, against the USD.
● Soy oil price premium over palm oil is now US$160. This suggests that importers will favour palm oil over soy oil in the short term.
● Malaysian palm oil exports for September 2010 rose 29.9% MoM. This suggests inventories may fall MoM, as harvesting of fresh fruit bunch was probably disrupted by the holiday season.
● All the plantation stocks under our coverage (except GENP) have underperformed the local indices. The worst performers YTD have been Astra Agro (underperformed by 49%), Sampoerna Agro (-40%), London Sumatra (-22%) and Sime (-20%).
● We expect palm oil prices to strengthen seasonally at year end, but remain bearish on palm oil prices for 2011. We maintain our UNDERPERFORM rating on Sime Darby, GENP, IOI and Astra Agro. Wilmar remains our only OUTPERFORM.
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