CPO

CPO: Maybank-KE sheds more light on the Palm Oil sector following its recent marketing trip in Singapore, where the house met with 15 funds, and concluded that most of its clients had little or no exposure to the sector. Surprisingly, fund managers were unaware that valuations of CPO stocks in M’sia are relatively higher versus regional peers due to the growing pool of Shariah funds in M’sia which is structural in nature. Many of the funds however agreed that Indonesia’s CPO stocks were good for a short-term trade in the coming quarter, given their natural hedge against a weakening Rupiah. As a guide, CPO benchmark and revenue for Indonesia’s CPO planters are often denominated in USD, while majority of the costs are in Rupiah. Overall, Maybank-KE maintains its Neutral stance on a 12-month view as the sector appears fairly valued at ~RM2,600/t, in line with its forecast. Top Buys are First Resources (TP $2.39), Bumitama Agri (TP $1.14), TSH Resources (TP: RM3.40) and Ta Ann (TP: RM4.50) for their strong FFB output growth.