Golden Agri-Resources (GAR): The upcoming corn harvest from Brazil is expected to be bigger than ever, where market watchers believe it could flood an already oversupplied global corn market and depress prices further.
Furthermore, price differential between soy and CPO has narrowed significantly to below US$300/ton, thus reducing substitute demand for CPO.
Having said that, El Nino effects are more pronounced this year in Indonesia. While some plantation stocks have run up on this news, any impact on product is likely to come later; as it usually takes 6-9 months for the tree stress to show up.
OCBC believes that unless there is a strong recovery in demand, the near-term outlook for GAR remains somewhat muted. The house maintains its SELL rating with unchanged FV of $0.35 (based on 13.5x FY15F EPS).
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