Recall that crude oil has been declined for a third day in New York after builders began work on fewer US homes than projected in Dec, signaling the economic recovery may be slowing in the biggest crude-consuming nation….
Futures dropped as much as 0.5% after a report showed housing starts slipped to the lowest since Oct09, while US crude inventories increased 3.53m barrels last week, the biggest gain in eight weeks, negating concerns over supply. Given CPO’s high correlation with oil future, it would be likely to see CPO link stocks take a drop….
Similarly, yesterday JP Morgan in their CPO sector report yesterday downgraded Golden Agri to underweight, on valuations basis, noting that with limited upside to CPO price, believe that upside to Golden Agri’s share price may also be limited. Share price has performed strongly in the last 6 months and is now trading at 14x FY11E P/E - 25% above historical mean P/E…..
House instead favours First resources, citing that Stock currently trades at 12x FY11E P/E against sector average of 16x.
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