PETALING JAYA: Second-tier plantation stocks on Bursa Malaysia are expected to rebound soon on short-term speculative buying, analysts said.
The major beneficiaries of the recovery include Sarawak Plantations Bhd, Sarawak Oil Palms Bhd (SOP), Rimbunan Sawit Bhd, TH Plantations Bhd, IJM Plantations Bhd, Tradewinds Plantation Bhd and TSH Resources Bhd.
The price of crude palm oil (CPO) has retraced by about 30% to RM3,390 per tonne to date from a record RM4,486 per tonne. However, Aseambankers, in a recent report, said it is “not ruling out the possibility of another round of speculative buying stemming from the US Fed interest rate cut.”
The brokerage also expects CPO prices to peak in this year and trade at a more sustainable price in 2009.
On maintaining its CPO average price at RM2,800 per tonne this year and RM2,500 next year, Aseambankers said: “We concur that our CPO assumption for 2008 can be conservative if the price stays at present high levels for the rest of the first half this year.”
The brokerage is revising its plantation stock calls, but maintains a neutral stand on the plantation sector.
“Our buy calls remain unchanged for TH Plantations, with new target price of RM4, Tradewinds RM4.10 and TSH Resources RM3.40,” it added.
TH Plantations and TSH closed unchanged at RM2.98 and RM2.63 respectively while Tradewinds eased six sen to RM3.40 yesterday.
Aseambankers, however, said sentiment on the sector could be weighed down by talk of the imposition of windfall tax on plantation companies.
Such talk re-emerged on concerns that the Government needed to raise its revenue equation to help sustain the high subsidies in fuel and other food products.
On SOP, an analyst said the counter should be priced higher, given its good earnings prospects, expansion plans and consistent CPO production.
He said SOP was actively expanding its upstream and downstream activities, which would enhance its valuation. The counter ended five sen lower at RM5.50 yesterday.
Citigroup, in a recent report, has a “buy” call on pure planter IJM Plantations, with CPO prices being the key share price catalyst as well as the company's long-term growth driven by new land acquisitions.
On TSH, KAF said in a report the company remained “a relatively under-appreciated growth story”, given its projected 32% compounded average growth rate for 2007 and 2009. The group had good leverage on rising CPO prices as every RM100 a tonne increase would result in a 5.7% improvement in earnings, it said.
KAF said TSH's growing earnings would come from its upstream activities. This is given the aggressive expansion in its land bank, maiden contribution from its refinery via joint venture with Wilmar International group, and sustained earnings.
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