Sunday, December 28, 2008

23-12-2008: Outlook for plantation sector positive, says ECM Libra by Tony H C Goh

ECM Libra has maintained an overweight rating on the plantation sector, as the recovery of crude palm oil (CPO) prices is in sight, once production starts to ease off and the stock level begins to decline.

There are also signs that CPO prices are decoupling from the weakening crude oil prices, as prices have been holding steady at around RM1,500 per tonne despite oil prices plummeting to US$30 (RM105) per barrel, said ECM Libra in its weekly review of the plantation sector.

"We believe that CPO prices are finally being influenced by their own fundamentals - and given that less than 5% of total palm oil production are being used for biodiesel, the biodiesel effect is finally losing its flavour," said ECM Libra.

Most plantation companies have staged a mild recovery in share prices over the week, led by IOI Corp Bhd which gained 11.3%. Others companies included Asiatic Development Bhd which was up by 9.8%, and KLK Bhd which went up 7.1%.

The recovery in share prices of plantation majors in the past week came despite a 3.4% fall in CPO price from RM1,590 to RM1,536. For 2009, the average CPO price is expected to hover around RM2,175 per tonne.

I m still very much into Plantation as a sector. As we all could see, though at a point CPO and Crude Oil were moving in tandem, at the moment CPO iss quite steady at rm1500 level. Crude Oil are still retracing and trading below US40 now. Many plantation stocks in KLSE have been BADLY battered. Some blue-chip counters are at very attractive level. With an economic downturn still very large at the backdrop, we should still be very cautious in our trading.

IOICorp has been the top pick by many broker houses in their reports. Asiatic is another good counter to consider, if you wish to be in Plantation play. KLK and Sime are the giants, lagging behind but KLK making moves too recently. I do still like HSPlant(her mom's price breached rm2.00 recently).

All in all, I have chosen to play with a call-warrant and didnt doubt to grab IOI-cj when it was offered. I m still looking at Sime-cg. IOI-cj is my first call-warrant. I bought only 50k units at 0.12 ... and sold 20k at 0.155. It touched 0.165, actually. At the moment, market is in holiday mood, so I shall keep the other 30k to be cleared at 0.165 and above, hopefully.

What about Sime-cg? Well, I was q-ing for it at 0.11 for past few trading days. It was offered 0.12(if I m not mistaken) by OSK. I guess I will still stick with my play on plantation, with Sime-cg at 0.11(or 0.115), if possible. If not, never mind ... many more in my mind, anyway. Hehe


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