UOBKayhian on 6 Mar 2015
FY15F PE (x): 11.9
FY16F PE (x): 9.9
CPO price well supported in 1H15. Management believes that CPO price will be better
in 1H15 with the tight CPO supply due to the decline in CPO production owing to the
lagged impact from prolonged dry weather in 1Q14. Also, inventory level in key
producing countries and key consuming countries such as China and India are relatively
low or are decreasing. This indicates demand from consuming countries is likely to pick
up post winter seasons.
Direction of CPO price in 2H15 depends on the biodiesel offtake in Indonesia. While
CPO price in 1H15 will be supported by the tight supply in the market, CPO production
will enter into its peak production season going into 2H15. If Indonesia is able to execute
its biodiesel programme well in 2H15, it will help to absorb the increase in supply in the
market and provide support to the CPO price. Otherwise, CPO price might go down.
Maintain BUY and target price of S$2.80 based on 15x 2016F. FR remains one of our
top picks in the plantation sector for its attractive profile age, cost-efficient estates and
hands-on management.
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