ARA, csfb maintain OUTPERFORM with target price $0.98

CHINA FARM EQUIPMENT, uob maintain BUY with target price $0.74

CHINA HONGXING, db maintain BUY with target price $0.85

COMFORTDELGRO, citi downgrade to SELL with target price $1.44($2.01)

LIAN BENG, cimb maintain NEUTRAL with target price $0.38

MAN WAH HOLDINGS, ocbc maintain BUY with target price $0.51($0.52)

NOBLE, csfb maintain OUTPERFORM with target price $3.45

NOL, citi maintain SELL with target price $2.70
NOL, leh maintain EQUAL WEIGHT with target price $3.70
NOL, ms maintain OVERWEIGHT with target price $4.80

SINGTEL, csfb maintain OUTPERFORM with target price $4.20

SMRT, citi upgrade to HOLD with target price $1.88($1.48)
ARA, csfb maintain OUTPERFORM with target price $0.98
- ARA announced the third and final closing of its flagship private
real
estate fund, the ARA Asia Dragon Fund (ADF) with an additional
US$133.22
mn, bringing total committed capital to over US$1.13 bn. Together with
co-investment of US$500 mn, the fund has over US$1.63 bn equity,
representing potential real estate investment capacity of US$4-5 bn
with
leverage.
- To date, ADF has invested in real estate with a gross asset value in
excess of US$800 mn, we understand, in development projects in
Singapore
(Grange Infinite) and China.Tianjin (residential township) and Nanjing
(commercial development).
-This ADF closing is within our expectations and hence we are
maintaining
our forecasts. ARA has launched its second Shariahcompliant fund on the
back of the success of AIFEREF and is on track to closing the
US$150-200 mn
fund by end of year.
-We like ARA.s defensive and stable fee income from committed AUM, in
addition to potential growth from its scalability. In our view,
valuation
is compelling at 10x 2008E P/E, or 8x ex-cash, in addition to
attractive
dividend yield of 5-7%. OUTPERFORM.

CHINA FARM EQUIPMENT, uob maintain BUY with target price $0.74
-We recently visited China Farm Equipment’s (CFE) agricultural truck,
farm
equipment, and diesel engine factories located in the vicinity of
Changsha
city, Hunan province.
-Truck ¨C exploiting overseas market to improve overall gross margin.
CFE
deems truck to be one of the important agricultural equipment and a
good
complement to its business. This is why CFE is keen to develop the
trucking
business despite the fact that its relatively low margin will likely
drag
down the company’s overall gross margin. CFE has been actively
exploiting
the overseas market for its trucking business as the 17% export tax
rebate
would boost the gross margin of exported trucks from 13-15% to 26%. The
company targets to increase the proportion of exports to 75% in 2008,
which
will help improve profitability. CFE is also applying for the
qualification
from the Chinese government to export whole trucks instead of exporting
parts and then assembling them at the destination country as it is
doing
now. If CFE manages to acquire the qualification, it will be able to
raise
the average selling price (ASP) of its exported trucks by 10%.
-Farming equipments ¨C profitability expected to remain at same level.
High
steel prices have caused a 13% increase on average in CFE’s raw
material
prices. The company intends to mitigate the impact through the
following
ways: a) a 7% increase in ASP, b) internal cost saving measures to
elevate
gross margin by 2-3%, and c) development and sales of new high
value-added
models to expand gross margin by another 3%. Thus, CFE might earn
Rmb1,000
less on each piece of farming equipment sold as compared with last
year,
but overall gross margin is expected to remain stable due to the
introduction of new higher-margin models such as the 1.36 harvestor. In
addition, CFE is negotiating with the government for the right to
further
raise ASP by Rmb2,000 when supply falls short of demand, or when raw
material prices continue to increase.

CHINA HONGXING, db maintain BUY with target price $0.85
-Reversion to the mean in the long run. In this report, we try to find
out
what is in the price based on the historical mean of China Hongxing.
Our
study finds that the market could be pricing in a 30% drop in sales and
an
8.0ppt decline in gross margins, or a 47.4% decline in earnings based
on
our current estimates. The stock is currently trading below one
standard
deviation and in our opinion offers attractive valuation. Maintain Buy.
-Stock is trading below one standard deviation. China Hongxing’s
historical
average over the past two years has been approximately 23.0x with a
standard deviation of 9.0x. The stock is trading at 11.6x and 8.8x
FY08-09E
PE, respectively, which is its furthest point from the mean in its
trading
history and traded more than one standard deviation in March 2008.
-Recent May retail sales in China indicate a slowdown. Channel checks
revealed that some of the sports shoe companies have experienced slower
May
sales, in line with the latest May retail sales in China. However, the
industry players that we have talked to remain positive on retail sales
in
the 2H08 due to the Beijing Olympics. We also note that sales from the
last
three trade fairs (Dec07-May08) indicate that the company has secured
orders of about RMB2.0bn, or 64% of our FY08E sales.
-A call on valuation. We maintain our Buy rating with a DCF based
target
price of S$0.85. For our DCF calculation, we assume a beta of 1.1, an
equity risk premium of 5.3% and a riskfree rate of 4.9% to derive our
WACC
of 10.7% and terminal growth rate of 2.5% in line with our assumptions
for
other China brands Based on our TP, this implies a forward PER of 21x.
Key
risks: increased competition in the sportswear segment, macro consumer
slowdown and inflationary pressures. See p8 for more on risks and
valuation.

COMFORTDELGRO, citi downgrade to SELL with target price $1.44($2.01)
- Fuel surging, UK slowing ¡ª While long-term growth looks intact,
Comfort
faces near term ROAE pressure from diesel fuel costs and a weaker UK
business. We forecast operating margins of 9.9% in 2008E (2007: 11.2%),
and
ROAE of 12.5% (2007: 15%). A 2008E DPS of S$0.078 (5% yield) gives some
support. New target S$1.44 based on 15.9x 08E PER (2x P/BV). Our
previous
target price of S$2.01 (=2.7x 08E P/B) used a long-term
sum-of-the-parts
valuation.
- Diesel costs surging ¡ª 1Q08 was punctuated by a 7.5% rise in
operating
costs versus a 5.8% rise in revenues, operating margins falling to
10.1%
from a peak of 12.2% in 3Q07. The damage was due to diesel-led fuel
costs,
which in 1Q08 surged 32%yoy. Average 2Q08 diesel prices have risen 29%
over
1Q08. There is understandably little Comfort can do to hedge at these
levels, and there is only limited pass-through that can be made in fare
increases.
- UK slowdown ¡ª Quarterly growth from UK operations (33% of group
revenues,
second to Singapore’s 53%) has faltered, largely due to the c.14%
depreciation of the GBP against SGD since July 2007. Even in GBP terms
revenue growth has suffered from a slower London taxi business, a
product
of economic weakness developing in that financial centre. Our house
view is
for a further 5% depreciation of GBP against SGD for the rest of 2008.
- Lower EPS estimates 12-23% ¡ª Citi’s oil team views that crude prices
may
sustain above US$120/bbl into 2009E, while the UK slowdown may have
just
begun. Our net profit forecasts exclude one-time exceptional items such
as
the recently announced S$26.5m gain on the CityFleet - Cabcharge share
swap.

LIAN BENG, cimb maintain NEUTRAL with target price $0.38
-LBG has won three contracts amounting to S$117m, two of which are for
private residential construction while the third is a civil engineering
project from the Public Utilities Board. This brings its total order
book
to S$800m, for progressive delivery until 2010.
-New residential construction projects. The first project worth S$36.2m
is
for the construction of the 51-unit Bellerive condominium, just off the
prime Bukit Timah Road. Work is scheduled to start in Jul 08 and be
completed by Jul 2010. Construction cost is S$585 psf. The second
project
is worth S$50.4m for the construction of the 33-unit Emerald Hill
development near Orchard Road. Completion is expected in late 2010 at a
construction cost of S$668 psf.
-New civil engineering project. Worth S$30m, this project involves the
design and construction of a NEWater pipeline from Changi to Tuas and
Jurong Island, which will form part of the nationwide NEWater pipeline
network.
-Pleasant surprise for construction margins. For LBG’s two residential
projects, we are pleasantly surprised that it had managed to price its
construction costs at S$585 psf and S$668 psf respectively. We estimate
that gross margins should be in the midto high teens, assuming material
prices do not rise further. The niche nature of these projects would
probably allow the developers to price them at premiums, which probably
explains LBG’s ability to price in higher construction costs. With the
better margins, we suspect that the wins could significantly mitigate
LBG’s
higher cost of construction materials, especially steel rebars.
-Inevitable margin squeeze. Nevertheless, we maintain the view that the
rapid rise in construction costs will squeeze the margins of developers
and
project owners, who may be approaching pain thresholds. Unless
developers
and project owners have land banks at very low costs or projects so
niche
that large premiums can be charged, we are concerned that construction
costs are nearing a tipping point.
-Reduce exposure to main contractors. We continue to advocate reduced
exposure to main contractors such as LBG. These companies have large
order
books that can run into the next 2-3 years, and stand a higher risk of
margin erosion from unhedged construction material requirements. We are
also concerned about contractors that had turned opportunistic property
developers late in the cycle. These are likely to be saddled with
unsold
inventories and/or expensive land banks. LBG has both a large order
book of
over S$800m and unsold residential properties potentially below cost.
-Maintain Neutral and target price of S$0.38. We maintain our FY08-10
forecasts as we earlier factored in its growing order book. Our
valuation
of 8x CY09 P/E has been pegged at a 20% discount to our targets for
industry peers.

MAN WAH HOLDINGS, ocbc maintain BUY with target price $0.51($0.52)
-Taking a bigger slice of the pie. Having completed its capacity
expansion
exercise, Man Wah Holdings Ltd (MWH) has revised its actual production
capacity upwards by a sizable 65% to 500,000 sofa sets p.a. from a
previously projected 303,000 sets p.a. This comes as good news, as
capacity
expansion has been a key growth driver for MWH, given that the company
has
been enjoying a situation of demand surplus and was operating close to
full
capacity prior to the expansion.
-Larger scale, higher estimates. With the larger-than-expected
capacity, we
project stronger revenue growth from MWH. We have raised our FY09 and
FY10
sales forecasts by 12% and 22%, respectively. This in turn lifts our
net
profit estimates by 4% and 10%, respectively. MWH is capable of
exceeding
our forecasts if it meets its target of full capacity utilization by
FY10.
However, given the softening consumer sentiment in US and the possible
contagion effect it may have on Europe, we have taken a conservative
stance
and assumed 70% utilization rate by FY10.
-Unhampered by natural disasters. Addressing concerns about the impact
of
China’s recent natural disasters, such as floods and the earthquake,
MWH
has reassured us that it has been business-as-usual at all its stores.
It
does not foresee any significant impact on its sales and remains
focused on
growing its retail penetration in the PRC. Furthermore, it expects its
US
segment to continue growing as the group’s significantly larger
capacity
will now enable it to take on larger outsourcing orders.
-Sound growth; compelling valuations. Having proven its track record
with a
107% net profit growth to HK$187.8m in FY08, MWH continues to offer
strong
growth prospects at undemanding valuations. Based on the last traded
price,
it is being valued at 4.2x FY09 PER. With all its groundwork laid in
place,
we are forecasting net profit to grow by 23% in FY09 and a further 13%
in
FY10, subject to upward revisions depending on consumer sentiment. We
maintain our BUY rating on the stock, and tweak our fair value estimate
to
S$0.51 (previously S$0.52) to reflect an updated HKD/ SGD forex rate.

NOBLE, csfb maintain OUTPERFORM with target price $3.45
-We met up with more than 20 investors in HK and Singapore over the
past
week, many of whom were bullish on commodities demand over the longer
term
and viewed Noble.s diversified operations as well leveraged to this
structural theme.
-Noble.s growth strategy, the company.s competitive positioning within
each
of its three core commodity segments, and the rationale driving
management.s recent investments into selective infrastructure assets to
build-out its supply chain capabilities, were some of the key issues
that
we addressed.
-The many comparisons drawn between Noble and that of Olam, albeit
focused
in the agricultural commodities subset, suggest the latter remains well
held amongst the institutional investor base.
-While the market has so far accorded a valuation premium to Olam for
the
predictability of its earnings versus those of Noble, we believe that
an
improving core earnings trend, driven by strong growth in its
underlying
commodity operations, should help drive share price action over the
medium
term. OUTPERFORM.

NOL, citi maintain SELL with target price $2.70
-Media reports potential US$5bn loan ¡ª Bloomberg and Reuters indicated
that
NOL could potentially borrow US$5bn or more from a syndicate of banks,
ostensibly for a Hapag-Lloyd transaction. NOL did not make any
disclosure
or comment regarding this news. We nevertheless examine the
implications
should media reports prove true and only see added risk. Sell (3M),
S$2.7
TP.
- Hapag-Lloyd could cost US$6bn or more ¡ª Depending on the details of
any
deal, Hapag-Lloyd could fetch US$6-8bn+ as per news sources such as the
Wall Street Journal, Reuters, and Bloomberg. NOL would thus likely
require
substantial new capital in most transaction scenarios.
- Suggested debt levels imply net D/E of 1.9-2.6x ¡ª If we assume
US$5-7bn
of new straight debt, this would imply NOL assuming a net D/E of
1.9-2.6x.
Given the high level of leverage involved relative to peers, we believe
that if media reports prove true, such a large deal would likely have
been
completed with backing from NOL’s majority shareholder Temasek.
- Highlights the risk involved for any potential transaction ¡ª A
Hapag-Lloyd transaction would likely be larger than NOL’s market cap
and
thus pricing of any deal could have a substantial effect on current NOL
shareholders. Returns on acquired assets could easily fall below cost
of
debt in a tough environment, or per-share returns shareholders could be
diluted.
- Latest monthly operating numbers released ¡ª Volumes inline with
recent
trend, rates look to be covering higher YoY fuel costs.

NOL, leh maintain EQUAL WEIGHT with target price $3.70
-We maintain our view that profits and margins could have peaked due to
freight rate hikes, which will, however, be insufficient to offset
higher
costs. We maintain 2-EW rating and TP of S$3.70.
-NOL’s Period 5 (3-30 May) operating data highlighted that container
revenue grew 30% YoY driven by volumes and freight rates growing 13%
and
16%, respectively.
-P5 freight rate increased 16% YoY owing to higher Asia Europe rates.
It
also reflects transpacific annual contracts, which were 10-15% higher.
With
transpacific contracts concluded in May and June, we expect Period 6
freight rates to increase on YoY and sequential basis.
-Although YTD revenue is tracking ahead of our estimate, costs are also
higher than expected. We maintain our view of container shipping lines
reporting strong top-line revenues, but declining earnings and margins
due
to freight rate increases insufficient to offset higher costs.
Importantly,
Asia Europe demand has started weakening and may lead to Asia Europe
rates
sequentially declining in the latter part of this year.
- With 12% potential upside to S$3.70 (based on sum-of-the-parts), we
maintain 2-Equal weight.

NOL, ms maintain OVERWEIGHT with target price $4.80
-Quick Comment: Consistent with earlier months, NOL’s operating
performance
for May remains strong in the face of weak macroeconomic sentiment,
with
average freight rates and volumes up 15% and 13% respectively.
-What’s New: In Period 5, 2008 (May 3, 2008 to May 30, 2008), NOL
recorded
average freight rates up 15% YoY, to record levels of US$3,023/FEU.
From
our back of the envelope calculation, we estimate that net of bunker
fuel
surcharges, Period 5 rates were up 5%. We believe that the May freight
rates only partially reflect the positive May/June Transpacific
contract
rate negotiations - NOL was able to implement floating bunker
surcharges
for ~80% of contracts and base rate hikes of 3-6%. We believe that
higher
recoverability of bunker fuel surcharges and base rate improvements on
the
Transpacific routes will be fully reflected in June operating
performance.
-Average volumes for Period 5 were up a solid 13%, which we think is
attributed to continual strength in Intra-Asia demand and increase in
back-haul volumes from US to Asia. The 13% volume growth coupled with
15%
freight rate improvement resulted in revenue growth of 31%.
-Implications: We reiterate our Overweight rating on NOL and believe
that
the current market sentiment paints an overly negative picture of NOL’s
operating performance in 2008. NOL’s current stock price at 1.1x our
2008
adjusted for consensus P/BV estimate is close to trough valuations, in
our
view.

SINGTEL, csfb maintain OUTPERFORM with target price $4.20
- Full Mobile Number Portability (MNP) went live in Singapore on 13
June
2008. Marketing activity therefore reached a peak on Saturday, 14 June,
when StarHub launched an offer of six months free subscription for
postpaid
customers.
- However, while the headline looked concerning, standard revenue per
minute remains high and some 80% of subscribers are locked into
contracts.
We believe that this will limit the negative impact.
-Furthermore, SingTel, which is theoretically the most exposed operator
to
MNP, given its entrenched dominance in the post-paid sector (45.0%
market
share), has clinched an exclusive contract with Apple to launch the 3G
iPhone by year-end. This may well help SingTel retain its
higher-than-average data ARPU.
- The iPhone could also finally deliver a tangible benefit from
SingTel.s
extensive regional diversification; SingTel.s regional scale was such
that
it was able to attract iPhone launch for its associates in India,
Indonesia, and the Philippines. We maintain our OUTPERFORM rating and
S$4.20/share target price.

SMRT, citi upgrade to HOLD with target price $1.88($1.48)
- Higher sustainable rail ridership ¡ª Raising estimates 13-15% for
SMRT, on
higher rail ridership growth, plus upside to high-margin advertising
and
rental income for FY09E operating margins of 13% and ROE of 23%.
Government
initiatives (increasing public transport usage, doubling of rail
network,
population increase) supports long-term growth. Risks: near-term high
energy costs, and longer term whether the government introduces more
competition in the rail space.
- Target price S$1.88 ¡ª We have afforded SMRT a higher fair-value PER
multiple of 17.8x (from 16x), equivalent to a P/BV of 4x, recognizing
the
rail story’s structural growth drivers, stable and highly cash
generative
business, with recent dividend payouts of 78% of earnings (for a 5%
dividend yield), plus the potential long-term growth upside for rail.
- Circle Line ¡ª Unlike previous new lines, we are optimistic that full
operation from 2010 of the Circle Line can be earnings accretive almost
from the start due to higher ridership demand and scale benefits from
the
MRT network.
- Long-term rail growth, but sector to be contestable ¡ª Land transport
master plan prepares for population growth, encourages public transport
usage, a doubling of the rail network. New lines Thomson and Eastern
Region
will be built, while existing North-South and East-West will be
extended.
The new lines could be opened to more competition.

[ SECTOR ]

DRY BULK by cimb
-The Metal Bulletin reported this morning that Rio Tinto and Chinese
steelmaker Baosteel have settled on an overall annual price increase of
85%
for iron ore, reflecting a freight differential between Australian and
Brazilian suppliers. Baosteel will pay 96.5% more for Pilbara blend
lump
and 79.9% more for fines shipped from Australia. The 85% overall
increase
takes into account the breakdown of Rio’s output, roughly 75% fines and
25%
lump. Market sources expect BHP to announce a settlement “very shortly”
in
line with the Rio settlement. The new Baosteel prices will be the
benchmark
for all Rio’s long-term contract sales for 2008-09 and will also be
used by
smaller iron ore players when they negotiate contracts with their
buyers.
Rio’s new prices, which will be backdated to 1 April 2008, are 144.66
US
cents per dry metric tonne of fines and 201.69 US cents per dry metric
tonne of lump.
-Destocking impetus may pressure freight rates. The agreement between
the
Chinese steel mills and the Australian miners may provide impetus for
the
Chinese iron ore traders to reduce their stockpiles at the ports. If
iron
ore spot prices rise to reflect this new settlement, the traders may
use
the opportunity to dispose of their stocks profitably. This will, in
turn,
pressure dry bulk freight rates as new shipping demand decelerates
temporarily. For more information about iron ore stockpiles in China,
please refer to our report dated 16 June.
-Demand for iron ore may also be affected if spot prices rise. Smaller
Chinese mills which depend on spot iron ore and spot coking coal have
been
pressured by rising costs, and we fear that further cost increases
could
affect their ability to maximise production. This could lead to a
moderation in the growth of iron ore demand.
-Factory closures during Beijing Olympics add uncertainty. Up to 73
steel
mills in Hebei province surrounding Beijing have been threatened with
electricity cuts from mid-July to late August unless they control their
emissions during the Games. We have no doubt that Beijing is determined
to
host the “perfect” Olympics. The knock-on effect on iron ore imports
and
freight markets is likely to be negative although quantifying the
impact is
difficult.
-Maintain UNDERWEIGHT on the dry bulk sector. We believe that share
prices
of dry bulk companies will continue to suffer as investors bail out on
sharply higher nearterm risks. We expect freight rates to bottom
between
July and August, which will be an excellent re-entry point. Rates
should
rally sharply from September after the conclusion of the Olympics. We
also
expect massive vessel oversupply to make itself felt from 2H09,
heralding
the beginning of a multi-year downturn in dry bulk freight rates.
-Near-term upside risks may include the failure of the Chinese
government
to control further stockpiling and additional demand for coastal
shipping
of coal following the Sichuan earthquake. The resolution of the
Argentinean
farmers’ strike could also release grain cargoes into the panamax and
handymax segments, while the impact of industrial closures during the
Olympics could be less than feared.

OIL & GAS by cimb
-A meeting between Saudi Arabia and the energy ministers of 35 nations
in
Jeddah on 22 Jun 08 yielded no concrete solutions to high oil prices in
the
near term. Key messages from the meeting were: 1) Saudi Arabia, as the
major crude oil supplier, promises to increase its output by 200,000
barrels a day (bopd) in Jul 08 to 9.7m bopd. In addition, Saudi Arabia
is
ready to add 2.50m bopd to its output in the next few years beyond its
current expansion plans. 2) Saudi Arabia has asked consumer nations to
help
reduce crude consumption and speculation. Participants also called for
more
transparency and regulation of energy markets, more investments in
production and refining capacity, and more cooperation between
producers
and consumers.
-The increase of 200,000 bopd in Saudi Arabia’s output in Jul 08 would
not
be enough to bring down oil prices in the near term, in our view. We
expect
crude oil prices to stay strong in the near term due to continued tight
supply. However, we expect prices to soften in 2H08 on the back of
weaker
demand, assuming there is no declining output from non-OPEC countries
and
no supply disruptions in Nigeria and Iran.
-Declining demand. In response to high oil prices, global oil
consumption
is showing signs of softening in the US and Europe. Demand growth in
developing countries should also drop following the announcement of
cuts in
subsidies in countries such as Malaysia, Indonesia, and India. Three
major
agencies, IEA, EIA, and OPEC, recently reduced their global demand
growth
forecasts for this year by 70,000-100,000 bopd. The IEA now predicts
that
global demand for oil products in 2008 will grow by 0.9%, or 800,000
bopd,
down from its 1.2% growth forecast in May 08. OPEC cut down its growth
forecast for global oil demand to 1.28% from 1.35%.
-We believe there is a good chance of further revisions by the three
agencies in the coming months following recent cuts in subsidies for
petrol
in China as this was the first rise in Chinese fuel prices in eight
months.
However, the revisions should be small as we expect higher petrol
prices in
China to have a marginal impact on Chinese consumption as China’s
current
prices are still below international market prices, unless China
announces
more cuts in price subsidies.
-Tight supply remains. The IEA and EIA have also lowered their growth
forecasts for global crude supply. The IEA has cut its expectations for
supply growth by 220,000 bopd, while the EIA has cut its forecast for
non-Opec output growth by nearly half to 290,000 bopd on soaring field
costs and geopolitical constraints.
-Just last week, two offshore oil production fields in Nigeria were
shut
down after an armed attack by a powerful militant group from the Delta
region, which interrupted supplies by as much as 320,000 bopd. In
addition,
tensions in the Middle East are rising on the issue of Iran’s nuclear
facilities.

PLANTATION by cimb
- Interest in plantation stocks is still strong. We recently completed
a
one-week roadshow on the regional plantation sector in Singapore and
Hong
Kong. The purpose of the trip was to update investors on: (1) our
outlook
for CPO price as well as the sector; (2) recent changes in palm oil
taxes
in Malaysia; and (3) highlight our top picks. If our tight schedule is
anything to go by, interest in the Asean palm oil sector remains
strong.
- Investors are neutral to overweight. Most investors are largely in
agreement with us and are neutral to overweight on the sector. Some are
looking to add to their positions as they are bullish on the
medium-term
prospects for CPO price. However, others are concerned about the recent
volatility of crude oil price and the potential de-rating of the
plantation
sector following its strong YTD outperformance.
- Maintain OVERWEIGHT call. In the short term, we are turning a bit
cautious on the sector in view of (1) the high volatility in the oil
market, (2) possible demand dent from economic uncertainty and
near-record
CPO prices, (3) biofuel policy risks, and (4) weak market sentiment.
However, we remain upbeat on the sector’s long-term fundamentals and
maintain our OVERWEIGHT call given: (1) the strong prospects for CPO
price,
(2) the sector’s relatively defensiveness against political risks, and
(3)
the sector’s resilience against an economic slowdown as 80% of crude
palm
oil is processed and used in edible products. We continue to believe
that
there is potential upside to our CPO price forecasts given the current
tight edible oil supplies and volatile global weather conditions of
late.
- Top picks in the region. There is no change to our top big-cap picks,
which are IOI Corp for Malaysia, Wilmar for Singapore and Astra Agro
for
Indonesia. Among the mid-cap planters, we like Asiatic in Malaysia,
IndoAgri in Singapore and Sampoerna Agro in Indonesia. Key re-rating
catalysts for the sector are higher CPO prices, adverse weather,
further
biofuel incentives and rising crude oil price.