Stock Name: KULIM
Company Name: KULIM (M) BHD
Research House: OSK



OSK has kept its "neutral" call on the Southeast Asian plantation sector.

The research outfit noted that palm oil surged to its highest level since July 2008 although the Malaysian inventory level crept up.

"We believe this is a rally triggered the widening of spread against soybean oil and by relief that the stockpile did not climb faster than it could.

"Though we are skeptical on the longer term sustainability of the rise, we think the short-term momentum could carry prices higher," OSK said.

OSK added that it has upgraded the "target PE for plantation stocks from 15x to 18x against CY11 earnings resulting in increases in target prices across the board".

"We continue to favour Indonesian planters such as Golden Agri, Astra Agro Lestari, London Sumatra, First Resources, and Kencana Agri as valuations are more compelling.

Malaysian planters also made gains yesterday but were under performing their Indonesian peers, which was not surprising given the expensive valuations.

Of the stocks under coverage, only Kulim and Genting Plantations delivered respectable stock price performance on absolute and relative basis over the past 3 and 6 months.

"We have raised Kulim's TP to RM11.20 from RM10.30 previously after fine-tuning our sum-of-parts valuation. Should Kulim sell off all its assets, repay all its company borrowings and return the balance to shareholders, all shareholders will get RM14 per share. -- Reuters