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Expect palm oil prices to weaken between now and end of the year on rising inventories. CY13F/14F/15F CPO prices cut by 11%/2%/4%. We expect 2Q13 results to lag consensus; as realised CPO ASP is lower than market expectations. Switch to Singapore listed planters (close to -1SD forward PE); accumulate others by year-end. Top picks: BAL, FR, WIL and IOI. Key risks: Weak FFB yield recovery (upside), strong pick up in global economy (upside), further weakness in China’s economic growth (downside) trade barriers, erratic weather, crude oil price drop.

Felda Global Ventures, Hold; RM4.57 Felda Global Ventures
Price Target : RM4.40 (Prev RM4.10); FGV MK
Lacking growth drivers Lacking growth drivers th drivers

Slashed FY13-15F earnings by 7%/3%/4%. Muted growth from unfavourable tree age profile and depressed CPO ASP. Maintain HOLD with RM4.40 TP.

Genting Plantations, Hold; RM9.15 Genting Plantations
Price Target : RM9.90 (Prev RM9.00); GENP MK
Best of both worlds Best of both worlds both worlds

Long-term growth prospects supported by booming Johor property market and maturing Indonesian estates. Raised FY13-15F earnings by 7%/12%/5%. Maintain HOLD with RM9.90 TP.

IJM Plantations, Hold; RM3.20 IJM Plantations
Price Target : RM3.50 (Prev RM3.00); IJMP MK
Too much too soon Too much too soon

FY14F/15F earnings cut by 7%/2% on lower CPO price forecasts. Strong 3-year FFB production CAGR of 18% to buffer against low CPO price. Maintain HOLD with RM3.50.

IOI Corporation, Buy; RM5.23 IOI Corporation
Price Target : RM6.15 (Prev RM6.25); IOI MK
Property value yet to be unlocked Property value yet to be unlocked

FY13F-15F earnings revised by -5% - +4% on cuts in CPO price assumptions. New planting reduced to 8k ha p.a. (from 10k ha); replanting raised to 5k ha p.a. (from 2.8-3.5k ha). TP (based on SOP) reduced to RM6.15; on lower Plantations and Manufacturing valuations. BUY call reiterated for 18% upside. We believe the group’s property segment remains undervalued.

KL Kepong, Fully Valued; RM21.10 KL Kepong
Price Target : RM18.70 (Prev RM18.85); KLK MK
Priced to perfection Priced to perfection

Revised FY13-15F earnings by -4%/+4%/+3%. Lower plantation profit to be slightly offset by better oleochemical and property earnings. Maintain Fully Valued with RM18.70 TP.

Sime Darby, Hold; RM9.43 Sime Darby
Price Target : RM9.65 (Prev RM9.50); SIME MK
Moderating growth Moderating growth

Having imputed lower CPO price forecasts, we cut Sime Darby’s FY13F-15F core earnings by 1-5%. We expect 4Q13 core earnings to come in at RM784m (+13% q-o-q). SOP based valuation slightly raised to RM9.65 – as we roll-over valuation base year to CY14F. Maintain HOLD for c.3% dividend yield.

TSH Resesesources ources ources, Hold; RM2.40
Price Target : RM2.40 (Prev RM1.90); TSH MK
Strong growth priced in Strong growth priced in

FY13-15F earnings revised by -10%/+3%/+8% as lower CPO prices are offset by better efficiency from Indonesian operations. Impressive 3-year FFB CAGR of 18% to buffer against weakness in CPO price. Maintain HOLD with RM2.40 TP.

SapuraKencana SapuraKencana apuraKencana, Buy; RM4.09
Price Target : RM5.05; SAKP MK
Weak quarter Weak quarter eak quarter

1QFY14 result below expectations. Strong earnings visibility underpinned by huge order book estimated at RM26.5bn. Maintain BUY with RM5.05 TP.

Source: HwangDBS Research - 1 Jul 2013