UOB KayHian says firm CPO prices are likely to stay until mid-2011 as the peak production cycle is likely to be delayed to June/July vs earlier expectations of March/April.

The house says this is due to a lack of moisture after less-than-normal monsoon rainfall, while oil palm trees look stressed. It expects 2011 new add from Malaysia of 600,000-700,000 tons vs 800,000 tons earlier.

 

 

“This is new development that we think the CPO market has yet to factor in” and which could support CPO prices above MYR3300/ton to end-2Q11. 

 

Despite bullish CPO prices, it says plantation stocks are underperforming “as this sector is very well owned by investors.” 

 

Still, the house likes mid-cap names, including First Resources (EB5.SG), rated Buy with a $1.86 target and Kencana Agri (F9M.SG), Buy with a $0.53 target. Shares are +0.7% at $1.44 and +1.1% atS$0.445 respectively. Sell-rated Golden Agri (E5H.SG) is off 0.7% at $0.725 while Hold-rated Indofod Agri (5JS.SG) is flat at $2.60.