SINGAPORE (Jan 9): RHB is maintaining its “buy” call on Golden Agri at a target price of 46 cents while declaring the stock as its top pick within the plantation sector.

(See also: Will 2017 be a bumper crop year for plantation stocks?)

“We like Golden Agri as we believe its more geographically diversified landbank would allow it to face challenges better in times of extreme weather,” states RHB’s team of analysts in a Tuesday report.

As a result of a significant recovery in fresh fruit bunch (FFB) output as well as continued margin improvements in Golden Agri’s palm downstream and oilseeds divisions, the research house is expecting Golden Agri to post core net earnings growth of above 100% in 2017.

Aside from undemanding valuations and how the stock is currently trading at a discount to the regional peer average of 19x, RHB highlights how Golden Agri is one of the “more sensitive stocks” to crude palm oil (CPO) price moments as every 100 ringgit/tonne in the CPO price would affect its earnings by 9-11%.

“Golden Agri is also one of Singapore’s highest beta plantation stocks, which would bode well for it in periods of market uncertainty,” it adds.

Key risks to RHB’s view include a reversal in crude palm oil and soybean price trends; weather abnormalities resulting in an oversupply or undersupply of vegetable oils; a slower-than-expected implementation of biodiesel mandates; and lower-than-expected demand for vegetable oils.

As at 12.11pm, shares in Golden Agri are up by 1 cent at 42 cents.