PLANTATION ---NEUTRAL FROM ecmlibra

for the past two years I can't recall buying or holding any plantation stocks,why? I can't understand the whole business or I have other better stocks to look at, I don't know but after reading the report I still find it hard to take a look at any plantation stocks,howabout you ?

Plantation
Neutral
(under review)
September MPOB statistics
· Production declines 2.7% m-o-m
September production came in slightly weak m-o-m as expected given the Eid celebrations that took place during the month. On a cumulative basis, 9MCY10 production is up some 1.6% from 9MCY09. Looking into October, we expect that there could be a spike in production, but not one
as pronounced as was seen in 2009 (see figure 3). This is so because we view that the effects of the El Nino in 1QCY10 are taking a toll on yields and also that La Nina readings have become exceedingly high of late (see figure 7).

· Y-o-y export growth from Pakistan, US, EU and Egypt
Contrary to the belief that China has been driving export growth this year, it appears that exports to Pakistan, US, EU and Egypt are taking the lead instead. 9MCY10 exports to China are actually down 8.4% while exports to the said 4 countries have surged 11%, 14.6%, 18.4% and a whopping 58.4% respectively. Egypt alone took a record 161k mt of palm oil in September alone. To note, cumulative 9MCY10 exports are up 6.4% y-o-y and m-o-m export growth closed up 21%.

· Stock levels remain status quo at 1.7m mt
Stock levels were flat in September given that production still rose and that exports were coming from a low base. With our projection that October production won’t be as high and exports continue to be strong, the rise in stock levels next month may not reach safe levels (>2m mt) to take the industry through the year end festive season and the oncoming production down cycle.

· Sector call under review
September statistics changes our take on the sector to be more CPO price positive. Already, CPO prices nearly hit RM3,000 per mt yesterday, largely fuelled by the USDA report on trouble with soy supplies. YTD MPOB price now averages is RM2,540 per mt. We view that this situation could see CPO prices continue into strength and hence inducing strong corporate results in 4QCY10 and potentially stronger CY11 numbers. Our Neutral call on the sector and target prices of stocks under coverage are under review.
SIMEDARBY HOLD
IOI HOLD
KLKEPONG HOLD
GENTING PLANT HOLD
BOUSTEAD BUY
IJMPLANT SELL
full report please refer to ECMLIBRA & MPOB