Hot Stocks IOI Corp, PPB fall on stronger ringgit, valuation concerns

by **Cals** Thu 10 Jul 2014, 02:30

Hot Stocks IOI Corp, PPB fall on stronger ringgit, valuation concerns

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Wednesday, 09 July 2014 15:33

KUALA LUMPUR (July 9): IOI Corp Bhd and PPB Group Bhd fell amid a strengthening ringgit versus the US dollar, seen to be denting demand for crude palm oil (CPO), and over-valuation concern.

A firmer ringgit makes Malaysian CPO more expensive to global buyers.

At about 3pm, IOI Corp fell five sen or 1% to RM5.20 while PPB plunged 12 sen or 0.8% to RM14.82.

Kuala Lumpur Kepong Bhd (KLK), which traded flat at RM24.32, had earlier fallen as much as 18 sen or 0.7% to RM24.14.

The ringgit strengthened to RM3.1730 versus the US dollar today on bets Malaysian policy makers will raise interest rates for the first time in three years, according to Bloomberg. This compares to RM3.3511 seen in February this year.

Malaysian CPO futures have fallen. CPO for September 2014 delivery was traded at RM2,379 a tonne today compared to a six-month high of RM2,817 on March 10 this year.

Valuation concerns could also have affected the trading dynamics of plantation companies' shares.

Kenanga Investment Bank Bhd indicated in a note today IOI Corp, KLK and PPB were traded at valuations above the industry average.

According to Kenanga, IOI Corp was traded at a one-year forward price-earnings ratio of 22.8 times versus the sector average of 18 times.

KLK and PPB were transacted at 19.9 and 19 times respectively.

Meanwhile, CIMB Investment Bank Bhd analyst Ivy Ng Lee Fang said investors had reduced holdings in plantation companies' shares on valuation concerns.

In a note, Ng said investors had indicated that they preferred to return to the sector when valuations were more reasonable.

"Some cited valuations as the key reason for exiting the sector while others feel that the market may have already priced in the potential rise in CPO price as the share prices of planters have outperformed CPO price YTD," Ng said.