CIMB Research maintains Neutral call on plantations

KUALA LUMPUR: CIMB Equities Research is maintaining its Neutral call on the Malaysian PLANTATION [] sector but may downgrade it after the results season.

It said on Thursday, Aug 11 Malaysian planters are trading at pricier valuations than regional peers, while crude palm oil (CPO) price is likely to trend down in 2H11 and earnings are at risk from higher labour costs.

“This outweighs the attractive dividend yields of the Malaysian planters which are expected to record strong results this year due to higher prices and better production,” it said.

CIMB Research said its only pick in Malaysia is Sime Darby for its efforts to enhance shareholders’ value and its improving earnings prospects.

It has Neutral calls on KL Kepong, Genting Plantations and Hap Seng Plantations.

“IOI Corp remains an Underperform as we are negative on the group’s plans to expand its property business, which could reduce the price-to-earnings premium accorded to the company for its estates’ strong fresh fruit bunches yields,” it said.