DJ MARKET TALK:Palm Oil Undervalued Vs Crude Oil, Soybean Oil -GS 0120 GMT [Dow Jones] Crude palm oil prices are undervalued relative to crude oil and soybean oil, Goldman Sachs says in report. Notes over last two months, crude oil, soybean oil prices +17%, +7% respectively, while CPO prices +1%, with CPO price discount to soybean oil widening to 28% from 24%. "We see more upside potential for CPO prices over the next 3-6 months on higher CPO biodiesel demand, potentially higher soybean prices and a narrowing price discount to soybean oil."
Keeps positive view on plantations sector. Tips top sector pick as London Sumatra (LSIP.JK), rated Buy on Conviction List, for attractive valuations, potential cost savings after being taken over last year by Indofood Agri (5JS.SG), rated Buy. Says in Malaysia, prefers Asiatic Development (2291.KU), rated Buy, as plantation pure play with high leverage to CPO prices. Tips Sime Darby (4197.KU), rated Buy, as preferred large-cap exposure to sector. Says likes Wilmar (F34.SG), rated Buy, for strong long-term growth potential.
