Palm oil prices near the bottom?

The price of palm oil, down 67% from a Mar record, is near the end of its decline because supplies will slow and demand for the edible oil will ride out the global slowdown, Goldman Sachs said.

The price is "to a bottom," analysts led by Patrick Tiah in Singapore said in a report. " Edible oil demand has remained relatively resilient even during severe recessions."

The prices of crude oil and other commodities have tumbled this year on concern the worldwide economic slump will reduce demand. Malaysia and Indonesia, the largest producers of palm oil, are felling oil palms and planting younger saplings to cut output. Palm oil is their biggest agricultural export.

The price of the edible oil, based on previous cycles, is mainly driven by supply, Goldman said in a report. The replanting will help reduce output, while the yield from plantations is under "stress," Goldman said. It’s not clear when any rebound will happen, according to the report.

Palm oil, used in cooking and to make biofuels, on Mar 4 reached a record 4,486 ringgit (US$1,236) a tonne in Malaysia.

Still, Goldman cut its price forecast for palm oil for the next 2 years by between 41% and 50%, joining analysts at CLSA Asia Pacific-Markets and UBS AG. Palm oil will probably fetch 1,000 ringgit a tonne in 2009, and 1,250 ringgit in 2010, analysts at CLSA said in a Nov14 report. UBS on Nov 6 cuts its price forecast for 2009 by 31% to US$450 a tonne.

Palm oil prices the next 2 years

Palm oil prices in Malaysia next year may trade on average 32% lower than current levels, partly because of oversupply and fading demand for biofuels, CLSA Asia- Pacific Markets said.

Palm oil will probably fetch 1,000 ringgit (US$278) a ton in '09, and 1,250 ringgit in '10, analysts at CLSA Asia-Pacific Markets in Kuala Lumpur said in a report. The '09 forecast is 64% lower than this year's projected average of 2,750 ringgit, James Gruber, a Kuala Lumpur-based analyst at CLSA, wrote in an e-mail today.

"Serious oversupply issues will take time to resolve," the brokerage said in the report. "The biofuels story is waning, providing less demand support."

Wilmar's 3Q08 results above expectations

Wilmar said 3Q08 net profit more than doubled to US$482.6 m driven by strong sales volume, higher margins. Goldman Sachs says the record quarter was above expectations, annualized performance came in 18% ahead of broker's own estimate, 20% above consensus. Says downstream margins very strong, margins benefitted from hedging, tight credit market curbed rivals. Adds balance sheet improved significantly; "the significant balance sheet improvement should also allay funding concerns for stock and convertible bond investors." Maintains Buy rating, target price not given.above expectations

AusGroup's outlook challenging

JPMorgan cuts AusGroup target price to $0.40 from $0.95 following recent 1Q09 results. Broker says engineering services company's results in line with expectations but outlook turned more challenging, "as operators begin to reassess their E&P plans, we believe the risk of a slowdown in orders from key customers is high." Adds declining commodity prices may also hurt demand in mineral, resources segment. Cuts FY09, FY10 net profit forecasts by 4%, 23%, respectively. But maintains Overweight rating on valuation grounds; "we believe that the year-to-date 85% correction in stock price has brought valuations to undemanding levels."

Singapore Petroleum Co - cautious Asian refining sector

Merrill Lynch downgrades Singapore Petroleum Co. (SPC) to Underperform from Buy to reflect caution over Asian refining sector, margin revisions in '09-'10; "additionally, we cite the company's accounting complexity and rapidly rising working capital as major risks." Cuts target price to $2.00 from $10.00 after changing valuation basis to trough cycle valuation from discounted cashflow model. Expects complex refining margins to fall if Asia heads into recession; "the unusual extent of the profit deterioration in 3Q08 and the lack of catalyst from a sector perspective lead us to recommend investors to exit the stock."

Beware! Big cut in tp. And with oil prices still likely to fall, may not be time to buy SPC yet.

Jiutian 3Q08 results

Jiutian Chemical was expected to report a loss of not more than RMB4m for 3Q08. In a report dated 29/10, DBS understood that DMF prices declined from RMB6400/tonne in 2Q08 to < RMB6000 /tonne in 3Q08 while methanol costs remain fairly high at close to RMB3000/tonne. Given such high methanol costs but depressed DMF prices, the 2nd DMF plant of 120k tpa capacity was not operating at all in the quarter. Profitability from its more efficient 1st DMF plant was also affected and thus unable to fully absorb the fixed costs as in the previous quarters.

DBS do not expect the 2nd DMF plant to contribute to revenue and a similar loss in 4Q08 for the group is highly likely. As such, they cut their FY08 net profit estimate by 72% to RMB10m. In their view, the deteriorating global economy and slowdown in domestic growth would drag demand for DMF and exacerbate the oversupply situation. They now expect the oversupply of DMF to persist into '09 instead of a recovery through industry consolidation. On the back of such bearish outlook, they trim their ASP and sales volume assumptions and slash their FY09 sales and profit by 37% and 56% respectively.

Given the lacklustre DMF market, their fair value on Jiutian is reduced to $0.03 from $0.15, based on 4x revised FY09 earnings (vs 9x previously).

For re-rating, Jiutian will need to deliver a few consecutive quarters of improving results. The formalization of Yong Mei’s investment into Jiutian’s methanol project and plans for asset injection into Jiutian could also be key catalysts for Jiutian.

Jiutian reported a net loss of RMB3.2m for 3Q08. This is slightly better than expected. The loss is largely due to:

1. Shutdown of the Group's second DMF plant in Anyang Jiuyang resulted in RMB9.2m of unabsorbed factory costs (comprising largely depreciation of the plant and fixed wages) incurred in 3Q08 and included in the administrative expenses;
2. The one-off expense of RMB2.1m in relation to a back-charge of value-added tax imposed by the tax authority over a dispute on the treatment of third party logistic costs for the delivery of goods to customers in FY06 and FY07;
3. Higher business activities from operation of the storage and distribution facility in Changzhou and the operation of the second DMF plant in Anyang Jiuyang;
4. Pre-operating expenses (comprising largely of amortization of land use rights, land taxes and wages) incurred for the new 250,000 tonnes methanol plant in Anyang Jiulong under construction of RMB2.7m;
5. Higher one-off professional fees incurred by the Group on projects undertaken and;(f) Higher finance costs arising from increase in bank loans and interest rates to finance the expansion plans and working capital.

Jiutian said that the first DMF plant of 30k tpa capacity in Anyang Jiutian operated below capacity as it faced shortages in the supply of key raw materials, namely water gas and steam which resulted in lower production of a key feedstock, methanol which in turned affected the production volumes for methylamine and DMF.

Average selling price of DMF was RMB6,673/tonne in 3Q08 whilst ASP of methanol was RMB3,078 /tonne in 3Q08. In line with the previous quarter's guidance, the second DMF plant is expected to operate well below its operational capacity until the Group completes construction of its 250k tpa tonne methanol facility in Anyang Jiulong, which is scheduled for completion by 1Q09.

With the anticipated completion of the methanol facility, Jiutian will be able to fully integrate its operations and will be better equipped to control its operating costs. Its results could start improving from 1Q09 or 2Q09 onwards, so I recommend a Accumulate on the stock.

UBS upgrades Venture

UBS upgrades Venture Corp to Buy from Neutral on valuation grounds but cuts target price to $9.00 from $11.00 on lowered margin, growth forecasts. Says, "Venture's valuation is attractive as it is at below trough level, and the company should be able to maintain its cash dividend payout and pay back its debt even under the worst case scenario." Lowers FY08 EPS estimate to $0.24 loss per share vs previous forecast of $0.91 profit per share, cuts FY09, FY10 EPS estimates by 43%, 21%, respectively, to factor in worst case scenario of write-downs of DMX investment, CDO exposure, goodwill from GES acquisition and assumption that overall business does not recover until '10.

Coal prices

Prices for power-station coal may fall further because of a potential oversupply and as the market returns to being driven by demand, currency and cost factors rather than by speculative investors, the McCloskey Group, an industry research body, said.

Coking-coal contract prices are expected to decline 57% next year as Asian steelmakers cut output because of weakening demand, BNP Paribas SA said in a report 6/11.

Crude Palm Oil Prices May Have Bottomed Out

Crude palm oil prices may have already bottomed out and are likely to be supported by a slowdown in production and a rise in demand, Hamburg-based vegetable oils analyst Thomas Mielke said 7/11.

Mielke, who is editor-in-chief of the Oil World journal, said current palm oil prices - at just 60% of soybean oil prices - aren't sustainable and are likely to rise.

"CPO prices probably hit the lows around 10 days ago. Soy oil and CPO prices may appreciate until the end of Nov, with some fluctuations," Mielke said, giving a price outlook during an international conference on vegetable oils.

On Oct 28, the benchmark 3rd-month CPO futures on BMD hit a 3-year low of 1,331 ringgit a tonne.

Mielke also said Malaysia's CPO production is unlikely to rise in '08-09 due to lower yields, compared with last year's actual output of 17.6 m tons.

He said CPO prices are likely to range between US$650/tonne and US$1,100/tonne, cost, insurance and freight Rotterdam in the medium term.

Soy oil prices are likely in the US$750-US$1,200/tonne range, free on board the Netherlands in the medium term, he added.

Hyflux more than doubles 3Q08 net profit

Hyflux sharply higher after the water treatment company reports more than doubling of 3Q08 net profit to $18.5 m on back of growing work in China, Middle East, North Africa. Credit Suisse says results in line with forecasts, company continues to expect strong growth in China, is encouraged by China's focus on infrastructure spending; maintains Outperform rating and unchanged $2.67 target price. But Nomura is more cautious, "we remain concerned at Hyflux's equity-dependent asset-light model;" puts current Buy rating under review with negative bias. JPMorgan says results were "robust," ahead of broker''s estimates due to strong performance in municipal sector, better-than-expected profit margin. Broker adds water sector outlook remains positive, company is addressing its financing issues; maintains Overweight rating with $3.00 target price.

Wilmar to invest in Fortune Gas Investment

Fortune Oil said that it finalised Shareholders Agreement and fulfiled all conditions precedent for Wilmar International to invest US$36 m in Fortune Gas Investment Holdings.

Following completion, Wilmar will hold 15% of the enlarged share capital of Fortune Gas, a Hong Kong registered company holding all of the Company's gas operations, including the gas distribution and coal seam gas business.

Completion will take place by Nov 5 upon payment of the subscription amount and the allotment of shares in Fortune Gas. On completion, Fortune Oil will own 85% of Fortune Gas, it said.

The funds raised will be invested in the growing gas distribution and coal seam gas business of Fortune Gas and will provide the funding required to continue the development of this business.

These funds are in addition to the GBP9.85 m raised by Fortune Oil through a placement of shares with Creation Investments Limited, a wholly owned subsidiary of Kerry Holdings Limited announced on Jul 4, the company said.

Fortune Oil announced on Sep 1, that the Company had also signed a conditional Subscription Agreement with Star Medal, another wholly owned subsidiary of Kerry Holdings for an investment of US$36 million for a 15% interest in Fortune Gas.

The Company and Kerry Holdings have mutually agreed for Kerry Holdings to continue to support the growth of Fortune Gas through Fortune Oil, and have rescinded the Sep 1 '08 agreement. Kerry Holdings continues to hold 4.74% of Fortune Oil's fully diluted share capital through Creation Investments, it said.

Revenues from the gas business continue to grow in line with expectations, with no apparent impact from the slow-down in China's GDP growth rate.

The Board of Fortune Oil does not expect the demand for gas from customers to be affected by the current changes in the global economy and the demand for natural gas as a clean fuel continues to exceed supply.

The Company will provide a detailed update of its operating performance in the Interim Management Statement, due to be released on Nov 10.

Deutsche Bank lowers palm stocks' target prices

Deutsche Bank lowers S'pore palm stock target prices on back of cuts to CPO price forecasts. Says, "our increasingly bearish outlook for crude oil prices suggests that while biodiesel demand is likely to grow, it may not provide much price-related respite as an abundant CPO inventory may need more discounts to stimulate biofuel demand."

Cuts Wilmar target to $3.60 from $4.00; maintains Buy rating. Cuts Golden Agri target to $0.14 from $0.16; maintains Sell rating. Cuts Indofood Agri target to $0.43 from $0.47; maintains Hold rating. Cuts First Resources target to $0.22 from $0.25; maintains Hold rating.

STX PO downgraded on drop in BDI

STX Pan Ocean fell as drop in Baltic Dry Index (BDI), worries over reports that company has defaulted on charter hire contract weigh. CIMB notes Lloyd's List has reported that dry bulk shipper had returned a chartered-in vessel 2 months early, ship owner has launched legal proceedings to recover lost charter income. "This development stocks our deepest fears, the scope of the problem could be massive," says broker; warns charter-in strategy at risk of generating large losses, latest development suggests STX Pan Ocean may have been caught out by falling freight rates, be paying more to rent chartered-in ships that it can get back in chartering them out. Broker downgrades stock to Underperform from Trading Buy, cuts target price to $0.89 from $1.64.

Forward curve doesn't offer any clues to possible rebound in Baltic Dry Index, which down another 6.7% overnight, says Imarex. "One of these days these numbers (forward freight agreements) will show promise - though today is not that day. More reports of falling ore prices and declining demand for steel can be readily found. Until that changes - I don't expect to see the futures shine any uplifting light on the (dry bulk) sector," says analyst in report. On bright side, Imarex says reports of Capesize ships being laid up in port, while obviously reflecting market weakness, are "part of the self-correcting mechanism that shipping markets - and all markets - possess."

Nomura upgrades Wilmar and Golden Agri-Resources

Nomura upgrades Wilmar to Strong Buy from Buy, says company's integrated business model means it should have resilient earnings growth despite lower crude palm oil (CPO) prices. Says, "while lower CPO prices hurt its upstream business, the segment accounts for only 20% of total profit;" adds lower palm oil prices actually benefit downstream division. Cuts target price to $3.50 from $4.90 due to lowered sum-of-the-parts valuation to reflect recent de-rating in overall market. But says new, lower target still offers substantial upside, stock trades on undemanding FY09 PE of only 10x, at discount to upstream Malaysian plantation stocks and leading food & beverage stocks in China.

Nomura ups Golden Agri-Resources to Strong Buy from Buy, says plantation firm's above-average production growth should cushion it from lower crude palm oil prices; "we are now undeniably riding a CPO price down cycle, which could last for at least another year." Cuts FY08-10 earnings forecasts 17-37% to reflect reduced CPO price assumptions; cuts target to $0.41 from $0.79. But "Golden Agri's above-average crop output growth of 8-14% per annum, versus the peer average of 4% per annum, should mitigate the earnings downside." Adds stock looks heavily undervalued, trading on PE of only 4x.

Sino-Env : concerns over equity swap

Sino-Environment down 18.1% at $0.385 on strong volume on concerns over possible mark-to-market loss from company's equity swap. China-based firm announced in Jun $149 million convertible bond issue due Jul '13 with 4% coupon, concurrent equity swap with Morgan Stanley at $1.8276/share as hedging tool. Swap will result in loss for company if share price falls during tenure. "This loss will be booked in their P&L statement and impact their accounting profit," says analyst; "on hindsight, a lot of people can question why they went into this, but in this current market condition, I don't think someone of their status can get a loan at 4% without going into all these complicated financing arrangements." Adds share price also hurt by ongoing redemption by funds. 3Q08 results expected in Nov.

Deutsche Bank initiates plantation stocks

Deutsche Bank sets $0.16 target price for Golden Agri.

Deutsche Bank starts First Resources at Hold, sets $0.25 target price. Says company is pure plantation play, has highest leverage to CPO prices among S'pore-listed palm plays. Broker is bearish on CPO prices in near term but says this has been priced in by stock's recent correction. Adds large percentage of company's plantation acreage is moving into prime production over next 3-4 years, should boost output; company's small size, discount to assets may make it takeover candidate.

Deutsche Bank initiates Indofood Agri at Hold, sets $0.47 target price. Broker is positive on plantation company's long-term prospects as is market leader in Indonesia, can leverage on extensive sales distribution network established by controlling shareholder PT Indofood Sukses Makmur. Also says valuations reasonable, but is cautious on stock in near-term due to falling crude palm oil (CPO) prices, expects consensus earnings estimates to be cut. Says, "given that the bulk of its profits are driven by CPO pricing, we expect earnings to dip by 31% in '09 before picking up in '10." Adds, "Indofood has a net debt of 40%, which is not favourable given the current negative sentiment for companies with high gearing."

Straits Asia received credit facility

Straits Asia Resources said Fri that it received a US$300 million financing commitment from Standard Chartered Bank.

The 18-month credit facility will be used to refinance an existing US$230 million bridge loan due in Dec and for future capital requirements, the coal producer said in a statement.
Financial terms of the new facility weren't disclosed.

Will rate cuts halt equities slide?

Investor Marc Faber said a series of coordinated interest-rate cuts by central banks including the Federal Reserve to ease the economic effects of the global financial crisis won't halt a worldwide slide in equities.

"Artificially low interest rates" that encouraged consumers and banks to take on more debt were the main cause of the credit-market turmoil that caused the failure of Bear Stearns and Lehman Brothers, according to Faber, who predicted the 1987 stock-market crash.

"The slashing of interest rates will not help very much," Faber, said in an interview in Manila. "They may cushion somewhat the decline but make matters worse."

The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point in a bid to unfreeze global credit markets.

The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27%

The decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937. Policy makers are aiming to unfreeze credit markets after the premium on the 3-month London interbank offered rate over the Fed's main rate doubled in 2 weeks to a record.

Policy makers are reducing rates as economies weaken around the world. The International Monetary Fund said the global economy is heading for a recession in '09 and increased its estimate of losses from the financial crisis to US$1.4 t.

The Fed cut its key rate to 1.5%, a level last seen in Sep '04. Low interest rates on deposits have pushed consumers to speculate on higher yields in other assets including stocks, real estate and commodities, Faber said.

"Had central banks around the world kept interest rates that encourage saving we won't have these problems today,'' the investor said.

Faber, publisher of the Gloom, Boom & Doom report, told investors to sell U.S. stocks a week before 1987's so-called Black Monday crash, according to his Web site, and recommended buying gold at the start of its 6-year rally.

Cosco upgraded by Kim Eng but not Deutsche Bank

Even as Kim Eng upgraded Cosco to buy on low valuations of just 2.7X FY09 P/E with $1.95 target price, Deutsche Bank initiates at Sell, sets $0.50 target price. Broker says company faces inevitable exposure to shipbuilding down cycle; "risks are high, with a potential industry overbuild of bulk carriers, difficulty in securing financing, which has contributed to fewer new order wins, a potential shipyard capacity overbuild and steel price volatility." Adds, "year to date new orders have collapsed for Cosco, and we believe they are at the cusp of an unprecedented industry downturn." Says stock still trading at premium to regional peers.

Deutsche Bank also initiates Yangzijiang at Sell, sets $0.21 target price. Broker warns stock very leveraged to shipbuilding supercycle reversal; "industry risks are high and any order cancellations, shipyard failures, decline in vessel prices, or news on inability to secure financing, would be viewed as negative catalysts." Says new orders have fallen sharply, expects weakness to persist, customers may face financing difficulties, execution of contracts remains a worry. Adds shares still trading at premium to other China shipyards.

Iceland teeters on the brink of bankruptcy

This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.

Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy — from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes — their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.

"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.

A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

One of Iceland's biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers — including enough to make it the largest private company in Britain, where it owns a handful of stores such as the famous toy store Hamley's.

Kaupthing, Iceland's largest bank and one of those whose share trading was suspended last week to stop a huge sell-off, has also invested in European retail groups.

Thousands of Britons have accounts with Icesave, the online arm of Landsbanki that regulators said was likely to file for bankruptcy after it stopped permitting customers to withdraw money from their accounts Tuesday.

To try to wrest control of the spiraling situation, the government also loaned US$680 m to Kaupthing to tide it over and said it was negotiating a US$5.4 b loan from Russia to shore up the nation's finances.

The speed of Iceland's downfall in the week since it announced it was nationalizing Glitnir bank, the country's 3rd largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.

Famous for its cod fishing industry, geysers, moonscape and the Blue Lagoon, Iceland was the site of the Cold War showdown in which Bobby Fischer of US defeated Boris Spassky of the Soviet Union in 1972 for the world chess championship. Last year, Iceland won the U.N.'s "best country to live in" poll, with its residents deemed the most contented in the world. No more.

Despite sunny skies Tue after 3 days of unseasonably cold weather, Reykjavik's mood remained grim — cafes were half-empty, real estate agents sat idle, and retailers reported few sales.

Icelanders are also beginning to question how a relative few were able to generate the disproportionate wealth — and associated debt — that Haarde has warned puts the entire country at risk of bankruptcy.

Iceland's reinvention from the poor cousin in Europe to one of the region's wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s.

Those free market reforms turned Iceland from a conservative, inward-looking country to one of a new generation of internationally educated young businessmen and women who were determined to give Iceland a modern profile far beyond its fishing base.

Entrepreneurs become its greatest export, as banks and companies marched across Europe and their acquisition wallets were filled by a stock market boom and a well-funded pension system.

Among the purchases were the iconic Hamley's toy store and the West Ham soccer team.
Back home, the average family's wealth soared 45% in half a decade and gross domestic product rose at around 5% a year.

But the whole system was built on a shaky foundation of foreign debt. The country's top 4 banks now hold foreign liabilities in excess of US$100 b, debts that dwarf Iceland's gross domestic product of US$14 b

Those external liabilities mean the private sector has had great difficulty financing its debts, such as the more than US$5.25 b racked up by Kaupthing in 5 years to help fund British deals.

Iceland is unique "because the sheer size of its financial sector puts it in a vulnerable situation, and its currency has always been seen as a high risk and high yield," said Venla Sipila, a senior economist at Global Insight in London.

The krona is suffering in part from a withdrawal by a falloff in what are called carry trades — where investors borrow cheaply in a country with low rates, such as Japan, and invest in a country where returns, and often risks, are higher.

After watching the free-fall for several days, the Central Bank of Iceland stepped in Tue to fix the exchange rate of the currency at 175 — a level equal to 131 krona against the euro.

Haarde said he believed the measures had renewed confidence in the system. He also was critical of the lack of an Europe-wide response to the crisis, saying Iceland had been forced to adopt an "every-country-for-itself" mentality.

He acknowledged that Iceland's financial reputation was likely to suffer from both the crisis and the response despite strong fundamentals such as the fishing industry and clean and renewable energy resources.

As regular Icelanders begin to blame the government and market regulators, Haarde said the banks had been "victims of external circumstances."

Richard Portes of the London Business School agreed, noting the banks were well-capitalized and had not bought any of the toxic debt that has brought down banks elsewhere.

"I believe it is absolutely wrong to say these banks were reckless," said. "Quite the contrary. They were hugely unlucky."

Why Hyflux plunged?

Some traders attribute Hyflux's pullback to note from KE calling for Trading Sell with downside target of $2.02, while others say concerns about Hyflux Water Trust not being able to secure funds to buy 9 of its China-based water treatment plants may be weighing on stock. Hyflux granted trust first right of refusal in Jun to acquire plants, valued at $180 m, saying move in line with strategy to monetize assets. Proposed divestment subject to shareholders' approval but no update provided since then.

DBS Vickers downgrades Hyflux Water Trust to Hold from Buy, citing concerns about getting funds for future acquisitions. Says trust may not end up buying initial portfolio of 9 China-based water treatment assets from sponsor Hyflux given tougher credit conditions; "there is considerable uncertainty in the timing and quantum of the acquisition-driven growth story for HWT." Cuts target price to $0.53 from $0.90, lowers FY08-09 DPU forecasts by 3%, 13% respectively. Adds recent resignation of CFO Grace Goh - touted as instrumental in raising trust's investment profile - may further compound situation.

Kim Eng raises Goodpack target price

Kim Eng raises Goodpack target price to $1.94 from $1.65, maintains Buy rating. Expects Goodpack to get EBITDA of US$85-95 m with enlarged fleet of 2.5 m intermediate bulk containers (IBC). Also, steel, wood prices tripled since '01; upward steel price trend helped to shift demand from one-off steel drums to reusable IBCs. Notes, corporate restructuring at top management level has previous years of logistics experience from DHL which will free up management resources to source for more opportunities in new markets such as Japan, new products segments. "Divestment of fully-depreciated IBCs will yield handsome amount of US$22.5 m approximately; will buffer cash drain if its warrants are not converted."

Sinotel to benefit from potential huge capital spending

Phillip Securities starts Sinotel Technologies at Buy with $0.27 fair value, implying FY08 P/E of 3.95X, FY09 P/E of 3.44X. Expects China-based wireless telecom applications provider to benefit from potential huge capital spending by country's telcos as sector consolidates to upgrade infrastructure, improve competitiveness, prepare for 3G rollout; "Sinotel is well positioned to benefit from this restructuring given its good track record, long-standing working relationship with the telecommunication carriers and technological experience."

Asian palm oil plays look good value says Citigroup

Asian palm oil plays look good value despite recent correction in crude palm oil (CPO) prices, says Citigroup. Broker notes drop in CPO prices sharper than expected as strong palm oil harvests put pressure on prices. But says increasing attractiveness of biodiesel may provide support; "in our view reprieve will come from a generally unexpected corner: Biodiesel."

Says biodiesel refining margins attractive at current CPO price, refiners ramping up capacity, should take supply out of food oil market. Says, "all the CPO plays look good value against the backdrop of an expected bounce in CPO prices;" notes sector median PE multiple of 6.8x for both FY08/FY09. Recommends First Resources for play on biodiesel, undemanding valuation.

Lee Pineapple increasing stake in United Fiber

OCBC's founding Lee family increased its stake in the construction, property forestry and pulp company to 8.65% from 7.14%. Don't know what they see in the syock. But the purchases are providing support. Purchases by Lee Pineapple in Mediaring, failed to stem the slide. I don't see any synergy in the purchases other than for investment purposes.

Palm oil will average about US$700 if crude oil prices decline

Palm oil will average about US$700 a metric ton over the northern hemisphere winter as crude oil prices decline, according to LMC International Ltd.'s James Fry on 9/9.

Crude oil may trade between US$80 and US$85 a barrel over the winter months, Fry, managing director at the commodity and biofuel research company, told reporters at a conference in Singapore.

Palm and soybean oils, mostly used in food, often follow crude oil as they can be used as biofuels. Crude has tumbled 27% from its Jul 11 record, while the price of palm oil has almost halved from a Mar peak. Palm oil tends to cloud in cold weather, reducing its appeal for use in cooking and fuels.

"Crude oil should fall another $20 from here and that will keep palm oil depressed," Fry said.

"Palm oil has trouble making more sales because of its cold-weather properties."

"We've downgraded our price assumption per ton from US$1,050 to US$900 in '09, and from US$1,100 to US$900 in '10,'' said Merlissa Paramitha Trisno, an analyst at PT Mandiri Sekuritas in Jakarta. "We see a risk of lower crude palm oil prices if the oil falls to belowUS $100 a barrel.''
Palm oil has tumbled 48% from a record 4,486 ringgit a ton in Mar. Soybean oil, palm oil's main rival, has fallen 34% from its peak of 72.69 US cents a pound.

Soybean oil is 56% more expensive than palm oil today, more than double the 12-month average of 23%, according to data on the Bloomberg.

Fry wrongly predicted Sep 23 '07, that prices may touch 2,250 ringgit a ton by Jan of this year as production rose. It averaged 3,226 ringgit in Jan and reached a record 4,486 ringgit in Mar.

On Apr 10, he said palm's gain of 57% in 12 months had been "reasonable" as it was tracking crude prices higher. On Mar 13, Fry predicted the price may average 2,060 ringgit a ton for the full year.

Palm Oil Must Fall to Boost Biofuel, Food Demand, Mistry Says

Prices of palm oil, the world's most consumed vegetable oil, need to decline further to spur more demand from the biofuel and food sectors as stockpiles swell to records, said yDorab Mistr, director at Godrej International Ltd.

Palm oil would be a viable feedstock for biofuel at 2,200 ringgit a ton (US$636), free-on-board, if crude oil stays around US$100 a barrel and the dollar stabilizes at the current level, Mistry said 10/9 at a conference. Prices would have to fall to US$550 a ton should oil fall to US$80 a
barrel, he said.

Palm oil has fallen 48% from a record on Mar 4 as expectations for bumper crops and swollen stockpiles have curbed demand. Crude has tumbled 29% from its peak.

"High prices have over time evoked a supply response," Mistry said. Record high stockpiles in Indonesia and Malaysiah will weigh on palm oil and "prices have to react and correct,'' he said.

Production will jump to 18 million metric tons in Malaysia and 20 million tons in Indonesia this year as favorable weather aided harvests, he said. Stockpiles in the 2 countries will exceed 5 million tons by the end of November, he said.

Increasing output of other vegetable oils, including soybean oil, the main rival, will add to the glut. China is projected to produce a record 18 million to 19 million tons of soybeans this year, reducing demand from the world's largest buyer, Mistry said.

There will be "bumper crops of oilseeds" around the world after a timely monsoon in India and the latest Hurricane Gustav which brought the "much-needed moisture'' to the developing soybean crop in the U.S. Midwest.

Vegetable oil supply and demand may become "more balanced" in 2008-09 if biofuel producers consume an additional 2.5 million tons and the food sector uses 4 million tons extra, Mistry said.

The U.S. Department of Agriculture will publish its output estimates of soybean crop in a report to be released on Sept. 12. The agency may reduce its soybean crop estimate by 50 million bushels in Sept. 12 report, but even that reduction ``may not affect prices beyond two days,'' Mistry added.

Nov-delivery palm oil rose 1.4% to 2,388 ringgit a tonne on BMD at 3:28 p.m. in Kuala Lumpur.
"It's foolish" to assume the biofuel subsidy in the U.S. and Europe may stoke demand for palm oil, Mistry said.

"Palm diesel must not rely on any subsidy or mandate and it must be cheaper than fossil diesel and make money for producers and blenders" to attract demand from them, he added.

Godrej International is one of India's biggest importers of vegetable oils, and Mistry has traded the commodity for more than 3 decades.

Straits Asia locked in good price rises for '09

Straits Asia headed higher as beaten-down commodity plays among best performers in today''s market rally. Thermal coal miner has grappled with weak sentiment recently on worries over falling commodity prices, but Macquarie says company locked in good price rises for next year. Broker says channel checks indicate company locked in 5.5 m tons '09 production at US$110/ton vs '08 price of US$70; "given that 50% of '09 production has been locked in at prices of US$110/ton, we believe a re-rating in the stock is overdue." Maintains Outperform call, $5.10 target price.

Malaysian CPO futures on 4 Sep '08

Malaysian CPO futures advanced for the first time in 3 days on speculation this week's price decline will boost demand and a rally in crude oil may raise the appeal for the commodity as an alternative fuel. Palm oil for Nov delivery added as much as 2.6% to 2,515 ringgit (US$734) a tonne on BMD before closing at 2,510 ringgit.

"It's a technical correction in the palm oil market" after recent declines, Merlissa Baramitha, an analyst with PT Mandiri Sekuritas in Jakarta, said.

The futures contract has tumbled 45% from a record 4,486 ringgit on Mar 4 amid concerns that global supply may exceed demand and as funds cut commodity investments.

Palm oil prices may rebound 30-40% over the next 6 months on rising biofuel demand and slowing production, boosting shares of Wilmar International and Malaysia's IOI Corp., Goldman Sachs said.

"Near-term crude palm oil fundamentals are bearish, due to high inventory levels in Malaysia, but we believe this is already priced in,'' with rates at a 40% discount to soybean oil, Goldman analysts Patrick Tiah and Nikhil Bhandari said today in a report. That's twice the long-term average discount of 20%.

"My expectation is for palm oil futures by the end of Dec to be trading between 2,700 and 2,900 ringgit because of strong demand and tighter supplies,'' Thomas Mielke, chief editor of OilWorld said an interview today at a conference in Siem Reap, Cambodia.

Meantime, Bursa Malaysia Bhd. said it will start offering U.S. dollar-denominated palm oil futures contracts tomorrow. The contract, called FUPO, will be cash-settled, the exchange said.

Wimar down on cut in target price and closure of commodities-focused hedge fund

Goldman Sachs cuts Wilmar target price to $4.90 from $6.40; maintains Buy rating. Broker says target price cut due to lower assumed valuation multiple for plantation business, to bring it in line with peer IOI Corp.; now assumes 16X FY09 PE multiple for plantations business vs 25X previously.

But broker says Wilmar remains top pick in Asian palm sector; "Wilmar should be a core holding for long-term investors as it offers high-quality, high-growth exposure to the palm oil sector, given market leadership in its downstream businesses and strong organic growth potential." Adds, while many palm companies have seen earnings cuts on back of lower palm oil prices, Wilmar has not, thanks to strong downstream margins on back of lower palm feedstock prices.

Singapore commodity plays leading blue chip losers as retreating oil price weighs, raises fears of cooling commodity cycle; Noble, Olam, Straits Asia Res and Wilmar are all down.

"Oil, which has been the poster boy for the commodities rally in 1H08 has fallen below the 200-day MA support at around US$115 per barrel," says DBS Vickers. Adds, news Ospraie Management will close commodities fund due to losses in energy, mining and natural resources equity holdings also likely to hit sentiment. "Our negative view on commodity related plays remains unchanged," broker says.

Funds are likely to hold big commodity stocks, so they'll be more affected than smaller players.
Shares may have further downside risk, particularly if oil continues to come off.

Gartner Research and Moody's don't see meaningful recovery in semiconductor sector until well into '09

Research firm Gartner Inc. (IT) has reduced its 2008 and 2009 revenue growth forecast for the semiconductor industry and doesn't expect the sector to recover until the second half of next year.

"We''re at a crossroads," said Gartner Research Director John Barber during the firm's semiconductor roadshow in Singapore Sep 2. "We''re seeing weakness in the market we didn't see in the first half (of the year)."

He said that while the semiconductor industry performed relatively well in the first half of the year behind strong growth in personal computers and handsets, deteriorating global economic conditions are starting to diminish consumer buying power around the world.

Gartner now expects the semiconductor industry revenue to grow 4.2% from 2007 to US$285 billion, down from a previous forecast for 4.6% growth to US$287 billion. Revenue for 2009 is expected to grow 7.8% from 2008 to US$308 billion, down from 7.9% growth to US$309 billion forecast earlier.

"We are starting to see the strength of consumer demand for PC and handsets starting to weaken," Barber said, adding that the forecasts could be adjusted further should macroeconomic conditions continue to deteriorate.

Falling demand, rising margin pressures and increasing competitive pressures will also fuel further merger and acquisition activities, he said, as companies fight for a foothold in the market.

Barber also said a market recovery for dynamic random access memory, or DRAM, and NAND flash memory chips is unlikely until 2010 due to anticipated weakness in consumer demand and oversupply. He said demand for DRAM, widely used for PCs, will remain weak until the mass adoption of 64-bit operating systems that require more memory begins.

Adverse market conditions for NAND chips, used in digital cameras and MP3 players, are further compounded as major players like Samsung Electronics continue to add capacity to take further market share, Barber said.

"We''ve seen in the past some guys willing to lose money for market share," he said. "We could possibly see that again."

Gartner research vice president Philip Koh says global economic slowdown weakening consumer demand for PCs and handsets, hurting overall demand for semiconductors. "Even though computer makers plan to launch more low-cost netbooks, consumers will refrain from buying new PCs or replacing old ones, as their confidence in the economy is weak," says Koh.

He does not think demand for chips will pick up until 2H09 when global economy may turn around.

Moody's sets negative rating outlook for Asia Pacific's technology, semiconductor sectors over next 12-18 months.

"This outlook reflects mainly the pressures apparent on profitability due to the severer-than-normal downturn in prices for DRAM chips and NAND flash memory," says Moody''s analyst Ken Chan. "Profitability for the foundries as well as the outsourced semiconductor assembly and testing (OSAT) sectors is being undermined by lower average selling prices, foreign-exchange volatility, and higher costs for raw materials and utilities."

Moody''s says it doesn't see meaningful recovery until well into 2009. Notes Asian technology, semiconductor sectors have also yet to feel full impact of economic slowdown in US, Europe, Japan.

Soyoil's premium to palm oil may halve

Palm oil climbed after Godrej International's Dorab Mistry said soybean oil's premium to the tropical oil may halve, spurring buying from investors looking for a bounce in prices.

Soybean oil's premium to palm oil, the widest in more than 6 years, may narrow as output of palm oil peaks in Indonesia and Malaysia and a price plunge lures buyers, said Mistry, who has traded vegetable oils for more than three decades.

Soybean oil was around 56% more expensive than the tropical oil. The gap widened to 69% on Aug 26, the most since at least Jan '02, according to data compiled by Bloomberg.

"Demand for palm oil is bound to emerge as it is a lot cheaper," Alvin Tai, analyst at OSK Research Bhd. said by phone from Kuala Lumpur. "One can make money using palm oil to make bio-fuel until palm is available at 2,900 ringgit.''

Palm oil has declined 14% this year, while soybean oil has gained almost 10% after supply from Argentina, the world's largest exporter, was curbed during a 4-month strike by farmers over the Mar increase in export taxes.

That's made crude palm oil US$470 a tonne cheaper than soybean oil, Sunaina Dhanuka, analyst at Macquarie Securities, said in a report. The gap relative to both soybean and rapeseed oils is at an "all-time high," she said. Still, prices may not exceed US$1,000 a ton in the medium term due because of a favourable supply outlook, she said.

Consumption of palm oil in China and India still strong

Palm oil averaged 3,513 ringgit (US$1,054) a tonne in Q2, 44% higher than the year-earlier quarter.

Consumption of palm oil in China, the world's largest palm oil buyer, was still growing at about 19% a year, Golden Agri's Chairman and CEO Widjaja said, matching the rate reported by the Beijing-based Customs General Administration for the first 6 months.

India, the 2nd-biggest buyer of vegetable oils, imported 3.09 m tonnes of edible oils, including palm oil in the 8 months ended Jun, according to the Solvent Extractors' Association. That's 13% more than a year earlier.

Biodiesel manufacturers are making quite good margins

Palm oil prices have reached a "bottom' and will be supported by declining supplies and increasing demand for biodiesel, Derom Bangun, chairman of the Indonesia Palm Oil Association, said.

Prices of the cooking oil reached US$825 a tonne on a cost-and- freight basis in the port of Rotterdam around 17 Aug, or about US$750 a tonne in Malaysia, Bangun said in an interview with Bloomberg Television on 27 Aug.

"Supply will get tight in the long term and prices of palm oil may rise in the fourth quarter," Miang Chuen Koh, analyst at Morgan Stanley Asia (S), said by phone 27/8. "Demand will pick up from the food side as well as biodiesel."

"Recently prices dropped from over US$1,200 a ton in Rotterdam to US$825," Bangun said. "Last week prices rebounded to US$880-$900 although they fell again yesterday to US$860. Prices will remain there and are not going further down."

Output will decline after the peak production season in Malaysia and Indonesia ends in Sep, Bangun said.

"What happens now is a kind of temporary oversupply'' as traders and processors built up excessive inventory at high prices without noticing weakening demand, he said. "That's why for some time they don't buy any more palm oil, causing prices to drop to such a low level."

The Indonesia Palm Oil Association is an organization of crude palm oil producers, consisting of state-owned and non- state plantations, foreign-owned plantations and cooperatives of oil-palm growers.

Malaysia is trying to "ensure there is no oversupply," Plantation Industries and Commodities Minister Peter Chin Fah Kui said in an interview 26/8. "We're encouraging the industry to clear their stocks and asking companies not to import" crude palm oil from other countries like Indonesia.

The country's stockpiles reached a record 2.04 m tonnes in Jun before declining to 1.98 m tonnes in Jul, according to the Malaysian Palm Oil Board.

"Making biofuel from palm oil has become economically viable now,'' Alvin Tai, analyst at OSK Research Bhd., said by phone from Kuala Lumpur.

Biodiesel manufacturers can break even with crude oil priced at the current level and palm oil at 2,900 ringgit, Tai said. "So you can see they are having quite good margins now" with palm oil trading below 2,500 ringgit a tonne.

Golden Agri-Resources, a unit of Indonesia's largest oil-palm grower, Sinar Mas Group, is looking at a possible mandate from the government to use the product in blended fuels, Chairman and CEO Franky Widjaja said Aug 12. The company doesn't make biodiesel yet.

"If the Indonesian government were to mandate for a 3% compulsory blend of biodiesel, that's equivalent to 550,000 tons of palm oil demand,'' Widjaja said. "If the government were to mandate 5%, that's equivalent to 900,000 tons."

Malaysian CPO futures on 3 Sep '08 and OilWorld forecast.

Malaysian CPO futures in fell for a second day, erasing earlier gains, as the fourth day of declines in crude oil prices reduced the appeal of the tropical commodity as feedstock for alternative energy. Palm oil for Nov fell 33 ringgit, or 1.3%, to close at 2,451 ringgit (US$712) a tonne on BMD.

"Palm oil prices are currently undervalued,'' Thomas Mielke, chief editor of OilWorld, the trade publication, said from Siem Reap, Cambodia. "At this level, palm oil consumption for energy is set to rise sharply."

Still, "palm oil prices will rebound in the fourth quarter,'' Tan Ting Min, a research analyst at Credit Suisse, wrote in a report today. "Malaysian palm oil exports in Aug grew to hit an all-time high, driven primarily by a strong pick-up in exports to India and Pakistan ahead of the festive seasons.''

"We expect a pick-up in Sep,'' wrote Tan. "Palm oil exports to the Middle Eastern countries should also be higher ahead of the festive season.''

Palm oil may average 7.6% more in the year ending Jun '09 because of increased demand for biofuel, said OilWorld's Thomas Mielke.

The tropical commodity may average US$1,120 a tonne, up from US $1,041 a tonne the previous year, Mielke said.

Increased demand for the tropical oil as feedstock for biofuel would support palm oil prices unless crude oil prices declined, he said.

Argentine soybean oil may average US$1,250 a tonne in the year ending Jun, up from US$1,105 a tonne the previous year, he said.

"Palm oil will be rising less than the soybean oil as there's less supply issues in palm oil than in the soybeans,'' he said.

Malaysian CPO futures on 2 Sep '08

Malaysian CPO futures dropped as crude oil plunged, reducing demand for alternative fuel made from vegetable oils, including the tropical commodity. Palm oil for Nov delivery slumped 5.2% to 2,484 ringgit (US$725) per tonne on BMD, the most since Aug 26. Earlier, the futures fell as low as 2,434 ringgit, extending a 14% decline in Aug, the second straight monthly drop.

Crude oil drove the palm oil market down "and it's really a function partly of the dollar's strength that is driving oil prices and commodities lower," said James Gruber, an analyst at CLSA Asia Pacific Markets in Jakarta. "Secondly, there's demand concern due to weakening economic growth globally."

Palm oil may fall to less than 2,425 ringgit (US$709) a tonne if crude falls below US$100 a barrel, Malaysian Plantation Industries and Commodities Minister Peter Chin Fah Kui said.

If "petroleum is going to come down further, there will be a chance that palm oil will also follow because the graph tracks each other," Chin told reporters today in Kuala Lumpur. Still, the current range of 2,500 ringgit to 3,000 ringgit would be "comfortable" for growers, he said, echoing recent comments.

"In the near term, palm oil will continue to track crude oil prices," said James Ratnam, an analyst at TA Securities Holdings Bhd. in Kuala Lumpur. Chin's forecast "makes sense," he said.

The decline in palm oil prices may prompt the government to review a special tax on domestic producers such as IOI Corp. and Sime Darby Bhd. as the band in which the levy is payable has narrowed, hurting collection, Chin said.

Planters, who pay the tax when they sell palm oil at more than 2,000 ringgit a tonne, want the threshold raised because their production costs have risen. The tax is charged based on the difference between the current price and the 2,000 ringgit level.

Malaysia Aug palm Oil exports up despite defaults. Exports rose 8% in Aug, compared with the previous month, according to independent surveyor Intertek. A total of 1.49 m tonnes of palm oil exports were tracked in Aug, Intertek said. Another cargo surveyor SGS (Malaysia) Bhd. said Malaysia's palm oil exports rose 6.6% on month in Aug to 1.49 m tonnes.

Qualitas Medical's valuation is hefty

Players are turned off by Qualitas Medical's high valuation. IPO price of $0.25 translates to P/E of 27.8X. Pullback in broad market also weighing on stock. Despite dismal performance, OCBC says Malaysia-based clinic chain still has attractive traits. Notes "critical mass" of doctors (from 89 clinics, 63 affiliate clinics) makes company attractive when it comes to seeking contracts from corporate employers, multinational corporations; "Qualitas will also be a candidate that comes to mind for small private clinics seeking to join or become affiliated with a larger group."

IPO of 22 m shares 1.0X subscribed.

Malaysian CPO futures on 29 Aug '08

Wilmar may rebound to around $4.

Soybean oil's premium to palm oil, the widest in more than 6 years, may halve as output of palm oil peaks in Indonesia and Malaysia and a price plunge attracts buyers, said Dorab Mistry, director at Godrej International Ltd.

"Soybean oil will come down with the accumulation of stocks in Argentina,'' said Mistry, who has traded edible oils for more than 30 years. The gap will shrink to its "traditional level of US$70-US$90 a ton from about US$200 now," he said.

The 2 vegetable oils, used in cooking and for alternative fuel, are the most consumed in the world. The US, Brazil and Argentina are the biggest growers of soybeans, which are crushed to make oil, and Indonesia and Malaysia produce most of the world's palm oil. China and India are the largest users.

"I expect a dramatic fall in the soybean oil premium starting from Oct," said Dinesh Shahra, MD of Ruchi Soya Industries Ltd., India's biggest edible oil importer. "Palm oil prices may stabilize or even rise with a decline in production."

Soybean oil was 56% more expensive than palm oil today as measured by the most active contracts on CBOT and BMD. The gap widened to 69% on Aug 26, the most since at least Jan '02, according to data compiled by Bloomberg.

Reduced supplies from Argentina, the 3rrd-biggest soybean exporter, as farmers protested against export taxes, helped push soybean oil up 6 percent in the past 5 months. Increasing inventories sent palm oil down 23% in the same period.

These no demand for soybean oil at all,'' Mistry said in a phone interview from Kuala Lumpur Aug 26. "We have seen good demand coming in at the lower levels for palm oil."

Mistry said Aug 25 that each of his price forecasts in the past 30 months had come true, though he abandoned his medium- term prediction for palm oil to reach 4,500 ringgit (US$1,327) a ton by Feb.

The narrowing in the premium may be accentuated by lower purchases of soybean oil from China and India as they begin harvesting soybeans in Oct, Ruchi's Shahra said in a phone interview Aug 28.

Imports of soybean oil by China, the world's biggest consumer of cooking oils, increased 10% to 1.47 m tonnes in the first 7 months of this year, while purchases of palm oil jumped 23% to 2.8 m tonnes, the Beijing-based customs office said Aug 15.

Purchases of palm oil by India, the 2nd-largest user, jumped 44% in the 9 months to Jul to 3.19 m tonnes from 2.22 m tonnes in the year ago period, according to the Solvent Extractors' Association of India. Imports of soybean oil slumped by more than half to 418,899 tons.

Soybean oil's premium may narrow from Dec as palm oil's stockpile-to-use ratio may be poised for a drop, Ben Santoso, an analyst at DBSVickers said. "We are already reaching the peak of the premium."

Soybean oil is historically more expensive than palm oil, because the vegetable oil extracted from crushing palm fruit is harder to store and turns cloudy in cooler temperatures, limiting its use in the winter months in the northern hemisphere.

Palm oil climbed 6.1%, the most in more than a week, to close at 2,620 ringgit a ton in Malaysia today, while soybean oil was at 54.55 US cents per pound, up 0.9% at 6:13 p.m. S'pore time.

Malaysian CPO futures on 28 Aug '08

Malaysian CPO futures ended down more than 1% after a volatile trading day on Thu, with some players starting to unwind positions ahead of a long holiday weekend, dealers said. The benchmark Nov contract on BMD fell 32 ringgit to close at 2,503 ringgit (US$739) a tonne.

"In Malaysia, Mon is a holiday so everybody is book-squaring or making their positions even ahead of the 3-day holiday," said a dealer at a foreign brokerage firm.

Palm oil futures have been hurt this week by rising supply and falling soyoil prices.

Industry analyst Dorab Mistry told a conference earlier this week that benchmark CPO futures were likely to fall to 2,200 ringgit per tonne due to increasing supplies. Malaysian CPO output forecasts of 17.4 m tonnes for '08 could be comfortably exceeded, while Indonesia's output will rise beyond 19 m tonnes, he said.

(US$1=3.372 ringgit)

Malaysia may act rapidly should prices of palm oil extend its decline

Malaysia, the world's 2nd-largest palm oil producer, may act rapidly should prices of the edible oil extend their decline, Plantation Industries and Commodities Minister Peter Chin Fah Kui said.

"We might need to take immediate measures" if prices "drop drastically below 2,000 ringgit (US$590) a ton," Chin said in a phone interview.

Palm oil, used in cooking and as an alternative fuel, has slumped as supplies from Malaysia and Indonesia, the top growers, outpaced demand. The price plunged to a 15-month low in Aug as tumbling crude oil reduced its attraction as a biofuel.

"Production is improving in '09 and '10 so prices will continue to fall," Nirgunan Tiruchelvam, assistant director at ABN Amro (S) said by phone. "Even if they want to intervene, it may not dent overall supply."

Malaysia is trying to "ensure there is no oversupply," Chin said. "We're encouraging the industry to clear their stocks and asking companies not to import" crude palm oil from other countries like Indonesia.

The country's stockpiles reached a record 2.04 m tonnes in Jun before declining to 1.98 m tonnes in Jul, according to the Malaysian Palm Oil Board.

"Last month, we had an oversupply of 2.1 m tons,'' Chin said. "That's too much and we must understand that it's not only Malaysia that produces palm oil but Indonesia" too.

The 2 countries produce almost all the world's palm oil. Indonesia's output may exceed 19 m tonnes this year, while Malaysia may produce more than 17.4 m tonnes, Dorab Mistry, director at Godrej International Ltd., said at a conference in Kuala Lumpur.

Palm oil must drop to 2,200 ringgit a tonne in the next few weeks for demand to recover, Mistry said.

"We have at present a deadly cocktail of rising production combined with some demand rationing," he said. "Prices have to go to the level where they create strong demand growth."

The slump in palm oil prices has prompted Indonesia to consider mandating use of the cooking oil to make biofuels and Malaysia to boost exports and local consumption to support prices. Buyers in China and India, the biggest importers, are seeking to defer deliveries and renegotiate purchases.

Singapore Petroleum Co

Singapore Petroleum Co still in underlying downtrend (since mid-Jul) as 3Q traditionally weak for oil refiners. Merrill Lynch, which has Buy call with $10.00 target, says unprecedented slowdown in China's fuel consumption during Olympic Games, weakness in US economy, recent pullback in oil prices likely to keep share price subdued in near term. But expects SPC to benefit as pent-up demand in China post-Games likely to cause "positive shockwave" to gross refining margins. Adds partial supply shutdown in Europe in 4Q08 to prepare for launch of Euro V fuel specifications in Jan '09, partial capacity shutdown in Asia from Sep-Nov will also help SPC's margins.

Raffles Education's valuation "very rich" says Kim Eng

Raffles Education extended losses after breaching psychological $1.00 support earlier this week. Kim Eng says valuations "very rich" given prospective P/Es of 34X FY08, 31X FY09 earnings - "pricey even with its past track record of earnings growth." Adds ability to extract synergies from recently-acquired Oriental University City (OUC) will take time, while funding for additional acquisitions may be tough as slowing market lowers investor appetite for fund-raising exercises.

Citigroup downgrades Raffles Education to Hold from Buy; cuts target price to $0.95 from $1.50. Broker says move follows unimpressive recent FY08 results, prospect of slowing organic growth as company encounters government restrictions setting up new colleges in China. Adds company facing cash constraints; "a continued aggressive M&A strategy to acquire Chinese colleges, high dividend payout, outstanding payment for OUC acquisition and delayed Hong Kong IPO of its China business create a funding gap, which we expect to be filled with new debt, resulting in higher interest expenses."

But says stock does not merit Sell rating as still positive on company''s aspirations to build private college network in long term, China regulatory overhang should at some point be resolved.

UBS cut its assumed price for palm oil for '08-'11

UBS cut its assumed price for palm oil by 16% for '08, 28% for '09, 21% for '10 and 13% for '11.

"We remain negative on the sector," analyst Alain Lai wrote in a note to clients.

Wilmar International: UBS lowered its price target to $4.70 from $5, and maintained its "buy" rating on the stock.

Indofood Agri Resources: UBS cut its price target on the palm oil unit of Indonesia's biggest noodle maker to $1.38 from $2.01, and maintained its "neutral" rating.

Goldman Sachs raises Wilmar target price

Goldman Sachs raises Wilmar target price to $6.40 from $6.20; reiterates Buy rating. Broker says target price change reflects earnings adjustments post 1H08 results; raises FY08-FY10 earnings estimates by 4%-5% due to increase in sales volumes for downstream products. Notes volumes strong in 1H08, tend to be seasonally stronger in 2H. Adds company confident on downstream margins, believes decline in CPO price may be supportive factor, also makes biodiesel margins more favourable; company's biodiesel plant fully utilized, may consider expanding capacity.

Analysts generally still bullish on Wilmar's prospects

Analysts generally still bullish on Wilmar's prospects.

"The result validates our view that Wilmar has the best business model for exposure to volume growth of the edible oils industry," says UBS, which has a $4.70 target.

"Indonesia's palm oil production is likely to pick up strongly and this should benefit Wilmar in terms of higher refining volumes, while lower feedstock prices should lead to improvements in its downstream margins," says Nomura, which retains Buy call, $4.90 fair value.

DBS Vickers expects Wilmar to still benefit from its dominant position in China, robust volume growth, but downgrades rating to Hold from Buy on limited upside to target price of $4.50 following recent run-up.

UOB downgrades AusGroup

UOB downgrades AusGroup to Sell from Buy; cuts target price to $0.43 from $1.40. Broker says stock looks fully valued post weak 4Q08 results, notes excluding provision writeback, 4Q08 would have showed net loss, margins sharply lower, operating expenses high, disappointing performance from subsea division. Cuts FY09, FY10 earnings forecasts by 46%, 36%, respectively; says new target price assumes FY10 PE of 5X, in line with Singapore small-cap offshore services stock valuations.

Malaysian CPO futures on 26 Aug '08

Malaysian CPO futures in tumbled for the 2nd day as a drop in rival soybean oil and a bearish outlook from a leading analyst unsettled the market. Palm oil for Novdelivery fell as much as 5.2% to 2,465 ringgit a tonne.

Palm oil, the world's most consumed vegetable oil, declined after Dorab Mistry, director at Godrej International Ltd., said yesterday that prices must fall to 2,200 ringgit (US$653) a tonne in the next few weeks for demand to rebound.

The edible oil slumped as "someone with that caliber turned bearish" and "soybean oil also fell," Kan Heen Sing, trader at HLG Futures Sdn., said today from Kuala Lumpur.

Futures fell to a 15-month low last week as supplies from Malaysia and Indonesia outpaced demand for food, and as weaker crude oil lowered its attraction as a biofuel. Global demand for vegetable oils may expand 6.5 m tons in the year from Oct, less than the 6.8 m ton increase in supplies, Mistry said.

The benchmark futures at 2,500 ringgit is an "important psychological level," Kan at HLG said. "If that level gets broken, we might see prices decline further to find some support around 2,350 ringgit."

Malaysian CPO futures on 25 Aug '08

Malaysian CPO futures plunged for the first day in 4 after crude oil slumped late last week, reducing prospects for biofuel demand made from the commodity and rival soybean oil. Palm oil for Nov delivery fell as much as 5.2% to 2,575 ringgit (US$763) a tonne and closed at 2,600 ringgit in Kuala Lumpur.

"Crude's down by US$6 a barrel," Ben Santoso, an analyst at DBSVickers, said. "The sentiment was too overwhelming."

The price must decline to 2,200 ringgit in the next few weeks for demand to rebound, Dorab Mistry, director at Godrej International Ltd., one of India's biggest buyer of the commodity, said at a conference in Kuala Lumpur today.

The vegetable oil has slumped 42% from a record 4,486 ringgit on Mar 4 as supplies from Malaysia and Indonesia outpaced demand for food, and as a decline in crude oil from its record reduced its attraction as a bio-fuel.

"We have at present a deadly cocktail of rising production combined with some demand rationing," Mistry said. "Prices have to go to the level where they create strong demand growth."

Mistry, who has traded vegetable oils since 1976, said he abandoned his forecast for palm oil reaching 4,500 ringgit by Feb next year as it was "over-optimistic."

Malaysia's palm oil exports rose 0.8% in the first 25 days of Aug, compared with the same period the previous month, according to independent surveyor Intertek. A total of 1.14 m tons were tracked from Aug 1 to Aug. 25, Intertek said today. Malaysia exported 1.13 m tons in the same period in July, the surveyor said.

Production may drop by Nov-Dec, Santoso said.

"The stocks-to-usage ratio for palm oil should come down to Dec '07 level," he said. "That should be supportive to the price by then."

Tri-M Technologies to acquire Kingworld Resources

Tri-M Technologies Mon said it will pay $203 m in a combination of cash and new shares to acquire Kingworld Resources Ltd., a private company under contract to develop an oil field in China.

Tri-M Technologies, which assembles circuit boards, will fund the purchase with $23 m in cash and 180 million new shares valued at $1.00 each, it said in a statement.

Tri-M shares were halted from trade last week, when they last changed hands at $0.995 each.

Kingworld Resources is now wholly-owned by Tri-M Executive Chairman Tiong Hiew King and Tiong Kiu King, the brother of another Tri-M executive.

Kingworld Resources signed a production sharing contract with China National Petroleum Corporation in Nov '07 to jointly develop an oil field in Jilin, China.

Macquarie says palm plays still look good value

Macquarie says despite falling CPO prices tracking falling crude oil price, palm plays still look good value, oversold trading on '09 PEs of only 6-7x. "Our sensitivity analysis indicates that the companies under our coverage will still enjoy positive earnings growth even if the oil price falls to US$90-100/bbl for FY0-10."

TriTech IPO

TriTech Group debutted weakly on SGX as weak underlying market conditions likely to offset stable fundamentals of Singapore's construction industry. Singapore-based ground, structural engineering services provider offered 36 m new, vendor shares in IPO at $0.20 each (4.58X historical P/E). The offering was 1.15x subscribed.

"With a historical P/E of 4.6, it's very difficult for its forward P/E to be higher because at this point in time, we have a lot of counters trading at forward P/Es of about 3x, including construction stocks," says local house analyst; "in this market, if their forward earnings are the same or more or less the same as their historical results, reception to the IPO wouldn't be that strong."

TriTech, which has worked on the Marina Bay casino-resort, CityDev's The Sail@Marina Bay waterfront condo, plans to use $4.4 m net proceeds (after setting aside portion for vendors) to commercialize water treatment technologies, buy machinery, expand overseas.

Downgrades on Wilmar

Wilmar International fell after analysts cut their price targets for the company on concern profit margins may drop, and palm oil plunged. The company cut selling prices for edible-oil products by about 12%, effective yesterday, the company said.

"We expect Wilmar's merchandising and processing margin to soften," wrote Ben Santoso at DBS Vickers, who cut his recommendation to "hold" from 'buy." The change was driven by "the deceleration of the renminbi appreciation against the US$, and softer CPO and oilseed prices,'' he said.

Wilmar, which supplies about 45% of China's retail cooking oil, reports earnings in dollars and a slower rate of appreciation for the Chinese currency may crimp profit growth. Royal Bank of Scotland Group cut its forecast for the yuan, saying the central bank was reining in yuan appreciation.

"About half of Wilmar's profits are derived from China," Tan Ting Min, a research analyst at Credit Suisse, wrote in a note. Tan cut Wilmar's price target to $4.80 from $5.40.

"With further softening in edible oil prices since end-Jun '08, the group has decided to lower its selling prices by approximately 12%,'' Wilmar said in the slides presentation. Still, "in spite of lower palm oil prices, palm plantation still has attractive margins," the slides read.

The price of palm oil was likely to "remain subdued" unless crude oil rallied, Wilmar said yesterday, without giving a forecast. CEO Kuok Khoon Hong warned of a "more challenging operating environment" this year.

The yuan has gained 6.9%t against the dollar this year, according to Bloomberg data.

Wilmar's net income in 2Q08 gained to US$331.7 m from US$101.5 m a year earlier. Sales advanced to US$7.8 b from US$3 b. The figures met expectations, DBS's Santoso wrote.

To be sure, Fordyanto Widjaja, an analyst at Morgan Stanley Asia, wrote in note that he remained bullish on Wilmar's profit outlook as the lower prices of agricultural commodities "is sentiment-driven" and "will be temporary."

Credit Suisse cuts Wilmar's target price

Credit Suisse cuts Wilmar's target to $4.80 from $5.40; maintains Neutral rating. Broker says 1H08 results solid, made up 64% of market's full year forecast driven by higher volume, increased selling prices; raises FY08 net profit forecast by 7%, FY09, FY10 estimates broadly unchanged. Notes stock trading at lower end of historical PE range, but still at premium to purer plantation plays, US soya producers. New target price assumes company's China division will trade at FY09E P/E of 25x vs 28x previously, while non-China business will trade at P/E of 15x vs 20x previously.

Artivision Technologies falls below $0.20 IPO price

Artivision Technologies falls below $0.20 IPO price, as investors wary of Singapore-based video content technology developer's limited track record (set up in '04), history of tight cashflow. According to IPO prospectus, Artivision faced negative cashflow for last 3 FY ended Mar due to huge investments in R&D, marketing to promote products. Firm also warns it may remain in red as it expects expenses to increase in near term. Will use $13.2m net proceeds to develop new features, expand presence in Asia, US, Russia.

SIAS Research analyst Jessy Xia says while company well positioned to take off "in an industry where technology advancement is urgently needed and well rewarded", investing in high-tech firm not without risks. Notes slow take-up rate for Artivision's technology, operating expenses outpacing revenue growth. IPO of 75 m new shares 1.05X subscribed.

Artivision develops video content technology used for security, traffic management.

S&P maintains Genting International at Hold

Standard & Poor's Equity Research maintains Genting International at Hold, cuts target price to $0.53 from $0.69 following 1H08 results. Incurred operating loss of US$9.6 m vs US$54.2 m operating profit year earlier due to losses at U.K. casinos. U.K. business hurt by lower business volume, write-offs due to rationalization of casinos, higher gaming duties. House expects U.K. casinos to continue performing poorly in near future.

Daiwa downgrades China Lifestyle F&B

Daiwa downgrades China Lifestyle Food and Beverage Group to Sell from Hold due to poor 2Q08 revenue growth, expects share price will underperform significantly over next 6 months. Says China Lifestyle's 10.4% on-year increase in 2Q08 jelly dessert revenue "extremely disappointing" since company expanded its manufacturing capacity by 57% with the commissioning of its new plant in Mar '08. House cuts target price to $0.24 from $0.29 on expectation China Lifestyle will trade more in line with other S-chips.

Straits Asia Resources to buy coal assets from its parent

Straits Asia Resources said Fri it has agreed to buy US$100.3 million in coal assets from its parent, Straits Resources Ltd.

Straits Asia said in a statement it will purchase a project in Madagascar and another in Brunei from Straits Resources as part of a previously announced plan to transfer all of the parent's coal assets to the Singapore-listed company.

Straits Asia is expected to seek a dual listing in Australia at a later date, when Perth-based Straits Resources may distribute its stake in the company to investors in the form of locally-traded shares.

Following the restructuring, Straits Resources plans to focus on its core business as a base metals company.

Currently, all of Straits Asia's coal assets are in Indonesia. It operates 2 mines there that are expected to produce about 9 m metric tons this year and 11 m tons next year.

Straits Asia said the Madagascar assets have an exploration target of 300 m to 500 m tons of coal. It expects to be able to excavate three to 5 m tons of coal from the project annually, based on preliminary estimates.

The Brunei property is considered to be prospectiv" and has properties similar to coal seams in Kalimantan, Indonesia, Straits Asia said.

Noble won't be affected by sliding commodity prices

While commodity prices continue to slide, analysts believe Noble won't be affected. "Lower commodity prices will ease working capital requirements on the group. Noble's focus remains on volume growth, and on this note, management is confident that the demand for commodities will remain robust," says OCBC, which has Buy call with $2.99 fair value. "We think that (commodities) demand could moderate in light of slower growth from China. However, the inability of the commodity industries to supply the already reduced demand means that markets could remain tight for Noble," says Citigroup, which retains Buy call, $2.92 target. 2Q08 net profit +2.2X on-year at US$122.5 m on strong improvement across all business segments.

Indofood Agri's 1H08 net profit only 46% of concensus

Goldman Sachs cuts Indofood Agri target price to $3.10 from $3.20; maintains Buy rating. Broker says 1H08 profit only 40% of broker's full year forecast, 46% of consensus, but says 2H usually seasonally stronger on higher palm oil production, so full year forecast should still be achievable. Says lower target price reflects 2% cut to FY08 earnings estimate to reflect slower pace of cost savings for plantation firm's subsidiary London Sumatra, target price still assumes same 14X PE multiple.

Indofood Agri reported 263% on-year jump in 1H08 net profit to $185 m, CIMB upgrades stock to Neutral from Underperform, raises target price to $1.63 from $1.53, says shares now offer good upside following recent underperformance. Says results in line with broker's own forecast, but below consensus with 1H08 core net profit making up only 46% of full year consensus estimate.

Reuters interview with Swiber. Plans to tap growth in the offshore windpower sector.

Offshore oil services firm Swiber said it sees buoyant orders in the next 5 years from oil & gas explorers, and plans to tap growth in the offshore windpower sector.

"For a company typical to our industry, we may see order book grow to US$1-2 b in the next 5 years," Swiber's CEO Raymond Goh told Reuters in an interview on Thu.

The firm's order book stood at US$664 m at end-Jun. Swiber plans to ride on the expansion of the deepwater oil & gas industry, which it sees growing by over 30% yoy for the next 4 years as oil companies look further afield to profit from high crude prices.

Apart from supplying bigger vessels made for deepwater, the firm has also invested in new designs and technologies such as its "Equatorial driller" and is looking to secure deepwater drilling contracts in West Africa and Brazil, Goh said.

Swiber will expand its fleet size to 51 vessels by '10, up from 30 vessels to-date, through both bank borrowings and sale and lease-back agreements. The gearing ratio will be maintained at its current level of around 1 times, added Goh.

Swiber posted Q2 earnings of US$20.8 m for the Apr to Jun period on Wed, more than triple the US$6.3 m a year ago, on the back of surging revenue from its offshore construction projects.

Swiber, with a market cap of US$455 m, provides construction, installation and engineering services and competes with local rivals such as Ezra and CH Offshore.

Goh also expects developments in the offshore windpower industry to drive future growth, potentially contributing as much as 10% of Swiber's revenues in the near future.

The global offshore windpower market is expected to triple to be worth over US$6 b by '12, according to data from market researcher Douglas-Westwood.

Countries are boosting renewable power to cut fossil fuel emissions of greenhouse gases, blamed for global warming. Swiber is on the lookout for potential contracts with European energy companies involved in offshore windpower, and hopes to sign a contract in a year's time.

"It is unimaginable that oil prices will go down to US$40 again, and so there'll always be room for these kind of activities, especially in Europe. The only realistic alternative energy now is wind power," Goh said.

Although rising steel prices have become a major concern for players in the offshore energy industry, Goh said Swiber will not be significantly hurt as its rig-building is outsourced to shipyards and prices are fixed in its contracts.

Reuters interview with Straits Resources

Australian miner Straits Resources said on Thu it plans to grow its coal unit through acquisitions, and was targeting deals worth between A$1-A$2 b in Australia. Straits Resources, which owns 47% of Straits Asia Resources, said in Apr it was splitting its coal and metals businesses into 2 to improve its growth prospects.

"That's the only size that is relevant," Straits Resources CEO Milan Jerkovic told Reuters in an interview.

"You only do a corporate transaction of this size once every couple of years. So when you go ahead, you have to make sure it's a meaningful acquisition, especially since this is a consolidation phase in the industry," he said.

Jerkovic said Straits Resources was eyeing several Australian coal firms that are already in production and it has already begun talks with some of them.

"We are looking for companies that are more mature, either they are producing or ramping up production. We're looking for something that is meaningful globally so it has to be in the 5-10 m tonne production space," he said.

Jerkovic said the firm has been wanting to acquire coal assets in Australia for a long time, but discussions with producers have not been fruitful because of its status as a diversified miner.
Straits Resources' demerger plans include distributing its take in Straits Asia to its own shareholders, ahead of getting an Oct listing for Straits Asia in Australia to make it easier for local mining investors to trade in the stock.

Jerkovic says Straits Asia, which recently acquired coal fields in Magadascar and has signed a coal exploration agreement in Brunei, has plenty of strong growth opportunities and needs to grow quickly to avoid being taken over.

"We have to grow faster and bigger than what others are prepared to pay. We will give shareholders the options if the right offers come but for now, I think the right strategy is to grow and compete in that space," he said.

Corporate activity in Australia's coal sector has picked up in the past year, amid a tripling of coal prices from a year ago due to supply constraints.

Straits Resources, which has a market value of about A$1.2 b, has a diverse suite of coal, gold and copper assets in Indonesia and Australia.

Its flagship asset, Straits Asia Resources, has a market value of about US$1.78 b. The unit has 2 thermal coal operations in Kalimantan, Indonesia, that are on track to produce about 9 m tonnes in '08 and are expected to reach 19 m tonnes in the next 2 to 3 years.

Jerkovich said the demerged coal unit was targeting to reach a total output of about 50 m tonnes within 5 years, of which about 10 m tonnes of output would be coking coal.

UBS downgrades Golden Agri-Resources

UBS starts Golden Agri Resources at Sell with $0.67 target, based on 8.2X '09 earnings forecast. Says margins will come under pressure in '09 as potential increase in palm oil prices, higher oil yield won't be enough to offset higher fertilizer cost. Adds, valuations excessive, with stock trading at premium to its 5-year average P/E of 8.4X. Says key catalyst will be palm oil price, which "has not moved up as much as we expected" due to record-high inventories.

Malaysian CPO futures on 1 Aug '08

Malaysian crude palm oil (CPO) futures dropped a 4th week amid concern increased supplies from the biggest producers of the vegetable oil will damp prices. Palm oil futures for Oct delivery dropped 100 ringgit, or 3.3%, to 2,950 ringgit (US$904) a ton on the Bursa Malaysia Derivatives (BMD) Exchange.

Supply from Indonesia and Malaysia, which control 90% of the world's output of the commodity, is seasonally high this quarter, said Ben Santoso, a plantation analyst at DBS Vickers. Stockpiles in Malaysia reached a record 2.04 m tons in Jun, the Malaysian Palm Oil Board said.

Prices fell 15% in Jul as "fears intensified over Malaysian palm oil inventory build-up," said Santoso. "These concerns are being priced. As market participants take short positions, the negative sentiment is feeding on itself."

Palm oil closed below 3,000 ringgit a ton on Jul 29 for the first time since Dec after a drop in crude oil reduced the appeal of biofuels made from vegetable oils.

"We could go down a bit further from here," said Chris de Lavigne, a vice president at consulting firm Frost & Sullivan Inc Jul 29. "I see 2,700 ringgit as a floor."

Vegetable oils, used mainly in food, often track crude oil prices. Crude fell to US$122.10 a barrel today and is 17% below its Jul 11 peak of US$147.27.

Palm oil historically trades at a discount to soybean oil.

Soybeans declined on speculation rainfall forecast for the US Midwest will ease heat stress on plants, and as imports from China, the largest buyer, may slow after a possible state sale of soybean oil. Midwestern states in the US may get as much as 1 inch of rain next week, Meteorlogix LLC said in a report yesterday.

In China "domestic vegetable oil supply is very sufficient, so the market will remain weak in the short run," the China National Grain and Oils Information Center said in a daily report.

Soybean oil prices dropped 12% in Jul. Still, soybean oil costs 43% more than palm oil. The premium was as high as 46 % on Jul 28, the most since Jul 17 '06, according to data on the Bloomberg. The two commodities are substitutes.

Will the Bright World takeover deal fail?

Bright World Precision down 16.4% at $0.435 on above-average volume, extending recent weakness as investors increasingly worried US-listed China Holdings Acquisition's takeover deal will fail. Latter unveiled $0.70/share offer for stamping machine, metal component maker last week, sending stock to 9-month high of $0.665. But shares down almost 22% since deal announced Jul 22.

"Judging by the share price pattern over the past week, it appears that some investors may not be confident that the deal will go through given the numerous hurdles," says Kim Eng.

Among conditions, Bright World's quarterly, full-year net profits for periods ending Jun, Sep, Dec '08 can't fall by more than 10% on-year; also, not more than one-third of buyer's public shareholders can redeem their IPO shares for cash.

Downgrades on Lian Beng

Westcomb downgrades Lian Beng to Hold from Buy, cuts target price to $0.255 from $0.83 based on sum-of-parts valuation. Lowers FY09-10 earnings forecasts 65%-75% to reflect reduced margins due to rising construction costs, fewer contracts given industry-wide delay in property launches, absence of contributions from group's property development business. Says fiscal FY08 earnings of $11.9 million 50% below Westcomb's forecast.

Kencana Agri

Kencana Agri is an Indonesian crude palm oil (CPO) and crude palm kernel oil producer.

Kencana has crude palm oil and crude palm kernel oil plantations in Sumatra and Kalimantan. It also operates a bio-mass power plant on Bangka Island, Sumatra that sells most of the electricity generated to state-owned utility PLN. The group counts India, China, Malaysia and Vietnam among its customer areas. Its crude palm oil and crude palm kernel oil are also sold in Indonesia.

For FY2007, net profit was US$39.2m, more than doubling from US$14.84m the year before. Revenue was US$69.28m, up 69.7% from US$41.1m previously, on increased contributions from plantation and bio-mass business. Most revenue (99.7%) came from plantations, as the bio-mass power plant only started operating in 2007.

The group aims to capitalise on expected strong demand for crude palm oil and crude palm kernel oil by expanding its plantations, building more processing facilities and relying on new technology. It aims to increase its planted oil palm area from 24,349 hectares to over 80,000 ha in the next 5 years. It is also looking to develop complementary businesses. A second bio-mass power plant with generating capacity of 7.5 megawatts is under construction and expected to come on stream in 2009.

On potential risks, Kencana Agri says expansion plans could be scuppered by events beyond its control, such as government policies limiting its ability to obtain adequate rights to land suitable for plantations or an inability to obtain certification. Kencana is in the final process of obtaining certification for 42,640 hectares of land - close to 50% of its total land bank.

Fundamental Analysis on China Zaino

Following the TA, here's the fundamental analysis (FA) on China Zaino.

China Zaino designs, develops, manufactures and sells backpacks and luggage under its proprietary DAPAI brand. According to Frost and Sullivan, DAPAI is the leading brand for double-strap backpacks in China, with a market share of 35.8% in terms of revenue in '06, way ahead of number 2 brand Jinhou which has a market share of 4.3%.

It has won awards including: "Top 500 Asia Valuable Brand Award" and "2006 Top 12 Bags Brand in China".

China Zaino has an extensive distribution network in China, with over 3,000 concessionary retail outlets in 26 provinces, municipalities and autonomous regions in China.

Based on '06 financial figures, the offer price of $0.60 was at a PER of 7.91x. Based on FY08 forecast, the IPO price indicates a post-dilution forward PER of 9.0x. Between FY04 and FY06, its net profits grew at a compounded annual growth rate (CAGR) of 87.7%, from RMB54.8m to RMB193m. For the first 9 months of FY07, it achieved a 56.6% growth.

Demand for bags is robust in the PRC, owing to a growing Chinese population and increased domestic and international travel. Armed with net IPO proceeds of RMB410m, Zaino will be expanding its production capacity to satisfy demand in China.

CIMB forecast a 3-year earnings CAGR of 37% for FY08-10. Their target price is $0.95, set at 7x CY09 earnings, which represents a 50% discount to average valuations for Chinese retailers, in view of the slower growth of the backpack and luggage industry, compared with sporting goods.

Technical Analysis on China Zaino

Technical Analysis (TA) on China Zaino.

China Zaino has been bearish since peaking at $0.64 in 6/08. Has been unable to break above the 10-day Moving Average since then. It's moving in a downtrend channel with supports around $0.35 and $0.32. Resistances around 0.43, $0.46, $0.47 and $0.495.

More TA at SharePortal.

High yield plays

Singapore's resilient, high yield plays look good defensive bet, says CIMB. "High yields, we believe, would be a much stronger argument in a low growth and negative real interest rate environment. Add on the still-present EPS risk, yield becomes that much more attractive," says broker in note. Adds Singapore stands out as comparatively attractive in region as dividend yields far superior to deposit rates.

Says investors can use buy-and-hold strategy or trade dividend ex-dates buying stocks just before ex-date, selling them just after. Notes, Ascendas REIT, Ascott Residence Trust, Cerebos Pacific, Rotary Engineering, SPH as top picks for strong yield, limited downside earnings risk.

GMG Global looking at African expansion in the long term

Long term, GMG Global is looking at the vast continent of Africa to address shortage in supply of arable land in today's agro-economy. Africa covers more than 20% of the world land area.

For fund managers, other than vast natural resources, Africa's beauty lies in its infancy stage of economic development.

GMG has a market cap in excess of $400 m.

Natural rubber (NR) prices were about US$1,000 a ton 3-4 years ago. Now prices have broken past US$3,000.

A plantation has different stages: not all trees are mature for tapping. Some are getting old and need to be felled while others are still growing. During the first 7 years, the rubber trees are still growing and not yet mature for tapping.

In Africa where GMG operate, costs are denominated in Euro. Rubber is sold in USD and Euro. Thus, appreciation of the Euro inflates their costs. Nevertheless, rubber plantations in Africa are much more lucrative than in Indonesia or Thailand. In the Ivory Coast for example, there is a well-regulated price mechanism set by its government for smallholders and processors to reap the upside of increase in rubber prices.

Demand for synthetic rubber (SR) is 12 m tons a year, compared to 10 m tons of NR. That 55:45 ratio has been stable over the years.

68% of NR goes into automobile tyres. Each group has its unique end users with the exception of car tyre makers. Saloon car tyres are made of both SR and NR.

Yields in Africa are more than 50% higher than in Indonesia. In Indonesia, each hectare yields an average of 1.3 tons of rubber a year.

Smallholders are relatively inefficient; each hectare yields 0.6 tons a year to a maximum of one ton. This is because they do not have prime seedlings, lack fertilizers and may employ an inefficient tapping system. Further, they spend minimal effort in maintaining immature plantations.

In assessing tree yield, other than making sure formulae are comparable, one should adjust for worker productivity and occurrence of brown trees (for which latex supply have dried up).

Source: NextInsight

Apac Coal

I'm really disappointed with Apac Coal and Magnus Energy. Magnus Energy' subsidiary listed on ASX on 10 Jul, but on Apac Coal's website it displayed 8 Jul. No mention was made on this until today!

Response on the IPO has been poor, maybe due to poor market sentiment. 75m new shares at A$0.20 each were offered, but only 35.727m have been issued. Thus just exceeding the minimum subscription level of A$7m. Yesterday, it trading to a low of A$0.13, way below its offer price!

This brings the total number of issued shares to 249,705,637. The listing of Apac would dilute Magnus's equity interest in Apac to approximately 55.78%.

Coal stocks

OCBC, which has Buy calls on Straits Asia Resources (SAR) and Noble, says pullback in coal prices not expected to weigh on Noble as coal accounts for only about 10% of its revenue. Notes impact on SAR's FY08 earnings also immaterial as all of its current-year sales have been contracted. Keeps $2.76 fair value on Noble, $4.80 on SAR.

SAR' FY08 earnings unlikely to be hurt even if coal prices fall further, although outlook for FY09 may be less rosy, says OCBC analyst; "for 2008, they are quite safe because they have locked in pretty much 90% of their contracts. FY09 would be a little bit of a problem since they've only got a very small percentage of coal that they've sold off." But notes, even if coal prices weaken, impact can be mitigated "partially" if production levels increase, "which I think would."

The stock has been falling, as sentiment spooked by sudden fall in coal prices in Europe. Analyst says plunge in spot prices "very strange" as demand remains strong; "it could have been a very large one-party or two-party contract being dumped all of a sudden in the market for whatever reason, causing this spill-over effect."

DMG report on First Resources

The present macro environment as still being conducive for high cude palm oil (CPO) price. High crude oil price around US$140/bbl, high soybean oil prices (around 65 US¢/lb) as well as forecasted growing global demand for palm oil should help support current CPO price at around RM3,400-RM3,500/tonne. USDA estimates global consumption of palm oil to be 40.18m tones for 2007/08, up from 37.17m tones the previous year.

First Resources (FR) is focused on the upstream portion of the industry's value chain and hence can capture the upside of current high CPO prices. This is as evidenced by FR's gross and EBITDA margins of approximately 73% and 70% respectively in 1Q08. EBITDA grew at a CAGR of 56.6% between '04 and '07 and was up 220.2% yoy in 1Q08.

Being relatively new to the oil palm plantation scene, FR has an attractive maturity profile of oil palms. Their weighted average age of plantings is 7 years in FY07, which is classified under the peak production age group. 61% of FR's planted area is in the "prime" category (7 to 18 years) and 11% is in the "young" category. As these "young" trees mature over the next few years, fresh fruit bunch (FFB) and CPO production will rise with minimal increases in costs or capital expenditure.

With the global trend of higher consumption and usage of palm oil and the present high CPO price of about RM3,500/tonne, FR will continue to enjoy the present conducive environment, with its young weighted average age of trees. DMG are reiterating their BUY call and fair value of $1.43 (13x FY08 PER).

Analysis on GMG Global

Here's the technical analysis (TA) on GMG Global.

The upper band A'B' of the uptrend channel provided support at $0.195. This also coincided with the long white candlestick on 28/4. This is bullish as GMG had retraced less than 50% of its surge from $0.135 to $0.24. From there, it broke out of its Pennant Formation and began its next leg up. MACD is showing a golden crossover and RSI is displaying positive divergence. Resistance is set around $0.27 in proximity to the upper band C'D'.

Jaya

CLSA downgrades Jaya Holdings to Underperform from Outperform as stock had breached its unchanged target price of $1.60. Says no potential for time being to upgrade shipbuilder's earnings forecasts; "we fear that the company's earnings will actually be coming under pressure with an expected oversupply of AHTS vessels in '09 that will have a negative effect on charter rates and vessel prices." Adds margins will also be hurt by rising raw material costs.

FerroChina

Credit Suisse is arranging a US$200 m loan for SGX-listed steelmaker FerroChina to refinance debt and for other corporate needs, banking sources said Tue. The 3-year syndicated loan will offer 450 basis points above the London Interbank Offered Rate (LIBOR), one of the sources briefed on the deal told Reuters.

FerroChina, which makes galvanised steel in China, is widely seen as a takeover target after it appointed Merrill Lynch as an adviser to look at strategic options for the firm. FerroChina was not immediately available for comment.

"In current market conditions, this should be bearish news as US$200 m will add to gearing," said a dealer at a local broker. "Previously the firm also issued some convertible bonds, so market investors may view it as negative news because of its over-gearing, and it looks like their debt-level is pretty high."

FerroChina's long term debt-to-equity ratio is 0.19, which is higher than most other SGX-listed steel firms. In May, Chinese media reported that Australia and Russian firms are eyeing at least a 20% stake in the China-based company.