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.
Saturday, August 30, 2008
Friday, August 29, 2008
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)
"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.
"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.
Thursday, August 28, 2008
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.
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.
"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.
"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.
Wednesday, August 27, 2008
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."
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."
Monday, August 25, 2008
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."
"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."
Sunday, August 24, 2008
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.
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."
Friday, August 22, 2008
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.
"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$3 b. The figures met expectations, DBS's Santoso wrote.
To be sure, Fordyanto Widjaja, an analyst at Morgan Stanley Asia, wrote in note that he remained bullish on Wilmar's profit outlook as the lower prices of agricultural commodities "is sentiment-driven" and "will be temporary."
"We expect Wilmar's merchandising and processing margin to soften," wrote Ben Santoso at DBS Vickers, who cut his recommendation to "hold" from 'buy." The change was driven by "the deceleration of the renminbi appreciation against the US$, 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.
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.
Monday, August 18, 2008
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.
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.
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.
Thursday, August 14, 2008
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.
"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.
"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.
Sunday, August 3, 2008
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.
Friday, August 1, 2008
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.
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.
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