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.