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.
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