INDOFOOD AGRI to gain from 1Q10 CPO shortage
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Oil palm kernel.

Analysts: Tan Ting Min, Teddy Oetomo, Su Tye Chua

CREDIT SUISSE’S top pick in the agribusiness sector for 2010 is Indofood Agri, whose upstream business in oil palm plantation stands to benefit when oil prices rebound.

The broker predicts that palm oil prices will average RM2,500 in 2010, up 11% year on year.

”We believe palm oil prices, which will be firm in 1Q10, will be unsustainable in 2Q.” – Credit Suisse

The broker believes that palm oil prices, along with other vegetable oil prices will remain relatively firm in 1Q10 for the following reasons:
1) low stock-to-use ratio for vegetable oils,
2) weak production period for palm oil,
3) demand from China and India picking up, and
4) global biodiesel demand increasing with the mandatory blends.


However, palm oil prices will be under pressure in 2Q10 for the following reasons:
1) ample supply from the South American record high soy crop, and
2) palm oil production picking up from March 2010 onwards and continuing its upward trend until October/November 2010.


At S$2.06, Indofood Agri was Credit Suisse’ top pick because of its relatively undemanding valuation.

Credit Suisse has an outperform rating on Indofood Agri with a target price of S$2.35. 

It market weights the Singapore agribusiness sector.


The stock has since moved to S$2.14, implying an upside of 10%.


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OCBC Investment Research : NOBLE to outperform peers
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OIR's Lee Wen Ching likes Noble for its consistence outperformance.

Analyst: Lee Wen Ching

OCBC Investment Research reiterated its ‘Buy’ call on Noble Group on 7 Dec, raising target price to S$3.73 (previously S$3.17).

The stock last closed at S$3.14, implying an upside of 19%.

”We see room for further upside as consensus estimates have yet to catch up with the commodities supply chain management group's vision of doubling its net profit in two to three years.” – Lee Wen Ching, OCBC Investment Research

Ms Lee believes that Noble's next leg of growth will be spurred by its enlarged asset base.

The group has invested in several assets with the objective of enhancing its low cost sourcing capabilities, integrating its supply chain and increasing its processing capacity.

Recent capital investments include Gloucester Coal, terminals in Brazil, a sugar refinery in Brazil, and a soybean crushing plant in Argentina, to name a few.

Its enlarged capacity to is expected to support volume growth.

Its higher capacity will also enable it to capture the revival in demand as global economies recover.

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