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Maybank KE Research maintains Neutral on plantations [18-01-2013]  
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Maybank KE Research is maintaining its Neutral outlook on the plantations sector as the valuations reflect the crude palm oil (CPO) price recovery.

"Our regional top BUYs are Sime Darby, Sarawak Oil Palms and First Resources," it said on Friday.

Maybank Research described India's move to impose a 2.5% import duty on crude edible oils as a surprise.

It said this may be marginally negative for India's overall imports of vegetable oils in the short term but continues to favour palm oil over the long run as it is still the cheapest vegetable oil.

"We believe the negatives have been priced-in with yesterday's CPO mild price correction. Nonetheless, we think CPO price recovery may be slightly delayed with this new duty," it said.

Maybank Research said the latest duty hike does not disadvantage CPO significantly as it understands the 2.5% duty hike is also applicable to crude soyoil, crude rapeseed oil, and crude sunflower oil.

"In absolute terms, CPO will now cost RM55 a tonne (or US$18) more based on MPOB's spot CPO price of about MYR2,200 with the new duty.

On the CPO price, it said the third-month CPO futures price corrected 2.1% (or RM52) on Thursday but it believes the negatives have been fully priced in, into the latest CPO price.

"The downside risk of this new import duty on CPO by India is a slight delay in CPO price recovery to RM3,000 by Q2, 2013 (on lower production in H1, 2013 and exports boost following Malaysia's change in CPO export tax structure effective Jan 1, 2013). Nonetheless, we maintain our RM3,000 CPO average selling price forecast for 2013 (2012A: RM2,870)," it said.

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