JPMorgan: 3 mar Sime (overweight)

Sime Darby now has the highest upside potential based on our price
target: In absolute terms, the stock has not done much since its first day
of re-listing in late November. Relative to the KLCI, Sime has outperformed
by 6% while KLK and IOI have outperformed by over 20%.

CPO prices have continued to head north, up 30% since late Nov. and
a further 13% in the past two weeks to just under M$4,000/t (3-to-6-
month futures: M$4,300/t). While a short-term correction may be due,
we expect prices to stay above M$3,000/t until 2010 due to the tight
supply of substitute soybeans, the continued fight for acreage with corn,
and the strong demand for food purposes from China and India. Our
CPO price assumptions of M$3,150/t for 2008 and M$3,000/t for 2009,
upon which our valuation and price target are based, provide ample
buffer for any short-term easing in CPO prices, in our view.

Encouraging trends from plantations in 1H FY08 results: In 1H
FY08, plantations showed strong FFB growth (+10% Y/Y) and yields
which management attributes partly to early signs of improved practices
from its integration (largely due to recovery from yield stress the year
before). Sime's CPO yields of 4.14% in FY07 provide ample room for
improvement in the long term versus IOI's and KLK's 5.0-5.7%.

Upgrade to OW: We maintain our Dec-08 PT of M$13.40 based on a
derived 7% discount to our SOTP value of M$14.40. Stripping out the
non-plantation business, the market at current levels is assuming a longterm
CPO assumption of US$788/t for Sime versus the long-term historic
CPI/inflation adjusted average of US$977/t. Key risks to our PT are cost
overruns and less favorable terms for the multi-billion Bakun project.