Expects CPO prices to hover between RM2800-3200/mt in 2008 Asiatic expects CPO prices to hover between RM2800-3200/mt in 2008, in line with our projections of RM3000/mt for FY08 and RM2900/mt for FY09. It has largely continued with last year's policy of selling on the spot market where the average selling price for the first 3 months of 2008 was above RM3200/mt, having missed out on aggressive forward sales during the two-week window when prices spiked above RM3600/mt. Meanwhile, FFB and CPO production is expected to grow by ~5% in FY08 to about 1.27m tonnes and 265,000 tonnes respectively.
Keeping EPS forecasts unchanged; BUY maintained
We are maintaining our EPS forecasts for FY08 and FY09 although there is potential upside risk to our forecasts if CPO prices stay above RM3500/mt. According to management, every RM100/mt increase in CPO prices will raise plantation EBIT by ~RM25m or EPS by 2.5 sen. Plantations will contribute about 93% to group operating profit in FY08, followed by property development with 5%. We are keeping our BUY recommendation with a price target of RM9.90 based on 18x FY08 EPS of RM0.549.
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Tuesday 1 April 2008
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