We had a record ratio of earnings outperformers in our regional plantation sector in 2Q11. This was due to a stronger-than-expected recovery in production and better CPO selling prices. However, earnings might have peaked in 2Q11 for some as CPO prices are expected to trend lower in 3Q11. We retain our CPO price and earnings forecasts for all the planters. We are also staying NEUTRAL on the sector as P/E valuations are not particularly attractive while planters’ earnings growth is set to slow in 2012. Also intact are our Neutral positions on Indonesian and Singapore planters and our Underweight position on the Malaysian plantation sector due to its richer valuations. Our top picks in the region are Wilmar, Golden Agri and SIMP.
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