RHB Research has maintained its "overweight" rating on the plantation sector due to a potential El Nino weather event and tight supply conditions and rising biodiesel demand in Indonesia.
"Indonesian biodiesel demand is a game changer and a major price catalyst, while the development of El Nino would extend the price uptrend," it said in a research note today.
RHB projects crude palm oil (CPO) prices to hit close to RM3,000 per tonne during the first half of 2014.
The research house's top picks are First Resources at S$2.86 (RM7.36), Astra Agro Lestari at 29,291 rupiah, Golden Agri at S$0.66, and IOI Corp and Jaya Tiasa at RM5.11 and RM2.80 respectively.
Meanwhile, Hong Leong Investment Bank (HLIB) Research has retained its "neutral" call on the plantation sector due to the improved demand outlook and better production cost visibility.
The research house cited the diminishing price attractiveness of crude palm oil and pricey valuations for the sector for its rating.
"We are keeping to our average CPO price projection of RM2,700 per tonne in 2014 to 2015 for now, pending more convincing evidence that supports the potential El Nino event," it added.
HLIB's top picks are Genting Plantations and TSH Resources with target prices of RM12.12 and RM3.12 respectively. – Bernama, March 6, 2014.