Plantations (Neutral) - Inventory rises for the first time since Sep

Stock Name: CBIP
Company Name: CB INDUSTRIAL PRODUCT HOLDING

Research House: HLG

Price Call: BUY

Target Price: 3.03

Stock Name: TWSPLNT
Company Name: TRADEWINDS PLANTATION BHD

Research House: HLG

Price Call: BUY

Target Price: 5.04

Plantations (Neutral)
Inventory rises for the first time since Sep

• Palm oil inventory in Feb 12 rose by 2% mom to 2.06m tonnes (for the first time since Sep 11), mainly on the back of: (1) A 12.6% mom decline in exports; and (2) A 42.2% mom decline in domestic consumption, which altogether more than offset a 7.9% decline in production. 
• Exports fell by 12.6% mom to 1.21m tonnes in Feb 12, mainly due to decline from Egypt (-64.4%), Singapore (-8.8%), United States (-19.4%), Pakistan (-69.7%), Netherlands (-16.7%); partially mitigated by higher exports to China (+39%) and India (+2.6%). We believe the decline in exports was partly due to the delay in the issuance of tax free palm oil export quotas, which started only from 7 Feb onwards. This, coupled with lesser working days for the month may have resulted in less CPO being exported.   
• We are keeping our average CPO price forecast of RM3,000/tonne for 2012 as we believe: (1) CPO price will likely weaken once La Nina subsides (expected by mid-2012); (2) The current global economic headwinds may curb demand and prices of palm oil; and (3) Production recovery, expected to begin by March.
• Top picks are CBIP (BUY; TP: RM3.03) and Tradewinds Plantation (BUY; TP: RM5.04).

Source: HLIB Research 13 March 2012