Palm Oil Stocks are ‘Attractive,’ Morgan Stanley Says

(Bloomberg) -- PT Astra Agro Lestari and Golden Agri-Resources Ltd. were among palm-oil stocks that were rated “overweight” in new coverage at Morgan Stanley, which said the industry is “attractive” given the outlook for prices.

The brokerage also initiated coverage of Indofood Agri Resources Ltd. and Kuala Lumpur Kepong Bhd. with “overweight” recommendations. It has an “equal-weight” rating for Sime Darby Bhd. and an “underweight” rating for IOI Corp. Golden Agri led gains by most of the shares, surging 11 percent at 12:28 p.m. in Singapore.

Palm oil prices may rise to $800 a ton in 2010, given the use of existing stockpiles, prices of soybean and rapeseed oil, and the prospects of an El Nino weather pattern occurring, Morgan Stanley said. October-delivery palm oil traded at 2,394 ringgit ($681) on the Malaysia Derivatives Exchange today.
The “upside is in the upstream, as high crude palm oil prices favor this segment most directly,” Morgan Stanley analysts Conrad Werner and Miang Chuen Koh wrote in a report today. “We also see upstream cost pressures easing in the second half of 2009, mainly on the fertilizer side.”

Astra Agro, Indonesia’s biggest plantation stock, rose 4.3 percent to 22,000 rupiah, poised for the highest close in more than a year. Golden Agri, the world’s second-biggest palm oil producer, jumped 11 percent to 47 Singapore cents, while Indofood Agri gained 8.6 percent to S$1.65. Kuala Lumpur Kepong climbed 0.8 percent to 12.80 ringgit, while Sime Darby and IOI were little changed.