DBS sees weak Q1 for palm oil firms

Stock Name: IndoAgri
Company Name: INDOFOOD AGRI RESOURCES LTD.

Research House: DBS Vickers

Price Call: BUY

Target Price: 1.65

DBS Vickers said it expects Singapore-listed palm oil firms to report weak first quarter earnings, in line with their Indonesian peers.

Palm oil companies in Indonesia were hurt by low yields in January-March, due to the lagged effects of poor weather conditions in the first half of 2010, as well as rising costs and maturing farmland.

DBS said investors should take profits in First Resources, but build positions in Wilmar International, the world's largest-listed palm oil firm.

Palm oil firms are set to report earnings over the next few weeks, with Wilmar announcing its results on Thursday and First Resources on May 15.

DBS expects palm oil firm earnings to improve from the second half, however, due to a recovery in palm oil output and demand in the second and third quarters.

DBS has upgraded Indofood Agri Resources to buy from hold and raised its target price to $1.65 from $1.55, citing low price-to-book valuations.