OCBC Investment Research raised its target price on Singapore palm oil firm Wilmar International to $3.06 from $2.90, saying the market is less averse to taking risk after the U.S. stimulus, but maintained its 'hold' rating.
Wilmar shares were down 0.6% at $3.27 on Tuesday. The stock has jumped 9% since the company launched its first-ever share buyback and the U.S. Federal Reserve stimulus sparked a rally in commodities stocks last week.
OCBC said while “the market is adopting a more risk-on approach on the back of QE3”, Wilmar's fundamental outlook is still rather muted. It advised investors to take profit when Wilmar's share price hits $3.40 or higher.
Crush margins in China for Wilmar's oilseeds business remain sub-optimal due to excess capacity in the industry, while prices of soy and other raw materials are still volatile, OCBC said.
It added that cooking oil products could continue to face price freeze given the growing unemployment and inflationary concerns in China. Cooking oil makers like Wilmar could face margin compression due to rising input prices, OCBC noted.
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