Mistry’s top picks are Wilmar, Sime Darby as palm oil surges

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KUALA LUMPUR: Wilmar International Ltd and Sime Darby Bhd were chosen by Dorab Mistry as his top picks among palm oil companies as the director at Godrej International Ltd forecasts prices will rally into next year.

Sime Darby’s recent offer to take over New Britain Palm Oil Ltd (NBPOL) will give the Malaysian group greater access to the European market, while asset-rich Wilmar is probably the best company to buy over in the long term, Mistry told reporters.

Futures may rally to as much as RM2,500 a tonne by March as falling output in the biggest producers reduces inventories, Mistry told a conference in Kuala Lumpur on Wednesday.

The world’s most-used edible oil rebounded from a five-year low in September after Malaysia waived export taxes and production was seen declining in Southeast Asia. Mistry, who’s traded edible oils for more than three decades, said in September that it was a good time to buy palm oil companies, without identifying individual stocks, and reiterated that call at the conference. He listed Wilmar and Sime Darby as top picks in comments to reporters after his address.

“It’s a fantastic company,” Mistry said, referring to Singapore-based Wilmar International. “If you’re looking at something over the long term, it’s probably the best palm oil company to buy. But they need to do a few things for their shareholders, like increase the dividend.”

Sime Darby, the world’s largest listed palm oil producer by market value, on Oct 9 offered £1.07 billion (RM5.6 billion) for London-listed NBPOL to buy plantations in Papua New Guinea. The offer was made at an 85% premium to the target company’s stock price.

“It’s a very bold move, people thought they would not pay such a high price but still I think they will make it work,” Mistry said. “I do feel that Sime Darby has done a very good job by buying New Britain Palm Oil. It’s an excellent company and it gives Sime now a much bigger canvas to play in Europe. And they become the largest company for sustainable palm.”

“We see value emerging,” said Ben Santoso, an analyst at DBS Vickers Securities (Singapore) Pte Ltd.

“I’d prefer those that have collapsed in terms of price in recent months, so those are the ones that I have been recommending,” he said, citing Bumitama Agri Ltd, First Resources Ltd, Indofood Agri Resources Ltd and PT Astra Agro Lestari Tbk as recently upgraded.

“I am happy to repeat that the present is a good time to buy plantation and processing company equities,” Mistry told the conference. “In fact, with my forecast of improved prices for 2015, the timing could not be better.”

This article first appeared in The Edge Financial Daily, on October 31, 2014.