• Maintain BUY with lower Target Price of SGD0.80 from SGD0.85, 15% upside. 
• We believe CPO prices have overreacted negatively to the trade war and expect to see some respite in 4Q18, post seasonal peak. However, given the larger-than-expected price reaction, we are cutting our CPO price assumptions for 2018F-2019F to MYR2,400-2,500. 
• Our earnings have been cut by 9.2% for 2018F and 12-13% for 2019F-2020F. Our valuations have been rolled over to 2019 with a lower P/E target of 11x from 12x, based on regional sector valuations.

Trade War Still Affecting Sentiment

Negative sentiment surrounding the trade war and the recent strength of the MYR have resulted in CPO prices falling to low levels of MYR2,100-2,200/tonne. While we think the negative reaction is overdone, we do not expect much price recovery over the next few months, as we continue to head towards the seasonal peak output period. 

We expect some price recovery in 4Q18, once the peak production period is over and the real impact of the trade war starts to come through.

Source: RHB Invest Research - 02 Aug 2018