• Maintain BUY with lower SOP-based Target Price of SGD3.51 from SGD3.59, 12% 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 2018-2019 to MYR2,400-2,500. 
• Our earnings have been cut by 6-8% for 2018F-2020F. On soybean, we note that Brazilian soybean prices have risen and are now at a 20% premium to US soybean prices. However, we believe Wilmar can still generate positive crush margins even at these price levels.

Trade War Still Affecting Sentiment for CPO

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 head towards the seasonal peak output period. 

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

Source: RHB Invest Research - 02 Aug 2018