Golden Agriculture

I like what I see in Golden Agri\'s chart. Higher low formed early this week. Higher lows also formed on the MFI and OBV, indicating buying momentum and continuing accumulation. I see the brim of an interim base formation at 50c. Price has only gone above 50c on 3 occassions since middle of August. A convincing breakout above this formation will have to overcome a declining 100wMA which is at 52c next week. We might see this happening quite soon. If CPO hits RM3,000 in Q1 2010, a price target of 60c for Golden Agri is realistic.

Buy signal seen on the MACD in the daily chart. Price action today is, unfortunately, a bit weak. However, momentum is still good and accumulation is continuing in the shorter term. Over the longer term, the pickup is a bit milder. Price should largely stay between the rising 200wMA at 47.5c and the descending 100wMA at 52c this week until it breaks either way. I believe that the probability of a breakout upwards is higher.

This from CIMB, 9 Dec: We believe the worst is over for the plantation sector and project higher earnings for the companies in 4Q09 and 2010 due to higher selling prices, rising output and lower operating costs. We retain our CPO price forecasts and earnings numbers for all the plantation companies in our coverage and continue to OVERWEIGHT the sector due to our bullish view on CPO price and the improving earnings prospects. Our key picks in the region are Golden Agri, Indofood Agri and Wilmar in Singapore, Astra Agro, Sampoerna Agro and London Sumatra in Indonesia and Sime Darby in Malaysia. Factors that could extend the re-rating of the sector are rising CPO price, better-than-expected earnings and M&A activities. Any weakness in prices would provide an opportunity to accumulate. If Golden Agri goes to 46c, for example, I would buy more.

OCBC Investment Research, 10 Dec: Upgrade Golden Agri Resources(GAR)to BUY with S$0.58 fair value. In line with the recent re-rating of CPO stocks on the SGX, we note that the average forward PER has risen to around 14x. Applying a similar valuation to our FY10F EPS, we derive a fair value of S$0.58 for GAR. Given that the outlook for CPO has also improved, we upgrade our rating to BUY.

Crude Palm Oil (CPO) has been forming higher lows in the last 12 months. It is up by RM57 in today\'s session and closed at RM2,587, up 2.25%. This means that it has successfully tested the neckline of a double bottom formation. The new support for CPO is established at this neckline at around RM2,510. A retest of the 12 months high of RM2,790 is likely in the next few months. In such a case, I continue to like Golden Agriculture for its high leverage to the price of CPO.

Steaven Halim, a secretary of the Indonesian Palm Oil Producers (GAPKI), said Wednesday CPO producers were optimistic that CPO prices would go up early next year pushed by increased demand as part of the positive impacts of the recovering global economy. “As long as there is no new crisis, we are expecting that CPO prices will hover at least at US$800 per ton in the first quarter of 2010.” The remarks follow earlier predictions by Oil World, an independent forecasting service for oilseeds, oils and meal, whose analyst Thomas Mielke said prices would be supported by rising demand as production of vegetable oils from other plants such as soybean would decline due to unfriendly weather in several parts of the United States. 17 Dec 09, The Jakarta Post

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CPO up RM34 (1.31%) to RM2,620 today.