Downgrading sector to underweight. Our regional plantation team is downgrading the plantation sector from Neutral to Underweight. We believe a sharp reversal in palm oil price is imminent as palm oil is currently trading at a wide premium to crude oil and the risk of a downturn in prices will continue to increase as production moves out of its low season. Nevertheless, as average palm oil price YTD has exceeded our expectations, we are raising our FY09 average price assumption to RM1,900/tonne from RM1,650/tonne previously and maintaining our industry assumption of RM1,900/tonne for FY10.

Maintaining NEUTRAL for Indofood Agri and SELL for First Resources. In line with the rise in CPO price assumption, our FY09 and FY10 earnings for Indofood Agri Resources (IFAR) are IDR1.08t (+3.7% from previous estimates) and IDR1.29t (+3.3% previously) respectively. IFAR remains a NEUTRAL with a new fair value of S$1.17 (from S$0.95 previously), derived from 10x FY10 earnings. For First Resources (FR), our FY09 and FY10 earnings are IDR394b (+15.6% from previous estimates) and IDR468b (-12.3% previously) respectively. FR remains a SELL with a new fair value of S$0.42 (from S$0.21 previously), derived from 10x FY10 earnings.