IOICORP

Some morning news from broker house :-

IOI’s share price has fallen -30% since our SELL call on Apr08. We now raise IOI to a
HOLD (PT, RM4.80), given our expectation of a short-term technical rebound on CPO
prices, and IOI’s close predictive share price relationship to CPO. We see a short-term
arbitrage opportunity in CPO because CPO has grossly under-performed crude oil (-40%
from peak, vs. crude oil’s 20%), on very marginal changes in fundamental CPO data
points.
However, longer-term, we do not advocate a buy-and-hold strategy on plantations due to
structural issues facing crude oil (global economic slowdown; marginal supply cost of
USD60/bbl vs. USD110/bbl current price).