15-30% consesus is too high.
According to Macquarie, it sees the upstream crude palm oil (CPO) sector entering a prolonged downgrade cycle: we expect CPO prices to fall short of consensus expectations on burdensome supply, while planters‟ costs continue to surprise on the upside, driven by rising labour costs in Indonesia.
GGR is a key Underperform, as consensus looks ~20% too high for 2013. That is the second biggest gap we see amongst FSSTI constituents.
The midstream traders look only marginally better positioned, as most have already undergone wrenching earnings revisions through 2012. We think Wilmar can surprise positively when it reports 4Q12 results but see few catalysts to drive consensus 2013 expectations up from today‟s levels.
We expect a weak 4Q12 from Noble, although results should improve from 2Q13.
For Olam we foresee several tough quarters ahead. Its M&A programme is simply not living up to expectations, and the well publicized, negative Muddy Waters report will have likely impacted Olam‟s legacy middleman trading business. We think consensus is 15-30% too high for FY13-14 (years ending in June).
That is the biggest gap we see amongst FSSTI constituents.
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