Dec 5, 2011

Accumulate Tradewinds (TWSPLNT)

TWSPLNT stock code 6327 Tradewinds Plantation Berhad  (TWSPLNT)  is  an  investment  holding  company. The  company,  through  its subsidiaries, cultivates oil palm,  rubber, and animal husbandry, processes palm oil and kernel, and provides landscaping consultancy, design, and contract works. tradewinds-technical-analysis

TWSPLNT  reached a  significant major Wave 4  low at RM2.65 on 8 August 2011 with grossly oversold and bearish chart signals. Due to all its positive indicators, it is likely to surge to its obvious upside Wave 5 targets (of RM4.68 and RM5.42) and resistance levels above. ACCUMULATE (TECHNICAL) on dips for TWSPLNT, with stop-loss at RM3.49. 

The  daily,  weekly  and monthly  indicators  (like  the  CCI,  DMI, MACD,  Stochastic  and  Oscillator)  are  firmly positive and now depict the fine indications of TWSPLNT’s prolonged price strength. We expect TWSPLNT to remain very firm on any weakness to its support levels of RM3.51 and RM4.17. Our technical upside targets for TWSPLNT are RM4.68 and RM5.42. Stop-loss is at RM3.49.

Looking  at  the  different  sectors, we  noted  that  the  plantation  sector  had  been  resilient  despite  the  recent global  and macro-economic  woes. What  is more  interesting  is  that  the  share  price  of  smaller-capitalized plantation players had performed nicely. With the CPO 3-month futures prices hovering around the RM3,000-level, we  feel that investor sentiment for  the plantation sector will remain optimistic for  the short-term. Of the smaller-caps stocks, we continue to like TWSPLNT Berhad (TWSPLNT) for its strong price momentum.

On the fundamental aspect of TWSPLNT, we refer to their 3Q results announcement.  The group recorded an increase in revenue of 39.6% YoY from RM238.8m to RM333.5m and correspondingly saw a rise of 96% YoY (from RM50.3m to RM98.8m) in their quarterly net profit numbers as well. TWSPLNT attributed the increase to firmer CPO prices traded and also a rise in the production of palm products. 

Maybank  IB  does  not  have  coverage  on TWSPLNT. Consensus  data  according  to Bloomberg  reveals  that only 2 research houses have coverage on TWSPLNT and both houses have a Buy or Outperform call, on the stock with an average consensus target prices of RM4.13. Consensus estimates TWSPLNT to trade at a PER of 7.7x for FYE2012 and 7.0x for FYE2013. The indicated dividend yield for the stock is around 2.42%.

by Maybank Investment Bank