KUALA LUMPUR: JF Apex Research's top pick for the plantations sector are IOI Corporation (Target price: RM6.12) for its undemanding valuation and less exposure to the current downside risk for CPO price.

It said on Tuesday that also on its top pick list is IJM Plantations (Target price: RM3.50) for its strong earnings contribution from Indonesian estates.

The Malaysian Palm Oil Board (MPOB) released palm oil statistics for May on Monday.

JF Apex Research said CPO production continued to pick up in May. CPO production accelerated in May at 8.73% on-month after registered 5.07% growth in April.

“Quantum of CPO production growth in May was within our expectation of 7%-10% growth in view of CPO production to normalise starting from 2Q12,” it said.

It said CPO production in May plunged 20.56% on-year mainly caused by tree stress following bumper harvest in 2011.

“We continue to believe CPO production growth for full year 2012 would be soften, estimated to grow at between 2% and 4% (19.46 million tonnes) against 11.29% (18.9 million tonnes) growth in 2011,” it said.

JF Apex Research maintained a market weight on the sector in view of global economic woes to continue haunt palm oil market; whilst it believes demand for palm oil being the major vegetable oil will be underpinned by the underlying increasing population demand.

“Moreover, we reckon CPO demand is still resilient arise from the upcoming Ramadan in July,” it said.