GMG CHIONG tomoro

GMG Global: Merrill Lynch Initiate at Buy with $0.50 TP.based on SOTP, with an implied FY11E PE of 15.5x, and offering a 75% potential upside.

Again BIG eat up, now eat up total 5901 lots at 0.30.......sweeeee... swee.......  

GMG Global up 8.8% after Merrill’s “buy” call

Shares of Singapore’s GMG Global (GMGG.SI) rose as much as 8.8% on Wednesday after Merrill Lynch initiated coverage of the firm with a “buy” rating with a target price of $0.50.

At 10:54 a.m., shares of GMG Global, which owns rubber plantations in Indonesia, Cameroon and Ivory Coast, were 5.3% higher at $0.30 with over 65.9 million shares changing hands.

Merrill Lynch said GMG’s parent Sinochem, being China’s largest rubber trader, will give GMG direct access to the China market, which consumes a third of the world’s rubber production.

“The rubber sector is facing a severe supply shortfall post many years of underinvestment. With the rising demand driven by China and India auto, we expect the rubber price rally to last till 2012,” the brokerage said in a report.

The rise in GMG’s share price comes as Thailand’s Sri Trang Agro cancelled its Singapore secondary listing, citing market volatility.

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CIMB 27 Jan 11

GMG Global (GGL SP; S$0.32) – BUY

FY11P/E: 10x, P/BV: n.a

• The stock broke out of its bullish flag pattern yesterday on strong volume. It also took out its 50-day SMA in the process. This breakout would likely take prices to new highs in the days or weeks ahead.

• Its MACD has just moved back into positive territory while its RSI saw a sharp hook up above the 50-pts neutral mark. Both indicators suggest that there should be follow through buying.

• Traders may opt to buy now with a stop placed below yesterday’s low of S$0.285. One can also place a stop below the support trend line at S$0.28. We expect prices to take out the old high of S$0.345 to test the S$0.365 levels next as long as the S$0.28 level is not breached. The following resistance is at S$0.40.

Rubber Climbs to Near Record as China May Increase Purchases

Feb. 8 (Bloomberg) -- Rubber increased as a price decline yesterday spurred investors to buy amid speculation China, the world’s largest user, may step up purchases after the New Year holiday to replenish stockpiles.

The July-delivery contract gained as much as 2.1 percent to 501.3 yen a kilogram ($6,090 a metric ton) before trading at 499.3 yen on the Tokyo Commodity Exchange as of 11:57 a.m. The most-active contract had the biggest one-day drop since Jan. 26 yesterday, retreating from a record 504 yen reached Feb. 4.

China will resume trade tomorrow after the weeklong holiday. Natural-rubber inventories monitored by the Shanghai Futures Exchange stood at 58,673 tons, 61 percent below last year’s peak of 151,832 tons, the bourse said Feb. 1.

“Rubber is buoyed by expectations that Chinese buying may gather pace,” Kazunori Kokubo, general manager at Tokyo-based broker Yutaka Shoji Co., said today by phone. “The approach of wintering is another support to the market.”

Farmers reduce tapping during the so-called wintering period from February to May, when rubber trees shed leaves and latex production declines. Some plantation areas in northeast Thailand have already entered the low-output season, according to the Rubber Research Institute of Thailand.

Rubber users tend to increase stockpiles of raw material before the low-production period begins in major growing areas. Thai rubber production usually shrinks as much as 60 percent from peak levels, according to the Association of Natural Rubber Producing Countries.

La Nina

Rubber futures have gained 20 percent this year, extending last year’s 50 percent rally, as rising car sales led by China and India improved demand for tires. Supplies from Thailand, Indonesia and Malaysia, the top growers representing 70 percent of global supply, were curbed as a La Nina has led to higher- than-average rains in parts of Southeast Asia. The weather event started in June and usually lasts for nine months or more.

The Thai physical price remained at a record 184.05 baht ($5.97) per kilogram yesterday, supported by car sales and supply concerns, the Rubber Research Institute of Thailand said.
The Shanghai market is closed for the Lunar New Year holiday. May-delivery rubber in Shanghai climbed to a record 41,850 yuan ($6,350) a ton on Jan. 31.

Natural-rubber consumption in China may rise 9 percent to 3.6 million tons this year, while rubber use in India may gain 5.2 percent to 991,000 tons, according to the Association of Natural Rubber Producing Countries.

Natural-rubber output in India, the fourth-biggest producer, gained 2.8 percent in the 10 months through January as favorable weather and record prices boosted production, the state-run Rubber Board said yesterday.

Production totaled 749,950 metric tons in the April-January period, compared with 729,250 tons a year earlier, the board said in an e-mailed statement. Output was 98,800 tons last month, little changed from 97,500 tons a year earlier, it said.

To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net