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Malaysia’s competitiveness for downstream palm oil products is expected to decrease due to the change of Indonesia’s crude palm oil (CPO) and refined palm oil export tax policies, said RHB Research.
Malaysia's competitiveness for downstream palm oil products is expected to decrease due to the change of Indonesia's crude palm oil (CPO) and refined palm oil export tax policies, said RHB Research.
The Indonesian government has, with effect from Sept 21, 2024, abolished export tax rates based on a graduated scale and put into place a fixed 7.5 per cent export tax rate for CPO.
The research house said with this change, Indonesian pure planters will be able to benefit from higher effective CPO prices.
"While the edge that downstream refiners in Indonesia have would widen further, and Malaysia's competitiveness for downstream products would decrease," it said in a note.
In general, RHB Research said all Indonesian planters should benefit from this change in tax structure, given the higher effective CPO prices achievable with the lower export duties, and the wider tax advantage downstream planters would have.
This, it said, together with the revision in Domestic Market Obligation ceiling prices by 12 per cent to IDR 15,700/liter (from IDR 14,000) in mid-August, would help Indonesian planters record higher effective average selling prices (ASP).
For 2025, based on RHB Research's estimated RM3,800 per ton CPO price assumption, this change would improve earnings of the Indonesian and SGX-listed planters by RM116 per ton.
Hence, the firm said the earnings impact is likely to be in the range of 6.0 to 12 per cent per annum, depending on forward sales strategies and percentage of local sales
"Overall, we remain 'Neutral' on the sector. We make no changes to our earnings forecasts for now."
The firm's top pick in Indonesia is PP London Sumatra Indonesia (LSIP), while Malaysia picks remain a mix of pure and integrated planters like SD Guthrie, IOI Corp Bhd, Johor Plantations Group Bhd, and Sarawak Oil Palms Bhd.