PLANTATION SECTOR

16 March 2016

Malaysia imposes CPO export tax

OVERWEIGHT

Sector report
Gan Huey Ling
gan-huey-ling@ambankgroup.com
03-2036 2305

Quick Take

Published by
AmInvestment Bank Bhd (23742-V)
(A member of the AmBank Group)
15th Floor Bangunan AmBank Group
55 Jalan Raja Chulan
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Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
Fax: (03)2078-3162
Printed by
AmInvestment Bank Bhd (23742-V)
(A member of the AmBank Group)
15th Floor Bangunan AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
Fax: (03)2078-3162

Rationale for report: Sector update

Malaysia has imposed an export tax of 5% on CPO on a base price of RM2,500.34/tonne for
the month of April 2016.
The export tax has been zero since May 2015 as the average CPO price was below
RM2,250/tonne. There were instances when the government did not impose the export tax
when the average CPO price was above RM2,250/tonne as it wanted to assist the industry.
The imposition of the export tax would help Malaysian refiners compete with their Indonesian
peers as it would help lower the cost of feedstock by about RM125/tonne or US$30/tonne.
Currently, Indonesian palm refiners have a cost advantage over Malaysian refiners as CPO
prices in Indonesia are 13% to 15% weaker than prices in Malaysia.
The price differential between CPO in Indonesia and Malaysia expanded since the imposition
of the export levy in Indonesia in July 2015.
As a gauge, the difference between IJM Plantations average CPO prices realised in Indonesia
and Malaysia widened from RM170/tonne in 9MFY15 to RM255/tonne in 9MFY16.
We also believe that the export tax would spur more palm oil to be shipped out this month
before the tax takes place in April 2016.
SGS and Intertek had conflicting numbers on Malaysias palm oil shipments in the first 15
days of March 2016.
SGS reported that Malaysias palm oil exports inched down by 1.1% mainly due to a 52.9% fall
in shipments to European Union (EU). On the other hand, Intertek said that Malaysias palm
oil shipments climbed by 10.6% in the first 15 days of March compared with the same period
in February.
Plantation companies with palm refining operations in Malaysia include IOI Corporation,
Kuala Lumpur Kepong and TSH Resources. Genting Plantations palm refinery in Lahad Datu
is expected to be completed in 4Q2016. We have BUY recommendations on these companies.

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report
may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy
any securities. The directors and employees of AmInvestment Bank Bhd may from time to time have a position in or with the securities mentioned
herein. Members of the AmBank Group and their affiliates may provide services to any company and affiliates of such companies whose securities
are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has
been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it
should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates
included in this report constitute our judgement as of this date and are subject to change without notice.
For AmInvestment Bank Bhd

Benny Chew
SR VP Equity Research

16 March 2016

Plantation Sector

TABLE 1 : REGIONAL VALUATION COMPARISONS

FY16F

PE (x)
FY17F

FY18F

Dividend Yield (%)

FY16F
FY17F
FY18F

FY16F

ROE (%)
FY17F

Indonesia
PT Astra Agro
PT Bakrie Sumatra
PT London Sumatra
BW Plantation
Gozco Plantation
PT SMART
PT Salim Ivomas Pratama
JA Wattie
Provident Agro
Multi Agro Gemilang
Austindo Nusantara
Dharma Satya Nusantara
Sampoerna Agro
Sawit Sumbermas
Simple average

FY18F

16.1
16.1
33.9
12.3
13.8
12.5
23.2
18.3

13.9
13.6
18.4
8.6
10.0
8.3
19.9
13.2

13.5
13.4
7.0
21.3
13.8

1.8
2.2
0.0
3.8
1.7
0.9
1.7

2.6
2.6
0.0
3.0
1.9
1.0
1.8

3.5
2.9
3.0
1.4
2.7

14.4
9.8
2.5
3.2
13.1
9.7
24.1
11.0

14.5
10.1
5.0
4.7
15.9
9.6
23.1
11.8

13.8
9.9
6.4
19.6
12.4

Singapore
Wilmar International
Olam International
Noble Group
Golden Agri Resources
Indofood Agri Resources
Kencana Agri
First Resources
Bumitama Agri

12.2
11.2
6.1
17.2
12.0
15.2
10.9

11.3
9.9
5.0
14.0
7.8
11.9
8.8

10.4
14.7
5.1
12.7
7.5
9.4
9.0

2.7
2.9
3.6
2.0
1.0
1.9
1.1

3.2
3.2
3.9
2.7
1.6
2.2
1.5

3.5
2.3
3.3
2.7
5.3
2.7
2.7

7.6
8.6
7.8
2.8
3.9
14.9
17.7

7.9
9.1
8.7
3.9
6.3
18.0
19.6

8.3
6.1
10.0
4.0
6.1
19.0
18.2

Simple average

12.1

9.8

9.8

2.2

2.6

3.2

9.0

10.5

10.3

Malaysia
Genting Plantations
IJM Plantations
United Plantations
IOI Corporation
Kuala Lumpur Kepong
Felda Global Ventures
Kulim
Sarawak Oil Palms
TH Plantations
TSH Resources
Sime Darby
Sarawak Plantations
TDM Bhd
Ta Ann Holdings
Jaya Tiasa
Hap Seng Plantations
Simple average

26.4
32.5
18.0
28.2
24.1
24.3
48.4
14.7
11.0
20.8
25.7
16.1
9.6
13.6
16.4
22.0

22.0
20.6
16.2
24.6
21.5
17.8
36.0
11.8
7.3
17.9
20.5
13.0
9.2
10.8
13.4
17.5

19.3
16.6
23.3
20.5
14.2
39.2
11.7
15.0
15.8
17.6
7.8
8.6
10.1
12.4
16.6

0.8
1.9
3.8
2.1
2.5
2.9
3.6
1.4
1.6
1.3
2.7
2.4
4.8
1.2
4.4
2.5

1.0
2.5
3.8
2.4
2.6
3.7
0.6
1.6
2.3
1.6
3.3
2.8
5.1
1.4
5.1
2.7

1.0
3.0
2.4
2.8
5.2
1.9
2.2
1.8
3.6
3.8
5.3
1.5
5.4
3.1

7.6
6.7
19.3
12.3
3.6
2.2
9.1
2.8
9.9
6.2
4.6
14.7
5.6
5.8
7.9

8.6
9.1
20.2
11.8
5.1
2.4
10.5
4.1
11.0
7.7
5.6
14.0
6.7
6.7
8.8

9.2
10.3
20.3
11.7
5.6
2.8
10.1
4.9
10.5
8.6
8.5
13.9
6.7
6.7
9.3

Source: Bloomberg

AmInvestment Bank Bhd