RHB Group Research analyst Hoe Lee Leng has maintained "neutral" on the plantation sector given the continued uncertainty of the export policy in Indonesia.
In her June 9 report, Hoe keeps "buy” on winners of the change in Indonesia’s palm oil export tax structure, which includes Bumitama Agri and Wilmar International.
The Indonesian government will be imposing a new US$200 per tonne special export tax for the domestic market obligation (DMO) exemption to allow companies to obtain shipment permits without having to wait to verify their domestic sales obligation.
This is aimed at speeding up the trade process to ensure producers with overflowing stockpiles can export while farmers can sell their fresh fruit bunches.
Hoe says the addition of the special export tax will be punishing to companies operating in Indonesia which previously did not have an avenue to sell their palm oil domestically. Meanwhile, companies that sell domestically would benefit from the change in tax structure.
“Regulation on the special export policy is set to be issued in one to two days The DMO pricing for crude palm oil (CPO) is now at IDR10,600 per kilogram up from IDR9,300 per kilogram,” says Hoe.
Hoe also notes that the maximum tax and levy has been reduced in Indonesia, assuming the DMO is fulfilled. The Indonesian government has proposed to reduce the combined maximum CPO export tax and levy rate per tonne to US$488 from US$575 to encourage shipments.
The maximum CPO export rate is now revised up to US$288 per tonne from US$200 per tonne, while the maximum CPO levy rate is reduced to US$200/tonne from US$375. No further details on the tax structure and effective date have been announced.
Hoe’s target prices for Bumitama Agri and Wilmar are 95 cents and $5.10 respectively.
See also: RHB still upbeat on ST Engineering but trims target price by 2.3%
As at 11.28am, shares in Bumitama Agri and Wilmar are trading at 76 cents and $4.16 respectively.
Photo: Bloomberg
