Plantation stocks comparison

13^th Nov 2024  

Indonesia is the biggest palm oil producer in the world. Indonesia plans to implement biodiesel with a mandatory 40% blend of palm oil-based fuel from Jan. 1 next year, a senior energy ministry official said recently, lifting prices of the vegetable oil to a more than two-week high.

Indonesia currently uses B35, which has a 35% blend of palm oil-based biodiesel, and the government had previously said it would increase the blend to 40% next year without specifying a start date.

"There is no issue in terms of supply volume and other aspects, so we are ready for a mandatory (implementation)," energy ministry senior official Eniya Listiani Dewi said.

When implemented, the B40 mandate could increase biodiesel consumption to up to 16 MM kilolitres (kl) next year from a forecast of 13 MMkl this year, the energy ministry has estimated.

B40 will boost Indonesia's palm oil use for biodiesel to 13.9 metric MMt, from the estimated 11 MMt needed this year with B35, Indonesia's biofuel producers association APROBI had previously estimated.

Domestic palm oil consumption has grown 7.6% on average since 2019, driven in part by policies including biodiesel mandates and compulsory domestic sales for cooking oil, while output has risen less than 1% annually, according to GAPKI data.

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As a result, CPO price is rising so rapidly and all plantation companies are making more and more profit as shown by the CPO price chart below:

Plantation stocks comparison

 MHC Plantations Bhd is a Malaysia-based company. The principal activities of the Company consist of oil palm cultivation, investment holding and the operation of a hotel. The principal activities of the subsidiary companies consist of cultivation of oil palm, operation of quarries, milling and sales of oil palm products, including crude palm oil (CPO) and palm kernel (kernel), investment holding and power generation. Its segments include Plantation, Oil Mill, and Power Plant. The Plantation segment is involved in the cultivation of oil palms. The Oil Mill segment is involved in the milling and sales of oil palm products. The Power Plant segment is involved in the power generation and sale of biomass by-products. Its subsidiaries, Anson Oil Industries Sdn Bhd and Mistral Engineering Sdn Bhd, each owns and operates a biogas power plant that generates electricity by capturing the methane gas from palm oil mill effluent. Its Anson Hotel is centrally located in the town of Teluk Intan.

My comment:

I like MHC because it is selling at the cheapest PE ratio. Moreover, some of its oil palm plantations are located in Telok Intan which have property development potential.