- Last week, sector newsflow were in respect of the sale of Mission NewEnergy’s biodiesel plant in Malaysia, potential R&D levy on palm oil in Indonesia and risk of higher import duty on refined cooking oil in India.

- Bloomberg cited a report as saying that Mission NewEnergy has sold its 100,000 tonnes per year biodiesel plant in Kuantan to Felda Global Ventures for US$11.5mil (RM36.2mil).

- This values the biodiesel plant at a replacement cost of US$115/tonne (RM362/tonne). We think that Felda Global would probably export biodiesel from the plant. Based on the latest numbers, price of palm methyl ester in Europe is about EUR770-810/tonne.

- Felda Global might also produce biodiesel for the implementation of B5 in Malaysia. Recall that B5 is expected to be fully rolled out in Peninsular Malaysia from January 2014 onwards.

- Indonesia is studying on whether to impose a levy of US$0.75/tonne (RM2.36/tonne) to US$1.00/tonne (RM3.15/tonne) on palm oil to fund research and development (R&D).

- Impact of this development is not expected to be material. In Malaysia, we estimate that plantation companies pay a cess of RM7.00/tonne to fund MPOB’s (Malaysian Palm Oil Board) research activities.

- Finally, India is considering raising the import duty on refined cooking oil. This is not new. The Indian Government was supposed to make a decision on the import tax rates on vegetable oils in September.

- Refiners in India have been lobbying for the import tax rate on refined palm oil to be increased as they have been squeezed by poor demand and margins.

- The import tax differential between crude and refined palm oil in India is small and this has resulted in buyers importing refined palm oil instead of sourcing them locally.

- Presently, the import tax rates are 7.5% on refined palm oil and 2.5% on crude. We maintain NEUTRAL on the plantation sector. We have a BUY on Genting Plantations.Last week, sector newsflow were in respect of the sale of Mission NewEnergy’s biodiesel plant in Malaysia, potential R&D levy on palm oil in Indonesia and risk of higher import duty on refined cooking oil in India.

- Bloomberg cited a report as saying that Mission NewEnergy has sold its 100,000 tonnes per year biodiesel plant in Kuantan to Felda Global Ventures for US$11.5mil (RM36.2mil).

- This values the biodiesel plant at a replacement cost of US$115/tonne (RM362/tonne). We think that Felda Global would probably export biodiesel from the plant. Based on the latest numbers, price of palm methyl ester in Europe is about EUR770-810/tonne.

- Felda Global might also produce biodiesel for the implementation of B5 in Malaysia. Recall that B5 is expected to be fully rolled out in Peninsular Malaysia from January 2014 onwards.

- Indonesia is studying on whether to impose a levy of US$0.75/tonne (RM2.36/tonne) to US$1.00/tonne (RM3.15/tonne) on palm oil to fund research and development (R&D).

- Impact of this development is not expected to be material. In Malaysia, we estimate that plantation companies pay a cess of RM7.00/tonne to fund MPOB’s (Malaysian Palm Oil Board) research activities.

- Finally, India is considering raising the import duty on refined cooking oil. This is not new. The Indian Government was supposed to make a decision on the import tax rates on vegetable oils in September.

- Refiners in India have been lobbying for the import tax rate on refined palm oil to be increased as they have been squeezed by poor demand and margins.

- The import tax differential between crude and refined palm oil in India is small and this has resulted in buyers importing refined palm oil instead of sourcing them locally.

- Presently, the import tax rates are 7.5% on refined palm oil and 2.5% on crude. We maintain NEUTRAL on the plantation sector. We have a BUY on Genting Plantations.

Source: AmeSecurities