RHB Investment Research Reports

Plantation - Another U-Turn in Indonesia

Publish date: Thu, 28 Apr 2022, 10:19 AM
0 2,139
An official blog in I3investor to publish research reports provided by RHB Research team.

All materials published here are prepared by RHB Investment Bank Bhd. For latest offers on RHB Invest trading products and news, please refer to: http://www.rhbinvest.com

RHB Investment Bank Bhd
Level 3A, Tower One, RHB Centre
Jalan Tun Razak
Kuala Lumpur

Tel : +(60) 3 9280 8888
Fax : +(60) 3 9200 2216
  • Stay NEUTRAL. Indonesia has reversed its earlier decision and is imposing a ban of all exports of PO effective 28 Apr. This should worsen the pressure on inflation, and further encourage hoarding activities. We believe the winners of this move are pure Malaysian players as well as those with downstream capacities in Malaysia. Keep BUY on Sarawak Oil Palms (SOP) and Ta Ann (TAH).
  • Indonesia has reversed its earlier decision to only ban the exports of RBD palm olein, and has decided to ban all exports of PO effective 28 Apr. The export ban will now cover CPO, all refined palm oil and used cooking oil, among other palm oil products.
  • Flip flopping of policies is never viewed positively. This move will likely push vegetable and palm oil prices up further, although it will also create more uncertainty in the market. With this move, it would seem the Indonesian Government has ascertained that some refiners are not complying with the guidelines and are trying to circumvent the previous ban by exporting out other products like CPO and RBD palm oil instead. With this hard stance, the Government is punishing errant refiners by punishing the whole Indonesian plantation industry. Recall, Indonesia produces 46m tonnes of PO annually, of which 27m tonnes are exported.
  • With this move, all players in Indonesia would likely suffer, although pure upstream exporters would likely suffer more. We believe there would be a significant shift in the demand-supply mechanics in the country, causing domestic supply of CPO to be abundant, pushing down domestic CPO prices, thus allowing downstream planters to have their pick of CPO supplies at low prices. The downstream players in Indonesia would still be able to circumvent this ruling by holding back their refined oil stocks to benefit from the higher prices, if and when the Government lifts the ban. Refined oils can be kept for as long as 6-8 months with no impact to quality, and after packaging, can be kept for a further 12-18 months. However, doing this could result in incurring more wrath from the Indonesian Government and potentially, more crackdowns.
  • NEUTRAL; pick the winners. Vegetable oil prices will spike as a result of this news, but should Indonesia change its stance this will also reverse quickly. We continue to stay NEUTRAL on the sector, advocating a trading strategy. BUY the winners – pure planters in Malaysia (SOP, TAH). Downstream players in Malaysia with no exposure to Indonesia would also benefit given the lack of competition from Indonesia, and this would include SOP, IOI Corp and Genting Plantations.

Source: RHB Securities Research - 28 Apr 2022

Related Stocks
Be the first to like this. Showing 1 of 1 comments


Why Rhb Ib still living in denial and remain neutral on palm oil?

And only telling people to chase SOP and Taann only after prices are up 100%

Calvin and friends already bought up lots and lots of Sop and Taann when there were traded at Rm2.75 to Rm3.55 range last year

Of course we are still holding on as we expect both to rise and rise near Rm8.00 to Rm10.00 range

As for Palm oil Rhb Ib should not stay neural but tell it's clients not to miss this once a century palm oil Superbull by changing from neutral to overweight buy call

2022-04-29 05:16

Post a Comment