Hi guys

After Hong Leong IB talked good about Palm Oil Now Maybank IB gives a nice target price of Rm5.60 for SOP

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Sarawak Palm Oil ESG's ratings is medium, credentials appear to be relatively good, says Maybank IB

By NST Business - December 21, 2021 @ 1:22pm

KUALA LUMPUR: Sarawak Palm Oil Bhd's (SOP) overall environmental, social, and corporate governance (ESG) risk factors to be medium as the policy's credentials appear to be relatively good, with transparent and detailed sustainability disclosures.

Maybank Investment Bank Bhd (Maybank IB) also noted that SOP's geographical exposure to just Sarawak also helps limit the company's ESG risks relative to peers.

The bank-backed research firm also noted that while SOP is not yet an RSPO (Roundtable on Sustainable Palm Oil) member, it has good and sustainable

practices with zero burning and No Deforestation, No Peat and No

Exploitation (NDPE) commitments at its core.

SOP is 100 per cent MSPO (Malaysian Sustainable Palm Oil) certified

since 2019, six of its seven palm oil mills have been International Sustainability & Carbon Certification certified since 2017.

To reduce greenhouse gas emissions (GHG) emissions, SOP plans to install methane capture facilities for all seven palm oil mills (presently just one installed) but has not yet specified an execution timeline.

SOP is an integrated plantation company predominantly in an oil palm plantation, refinery, biodiesel, phytonutrient plant, and consumer products based in Sarawak.

The company also has a property development arm that is also helping to unlock the value of some of its well-located estates near Miri, Sarawak.

SOP has 121,994 ha of land concession (about 1.7x the size of Singapore), of which 87,964 ha are planted with oil palm in 2020.

Moving on, Maybank IB also noted that in 2019, SOP introduced an in-house '555 Target' to achieve five tonnes per hectare of palm oil in five years with RM5 billion in market capitalisation.

The ambitious target is aimed at sweating its assets by achieving optimum fresh fruit brunch (FFB) yield and oil extraction rate (OER) via best management practices to minimise the impact on the planet.

Maybank IB maintains a Buy call for SOP with an unchanged target price of RM5.60.

Key risks to the palm oil sector and SOP are weather anomalies resulting in poorer-than-expected output growth, lower-than-expected crude palm oil (CPO) price achieved and negative policies imposed by import countries.

Other risks also include unfriendly policies imposed by the Malaysian and Indonesian government on upstream or downstream segments, sharply lower crude oil prices, which makes palm biodiesel demand not viable, and weaker competing oil prices, like soybean and rapeseed.

Calvin comments:

Rapeseed or canola oil prices are now at World Record USD1,000 (Higher than previous high at USD600) due to drought in Canada & floods in Australisa

Soyoil also at very high prices over USD53 (Was only USD25 earlier)

As a result Cpo prices will remain high and elevated

WITH SUCH HIGH & SUSTAINED AND PROLONGED PRICES ALL PALM OIL COMPANIES WILL REPORT THE MOST FANTASTIC REAL SOLID PROFITS IN FEB, MAY & AUGUST 2022 SINCE THERE IS NO COMPETING RAPESEED OIL TILL END 2022 WHEN CANADA SEES ITS NEXT HARVEST

AND THEN THERE IS THE NEW FOUND DEMAND FROM THE MANY NEW BIODISEL REFINERIES FOR SOYBEAN & CORN IN USA FOR YEAR 2022 PUSHING UP EVEN MORE HIGHER DEMAND

So this time of weakness presents us a most opportune time to buy SOP on the cheao

Best regards

Calvin Tan

Please buy or sell after doing your own due diligence or consult your remisier/Fund manager