KUALA LUMPUR (April 25): Plantation stocks on the local bourse dominated the top gainer list on Monday morning (April 25) as Indonesia’s move to ban palm oil exports is seen to benefit Malaysian planters.
At the time of writing, Kuala Lumpur Kepong Bhd (KLK) was the top gainer by value, surging RM1.56 or 5.57% to RM29.56, followed by its controling shareholder Batu Kawan Bhd that jumped RM1.20 or 4.32% to RM29. Batu Kawan holds a 47.43% in KLK.
In the third place was BLD Plantation Bhd that soared RM1 or 11.11% to RM10, while in the fourth place was Sarawak Oil Palms Bhd which gained 69 sen or 10.76% to RM7.10.
Meanwhile, United Plantations Bhd and Ta Ann Holdings Bhd were the fifth and sixth top gainers at the time of writing, climbing 46 sen (2.79%) and 32 sen (5.19%) respectively to RM16.96 and RM6.48.
The top 10 gainers on Monday morning also included Hap Seng Plantations Holdings Bhd (up 27 sen or 8.44% to RM3.47) and Genting Plantations Bhd (up 22 sen or 2.42% to RM9.30).
Other planters that were on the rise included Sime Darby Plantation Bhd (up 21 sen or 4% to RM5.46), IOI Corp Bhd (up 20 sen or 4.51% to RM4.63), Kluang Rubber Company (Malaya) Bhd (up 17 sen or 4.22% to RM4.20), Sarawak Plantation Bhd (up 16 sen or 5.44% to RM3.10) and Sungei Bagan Rubber Company (Malaya) Bhd (up 15 sen or 4.29% to RM3.65).
Chin Teck Plantations Bhd (up 15 sen or 1.71% to RM8.92), Innoprise Plantations Bhd (up 14 sen or 7.18% to RM2.09), Negri Sembilan Oil Palms Bhd (up 14 sen or 3.61% to RM4.02), TH Plantations Bhd (up 11.5 sen or 11.56% to RM1.11), FGV Holdings BHd (up 10 sen or 5.08% to RM2.07) and Jaya Tiasa Holdings Bhd (up 10 sen or 8.93% to RM1.22) also advanced.
Analysts said on Monday that Malaysian crude palm oil (CPO) producers are potential winners amid Indonesia's palm oil export ban.
“The ban on palm oil exports is a surprise and likely to have massive repercussions for the global edible oil market in the short term. This is because Indonesia is the largest edible oil producer and exporter, accounting for 56% of world exports of palm oil and 34% of world exports of edible oils,” CGS-CIMB analyst Ng Lee Fang said in a note.
She expects CPO prices in Malaysia to rise significantly and potentially surge to new record highs due to panic buying by consumers if the temporary ban lasts more than four weeks.
According to her, potential winners from this ruling are palm oil producers with estates in Malaysia (KLK, IOI Corp, Sime Darby Plantation, Genting Plantations, Hap Seng Plantations and Ta Ann) as well as producers of competing edible oils (soya oil, sunflower oil and rapeseed oil).
Meanwhile, PublicInvest Research analyst Chong Hoe Leong said Malaysia, being the second largest global palm oil producing country, is set to benefit from Indonesia's palm oil export ban as most of the palm oil importers will shift their demand from Indonesia to Malaysia.
“The surprising move comes amid heightened concerns over the tightening global vegetable oil supplies. In response to the unexpected measure, soybean oil prices soared to a record high of US$1,795 (about RM7,803.76) per ton and palm oil futures rose RM36 to RM6,349 per ton. We maintain our 'overweight' call on the plantation sector,” he said.
Likewise, TA Securities analyst Angeline Chin said Indonesia's new policy will immediately cause a shock to the edible oil market.
“We expect CPO prices to rise as Indonesia’s move to ban exports of palm oil will tighten the supply of palm oil in the market. Malaysian exporters will likely benefit in the short term and are clear winners of this new rule,” she said.
With that, she reiterated her "overweight" recommendation on the sector.
She also maintained "buy" on Sime Darby Plantation (target price [TP]: RM6.03), IOI Corp (TP: RM5.55), TSH Resources Bhd (TP: RM2.11) and United Malacca Bhd (TP: RM6.84).
Meanwhile, KLK (TP: RM29.45) was downgraded by Chin to "hold" due to limited upside after the recent rally in its share price. Lastly, she maintained "sell" on FGV (TP: RM1.85) due to “pricey valuation”.
Maybank Investment Bank analyst Ong Chee Ting also said Malaysia-based planters are clear winners for now, and these pure Malaysia plays include Sarawak Oil Palms, Ta Ann, Boustead Plantations Bhd and Hap Seng Plantations.
Among the large-caps, she said IOI Corp had the least exposure to Indonesia.
“But bear in mind, this Indonesia palm oil export ban is temporary. We expect the ban to be lifted by the end of the second quarter of 2022. When the ban is lifted, we expect Indonesia to flood the global market with its inventory accumulated during the ban. And as the industry enters into its seasonal peak output period in the second half of 2022, this could trigger a sharp price correction,” he said while maintaining "neutral" on the sector.
“2022 will likely be a year of two halves for CPO prices. The CPO spot price has averaged RM6,248 per ton year-to-date. Given the high prices and new export ban, we now raise our 2022/2023 estimated CPO average selling prices to RM5,000/RM3,400 per ton respectively (from RM4,100/RM3,200 per ton),” he added.
RHB Research analyst Hoe Lee Leng also said the winners of Indonesia's palm oil export ban are pure Malaysian players as well as those with downstream capacities in Indonesia.
“Vegetable oil prices will spike as a result of this news, but should Indonesia change its stance, this will also reverse quickly,” she added.
She continued to stay "neutral" on the sector, advocating a trading strategy — buy the winners — for pure planters in Malaysia (Sarawak Oil Palms and Ta Ann) and downstream planters in Indonesia (KLK).