GenP. IJMPlant, Sime Darby, TSH to be impacted by Indonesian levy, says HLIB Research

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KUALA LUMPUR (May 8): Genting Plantations Bhd, IJM Plantations Bhd, Sime Darby Bhd and TSH Resources Bhd would be impacted by the Indonesian regulation requiring palm oil exporters to pay a levy of US$50/mt for crude palm oil (CPO) and US$30/mt for processed palm oil (PPO) by end-May, said Hong Leong IB Research.

In a note today, the research house said Indonesian President Joko Widodo has signed the regulation.

HLIB Research said 40% of the levy proceeds would be allocated to biodiesel subsidies, and the remaining 60% allocated to improve state plantations.

“Although the imposition of export levy is short term negative to pure upstream players in Indonesia, we are still mildly positive on the sector’s latest development, as: (1) The US$20/mt levy differential between CPO and PPO allows players to price their downstream products more competitively; and (2) Higher biodiesel consumption will lead to higher palm oil consumption and price over the longer term, although the expected levy proceeds of US$280 million are only sufficient to fund about 700,000 mt of biodiesel a year.

“Maintain Neutral stance on the sector, with average CPO price assumptions of RM2,300/mt and RM2,400/mt for 2015–2016 for now,” it said.