United Plantations, KLK rise after Indonesia slaps palm oil export levy

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KUALA LUMPUR (May 7): Plantation stocks including United Plantations Bhd and Kuala Lumpur Kepong Bhd (KLK) rose after Indonesia imposed export levy on its crude palm oil (CPO) and processed palm oil.

Indonesia President Joko Widodo decided to slap an export levy of US$50 (RM178.50) a tonne on the export of CPO and US$30 (RM107.75) on processed palm oil products. The levy essentially makes Indonesian palm oil products more expensive, hence, increasing the demand for Malaysian palm oil.

In Malaysia, United Plantations (fundamental: 1.65; valuation: 1.1) climbed 60 sen or 2% to RM26.20 at 10.43am. The top gainer saw trades of 100 shares.

The stock was traded at the same price at 11:35am.

KLK (fundamental: 1; valuation: 0.5) rose as much as 14 sen or 0.6% to RM22.14 before erasing gains.

At 11.36am, the stock was lower at RM21.98 with 48,900 shares changing hands.

Analysts expect the export levy, which will finance Indonesian biodiesel subsidies, to increase biodiesel usage.

TA Securities Holdings Bhd said the levy "could potentially boost biodiesel consumption and consequently, CPO price, in the long term.”

For now, TA said the levy would not have any impact on the research firm's CPO price assumption of RM2,575 a tonne this year.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)