The Star Malaysia - StarBiz - - Analyst Reports - By Ke­nanga Re­search Neu­tral

BUD­GET 2019 was a non-event for the plan­ta­tion sec­tor. Ke­nanga Re­search said the sec­tor could have seen some rel­e­vant pro­pos­als.

These in­clude an in­crease of min­i­mum wage by RM50 to RM1,100 per month na­tion­wide, ef­fec­tive Jan­uary 2019; a re­duc­tion in the ex­ten­sion levy for for­eign work­ers in the plan­ta­tion in­dus­try who have served for over 10 years, from RM10,000 to RM3,500 per worker per year; im­ple­men­ta­tion of biodiesel B10 pro­gramme for the trans­porta­tion sec­tor and B7 for the in­dus­trial sec­tor in 2019; and an al­lo­ca­tion of RM30mil to help small­hold­ers ob­tain the Malaysian Sus­tain­able Palm Oil (MSPO) cer­ti­fi­ca­tion.

“Both the in­crease in min­i­mum wage and re­duc­tion in the ex­ten­sion levy per se have a min­i­mal fi­nan­cial im­pact on planters un­der our cov­er­age as many are al­ready pay­ing above the min­i­mum wage lev­els, and the ef­fects are coun­ter­vail­ing.

“The im­ple­men­ta­tion of B10 pro­gramme is ex­pected to boost crude palm oil (CPO) con­sump­tion by an ad­di­tional 150,000 to 200,000 tonnes, which is in­signif­i­cant com­pared with our lo­cal an­nual CPO pro­duc­tion of 20 mil­lion but is, none­the­less, en­cour­ag­ing.”

Ke­nanga Re­search also said the al­lo­ca­tion of RM30mil for small­hold­ers’ MSPO cer­ti­fi­ca­tion is ex­pected to in­crease the avail­abil­ity of sus­tain­able fresh fruit bunches sup­ply for plan­ta­tion com­pa­nies with oil mills.

“Over­all, we deem Bud­get 2019 a non-event for the plan­ta­tion sec­tor as it has a min­i­mal fi­nan­cial/op­er­a­tional im­pact on planters un­der our cov­er­age.”

The re­search house also said it is re­vis­ing its 2018 CPO price fore­cast from RM2,400 per tonne to RM2,300 per tonne.

“The re­vi­sion is nec­es­sary as our ear­lier-ex­pected CPO prices re­cov­ery in the sec­ond half of 2018 have yet to take place thus far.

To achieve an av­er­age of RM2,400 per tonne for 2018, CPO price has to re­cover above RM2,800 per tonne level for the re­main­ing two months, which we think is nearly im­pos­si­ble.”

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