KUALA LUMPUR: CIMB Equities Research expects Felda Global Ventures Holdings (FGV), Hap Seng Plantations, Genting Plantations, Ta Ann and Jaya Tiasa to benefit from the suspension of export taxes on crude palm oil (CPO) for a three-month period from Jan 8 to April 7.

It said on Monday these are plantations with significant upstream operations which will benefit from this measure in the near term.

However, while planters with integrated palm oil operations in Malaysia (IOI Corp, KL Kepong, Wilmar) will see minimal earnings impact. 

“Maintain Neutral on the plantation sector and our average CPO price assumption of RM2,700 per tonne for 2018,” it said.

Last Friday, the government announced it has suspended export taxes on CPO for three months to boost palm oil prices and reduce high stockpiles. 

However, the export tax suspension will be lifted before the three-month period if CPO stocks fall to 1.6 million tonnes, according to Minister of Plantation Industries and Commodities Datuk Seri Mah Siew Keong. 

The government had earlier set the CPO export tax at 5.5% for January 2018.

Mah added that palm oil prices have plummeted since October 2017 and this is one of the short term pre-emptive measures by the government to manage the fall in crude palm oil prices so that smallholders' incomes are not impacted and the country's oil palm industry remains competitive. 

The scheme is open to all companies with CPO export licences. The last time Malaysia suspended CPO export taxes was in September to October 2014. 

Under the new structure, the export duty for CPO ranges from 4.5% to 8.5%, when the CPO price is above RM2,250 per tonne. 

The rate of the export taxes is set monthly, based on average CPO prices on the 10th of the previous month and the 9th of the current month.   

“This is a surprise to us and will be positive for Malaysian planters in the near term. This is because the move to cut export tax in January 2018 to zero will allow CPO exporters in Malaysia to save RM144 per tonne (5.5% (export tax) x RM2,623 per tonne (reference price for CPO)). 

“This will help boost CPO exports from Malaysia as it will be more competitive against Indonesian CPO exports, which are subject to a CPO levy of US$50 per tonne. 
 
“This is negative for Malaysian refiners as they will be less competitive against the Indonesian refiners. Following the suspension, the export tax differential between processed palm oil (refined products) and CPO will be zero in Malaysia compared to the US$20-30 per tonne export levy differential for Indonesian refiners,” it said.   

This measure will help encourage CPO exports from Malaysia, which have been weak following India’s move to raise import duties for palm oil in November.

 However, this move may not be able to significantly lift CPO prices due to the stronger ringgit and our projection that Malaysian palm oil stocks may have risen by 6% month-on-month to 2.7 million tonnes in December 2017, CIMB Research said.