Wednesday, 12 December 2012

Plantation Sector - No tax for CPO exports in January 2013? OVERWEIGHT


- Recently, the Plantation Industries and Commodities Ministry gave more details on the new export tax rate structure, which would take effect from 1 January 2013. 

- The reference price for the calculation of the export tax will be based on the average CPO prices in the past 30 days. The Ministry would also review its tax rates and reference prices monthly.  

- This is almost similar to Indonesia’s system where the export tax rates and reference prices are reviewed and revised monthly according to CPO prices in Amsterdam, Jakarta and Kuala Lumpur. 

- The monthly review of the prices and export tax rates would not only allow the Malaysian government to react towards CPO prices but also gives the country room to manoeuvre against Indonesia’s changes.  

- Based on a spot CPO price of RM2,1870/tonne, it would appear that it is beneficial for CPO producers in Malaysia to export. 

- This is because the export tax rate of 4.5% will only kick-in when CPO prices are between RM2,250/tonne and RM2,400/tonne.

- This means that upstream players would be able to export CPO in early-2013F without having to incur export tax. 

- However, we are unsure if this scenario would also apply to upstream players that had locked-in December to sell their CPO at higher prices, which could be above RM2,250/tonne, in January 2013. 

- If this were the case, then upstream players in Sabah would also benefit from not having to suffer the RM100/tonne discount to CPO price, imposed by the refiners in the state.  

- The only issue is that the upstream companies would have to set up their own marketing and logistics team if they would choose to export overseas.

- We maintain a positive stance on the plantation sector as we reckon that palm oil inventory would start declining in early-2013F. 

- CPO prices are also expected to be supported by rising soybean prices. There is risk that soybean production in South America would be affected by unfavourable weather.   

Source: AmeSecurities

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