Plantation Sector - Impact of the shootout with Sulus in Sabah Overweight

- According to the Press, security forces are holding off armed Sulu intruders in Kg Tanduo, Lahad Datu and two new areas of Semporna and Kunak. The crisis arose after Sulu intruders laid claim over the state of Sabah and refused to leave.

- We have checked with a few plantation companies on the impact of the shootout with the Sulus in Lahad Datu, Sabah.

- According to Hap Seng Plantations, management is monitoring the situation very closely. So far, Hap Seng Plantations’ harvesting schedule has not been affected by the crisis in Lahad Datu. About 91.3% of Hap Seng Plant’s oil palm estates are located in Lahad Datu.

- According to Kuala Lumpur Kepong (KLK), it has not experienced any change in harvesting schedule either. About 7.7% of KLK’s plantation landbank is in Lahad Datu, Sabah.

- Genting Plantations (GenP) said that there is no impact from the shootout with the Sulus as the company does not have any oil palm estates in Lahad Datu, Sabah.

- According to TH Plantations, its oil palm estates are located quite a distance away from the shootout. The group’s operations in the oil palm estates and palm oil mills are running normally.

- We understand that if there is any impact, it may be due to the closest refinery being located in Felda Sahabat, which is the area of the shootout. The refinery may be unable to take in new CPO due to the shootout crisis.

- However, as TH Plant has enough storage tanks, it believes that this would not be a major concern for now. Nevertheless, TH Plant would be following the situation closely to ensure that they could swiftly respond to any developments. About 6.5% of TH Plantations’ oil palm estates are located in Lahad Datu, Sabah.

- We gather that TSH Resources’ refining joint venture with Wilmar International is also not affected by the shootout in Lahad Datu so far. The group’s palm oil and refining operations are still running smoothly. TSH/Wilmar’s refinery, which has capacity of 750,000 tonnes/year, is located in Kunak.

- Sabah is the largest producer of palm oil in Malaysia. The state accounted for 29.5% of the country’s palm oil production in 2012. Sabah’s CPO production amounted to 5.5 million tonnes in 2012.

Source: AmeSecurities