Indonesia's plan to cap foreign oil palm holdings may impact KLK, GENP - CIMB

by **Cals** Mon 18 Aug 2014, 22:20

Business & Markets 2014

Written by Chen Shaua Fui of theedgemalaysia.com

Monday, 18 August 2014 11:14

KUALA LUMPUR (Aug 18): Malaysian firms with large holdings in Indonesian estates like KL Kepong Bhd and Genting Plantations Bhd may be significantly impacted by the country's lawmakers plan to cap foreign ownership in oil palm plantations to a maximum 30% from the current 95% limit.

CIMB Investment Bank Bhd wrote in a note that for now, it was still uncertain if the ruling would be retrospective, and whether the plantation bill would be passed.

Reuters reported that in a move to open the Indonesian plantation sector to smaller, local players, a maximum 30% foreign ownership was proposed. In the proposed law, firms will be given five years to comply with the rules, and those that refused to comply may face fine, temporary suspension and the revocation of permits.

"Planters with significant exposure to Indonesian estates, like KL Kepong and Genting Plantations, may be negatively impacted by this news," CIMB said.

“This uncertainty, coupled with the 100,000 ha limitation rules, may lead to slower new plantings in Indonesia, and negatively impact future supply growth from the country," it added.

The proposed foreign ownership limit may also spur affected firms to venture into other regions like Africa or Papua New Guinea, or expand downstream, CIMB said.

“We maintain our "neutral" sector rating, while our key picks remain First Resources, Astra Agro and Ta Ann,” CIMB said.