Hot Stocks Sarawak Oil Palms, Ta Ann lead decliners on Wilmar policy

by **Cals** Mon 17 Feb 2014, 18:47

Hot Stocks Sarawak Oil Palms, Ta Ann lead decliners on Wilmar policy

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Monday, 17 February 2014 13:14

KUALA LUMPUR (Feb 17): Sarawak-based oil palm plantation firms like Sarawak Oil Palms Bhd (SOP) and Ta Ann Holdings Bhd led the bourse's top decliners. This followed news on Singapore-listed Wilmar International Ltd’s policy to stop buying crude palm oil (CPO) from Sarawak.

Wilmar plans to stop buying CPO from plantations establish within forest and peat swamp land in Sarawak beginning 2016. Wilmar is an 18.3% associate of Malaysia's PPB Group Bhd and both companies are controlled by tycoon Robert Kuok.

Today, Bursa Malaysia's top decliner SOP declined as much as 17 sen or 3% to RM6.01 at about 12.10pm followed by Ta Ann which fell much as 15 sen or 4% to RM4.

Jaya Tiasa dropped to RM2.43 after falling as much as four sen or 2% to RM2.41 earlier.

At 12.30pm, SOP and Ta Ann settled at RM6 and RM4 respectively. Jaya Tiasa was traded at RM2.42.

Other Sarawak plantation firms include Rimbunan Sawit Bhd, WTK Holdings Bhd, Sarawak Plantation Bhd and TH Plantations Bhd.

Analysts said Wilmar's policy was not expected to impact all plantation firms there. CIMB Investment Bank Bhd analyst Ivy Ng Lee Fang said the firm expected Wlmar's move to "to affect some but not all Sarawak planters starting 2016".

Ng said this was because Wilmar would continue to buy CPO from suppliers who had committed to abstain from oil palm trees within forest and peat swamp areas after December 2015.

"We think that the news is slightly misleading as we understand that the new procurement policy will not affect planters who have committed to abstain from developments in forest and peat areas after 31 Dec 2015.

"As such, this policy will only affect Sarawak planters that plan to expand in peat areas from 2016 onwards," Ng wrote in a note.

Among Sarawak plantation firms, Ng has highlighted the outlook for Jaya Tiasa and Ta Ann.

Jaya Tiasa is not expected to be affected by Wilmar's move although Ta Ann may see a negative impact, according to her.

"Jaya Tiasa, which sells all of its CPO to Wilmar, plans to complete its new plantings by end-2014. As such, the group will not be affected by this new policy.

"Ta Ann may be affected as it is likely to continue planting in Sarawak (some of which may be peat land) after 2015. The group will have to sell to other refiners (ex-Wilmar) in Sarawak, if it does not meet the more stringent policy," Ng said.

Meanwhile, RHB Research Institute Sdn Bhd analysts said Wilmar's policy to stop buying CPO from Sarawak was not expected to impact players with existing plantations.

In a note today, RHB analysts Hoe Lee Leng and Alvin Tai said : “These (companies) include Sarawak Oil Palm (BUY, FV: MYR7.12), Jaya Tiasa (BUY, FV: MYR2.56), Ta Ann (BUY, FV: MYR4.97), and TH Plant (SELL, FV: MYR1.26), amongst others. However, this would have an impact on companies which have not completed planting in their Sarawak estates, or companies which need to replant.

“In addition, as this new policy will only be implemented from 2016 onwards, plantation players in Sarawak will have some time to find alternative solutions".