Hot Stocks PPB, KLK rise 3% on Indonesia biofuel policy

by **Cals** Mon 17 Feb 2014, 18:50

Hot Stocks PPB, KLK rise 3% on Indonesia biofuel policy
Business & Markets 2014
Written by Chong Jin Hun of theedgemalaysia.com
Monday, 17 February 2014 15:43

KUALA LUMPUR (Feb 17): PPB Group Bhd and Kuala Lumpur Kepong Bhd (KLK) rose as much as 3% each among the exchange's top gainers.Analysts said the oil palm plantation firms were seen as beneficiaries of Indonesia's biodiesel policy.

At about 3.15pm, PPB rose as much as 44 sen to RM15.96. KLK climbed to RM23.84 after rising as much as 68 sen to RM24.18 earlier.

PPB "is expected to benefit" as it owns 18.3% of Singapore-listed Wilmar International Ltd which in turn is the largest biodiesel producer in Indonesia, according to Kenanga Investment Bank Bhd research analyst Alan Lim Seong Chun.

"KLK derived some 90% of its operating profit in financial year ended September 30, 2013 (FY13) from palm oil-related activities" Lim told theedgemalaysia.com over telephone.

Of the 90%, upstream and downstream segments accounted for 63% and 27% respectively in FY13, Lim said.

The Jakarta Post reported today that state-owned oil and gas giant PT Pertamina had secured only 45 percent of its biodiesel target to meet a government mandate that diesel fuel blends include a minimum of 10 percent biodiesel.

The company announced on Sunday that it had selected winners of the second phase of a tender to procure fatty acid methyl ester (FAME) — a component of diesel mixes.

Previously, in the first phase of the tender held last year, the company secured 1.24 million kiloliters (kl) of FAME. In the second phase of tender held in January, the company secured 1.14 million kl.

In Malaysia,KLK and PPB shares rose as both companies made headlines ahead of the announcement of their quarterly financials .

Nanyang Siang Pau had featured today a story on KLK which was scheduled to announce its 1QFY14 results this Wednesday (February 19).

Affin Investment Bank Bhd analyst Ong Keng Wee wrote in a note today that the firm had a target price of RM21.89 for KLK shares. This comes with a "reduce" call on the stock, according to Ong.

PPB's Wilmar also made headlines. This followed news on Wilmar's policy to stop buying crude palm oil from Sarawak. Wilmar plans to stop buying CPO from plantations established within forest and peat swamp land in Sarawak beginning 2016.

PPB is expected to announce this month its results for the fourth quarter ended December 31, 2013.