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RHB Investment Maintains ‘Buy’ Call On Sarawak Oil Palms With Higher TP Of RM3.75

RHB Investment Bank Bhd has maintained its “buy” call on  Sarawak Oil Palms Bhd (SOP) at a higher target price (TP) of RM3.75 from RM3.37 previously.

This was backed by anticipation that demand for crude palm oil (CPO) would pick up in the second half of 2020 (H2 2020) on the resumption of economic activities, coupled with an anticipated CPO price retracement, said the research house.

“SOP’s refinery continues to run at high utilisation rates of close to maximum, despite the drop in demand from India in the first quarter of 2020  (Q1 2020), as it managed to divert its sales elsewhere.

“With India having resumed purchases of Malaysian palm oil following a four-month gap, this should bode well for SOP’s downstream division,” it said in a note today.

On the recent CPO export tax exemption announcement, RHB Investment said this is positive news for SOP’s upstream division.

“The waiver of export tax for palm oil until Dec 31, 2020 bodes well for SOP and is especially pertinent now that India has started buying again from Malaysia,” it said.

The research house expects to see a shift in import destination from Indonesia to Malaysia, as Malaysia’s CPO will be more competitive versus Indonesia, after the hike in the export levy to US$55.00 per tonne (from US$50.00 earlier) beginning June 1, 2020.

Prime Minister Tan Sri Muhyiddin Yassin, while unveiled the National Short Term Economic Recovery Plan (PENJANA) last Friday, said the government will provide 100 per cent exemption on export duty on crude palm oil, crude palm kernel oil and processed palm kernel oil from July 1, 2020 to December 31, 2020.

At 10.29 am, SOP’s share rose two sen to RM3.39 with 70,900 shares transacted. – BERNAMA

BacalahMalaysia Team

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