Wilmar policy affects Sarawak plantation stocks

PETALING JAYA: Sarawak-based listed plantation firms faced mild selling pressure, following reports that Wilmar International Ltd would discontinue buying crude palm oil (CPO) from some plantations in Sarawak from 2016.

Ta Ann Holdings Bhd and Sarawak Oil Palms Bhd (SOP) were among the top losers on the local bourse for the day, shedding 15 sen or 3.6% and 19 sen or 3% respectively while Jaya Tiasa Bhd and TH Plantations shed two sen each off their share price.

Other Sarawak-based plantation firms including Rimbunan Sawit Bhd, WTK Holdings Bhd, and Sarawak Plantation Bhd hardly saw any change in their price.

“The fall in some of the Sarawak-based plantation counters could be a knee-jerk reaction from the decision made by Wilmar,” said Danny Wong, chief executive officer of Areca Capital Sdn Bhd, an investment fund company.

Wilmar had said it planned to stop buying CPO produced from oil palm trees planted in forest areas and peat swamp land in Sarawak from 2016.

Analysts opined that not all companies would be impacted by Wilmar’s policy.

“This policy would only affect Sarawak planters that plan to expand in peat areas from 2016 onwards,” said CIMB Investment Bank analyst Ivy Ng in a client note.

She said the new procurement policy would not affect planters that have committed to abstain from developments in forest and peat areas after Dec 31, 2015.

Ng said that although Jasa Tiasa sold all of its CPO to Wilmar, the group would not be affected by the new policy as it was expected to complete its new plantings by end-2014.

She noted that Ta Ann might be affected by Wilmar’s new policy, as it was likely to continue planting in Sarawak, after 2015, of which some would be on peat land.

RHB Research Institute gave a “buy” call on SOP, Jaya Tiasa and Ta Ann, but a “sell” call on TH Plantations.

“As this new policy will only be implemented from 2016, plantation players in Sarawak will have some time to find alternative solutions,” it said.

Analysts said 72.5% of 1.6 million ha of peat swamp in Sarawak were planted with oil palm.

“The impact on Sarawak planters will depend on the quantum of CPO production affected by Wilmar’s decision and the availability of alternatives,” said Affin Investment Bank in a report.