KUALA LUMPUR: The expected government decision to raise the windfall profit levy (WPL) threshold to about RM4,500 per tonne has been viewed positively by analysts.
Currently, a WPL rate of three per cent is imposed on palm oil prices exceeding RM3,000 per tonne in Peninsular Malaysia and RM3,500 per tonne in Sabah and Sarawak.
CIMB Securities Sdn Bhd estimates that raising the WPL threshold to RM4,500 per tonne would impact plantation companies' earnings under its coverage by two to five per cent.
"This move would also enhance the earnings leverage of Malaysian plantation companies during periods of rising crude palm oil (CPO) prices.
"Planters most sensitive to this potential policy change would be pure upstream operators in Malaysia with a low earnings base," it said in a note today.
Meanwhile, CIMB said this move could also partly offset the lower windfall profit tax collection, should the government rationalise the cooking oil subsidy.
It added that improved long-term profitability for plantation estates would, in turn, encourage replanting efforts, boosting fresh fruit bunch (FFB) yields and future tax revenue for the government.
Furthermore, CIMB also believes that market expectations for the abolition or adjustment of the WPL are low, as the sector has not re-rated ahead of the 2025 Budget on October 18.
The firm has maintained its 2024 forecast for average CPO prices at RM3,900 per tonne, with expectations of a price decline during the peak production season in the fourth quarter of 2024 (4Q24).
"We continue to favour SD Guthrie Bhd, IOI Corp Bhd, Ta Ann Holdings Bhd, and Hap Seng Plantations Holdings Bhd for sector exposure.
"Key catalysts include better-than-expected CPO prices, potential value creation through mergers and acquisitions (M&A), and unlocking land bank value," it noted.