* Indonesian CPO: AALI and LSIP profit taking candidates? – Aditya Srinath thinks that upside to Indonesian planters earnings has started to taper off, as CPO export tax becoming more aggressive at the current CPO price level.
The tax levied on Indonesian CPO exports has increased 3.5x in the last four months (from $62/T in October to $224/T in January). In a previous Note (“Indonesia’s Export Tax: Who is paying for it”? 21 Oct 2010), we had argued that the burden of the export tax appeared to be borne by the traders rather than the Indonesian planters. Not only is that situation reversing against the planters, but it also appears that at these levels of palm oil prices, upside from higher CPO prices is accruing to the Government more than shareholders.
at the moment, JPMorgan analysts still use MYR2,800/ton CPO price assumption. When the assumption is lifted to above MYR3,300/ton, AALI and LSIP will still see earnings upgrade (latest sensitivity for AALI is +9% EPS for +10% CPO, for LSIP +11% EPS). But such positive sensitivity will no longer apply beyond MYR3,500/ton CPO price, as the higher export tax kicks-in. So beyond MYR3,500/ton, Malaysian planters could be more in favour.
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