Plantation sector Windfall profit tax in Malaysia, risks between Malaysian planters and Indonesia planters are similar (Overweight)
- According to Bloomberg, the Malaysian government announced windfall profit tax on Malaysian plantation companies. The government announced that the windfall tax will be effective in July 1st. The windfall profit tax is 15% for planters in Peninsular Malaysia and 7.5% for those in Sabah and Sarawak states. - The current development indicates that the regulatory risk between Malaysian and Indonesia planters have become similar. We view that there's no reason for Malaysian planters to trade above Indonesian planters. Worth noting that most Malaysian planters are trading at PER08F of 15.0x-20.0x, while Indonesian planters are trading at an attractive PER08F of 10.9x-15.5x. - We maintain our overweight stance on the sector, with Buy recommendation on London Sumatera Indonesia (LSIP, Rp9,800, Buy, TP: Rp12,000), Bakrie Sumatera Plantations (UNSP, Rp1,800, Buy, TP: Rp2,300), Sampoerna Agro (SGRO, Rp3,975, Buy, TP: Rp5,100). LSIP is currently trading at PER08F of 10.9x. UNSP is currently trading at PER08F of 15.5x, SGRO is currently trading at PER08F of 12.3x.
