MARKET DEVELOPMENT
PLCs Not Materially Affected by Floods in Peninsula M’sia
PLCs Not Materially Affected by Floods in Peninsula M’sia
31/12/2014 (Borneo Post) - Public listed companies (PLCs) are generally not expected to be materially impacted by the floods in Peninsular Malaysia, but certain sectors such as plantations may feel the pinch with flooded estates giving rise to worry over crude palm oil (CPO) output.
Several northern states in Peninsular Malaysia are currently experiencing one of the most severe annual floods in 30 years, analysts say, as Negeri Sembilan became the eighth state to be affected by the second wave of floods that have ravaged the country over the past 11 days.
The situation in flood-hit Kelantan, Terengganu, Pahang, Johor and Perak has reportedly worsened, while the situation in Perlis and Kedah has improved slightly.
A quick scan by Maybank Investment Bank Bhd (Maybank Research) revealed that PLCs under its coverage should not be materially affected by the floods, clearing concerns over sectors such as automotive assemblers, glove producers or oil & gas fabricators neither having plants, factories nor yards located in Kelantan and Terengganu.
“Banks and the consumer-retailers will probably see some economic loss as the floods have distrupted operations, and banks will defer loan instalments for the flood victims,” it said in its note yesterday.
“On a broader scale, the reconstruction of homes, restoration of public infrastructure like hospitals, schools, roads and bridges – as well as cash handouts to victims – could range anywhere from RM500 million to more than RM1 billion, we estimate, depending on the severisty of the damage which is only accessible after the floods subside.
“Small, unlisted contractors are likely to take on the reconstruction works,” it added.
However, an analyst with CIMB Investment Bank Bhd (CIMB Research) believed the floods willl negatively impact the harvesting, transportation and processing of palm oil from these areas, possibly leading to a larger decline in CPO output in December.
While CIMB Research admitted it was still too early to assess the exact impact of the flooding on CPO output as this will be dependent on the severity and length of the on-going monsoon, it expect this event to lift CPO prices in the near-term.
Malaysian Meteorological Department officer Azlai Ta’at said rainfall is still expected to continue until Tuesday, especially in the east coast. The department predicts the monsoon lasting into the middle of January, which means the rainy season will continue in the east coast until next month.
“This is negative for Malaysian planters with estates exposure in the states that are affected by one of the worst annual floods in Malaysia in 30 years,” it said in its report on Monday.
“The floods are expected to reduce palm oil output from these states, as harvesting, milling and transportation activities at the palm oil estates and related processing facilities located in affected areas will be disrupted.”
To note, the four worst-hit states Terengganu, Pahang, Kelantan and Perak accounted for 30 per cent of Malaysia’s palm oil supply in 2013. Planters with the highest estates exposure to the states impacted by the floods are Felda Global Ventures Holdings Bhd, followed by Sime Darby Bhd, IOI Corporation Bhd and Kuala Lumpur Kepong Bhd.
“However, we feel it is too early to assess the exact impact of the flooding on palm oil output as we are unable to predict the severity and length of the ongoing monsoon,” it said.
A group of palm oil millers in southern Peninsular Malaysia earlier this week estimated that output across Pahang, Johor and Malacca tumbled 36 per cent between December 1 and 20 from the same period a month earlier.
“We expect this news to lift CPO prices in the near-term on concerns over palm oil supply. But the upside to CPO prices may be capped by worries over slower global growth, weak crude oil prices, and higher soybean supplies,” the research analyst opined.
“The rise in CPO price may not be sufficient to cover for the loss in production from some the estates impacted by the floods. As such, this news is negative for planters that are impacted by the floods.”
CIMB Research affirmed that East Malaysian planters have no estates exposure in these states.
Several northern states in Peninsular Malaysia are currently experiencing one of the most severe annual floods in 30 years, analysts say, as Negeri Sembilan became the eighth state to be affected by the second wave of floods that have ravaged the country over the past 11 days.
The situation in flood-hit Kelantan, Terengganu, Pahang, Johor and Perak has reportedly worsened, while the situation in Perlis and Kedah has improved slightly.
A quick scan by Maybank Investment Bank Bhd (Maybank Research) revealed that PLCs under its coverage should not be materially affected by the floods, clearing concerns over sectors such as automotive assemblers, glove producers or oil & gas fabricators neither having plants, factories nor yards located in Kelantan and Terengganu.
“Banks and the consumer-retailers will probably see some economic loss as the floods have distrupted operations, and banks will defer loan instalments for the flood victims,” it said in its note yesterday.
“On a broader scale, the reconstruction of homes, restoration of public infrastructure like hospitals, schools, roads and bridges – as well as cash handouts to victims – could range anywhere from RM500 million to more than RM1 billion, we estimate, depending on the severisty of the damage which is only accessible after the floods subside.
“Small, unlisted contractors are likely to take on the reconstruction works,” it added.
However, an analyst with CIMB Investment Bank Bhd (CIMB Research) believed the floods willl negatively impact the harvesting, transportation and processing of palm oil from these areas, possibly leading to a larger decline in CPO output in December.
While CIMB Research admitted it was still too early to assess the exact impact of the flooding on CPO output as this will be dependent on the severity and length of the on-going monsoon, it expect this event to lift CPO prices in the near-term.
Malaysian Meteorological Department officer Azlai Ta’at said rainfall is still expected to continue until Tuesday, especially in the east coast. The department predicts the monsoon lasting into the middle of January, which means the rainy season will continue in the east coast until next month.
“This is negative for Malaysian planters with estates exposure in the states that are affected by one of the worst annual floods in Malaysia in 30 years,” it said in its report on Monday.
“The floods are expected to reduce palm oil output from these states, as harvesting, milling and transportation activities at the palm oil estates and related processing facilities located in affected areas will be disrupted.”
To note, the four worst-hit states Terengganu, Pahang, Kelantan and Perak accounted for 30 per cent of Malaysia’s palm oil supply in 2013. Planters with the highest estates exposure to the states impacted by the floods are Felda Global Ventures Holdings Bhd, followed by Sime Darby Bhd, IOI Corporation Bhd and Kuala Lumpur Kepong Bhd.
“However, we feel it is too early to assess the exact impact of the flooding on palm oil output as we are unable to predict the severity and length of the ongoing monsoon,” it said.
A group of palm oil millers in southern Peninsular Malaysia earlier this week estimated that output across Pahang, Johor and Malacca tumbled 36 per cent between December 1 and 20 from the same period a month earlier.
“We expect this news to lift CPO prices in the near-term on concerns over palm oil supply. But the upside to CPO prices may be capped by worries over slower global growth, weak crude oil prices, and higher soybean supplies,” the research analyst opined.
“The rise in CPO price may not be sufficient to cover for the loss in production from some the estates impacted by the floods. As such, this news is negative for planters that are impacted by the floods.”
CIMB Research affirmed that East Malaysian planters have no estates exposure in these states.