RHB Bank Singapore has kept an "overweight" call on the plantation sector, as it expects the B40 biodiesel mandate in Indonesia to progress, The Edge Singapore reported on Thursday.
The mandate, which will require a 40% blend of palm oil in diesel, will likely be implemented in 2025, although adjustments to the policy may occur, the report quoted analyst Hoe Lee Leng as saying following a meeting with the Indonesian Palm Oil Association (GAPKI).
The mandate is crucial for palm oil consumption growth, but funding concerns for the mandate persist especially if crude palm oil exports decline and levy collections lessen, the report said.
To address these challenges, the GAPKI is considering measures such as increasing the palm oil export levy, lowering subsidies for biodiesel producers, and phasing in the B40 mandate's implementation, the newspaper reported.
Although these measures could negatively impact plantation companies' earnings, Hoe believes that sustained high crude palm oil prices may offset the impact, the report said.
The equity research firm has palm oil producer Bumitama Agri (SGX:P8Z) as a top pick, according to the report.
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