Sugar funding hike seen disastrous for MSM
CIMBResearch expects a recent sugarine funding hike to have a disastrous impact upon Felda's sugarine unit,MSM Malaysia Holdings Bhd.
"The 34 sen per kg hike in sugarine funding for made during home sugarine refiners is bad news for MSM, as you guess that a enlarge is 5 sen short of a volume indispensable to cover a rise in tender sugarine costs," a research house pronounced in a inform yesterday.
"This is disastrous for MSM as a enlarge in subsidy! is not sufficient to cover a rise in tender material costs for a current year," CIMB said.
It forked out that MSM had to compensate a aloft tender sugarine cost following a end-2011 expiry of a long-term contracts for tender sugarine during 17.5 sen per pound.
"Raw sugarine now costs around 26.5 sen per pound, inclusive of ride costs. MSM additionally has to source a tender sugarine from a ubiquitous marketplace during marketplace prices, exposing it to aloft sensitivity of tender material costs. We guess that MSM needs a serve 5 sen per kg rise in sugarine funding to say 2011's absolute distinction margin," it said.
CIMB pronounced this "negative news" may lead to short-term debility in a company's share price.
"Apart from taking flight cost pressure, MSM may additionally be affected by slower direct expansion if a Government reduces a funding as well as raises sugarine sell prices over time.
"Going by a experience of a past dual years, there is a great chance of a review of offered prices as well as subsidies provided around M! ayJuly t his year.
"Despite a disastrous news you say our "neutral" rating, given a share cost await from a dividend ! produce of about 5%. Also, a sugarine industry may be liberalised gradually, that would be positive for a company," CIMB said.
It noted that a Government had lifted a funding for made during home sugarine refiners by 34 sen per kg to 54 sen upon January 1, 2012, to cover a rise in tender sugarine costs following a expiry of long-term contracts during a end of final year. The sell offered cost for counterfeit as well as excellent sugarine stays during RM2.30 per kg.
"The rider to a funding rate for sugarine is not a surprise, as a long-term contracts for tender sugarine expired during end-2011 as well as a Government typically reviews as well as adjusts a sugarine funding during a commencement of a year to simulate changes in tender sugarine costs.
"We are additionally not astounded that a sell cost for sugarine is unchanged given a upcoming ubiquitous election," it said.
CIMB, however, pronounced it was astounded that a Government had yet to seal brand brand new long-term contracts for tender sugarine during bound prices.
"This is unusual, carrying happened usually once in a past. Sugar producers are now sourcing tender sugarine from a ubiquitous market, that is disastrous as it exposes a sugarine refiners to aloft sensitivity in tender material costs.
"It is unclear if a check in a signing of brand brand new long-term sugarine contracts is due to pricing issues or is partial of a Government's plan for light liberalisation of a made during home sugarine industry," it said.
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THE FOLLOWING REPORT IS OLD: 9 May 2012. It is still relevant.
Malaysia Insider
Sugar cost up twenty sen tomorrow
May 09, 2011
Datuk Seri Idris Jala's Pemandu agency pro! nounced final year that funding cuts were indispensable to bring down government expenditure. record pic
KUALA LUMPUR, May 9 The cost of sugarine will be lifted by twenty sen to RM2.30 effective during midnight.This follows a previous enlarge in Dec final year, that saw a cost being lifted by a identical amount.
The enlarge is partial of a government's concerted funding c! uts firs t voiced upon July 16 final year, when prices went up by 5 sen per litre for motor fuel as well as diesel, 10 sen per kg for LPG as well as twenty sen per kg for sugar.
It additionally comes after a cost of RON97 motor fuel was increasing by twenty sen final week. RON97 is, however, not subsidised as well as a cost determined by a managed float.
Last week, a United Nations expelled a survey projecting a moderate slip in economic expansion for Malaysia this year due to taking flight food as well as fuel prices, that economists predicted would be serve hampered by a government's lack of political will for reforms.
Domestic sugarine cost went up by 40% from January 2010 to May 2011 ever given a sugarine corner was taken over by FELDA from Robert Kuok. Yet during a old price, Robert Kuok could make great profit.
Global Sugar cost fast from October 2009 to Apr 2011.
Posted byDian
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