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New Straits Times
12 hours ago
- Business
- New Straits Times
SST expansion sends ripple effects across key sectors
KUALA LUMPUR: The expanded Sales and Service Tax (SST), projected to generate RM10 billion in annual government revenue, is set to create ripple effects across industries, according to RHB Investment Bank Bhd. The firm said while essential goods and services remain exempt, the broader tax net is likely to create both opportunities and challenges for key sectors such as plantations, consumer goods, property and real estate investment trusts (Reits). "On balance, the SST expansion appears to be a carefully calibrated move. It shores up public finances with limited impact on the average consumer, but the sectoral implications could be material in certain pockets of the economy," it said in a note. Among the sectors expected to face headwinds is the glove manufacturing industry, which continues to grapple with tight margins amid an oversupplied post-pandemic market. "The expanded SST will increase glove production costs by approximately 25–30 US cents per 1,000 pieces. This puts further strain on producers at a time when competition remains intense, and cost pass-through remains challenging," it said. A temporary relief has been introduced via a grace period until Dec 31, during which the Customs Department will withhold enforcement of the new tax on latex imports. The plantation sector also faces pressure, particularly among downstream players, as palm kernel oil (PKO), a key processed output, will be subject to a five per cent SST. While crude palm oil and fresh fruit bunches (FFB) are exempt as agricultural produce, PKO is categorised as a manufactured product and thus taxable. RHB Investment said this could affect companies such as Sime Darby Plantation Bhd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd, although the precise earnings impact remains unclear due to limited disclosure on internal versus external sourcing of PKO. Meanwhile, Reits are expected to absorb the new eight per cent SST on leasing and rental income with manageable short-term impact, as landlords are likely to pass on the tax to tenants. "However, upon the next lease renewals, upside to rental reversions may be limited, as landlords may prioritise tenant retention and maintain positive business relationships," the firm said. In view of this, the research house said it prefers industrial Reits, which are typically backed by long-term master leases with multinational corporations. In the consumer sector, the impact is projected to be manageable given that exemptions cover daily essentials. Retailers with strong bargaining power may be able to offset the effects through rental negotiations. The expanded SST will also apply to inter-company leases, previously tax-exempt, potentially affecting conglomerates with extensive asset portfolios. "This change could impact how groups allocate resources across subsidiaries, especially those with large asset portfolios under lease-based structures," it said. Despite uneven impacts across sectors, the firm remains optimistic about the broader economic outlook. It noted that the additional RM10 billion in expected revenue can serve as an effective pump-primer to stabilise and drive the domestic economy. It said the SST expansion also signals the government's ongoing commitment to steady public finance reform, amid global trade frictions and geopolitical volatility. "It's a good time to gradually accumulate quality names, particularly those with pricing power and minimal tax exposure," it added, recommending a cautious but selective investment stance focused on domestic-centric stocks.
The Star
12-06-2025
- Business
- The Star
Earnings pressure seen
RHB Research remained cautiously optimistic on CPO prices. PETALING JAYA: Malaysia's plantation sector could face fresh earnings pressure in the second half of this financial year, as a new layer of taxation takes effect from July 1 under the expanded sales and service tax (SST) regime. According to RHB Research, the revised tax structure, which would impose a 5% levy on several upstream and downstream products, would add to the cost burdens of planters. It noted that the tax would apply to fresh fruit bunches (FFB), empty fruit bunches (EFB), palm kernel shells (PKS), palm fatty acid distillate (PFAD), palm kernel fatty acid distillate (PKFAD), and palm kernel oil (PKO). RHB Research said it expected the biggest negative impact to come from the purchase of external FFB for crude palm oil millers, as well as external PKO purchases for downstream planters. 'This tax is to be levied on top of all the other taxes the palm oil industry currently already faces – including windfall taxes, sales tax of CPO in East Malaysia, and export tax on all palm oil products,' the brokerage said, noting the negative impact of the expanded SST. 'While there can be some offsetting factor in the form of additional tax to be levied on sales of EFB, PKS and PFAD, among others, we believe the net earnings impact will still be negative,' it added. Based on RHB Research's calculations, the earnings drag could range between 0.3% and 11% annually for the companies it covers, depending on the volume of externally sourced FFB. 'We base this calculation on external FFB purchased in Malaysia multiplied by the current FFB price of RM850 per tonne and multiplied further by 5%,' it explained. The research house flagged FGV Holdings Bhd as the most exposed, noting that approximately 70% of its FFB intake comes from outside sources. RHB Research added that limited disclosures on other inputs such as PKO purchases and sales of by-products made it difficult to quantify the full extent of the impact. 'However, we are unable to calculate the impact of the purchase of external PKO and sales of other products, as these disclosures are not given,' it explained. While it continues to engage companies for greater clarity, RHB Research said it was maintaining its earnings forecasts for now. 'Earnings forecasts are unchanged for now till we obtain more clarification.' RHB Research placed the sector's rating 'under review', although it remained cautiously optimistic on CPO prices. 'We acknowledge that geopolitical risks have led to a CPO price destruction over the last couple of months,' it said. RHB Research's CPO price assumption of RM4,300 per tonne for the year is unlikely to be achieved based on the current trajectory. This is because year-to-date, the CPO price averaged at RM4,400 per tonne. However, it expected CPO prices to post a recovery towards the year end as seasonal production comes off its peak. It added that planters continue to deliver earnings-wise, while valuations remain depressed at this juncture. Its top picks remained unchanged, comprising Jaya Tiasa Holdings Bhd , Sarawak Oil Palms Bhd and Sime Darby Plantation Bhd.
Borneo Post
12-06-2025
- Business
- Borneo Post
Analysis: SST could cut plantation earnings by up to 11 pct annually
The biggest blow is expected to come from the purchase of external FFB by CPO millers and external PKO by downstream producers. — AFP photo KUCHING: The plantation sector may see its earnings drop by as much as 11 per cent per annum due to the expanded Sales and Service Tax (SST) coming into effect on 1 July, according to RHB Investment Bank Bhd (RHB Research). The house said the new 5 per cent tax will apply to several palm oil-related items including fresh fruit bunches (FFB), empty fruit bunches (EFB), palm kernel shells (PKS), palm fatty acid distillate (PFAD), palm kernel fatty acid distillate (PKFAD), and palm kernel oil (PKO), among others. 'We expect the expanded SST to be negative for the sector,' it said in a note on Thursday, adding that the estimated earnings impact could range from 0.3 to 11 per cent per annum for Malaysian plantation companies under its coverage. It noted that FGV Holdings Bhd is likely to face the most significant hit given that about 70 per cent of its FFB is sourced externally. The biggest blow is expected to come from the purchase of external FFB by crude palm oil (CPO) millers and external PKO by downstream producers. 'This tax is to be levied on top of all the other taxes the palm oil industry currently already faces – including windfall taxes, sales tax of CPO in East Malaysia, and export tax on all palm oil products. 'While there can be some offsetting factor in the form of additional tax to be levied on sales of EFB, PKS, PFAD, etc, we believe the nett earnings impact will still be negative,' it added. RHB Research calculated the estimated earnings impact using a base price of RM850 per tonne for FFB and based it on the volume of external FFB purchases, though full figures for external PKO purchases and other sales were not available due to limited disclosures. Despite the negative outlook from the new tax, RHB Research has kept its earnings forecasts unchanged for now, pending further clarification from the companies under its coverage. The research house has also placed its sector rating under review, down from a previous overweight stance. 'Geopolitical risks have led to a CPO price destruction over the last couple of months and our price assumption of RM4,300 per tonne for the year is unlikely to be achieved,' it said. The year-to-date CPO price is around RM4,400 per tonne, and analysts expects a potential recovery towards the end of the year as production slows. Its top stock picks remain unchanged and include Johor Plantations Group, Sarawak Oil Palms, SD Guthrie, Bumitama Agri Ltd, and PP London Sumatra Indonesia Tbk. analysis economy expanded SST palm oil plantation SST
The Star
12-06-2025
- Business
- The Star
Planters brace for profit hit under expanded SST regime
PETALING JAYA: Malaysia's plantation sector could face fresh earnings pressure in the second half of the year, as a new layer of taxation takes effect from July 1 under the expanded sales and service tax (SST) regime. According to RHB Research, the revised tax structure, which would impose a 5% levy on several upstream and downstream products, would add to the cost burdens of planters. It noted that the tax would apply to fresh fruit bunches (FFB), empty fruit bunches (EFB), palm kernel shells (PKS), palm fatty acid distillate (PFAD), palm kernel fatty acid distillate (PKFAD), and palm kernel oil (PKO). RHB Research said it expected the biggest negative impact to come from the purchase of external FFB for CPO millers, as well as external PKO purchases for downstream planters. 'This tax is to be levied on top of all the other taxes the palm oil industry currently already faces – including windfall taxes, sales tax of crude palm oil (CPO) in East Malaysia, and export tax on all palm oil products,' the brokerage said, noting the negative impact of the expanded SST. 'While there can be some offsetting factor in the form of additional tax to be levied on sales of EFB, PKS and PFAD, among others, we believe the net earnings impact will still be negative,' it added. Based on RHB Research's calculations, the earnings drag could range between 0.3% and 11% annually for the companies it covers, depending on the volume of externally sourced FFB. 'We base this calculation on external FFB purchased in Malaysia multiplied by the current FFB price of RM850 per tonne and multiplied further by 5%,' it explained. The research house flagged FGV Holdings Bhd as the most exposed, noting that approximately 70% of its FFB intake comes from outside sources. RHB Research added that limited disclosures on other inputs such as PKO purchases and sales of by-products made it difficult to quantify the full extent of the impact. 'However, we are unable to calculate the impact of the purchase of external PKO and sales of other products, as these disclosures are not given,' it explained. While it continues to engage companies for greater clarity, RHB Research said it was maintaining its earnings forecasts for now. 'Earnings forecasts are unchanged for now till we obtain more clarification.' RHB Research placed the sector's rating 'under review', although it remained cautiously optimistic on CPO prices. 'We acknowledge that geopolitical risks have led to a CPO price destruction over the last couple of months,' it said. RHB Research's CPO price assumption of RM4,300 per tonne for the year is unlikely to be achieved based on the current trajectory, as year-to-date, the CPO price averaged at RM4,400 per tonne. However, it expected CPO prices to post a recovery towards the year end as seasonal production comes off its peak. It added that planters continue to deliver earnings-wise, while valuations remain depressed at this juncture. Its top picks remained unchanged, comprising Jaya Tiasa Holdings Bhd , Sarawak Oil Palms Bhd and Sime Darby Plantation Bhd.
The Sun
25-04-2025
- The Sun
Senai paint factory fire injures 3, destroys vehicles and nearby units
KULAI: Three men, including a Bangladeshi national, sustained burn injuries in a fire at a paint mixing factory in Taman Perindustrian Desa Idaman, Senai, yesterday afternoon. Fire Operations Commander, senior officer Muhammad Fauzi Awang, said they received an emergency call about the incident at around 2.13pm, and 46 personnel along with fire engines were dispatched to the scene. He said the Operations Response Team (PKO) that arrived at the scene found that the fire involved a factory measuring 30 by 60 square feet. 'The blaze destroyed 95% of the factory and spread to two adjacent factories, damaging 25% of those buildings. A jeep, three cars, a multi-purpose vehicle (MPV), a lorry, and a forklift were also 80% burned,' he stated. 'There were three victims who suffered burns in the fire and were taken to the hospital by Health Ministry ambulances. However, information about the victims is not yet available,' he said in a statement yesterday. The firefighting operation ended completely at 7.22pm.
