In a note today, it emphasised that the current WPL rate of 3% applies to palm oil prices exceeding RM3,000 per tonne in Peninsular Malaysia and RM3,500 per tonne in Sabah and Sarawak.

“We estimate that raising the WPL threshold to RM4,500 per tonne would impact plantation companies’ earnings under our coverage by 2%-5%.

“This move would also enhance the earnings leverage of Malaysian plantation companies during periods of rising crude palm oil (CPO) prices,” it said, adding that the threshold increase would particularly benefit pure upstream operators with lower earnings bases.

The research firm also suggested that the government rationalise the cooking oil subsidy, which could partly offset the lower windfall profit tax collection.

“Improved long-term profitability for plantation estates would, in turn, encourage replanting efforts, boosting fresh fruit bunches yields and future tax revenue for the government,” said CIMB Securities.

It also foresees that the market expectations for the abolition or adjustment of the WPL are low, as the sector has not re-rated for the upcoming budget.

As such, CIMB Securities maintained its 2024 forecast for average CPO prices at RM3,900 per tonne, with expectations of a price decline during the peak production season in the fourth quarter this year, and kept an ‘overweight’ rating on the sector.