- In Indonesia, higher production was offset by strong domestic consumption, underpinned by biodiesel demand. Officials now signal that the planned shift to B50 is unlikely to begin in Jan 2026, with an interim B45 being more probable.
CPO prices remained buoyant in Sep.
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- We bake in higher CPO price forecasts for FY25 given year-to-date firmness, and expect CPO price to trade rangebound between MYR4,200 to MYR4,400 in the near term, barring a weather or policy shock.
More stringent government regulations on land compliance could result in potential fines and impairment risks,
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- However, we also incorporate a 2.5% discount to the multiple amidst ongoing regulatory risk, which is challenging to quantify at the time of writing. The Indonesian government has introduced a fine of IDR25m per ha per year for CPO plantations operating within designated forest zones, as part of ongoing efforts to tighten land use governance. The new Government Regulation No. 45/2025 could result in CPO players with plantations in Indonesia, such as Bumitama Agri, recording one-off fines and incurring sustained earnings impact if land is confiscated.
Revised fair value estimate of S$1.30; reiterate HOLD.
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