SUPPLY INTACT: Suppliers unload bagfuls of rice from a lorry to be delivered to customers here. Bernas has secured 800,000 tons of rice via a MoU signed with the Vietnamese government that covers the supply of rice for the next 12 months, allowing Bernas to supply rice to Malaysian consumers at a reasonable price for the next six to 12 months. — Bernama photo
KUCHING: Padiberas Nasional Bhd (Bernas) is to have an optimistic third quarter performance for this year, as well as an uninterrupted supply despite the Thai rice supply being halted by the floods.
Bernas had secured 800,000 tonnes of rice via a recent memorandum of understanding (MoU) signed with the Vietnamese government. The agreement covered the supply of rice for the next 12 months, allowing Bernas to supply rice to Malaysian consumers at a reasonable price for the next six to 12 months.
Maybank Investment Bank Bhd (Maybank Investment) said in a research report that this order was characteristically large for a single supplier, but it also added that the action showcased the extent of the high levels of inventory in the world.
At present, Vietnam and India lead the pack with its record-high inventories, predicted to offset Thailand’s impacted rice exports.
“Bernas was not to be affected by the rice crisis with sufficient rice stockpile to last five to six months, its secured and locked-in prices for rice imports would last till March 2012 for direct consumption and stockpile replenishment,” added the research report, also stating that he MoU added to the strength of Bernas’ business strategy.
Moreover, Thailand’s floods had put a halt on rice-smuggling activities, resolving Bernas’ chief problem of competition from cheap smuggled rice.
“Furthermore, we expected the Thai government to stress on restocking its national stockpile first and implement its policy of buying paddy from farmers directly at a fixed price,” said Maybank Investment. Its belief was that there would no longer be any financial incentive for Thai smugglers to market their product in Malaysia.
Thus, Maybank Investment pegged an unchanged target price of RM3.90 per share for Bernas, expecting a continued strong performance with a net profit growth of 40 per cent year-on-year to RM81 million. It added, “We believe there is potential upside to our earnings forecast as we have not imputed the benefit of no smuggling activities of Thai rice into Malaysia.”