Bumitama Agri

[Curiousparty]

Analysts increase TPs for Bumitama following positive 1H21 results

Analysts at Maybank Kim Eng and RHB have increased their target prices for Bumitama Agri on the back of the plantation player' s strong 1H21 results.

Maybank Kim Eng maintains its " buy" call with a higher target price of 93 cents, from its previous 65 cents. Its analyst Ong Chee Ting highlighted in an August 15 report that Bumitama is trading at a single digit price-to-earnings ratio, with attractive dividend yields of above 6%.

Meanwhile, RHB analysts maintain " neutral" with a higher TP of 47 cents from the previous 45 cents. The analysts said it expects earnings to improve in the coming quarters, as Bumitama has completed its forward sale contracts.

Bumitama booked a 6% y-o-y rise in 1H21 earnings on higher sales volume for its crude palm oil (CPO) and palm kernel products, which increased at 31% and 20% y-o-y respectively. RHB said the higher-than-expected profits stemmed from higher fresh fruit bunches (FFB) production, which was sustained throughout 2Q21.

Despite the 27% y-o-y FFB output growth in 1H21, Ong noted that Bumitama has conservatively raised its FY21 growth guidance to about 10% to 15% y-o-y. It expects 2021' s 1H and 2H output ratio to be 50:50 versus the typical 55:45, as it experienced a mini-peak in 2Q21.

Ong said Bumitama also has immaterial forward sales in 2H21, which means that the PATMI in the second half of the year will capture the current higher CPO average selling price (ASP).

Following its 2021 industry-wide CPO ASP revision to RM3,500 per tonne from RM3,100 per tonne, as well as its 2022 to 2023 ASP to RM2,800 per tonne, Maybank Kim Eng has raised its FY21, FY22 and FY23E core PATMI by 35%, 3% and 4%, respectively.

After adjusting for higher FFB output and higher realised CPO prices in 1H21, RHB analysts have raised its FY21 to FY23F earnings by 4% to 14%.

As at 2.00pm, shares in Bumitama are down 1% to 46 cents or 0.9 times FY2021 book value.

[Curiousparty]

Singapore, 12 November 2021 – Mainboard-listed Bumitama Agri Ltd. (“Bumitama” or “The Group”) is one of the leading producers of crude palm oil (“CPO”) and palm kernel (“PK”) with holdings of oil palm plantations in Indonesia.

The spike in quarterly profitability was primarily attributable to pent-up increase in average selling price of our CPO as the previous price-related constraint is mostly out of the way. Bumitama recorded all time high figures in EBITDA and net profit in the third quarter 2021 (“3Q21”), which amounted to IDR 1,028.7 billion and IDR 588.7 billion, respectively.

During 3Q21, Bumitama sold its CPO at an average price of IDR 10,000 per kg, or 27% higher than the same period of 2020 (“3Q20”). Sales volume between the two periods also climbed 13%. As a result, revenue from the key product spiked to IDR 2,679.8 billion in 3Q21, or 43% higher YoY.

The Group’s revenue for the first nine months of 2021 (“9M21”) reached IDR 8,496.8 billion, or 40% increase versus the same period of last year. The rise was primarily attributable to higher contribution from CPO as both price and volume climbed. Fertilizer application slowed down due to rainfall during the last two months of the reported quarter. Net profit recorded in 9M21 rose higher, or 70% year on-year to reach IDR 1,072.8 billion.

The Group remains upbeat to attain this year’s internal fresh fruit bunches (“FFB”) growth guidance, on track for record breaking output for the year as FFB harvest from both nucleus and plasma estates reached 2.7 million tons in 9M21 period, accounting for 79% of the previous record high output of 3.3 million tons in 2018.

Several industry experts have voiced that the price at current level should sustain, as tightness in global inventory is anticipated to persist due to ongoing supply disruptions as well as post-pandemic demand recovery. Bumitama management is confident that CPO price would remain at elevated levels compared to last year’s average till year end.

Could this be the start of a commodity boom cycle? Lower palm oil supplies in Malaysia and lower than expected crop production in other major vegetable oils growing regions have coincided with demand recovery as economies around the globe begin to normalize. The prices of vegetable oils have increased across the board, with palm oil and canola oil reaching all time high while soy oil hit 13-year
peak in May.