Bumitama Agri (BAL SP) - Maybank Kim Eng 2017-11-14: Delivering Results

BUMITAMA AGRI LTD. P8Z.SI

Bumitama Agri (BAL SP) - Delivering Results

Bumitama Agri's 3Q17 results were within our and consensus estimates, boosted by output recovery. U
nlike prior years, there will not be a distinct peak output in 4Q17 but earnings could still be stronger QoQ as 92% of 2017’s fertilizing activities have been completed in 9M17.
We are keeping our earnings forecasts. Bumitama Agri remains a BUY with an unchanged SGD0.95 TP on unchanged 14x FY17 PER, its 4-year mean.

Bumitama Agri reported a 3Q17 core PATMI of IDR271b (+45% YoY, -5% QoQ), bringing 9M17 core PATMI to IDR826b (+68% YoY), which met 70%/69% of our/ consensus full-year estimates.
3Q17’s YoY earnings jump was underpinned by higher revenue (+37% YoY, +7% QoQ), which was in turn boosted by strong FFB output growth recovery (+20% YoY, -6% QoQ) post El Nino (in part due to the lower base last year).
Meanwhile, CPO ASP achieved was marginally lower at IDR7,778/kg (-1% YoY, -3% QoQ).

3Q17’s FFB output growth was another good quarter but in part due to the low base last year and hence unlikely to be sustainable in 4Q17. Its 9M17 output (+41% YoY) met 74% of our full-year forecast, and is on track to meet our full-year growth forecast of +22% YoY (vs Bumitama Agri’s guidance of +25% YoY for the group).
Given the strong 2Q-3Q output in 2017 so far, the crop pattern may have mirrored 2014 and as such the usual distinct seasonal peak may not happen in 4Q17 this time.
In fact, Bumitama Agri alluded to a potentially flattish QoQ in 4Q17 (implying a decline YoY) as there is a delay in peak crop towards later part of the final quarter.

Despite flattish QoQ output guidance, we expect BAL to report stronger 4Q17 earnings as 92% of fertilizing work for the year was administered in 9M17 (1H17: 73%, 9M16: 67%).
We continue to like BAL for its medium term growth story, anticipating a 13% CAGR in its 2016-19 FFB output. This is underpinned by its young tree profile of 8.7 years average.

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-11-14

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