Bumitama Agri - Maybank Kim Eng 2015-10-19: Limited upside; D/G to HOLD

BUMITAMA AGRI LTD P8Z.SI

Bumitama Agri - Limited upside; D/G to HOLD

Upcoming 3Q15 core PATMI could underperform consensus estimates but still be within our expectations.
Expect 3Q15 results to be affected by forex losses on its US debt exposure given the sharp 10% decline in IDR vs USD.
Given limited upside to our TP, we downgrade BAL to HOLD (from BUY) with unchanged TP of SGD0.85 on 13x 2016 PER.

By our estimate, BAL will likely report a 3Q15 core PATMI of IDR238b (-19% YoY, +9% QoQ) and bring 9M15 core PATMI to IDR661b (-30% YoY), meeting 71% of our 2015 forecast (in line) but 61% of consensus (below).
The weaker YoY 3Q15 results were largely due to lower CPO ASP achieved of IDR6,770/kg (-17% YoY, -10% QoQ), mitigated by higher FFB output (0.38m MT; +15% YoY, +8% QoQ).
The low 3Q CPO ASP was partly due to Indonesia’s punitive USD50/t export levy introduced on 15 Jul 2015. And as IDR fell 10% vs USD in 3Q15 (vs -2% in 2Q15), 3Q15’s unrealised forex translation losses on its USD net debt exposure of ~IDR5t equivalent (as at 30 Jun 15) could be substantial.

9M15 FFB output of 1.08m MT (+6.5% YoY) met 67% of our 2015 forecast. Our 2015 15.6% FFB (nucleus) growth forecast (vs management guidance of 20% for nucleus + plasma FFB output) implies a 4Q15 FFB output of 0.38m MT (+39% YoY, +8% QoQ).
The dry weather that hit Kalimantan in Aug-Sep 2015 is casting doubt over BAL’s near-term prospects even though output traditionally peaks in 4Q.
But while 4Q15 FFB output may miss our expectations, this may well be compensated by the recent strengthening in CPO ASP. Hence, we are keeping our earnings unchanged for now pending its results. But given limited upside to our TP, we downgrade BAL to HOLD (from BUY).

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-19

Maybank Kim Eng SGX Stock Analyst Report HOLD DOWNGRADE BUY 0.85 Same 0.85