Bumitama Agri - Maybank Kim Eng 2015-11-12: Weak results priced in

BUMITAMA AGRI LTD P8Z.SI

Bumitama Agri - Weak results priced in

3Q15 results within our expectations but below consensus. Low CPO ASP achieved was mitigated by FFB output growth.
FRS16, FRS 41 impact guidance within our expectations. Guides for 9% / 23% cut in 2014’s EPS / Equity respectively.
Maintain HOLD for now with unchanged TP of SGD0.85 based on 13x 2016 PER.

BAL reported a 3Q15 headline PATMI of Rp200m (-30% YoY, -8% QoQ).
Stripping aside forex losses of Rp19.5b, its 3Q15 core PATMI was Rp214b (-27% YoY, -2% QoQ). This brings 9M15 core PATMI to Rp637b (-32% YoY) which met 68%/ 61% of ours (inline) / consensus (below expectations) forecasts.
Weaker 3Q results was largely due to lower CPO ASP achieved of Rp6,746/kg (-17% YoY, -10% QoQ) mitigated by higher FFB nucleus output of 383,448 MT (+15% YoY, +8% QoQ).
3Q15 cash cost of production was lower at Rp2,932/kg (- 15% YoY, -42% QoQ) due to extensive fertilising in 1H15.
BAL is revising down its 2015 target FFB growth to 15% (previously 20%) – now at the same level as our forecast. This follows an El Nino induced dry spell at BAL’s Kalimantan estates in the last 2 months which is likely to impact its FFB yield in early 2016.
For 9M15, BAL’s FFB nucleus output grew 6.5% YoY to 1.08m MT.

On the new FRS applications (effective 1 Jan 2016), BAL guides for an incremental annual depreciation of Rp110.3b - roughly in line with our Rp107.2b estimate (see our sector report dated 10 Aug). This implies an 8.9% cut in 2014 EPS.
It also guides for Rp1,627.3b (-23%) reduction on Equity. This in turn will raise its 2014 net gearing ratio to 72% (from 56%). Hence, we make no changes to our 2016-17 earnings as we have already incorporated FRS16 & FRS41 effects.
Maintain HOLD with unchanged TP of SGD0.85 based on unchanged 13x FY2016 PER (-1SD below 3yr mean).

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-11-12

Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.85 Same 0.85