BUMITAMA AGRI LTD
P8Z.SI
Bumitama Agri (BAL SP) - A BUY Despite Weak Results
- Despite a weak set of results, we continue to like Bumitama due to its inexpensive valuation of under 10x FY16 earnings and good tree age profile capable of double-digit production growth under normal weather conditions.
- With the strong El Nino in place, its production could slow to single-digit but will at least continue to head higher.
- We expect palm oil price to be strong in 2016, which will benefit Bumitama’s bottom line.
Weak results.
- Bumitama’s 9MFY15 core earnings were weaker than expected, making up 56% of our full year forecast and 61% of consensus expectation. Besides weaker than expected 9M production, it was largely due to lower than expected recognition of revenue. It had palm oil not loaded onto barges on time due to peak crop season. Consequently, 3Q CPO production was up by 20.6% YoY but sales volume was only up by 2.6%.
Production weaker than expected.
- Nucleus FFB growth came in weaker than expected at 6.5%. This was due to haze-related drop in harvesting activity. Hence the was some spillover harvest in October as the haze improved. 4Q production could be flat to slightly higher QoQ.
Trimming production forecast.
- Management lowered production growth guidance to 15% from 20% previously. Despite our already more conservative production growth of 14.6% for FY15, we are trimming it further to 8.9%. This puts our nucleus FFB forecast at 1.526m tonnes vs 1.605m previously. We also lowered our FY16 production growth estimate to 9.8% vs 11.2% previously.
Biodiesel sale to Pertamina.
- Bumitama secured 20k tonnes of biodiesel sale for delivery over 6 months and has delivered 1,915 tonnes.
Earnings forecast.
- We lower our FY15 forecast by 6.9% to IDR1,081bn. For FY16, despite the lower production number, our forecast is relatively unchanged at IDR1,390bn as we factor in lower biological asset depreciation charges of IDR175bn (IDR351.6bn previously). Management guided that it will be just IDR110.3bn net of tax.
Maintain Buy.
- We maintain our BUY call on the stock with a marginally lower TP of SGD1.41 (78% upside), based on an unchanged FY16F P/E of 17x.
Singapore Research
RHB Research
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http://www.rhbinvest.com.sg/
2015-11-13
RHB Research
SGX Stock
Analyst Report
1.41
Down
1.42
