Bumitama Agri - Maybank Kim Eng 2016-01-22: Sell-down overdone; BUY

Bumitama Agri - Maybank Kim Eng 2016-01-22: Sell-down overdone; BUY BUMITAMA AGRI LTD P8Z.SI 

Bumitama Agri (BAL SP) - Sell-down overdone; BUY 

Strong 4Q15 FFB output should restore confidence 

  • BAL’s production trend has normalised as FFB nucleus output peaked in 4Q15 with sharp growth of 29% YoY (+30% QoQ). 
  • We expect no surprises in BAL’s FY15 earnings. This should help restore some investor confidence as we believe the recent sell-down is overdone amidst anxiety over its 4Q15 output as BAL’s estates are largely in the drought-affected areas in Kalimantan. 
  • Maintain BUY and TP of SGD0.85 based on 13x 2016 PER. 

FFB output peaked in 4Q15 

  • BAL announced a strong set of 4Q15 production figures. Production finally caught up in 4Q15 with FFB nucleus output of 499,212 MT (+29% YoY, +30% QoQ), which represents 32% of its 2015 output. This brings 2015 FFB nucleus output to 1,578,815 MT (+13% YoY), which met 98% of our full-year forecast. 
  • The quarterly production trend appears to have normalised with a distinct peak in the final quarter as 2014’s trend was an anomaly. In any case, this set of production figures will allay investors’ fears of a disappointing 4Q15. 

Expect no surprises in 2015’s results 

  • The strong 4Q15 production coupled with high brought forward inventories (from 3Q15) will help boost BAL’s 4Q15 results amidst the relatively flattish QoQ CPO ASP. 
  • We expect BAL’s results to pick up sharply in 4Q15 to meet our 2015 full year core PATMI estimate of IDR936b. 
  • During 4Q15, the IDR strengthened approximately 6% against the USD and this will help reverse some of the forex translation losses recorded in 9M15 arising from its US dollar debt exposure. 

BUY; recent sell-down overdone 

  • We believe the recent sell-down in BAL shares was mainly due to concerns over its production outlook caused by the drought in Kalimantan back in 3Q15. Hence, this is an opportune time to accumulate. 
  • BUY with unchanged TP of SGD0.85 based on undemanding 13x 2016 PER.

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-01-22
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 0.85 Same 0.85