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

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.

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.

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.

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