Bumitama Agri - Maybank Kim Eng 2016-02-23: No earnings surprises

BUMITAMA AGRI LTD P8Z.SI

Bumitama Agri (BAL SP) - No earnings surprises

FY15 core PATMI met 103%/100% of our/consensus estimates.
We expect 17% EPS recovery in 2016 underpinned by stronger output and higher CPO prices.
Our 2016-18F forecasts incorporated FRS16 & FRS41 accounting impact effective 1 Jan 2016.

At 11.5x 2016 PER, BAL is still undervalued despite the recent rebound in stock price.
Maintain BUY and TP of SGD0.85 based on 13x 2016 PER.

FY15 headline PATMI was down 23% YoY to IDR891b.
Stripping fair valuation loss on biological assets (IDR46b) and FX translation losses (IDR52b), core PATMI came in at IDR964b (-22% YoY), within expectations.
The lower YoY PATMI was due to lower CPO ASP (-16% YoY) and higher cost of production (in part due to the weaker rupiah) but mitigated by higher FFB nucleus output (+13% YoY) and lower effective tax rate of 18% (-5.9 ppts YoY).
A final DPS will only be announced closer to AGM date.

Operationally, BAL posted a relatively good FFB nucleus output growth (1.58m MT, +13% YoY) in FY15 despite 3Q15’s drought that hit its estates. And we estimate its FY15’s all-in cost of production at ~MYR1,000/t (excluding FX loss and FV losses on biological assets), still one of the more cost efficient producers in the region.

BAL’s FFB (group) growth guidance of 8% (MKE: +14% YoY) for 2016 appears conservative in our view given its young age profile of 8 years.
For FY16, we are maintaining our 14% FFB nucleus growth forecasts and MYR2,300/t CPO ASP assumption for now.
BUY BAL for its long-term prospects and 23% 2015-17 EPS CAGR.
Our TP is unchanged at SGD0.85 based on an undemanding 13x 2016 PER; -1SD below its historical mean.

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-02-23

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