Bumitama Agri (BAL SP) - Maybank Kim Eng 2016-11-15: Expect even better 4Q16

Bumitama Agri (BAL SP) - Maybank Kim Eng 2016-11-15: Expect even better 4Q16 BUMITAMA AGRI LTD. P8Z.SI

Bumitama Agri (BAL SP) - Expect even better 4Q16

3Q16 results within our estimates but below market 

  • 3Q16 results were within our expectations. 
  • We anticipate even stronger 4Q16 earnings as BAL’s output typically peaks in the final quarter. At 11x FY17 PER and +68% YoY EPS growth for FY17, BAL is a BUY with an unchanged TP of SGD0.97 on 14x FY17 PER (pegged at -1SD of 4-yr historical mean to reflect the recent slowdown in nucleus plantings).

3Q FFB output grew 1% YoY, better than peers 

  • Reported 3Q16 PATMI was IDR206b (+29% YoY, +92% QoQ). 
  • Excluding forex gains of IDR19b, core PATMI was IDR187b (+7% YoY, +70% QoQ). This brings 9M16 core PATMI to IDR490b (-7% YoY) which met 72% of our FY16 forecasts (within) / 63% of market (below expectations). 
  • The significant improvement in 3Q results was mainly on recovery of 3Q FFB output (+1% YoY, +48% QoQ), higher CPO ASP achieved (+16% YoY, +1% QoQ), and higher PK ASP (+91% YoY, +7% QoQ).

FFB output typically strongest in final quarter 

  • While industry peers were mostly showing double-digit decline in output, BAL’s 3Q FFB output grew 1% YoY (due to 6,802ha of new areas that entered maturity in 2016) despite FFB yield declining 16% YoY to 3.7t/ha.
  • For 9M16, FFB nucleus output of 0.96m MT (-11% YoY) met 66% of our FY16 forecast; inline. Hence, we are keeping our FY16 FFB forecast of 1.47m MT (-7% YoY, inline with BAL’s guidance of -5-10% YoY) as FFB output is typically strongest in the fourth quarter.

Strongest quarterly earnings in 4Q16 

  • Amid presently high CPO price and strong output in 4Q16, we see BAL’s strongest quarterly earnings in 4Q16. Hence, we are keeping our EPS forecasts unchanged. 
  • Taking a 12M view, anticipating a normalised FFB yield in 2017 with FFB nucleus output growth of +25% YoY for FY17 (driven by biological yield recovery and organic growth from its young trees of 8-years old), we see value in BAL. BUY.

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-11-15
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 0.97 Same 0.97