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 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).

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).

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.

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