Bumitama Agri (BAL SP) - Maybank Kim Eng 2017-05-16: Off To A Decent Start

Bumitama Agri (BAL SP) - Maybank Kim Eng 2017-05-16: Off To A Decent Start BUMITAMA AGRI LTD. P8Z.SI

Bumitama Agri (BAL SP) - Off To A Decent Start

1Q17 results within expectations 

  • Decent 1Q17 results were boosted by higher output and higher CPO ASP achieved. The best is yet to come as BAL’s strongest quarter has traditionally been its final quarter when output peaks. 
  • Trading at just 11x FY17 PER with +24% EPS growth potential for 2017, BAL remains a BUY with an unchanged SGD0.96 TP on 14x FY17 PER, its 4-year mean.

Lifted by higher output and CPO ASP 

  • BAL reported a 1Q17 headline net profit of IDR278b (+21% YoY, -40% QoQ). Stripping aside forex, 1Q17 core net profit of IDR270m (+40% YoY, - 37% QoQ) met 24% of our/consensus full-year estimates; within expectations. 
  • The stronger YoY earnings were lifted by higher revenue (+41% YoY, -8% QoQ), which was in turn boosted by output growth (+26% YoY, -28% QoQ) post El Nino impact, and higher CPO ASP achieved of IDR8,450/kg (+35% YoY, +9% QoQ). 
  • Had it not been for the aggressive fertilisation application in 1Q17 which accounted for 56% of its full year programme, its core results would have been even stronger.

Expect 22% in output growth in 2017 

  • BAL typically enjoys a distinct peak in output in Q4 of the calendar year. Management believes there will be no exception in 2017. Its 1Q17 output of 393,967 MT met 21% of our full-year forecast, in line with historical trends. Hence, we are keeping our +22% YoY FFB nucleus output growth forecast for 2017. 
  • We consider BAL’s 2017 FFB growth guidance of +15% YoY to be low considering 
    1. expectation of a post El Nino rebound, and 
    2. its young tree profile of 8.7 years average and 
    3. +11% of new nucleus area coming into maturity in 2017.

BUY for its growth prospects 

  • We are keeping our earnings forecasts. 
  • We continue to like BAL for its medium term growth story, anticipating 13% CAGR in its 2016-19 FFB output. The stock is trading at an attractive 11x FY17 PER, as current valuation ignores its growth potential. 
  • BUY for its strong growth.

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-05-16
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 0.960 Same 0.960