Bumitama Agri (BAL SP) - Maybank Kim Eng 2017-11-14: Delivering Results

Bumitama Agri (BAL SP) - Maybank Kim Eng 2017-11-14: Delivering Results BUMITAMA AGRI LTD. P8Z.SI

Bumitama Agri (BAL SP) - Delivering Results

No surprises in earnings 

  • Bumitama Agri's 3Q17 results were within our and consensus estimates, boosted by output recovery. U
  • nlike prior years, there will not be a distinct peak output in 4Q17 but earnings could still be stronger QoQ as 92% of 2017’s fertilizing activities have been completed in 9M17. 
  • We are keeping our earnings forecasts. Bumitama Agri remains a BUY with an unchanged SGD0.95 TP on unchanged 14x FY17 PER, its 4-year mean.

3Q17 earnings lifted by output growth 

  • Bumitama Agri reported a 3Q17 core PATMI of IDR271b (+45% YoY, -5% QoQ), bringing 9M17 core PATMI to IDR826b (+68% YoY), which met 70%/69% of our/ consensus full-year estimates. 
  • 3Q17’s YoY earnings jump was underpinned by higher revenue (+37% YoY, +7% QoQ), which was in turn boosted by strong FFB output growth recovery (+20% YoY, -6% QoQ) post El Nino (in part due to the lower base last year). 
  • Meanwhile, CPO ASP achieved was marginally lower at IDR7,778/kg (-1% YoY, -3% QoQ).

9M17 output on track to meet our 22% growth 

  • 3Q17’s FFB output growth was another good quarter but in part due to the low base last year and hence unlikely to be sustainable in 4Q17. Its 9M17 output (+41% YoY) met 74% of our full-year forecast, and is on track to meet our full-year growth forecast of +22% YoY (vs Bumitama Agri’s guidance of +25% YoY for the group).
  • Given the strong 2Q-3Q output in 2017 so far, the crop pattern may have mirrored 2014 and as such the usual distinct seasonal peak may not happen in 4Q17 this time. 
  • In fact, Bumitama Agri alluded to a potentially flattish QoQ in 4Q17 (implying a decline YoY) as there is a delay in peak crop towards later part of the final quarter.

Expect stronger 4Q17 results 

  • Despite flattish QoQ output guidance, we expect BAL to report stronger 4Q17 earnings as 92% of fertilizing work for the year was administered in 9M17 (1H17: 73%, 9M16: 67%). 
  • We continue to like BAL for its medium term growth story, anticipating a 13% CAGR in its 2016-19 FFB output. This is underpinned by its young tree profile of 8.7 years average.

Ong Chee Ting CA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-11-14
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 0.950 Same 0.950