Bumitama Agri - Maybank Kim Eng 2018-05-08: A Seasonal Slow Start To 2018

Bumitama Agri - Maybank Kim Eng 2018-05-08: A Seasonal Slow Start To 2018 BUMITAMA AGRI LTD. SGX: P8Z

Bumitama Agri - A Seasonal Slow Start To 2018

Good time to accumulate

  • Bumitama Agri (BAL) 1Q18 core net profit (-10% y-o-y, -29% q-o-q) was within expectations as lower CPO ASP (-8% y-o-y) was mitigated by higher sales volume (+3% y-o-y) and lower fertiliser application. 
  • Expect better quarterly earnings ahead. We make no changes to our earnings forecasts. Trading at an EV of ~USD9,200/ha and just 10x FY18 PER, more than 1SD below its historical mean, BAL remains a BUY with an unchanged Target Price of SGD0.99 on 14x 2018 PER (5-year historical mean).

1Q18 results within expectations

  • 1Q18 headline net profit of IDR231.8b (-17% y-o-y, -36% q-o-q) was marginally dragged by FX losses of IDR15.9b. Adjusted, 1Q18 core net profit of IDR243.7b (-10% y-o-y, -29% q-o-q) met 19% of our / consensus full- year forecasts.
  • The lower y-o-y results were due to
    1. lower CPO ASP (-8% y-o-y, -4% q-o-q) and lower PK ASP (-22% y-o-y, -11% q-o-q), and
    2. a build-up in inventories (MKE estimate: +13,348 MT, vs 1Q17’s drawdown of 11,956 MT) as 1Q18 CPO sales volume growth (+3% y-o-y) was lower than production growth (+17% y-o-y).

15-20% FFB output growth guidance unchanged

  • Operationally, 1Q18 FFB nucleus output of 472,852 MT (+20% y-o-y, +11% q-o-q) met 23% of our full-year forecasts, and within BAL’s unchanged 15- 20% FFB growth guidance for 2018. However, it remains unclear if 2018’s quarterly output trend will revert to the usual distinct Q4 peak after last year’s anomaly. 
  • As for YTD rainfall, it has been good.

Maintain earnings forecasts and BUY

  • 1Q18 CPO cash cost was estimated at IDR4,487/kg (-16% y-o-y), in part due to lower fertiliser administered in 1Q18 whereby only 32% of full-year’s requirement was completed compared to 56% in 1Q17 (last year’s high fertilizing application rate was an anomaly). 
  • BAL expects to complete the remaining fertilizer applications in 2Q-3Q18. It maintains overall guidance for higher cash cost (per tonne) by 5-10% y-o-y for 2018 on increased fertilizer usage and higher labour costs.

Ong Chee Ting CA Maybank Kim Eng | https://www.maybank-ke.com.sg/ 2018-05-08
SGX Stock Analyst Report BUY Maintain BUY 0.990 Same 0.990