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

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 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).

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.

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