Bumitama Agri - Maybank Kim Eng 2019-05-14: A Very Slow Start To The Year

BUMITAMA AGRI LTD. (SGX:P8Z)

Bumitama Agri - A Very Slow Start To The Year

BUMITAMA AGRI LTD. (SGX:P8Z)'s 1Q19 results fell short of our/ market expectations. We expect better performances in the coming quarters, especially in 2H19 on much higher output, prices, and lower fertiliser application.
We maintain our earnings forecasts for now. Bumitama Agri remains a BUY with an unchanged SGD0.97 Target Price on 13x FY19 PER peg, its 4-year historical mean.

Bumitama Agri reported a 1Q19 PATMI of IDR111b (-52% y-o-y, -47% q-o-q). Stripping aside FX gains, 1Q19 core PATMI was IDR48b (-81% y-o-y, -79% q-o-q), which met just 4% of our/ consensus full-year estimates.
The weak results were mainly due to sharply lower CPO ASP (-16% y-o-y, +8% q-o-q) and PK ASP (- 38% y-o-y, -6% q-o-q) achieved while FFB nucleus output growth was only slightly higher y-o-y at 482,427t (+2% y-o-y, -13% q-o-q). There were also cost pressures from fertiliser, wages, and barge costs (the latter to expedite delivery of palm products to customers).
As for fertiliser, the relatively good weather has expedited application in 1Q19 as Bumitama Agri administered 35% of full-year requirement (1Q18: 31%).

2019’s cropping pattern will be unlike last two years based on bunch count sampling performed recently as Bumitama Agri guides for a possible repeat of 2012. 2019’s quarterly output is possibly on an ascending trend in the coming quarters and to peak in Q4.
While 2011-18’s 1H:2H output ratio was 46:54 (2018: 48:52), Bumitama Agri is guiding for a 42:58 ratio in 2019. Its 1Q19 FFB output was 19% of our full-year forecast.
Bumitama Agri kept its guidance of up to +15% FFB growth for FY19 (FY18A: +28% y-o-y) vs MKE’s forecasts of +9% y-o-y. Growth will be driven by its relatively young tree age profile and ~7k ha of new area coming to maturity (+4% of mature area).

We expect much stronger quarterly earnings in 2H19. We are keeping our FY19 EPS forecast for now pending an industry-wide review of our CPO ASP estimate after exceptionally weak prices thus far in 2019.

Ong Chee Ting CA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-05-14

SGX Stock Analyst Report BUY MAINTAIN BUY 0.970 SAME 0.970