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


Bumitama Agri - A Very Slow Start To The Year

Stronger earnings likely in 2H19

  • 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.

1Q dragged by low prices, low output & higher costs

  • 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%).

Cropping trend likely skewed towards 2H

  • 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).

Keeping earnings forecasts for now

  • 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