Bumitama Agri - Maybank Kim Eng 2019-08-15: Look Forward To Stronger 2H19

BUMITAMA AGRI LTD. (SGX:P8Z) | SGinvestors.io BUMITAMA AGRI LTD. (SGX:P8Z)

Bumitama Agri - Look Forward To Stronger 2H19


Weak results reflected in recent weak share price

  • BUMITAMA AGRI LTD. (SGX:P8Z)'s 2Q19 results fell short of our/market expectations on still low output and ASP. We look forward to much stronger 2H19 earnings.
  • Following revisions to our EPS, we cut our Target Price to SGD0.80 (previously SGD1.01) on unchanged 13x FY20 PER peg, its 5-year mean.
  • Bumitama Agri remains a BUY for its medium-term growth prospect and low cost of production.
  • Bumitama Agri offers decent dividend yields of ~3-5%, backed by its dividend payout policy of up to 40% of recurring income. An interim DPS of 0.38cents was declared.



2Q dragged by low output and price

  • Bumitama Agri reported a 2Q19 PATMI of IDR125b (-68% y-o-y, +13% q-o-q). Stripping FX aside, 2Q19 core PATMI was IDR116b (-72% y-o-y, +145% q-o-q), bringing 1H19 core PATMI to IDR164b (-75% y-o-y), which met just 14%/17% of our/ consensus full-year estimates.
  • The poor 2Q19 earnings were largely due to weaker-than-expected FFB output growth (-11% y-o-y, +15% q-o-q), lower CPO ASP of IDR6,582/kg (-16% y-o-y, +0.4% q-o-q), and higher expenses.
  • In terms of fertiliser application, Bumitama Agri has accelerated this in 1H19 at ~54% of its full-year plan (1H18: ~46%) which led to higher expenses. Also, 1H19’s selling expenses rose on increasingly higher proportion of palm products sold on a CIF basis (vs FOB basis) at ~60% in 1H19 (1H18: ~45%).


Lowered FFB output growth guidance

  • Bumitama Agri has lowered its FY19 FFB growth guidance to 5-8% vs earlier guidance of up to +15% FFB growth. This follows weaker-than-expected 1H19 output (-5% y-o-y) which was just 42% of our full-year forecast, and below its historical 1H:2H 46:54 ratio. Hence, we cut our FY19 FFB output growth assumption to 5% (from 9%).
  • And Bumitama Agri reckons 2019’s crop pattern will revert to past trend where output seasonally peaks in Q4.


EPS cut to reflect lower growth & higher expenses

  • Following the weak results, we have cut our FY19/20/21E EPS by 24%/21%/20% as we cut our FFB output by 3%-5%, and raised our cost assumptions.
  • Nonetheless, we look forward to better earnings in 2H19, especially in 4Q19 on seasonally stronger output and higher prices.





Ong Chee Ting CA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-08-15
SGX Stock Analyst Report BUY MAINTAIN BUY 0.80 DOWN 1.010



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