Bumitama Agri - RHB Invest 2020-02-19: Inexpensive Upstream Player; Keep BUY

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

Bumitama Agri - Inexpensive Upstream Player; Keep BUY

  • Bumitama Agri (SGX:P8Z)'s FY19 core earnings were in line with our expectations, coming in at 103% of our FY19 forecast – but below consensus, at 77%.
  • FY20 should be a better year overall, with improved FFB output and higher CPO prices.



FFB growth for FY19 fell 2% y-o-y

  • FFB growth for FY19 fell 2% y-o-y, below management’s 2019 growth guidance of flat output. Unit costs rose 15% y-o-y in FY19 due to lower FFB output and a correction in fertiliser mix in 2H20, where Bumitama Agri added additional magnesium to its fertiliser application, causing costs to rise.
  • Bumitama Agri’s average CPO price fell 4.7% y-o-y to IDR6,696kg, while PK prices dropped by a larger 35.4% y-o-y to IDR3,416/kg.


Briefing highlights:

  • Bumitama Agri is guiding for up to 10% FFB growth for FY20, coming from 4,000ha of new areas coming into maturity and weather normalisation. Weather at its estates in Kalimantan have normalised since mid-Nov 2019, and management is guiding for an FY20 45:55 FFB output ratio in 1H:2H. We have reduced our FFB growth projections slightly for FY20-22 to 8-10% from 9-11% previously;
  • 4Q19 unit cost of IDR4,022/kg was 1.8% higher q-o-q and 4.5% higher y-o-y due to higher fertiliser application – this brought FY19 unit costs to a 15% y-o-y increase. Management is now guiding for FY20 unit costs to rise 5% y-o-y – coming from an 8.5% y-o-y rise in wages, 3.5% inflation increase, and 14% rise in fertiliser prices. We have already conservatively imputed a 5-10% yearly increase in costs for FY20-22;
  • Management does not do any forward selling currently, and has set its CPO price budget at MYR2,600 for 2020. The collection of a USD50.00/tonne levy has started, and refiners have already started to pass down the tax impact to the upstream planters.


We maintain our call.






Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-02-18
SGX Stock Analyst Report BUY MAINTAIN BUY 0.85 DOWN 0.950



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