BUMITAMA AGRI LTD. (SGX:P8Z)
Bumitama Agri - 3Q19 FFB Output Affected By Dry Weather
- Maintain NEUTRAL with a higher SGD0.43 Target Price from SGD0.38, 2% downside and c.3% yield.
- Bumitama Agri’s 1Q20 results were above expectations, coming from lower unit costs and higher CPO prices. Management expects FFB output to remain weak in 2Q20, before recovering in 2H20.
- Valuations are fair at current levels.
Bumitama Agri has opted not to continue with quarterly results reporting
- Bumitama Agri (SGX:P8Z) has opted not to continue with quarterly results reporting, releasing financial reports on a semi-annual basis only. It will now release certain financial numbers and operational statistics. As such, we are unable to ascertain core net profit figures for 1Q20.
- Based on net profit figures, earnings for this period are above expectations, comprising 35-43% of our and consensus FY20 forecasts. This comes from higher 1Q20 CPO prices achieved and lower unit costs (estimate: 6% down q-o-q), but offset by lower-than-expected FFB output.
Stronger earnings came on higher ASPs.
- Bumitama Agri's 1Q20 FFB output grew 0.3% y-o-y, while CPO prices rose 33% y-o-y. This was below management’s guidance of up to 10% growth for FY20.
Bumitama Agri's briefing highlights:
Bumitama Agri is maintaining its FFB current growth projections of up to 10% for FY20.
- 1Q was affected by 3Q19’s dry weather, which has also continued to affect 2Q’s productivity. Management is hoping for significant improvements in FFB output in 2H20.
- In FY20, Bumitama Agri is targeting to plant up to 1,000ha of land, while 4,000ha are expected to come into maturity. We revise our FY20 FFB growth assumptions to 4% from 8%, but retain our 8-9% growth assumptions for FY21-22.
Bumitama Agri did not disclose its 1Q20 cash cost,
- only stating that it expects costs to remain within its guidance of flat to 5% growth y-o-y. As it acquired its fertiliser requirements for 2020 at end 2019, Bumitama Agri was not affected by the IDR’s 18% q-o-q depreciation for its import costs.
- As we had earlier projected FY20 cash costs to rise 10-15% y-o-y, we reduce our cash cost projections to reflect a 5-10% increase instead.
Management expects the Indonesian Government to continue with the B30 biodiesel mandate in 2020,
- although moving on to B40 and B50 may be postponed. Discussions remain ongoing on a potential pricing formula change or an additional collection of export levies for the biodiesel fund, but nothing has been confirmed yet.
Maintain NEUTRAL.
- Post adjustment for lower FFB growth and unit costs, we raise our Bumitama Agri's FY20F-21F earnings 5-14%. We up our Target Price to SGD0.43 with an unchanged 12x 2020F P/E, in line with Bumitama Agri’s peers.
- See Bumitama Agri Share Price; Bumitama Agri Target Price; Bumitama Agri Analyst Reports; Bumitama Agri Dividend History; Bumitama Agri Announcements; Bumitama Agri Latest News.
- We believe valuations are fair, as the stock is currently trading in line with historical averages.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-05-13
SGX Stock
Analyst Report
0.43
UP
0.380
