BUMITAMA AGRI LTD. (SGX:P8Z)
Bumitama Agri - 9M20 Estimated Core Earnings In Line; Keep BUY
- Excluding a large FX loss in 3Q20, we estimate Bumitama Agri (SGX:P8Z)'s 9M20 core earnings as in line with our forecast, but above Street’s.
- Although CPO prices were 26% y-o-y higher, 9M20 FFB output remained weak at -6%. At 9x 2021F, a large discount to peers and historical mean P/E, Bumitama Agri’s valuations are unjustified.
- Keep BUY with new S$0.60 target price from S$0.65, 15% upside.
Bumitama Agri recorded a 49% y-o-y rise in 9M20 earnings
- Bumitama Agri recorded a 49% y-o-y rise in 9M20 earnings on higher CPO (+25.6%) and PK (+18.7%) prices, offset by lower FFB output (-6%). This was seemingly below our and Street’s expectations, coming in at 55-67% of full-year forecasts. However, we understand there was a large unrecognised FX loss booked in the quarter due to the IDR’s depreciation during this period. Therefore, we believe core earnings are in line with our expectations, but above consensus.
Bumitama Agri's briefing highlights:
- Bumitama Agri maintained its FFB growth projections at flat to -5% for FY20. Management noted that productivity improved in September and October, and expects this improvement to continue in November. It notes that, despite the higher La Nina-induced rainfall, operations have not been affected so far. Nevertheless, to be conservative, we lower our FY20 FFB growth assumptions to -4.5% from -2.8%, and to 6-7% for FY21-22F from 7-9%. We also adjust our third party and plasma production forecasts downwards accordingly;
- In 9M20, Bumitama Agri did not manage to do much new planting, as it was difficult to do so in light of COVID-19, as third-party auditors were unable to do site checks. As such, we reduce our new planting targets to 100ha in FY20 and 1,000ha for FY21-22F from 1,500ha;
- No details were given about 9M20 cash costs, but Bumitama Agri maintained its guidance for FY20 cash costs to be 10-15% higher y-o-y. Fertiliser application is on track for completion by early 4Q. We make no changes to our cash cost assumptions;
- There has been no change to the export tax levy as yet, with the rate remaining at USD55.00/tonne for now, although news flow suggests that the change is likely to be implemented soon.
Lower earnings forecast
- Post adjustments for lower FFB and CPO output, we trim our Bumitama Agri's FY20-22F earnings forecast by 7-9%.
- We note that Bumitama Agri, as a pure planter, is highly leveraged to CPO prices and unit costs, where every MYR100.00/tonne change in CPO prices impacts earnings by 10-12%.
Maintain BUY.
- Post-earnings revision, our target price for Bumitama Agri is reduced to S$0.60, based on an unchanged 10x 2021F earnings. This is based on Bumitama Agri’s 5- year forward P/Es.
- Bumitama Agri's share price is currently trading at an inexpensive 9x 2021F P/E, at a large discount to its peers and historical P/E.
- See Bumitama Agri Share Price; Bumitama Agri Target Price; Bumitama Agri Analyst Reports; Bumitama Agri Dividend History; Bumitama Agri Announcements; Bumitama Agri Latest News.
Singapore Research
RHB Securities Research
|
https://www.rhbinvest.com.sg/
2020-11-10
SGX Stock
Analyst Report
0.60
DOWN
0.650
