BUMITAMA AGRI LTD. (SGX:P8Z)
Bumitama Agri - ESG ~ Prosper Thy Neighbour
Targets to be carbon neutral by 2030
- Bumitama Agri (SGX:P8Z) can pride itself as a sustainability champion. It pledged to make its operations carbon neutral by 2030. Bumitama Agri has also initiated many community projects to help improve the income and livelihoods of surrounding communities.
- Overall, its ESG credentials appear to be relatively good but its wide geographical land concession of 234,000 ha with over 30,000 workers exposes Bumitama Agri to multiple ESG risks.
- We maintain our BUY and target price of S$0.65 on 12x FY21E PER peg, its 5-year mean.
- Bumitama Agri trades at single-digit PER with attractive net dividend yields of above 4%.
43% of total certifiable area RSPO certified
- Bumitama Agri has 56,433 ha or 43% of its total certifiable area RSPO certified. In FY20, its annual production of RSPO CSPO was 236,962t.
- Due to pandemic-related travel restrictions, Bumitama Agri has deferred its time-bound plan to complete certification of all its mills by 2022 (previously 2020) or one year after obtaining HGUs, and for all plasma smallholders by 2024.
Set aside 39,310 ha or 17% of area for conservation
- Bumitama Agri has adopted a Sustainability policy of No Deforestation, No Peat, No Exploitation in 2015. It has resolved all past land disputes, deforestation and forest fire allegations amicably.
- Nonetheless, there is still an ongoing land dispute via RSPO complaints system pending resolution which relates to a 2012 case that was reopened in 2017 (after being closed in 2015).
- Bumitama Agri has also stepped up its environmental conservation efforts by setting aside 39,310 ha (or 17% of landbank) as conservation area. And it targets a 30% reduction in GHG intensity by 2030 using 2016 as baseline.
Community welfare at its heart
- Poverty and lack of awareness among rural community are common reasons in Indonesia for incidences of illegal deforestation and fires in the past. Cognisant of these, Bumitama Agri has initiated many community projects aimed to reduce deforestation and minimise any fire use for community land clearing (as allowed by provincial regulations). Its CSR expenditure has averaged 2.3% of past 3 year’s profits.
- Despite its environmental conservation and community development efforts, Bumitama Agri remains one of the lowest cost producers in the region.
- See
Ong Chee Ting CA
Maybank Kim Eng Research
|
https://www.maybank-ke.com.sg/
2021-06-04
SGX Stock
Analyst Report
0.650
SAME
0.650
