Bumitama Agri - UOB Kay Hian 2022-03-01: 2H21 Results Above Expectations

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BUMITAMA AGRI LTD. (SGX:P8Z)

Bumitama Agri - 2H21 Results Above Expectations

• Bumitama Agri’s 2021 results came in above our expectations, mainly due to the better-than-expected CPO ASP which was able to offset the impact from its previous forward sale contracts.
• We expect Bumitama Agri's 2022 earnings to increase by 25% y-o-y on the back of:
  1. strong CPO prices; and
  2. higher CPO production, thanks to both internal and external FFB production.
• Maintain BUY with a higher target price after factoring in the higher CPO ASP for 2022.

Bumitama Agri's 2H21 results above expectations.

• Bumitama Agri (SGX:P8Z) reported 4Q21 core net profit of Rp1,083b (+82% q-o-q, +79% y-o-y) , bringing 2021 total core net profit to Rp1,677b (+46% y-o-y). This is above our and consensus’ expectations, mainly buoyed by strong CPO net realised selling prices. Bumitama Agri's CPO net realised ASP came in above our expectations and better than some of its peers at Rp9,852/kg, despite Bumitama Agri’s large commitment of its 1H21 sales at Rp8,364/kg.
• Better h-o-h and y-o-y earnings. The better h-o-h and y-o-y earnings were mainly buoyed by strong net realised selling price which had increased by 43% h-o-h, despite lower FFB production and sales volume in 2H21.
• FFB production came in below expectations. Nucleus FFB production for 2021 came in below expectations, with 1.3% y-o-y growth. The lower FFB production was mainly dragged in 4Q21 where it had the lowest 4Q output since its listing, mainly due to the high rainfall. The average number of rainy days in Bumitama Agri-managed estates reached 190 days in 2021, 22% more than the 10-year average. Having said that, its FFB yield had improved from 19.0 tonne/ha in 2020 to 19.3 tonne/ha in 2021. Oil extraction rate remains flat y-o-y at 22.6% despite higher rainfall and higher external FFB purchase (+4% y-o-y).

Expect earnings to continue performing.

• With recent CPO prices continuing to spike, we reckon that Bumitama Agri would continue to benefit with the current Indonesia channel check, the commitment from most upstream players to DMO worked out to be about 15% of their nucleus CPO production. After taking into consideration the CPO produce from plasma and third party FFB (about 50% of total FFB processed), the committed volume under DMO will dilute for Bumitama Agri to only about 6% to 7%.

Revised our earnings forecast for Bumitama Agri

• We have adjusted our net target price: S$0.65), based on 7x 2022F P/E.
• See
  • Bumitama Agri's Share Price,
  • Bumitama Agri's Target Price,
  • Bumitama Agri's Analyst Reports,
  • Bumitama Agri's Dividend History,
  • Bumitama Agri's Announcements,
  • Bumitama Agri's Latest News.
• Catalysts:
  • Higher-than-expected CPO prices.
  • Higher-than-expected FFB production.

Jacquelyn Yow Hui Li UOB Kay Hian Research | Leow Huey Chuen UOB Kay Hian | https://research.uobkayhian.com/ 2022-03-01

SGX Stock Analyst Report BUY MAINTAIN BUY 0.85 SAME 0.650