Bumitama Agri - Maybank Research 2022-08-16: Post 1H22 Results Briefing

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BUMITAMA AGRI LTD. (SGX:P8Z)

Bumitama Agri - Post 1H22 Results Briefing

• Bumitama Agri (SGX:P8Z) hosted a post results briefing. Key takeaways:
  1. Better-than-expected CPO ASP was key to its outperformance in 2Q22 whereby 2Q’s CPO ASP achieved of IDR14,923/kg (+74% y-o-y, +10% q-o-q) was above market price. This was in part due to the long term contract arrangements with committed volumes (but not prices) which led to a 1-2 months’ lag price recognition;
  2. Following its strong FFB nucleus output growth in 1H22 (+9% y-o-y to 1.365mt), Bumitama Agri has revised up its growth guidance to +16-18% y-o-y (from +5-10% y-o-y) as it expects 2H output to be at least similar to 1H. Still, Bumitama Agri highlighted that it will only gain a clearer picture in Sept once the census figure from field survey is out;
  3. Group output will likely peak in 4Q after softening in 3Q;
  4. Inventory as at end-June is ~70% of available tank capacity, or about 2 months’ supply. Bumitama Agri expects a normalisation of inventory by end-Sept; and
  5. ~50% of its full-year fertiliser plan has been applied in 1H22 (1H21: ~45%).

Cost guidance unchanged at +20%-25% y-o-y for FY22E

• Bumitama Agri guides that its 1H22 nucleus cost of production was Rp5,200/kg (+14% y-o-y), much higher than our earlier estimates. The difference suggests that BAL benefited immensely from its constant purchase of 3rd party FFBs (even during the ban) and made better processing-cum-inventory gains in 2Q.
• For FY22E, Bumitama Agri maintains its unit cost of production guidance to be higher by 20-25% y-o-y, following fertiliser price hike (FY21: IDR4,564/kg).

BUY for Bumitama Agri's single-digit P/E & high dividend yields

• Bumitama Agri's 1H22 results were boosted by record CPO price and lower-than-expected cost. While we maintain our EPS forecasts, earnings risk is on the upside if Bumitama Agri manages to deliver +16%-18% y-o-y output growth (MIBG forecast: +10% y-o-y).
• Else, we continue to expect earnings to soften in 2H22 following recent CPO price correction and higher fertiliser cost expectations.
• 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.
• Trading at single-digit P/E offering over 6% dividend yields, Bumitama Agri remains a BUY with S$0.88 target price on 8x FY23 P/E, - 0.5 standard deviation its 5-year mean.
• Bumitama Agri's interim dividend of S$0.0125 will go ex-date on 6 Sept.

Ong Chee Ting CA Maybank Research | https://www.maybank-ke.com.sg/ 2022-08-18

SGX Stock Analyst Report BUY MAINTAIN BUY 0.880 SAME 0.880