Bumitama Agri

Kim Eng on 3 Mar 2014

• FY13 core net profit surpassed our and Street expectations.
• Outperformance mainly due to a strong rebound in 4Q13 nucleus output and higher CPO ASP.
• Reiterate BUY with a higher TP of SGD1.38 on 16x FY15E P/E after rolling forward our valuation base year.

What’s New
Bumitama Agri’s (BAL) FY13 core net profit of IDR834b (+12% YoY) outstripped our and consensus full-year forecasts by 125% and 118%, respectively. The earnings outperformance could be traced  to a solid 4Q13, with (i) stronger FFB nucleus output (+37% QoQ, +14% YoY), which met 32% of our full-year nucleus output  projection, and (ii) higher CPO ASP of IDR8,104/kg (+13% QoQ,  +29% YoY), in part boosted by a weakened Indonesian rupiah.

What’s Our View
In 2014, we expect BAL to post sterling EPS growth of 41%, buoyed by a higher CPO ASP of IDR8,217/t (+15% YoY) and a 25% increase in FFB nucleus output growth. We like BAL for its long-term value proposition, driven by its average young tree age of six years which will sustain a projected 20% FFB output CAGR (2013-2016), plantable reserves of 60k ha, and low cost of production. We raise our FY14E/15E earnings forecasts by 5%/7%. Maintain BUY with a higher TP of SGD1.38, based on 16x FY15E P/E (previously SGD1.14 on 16x FY14E P/E), as we roll forward our valuation base year.