Thursday, 14 August 2014

Bumitama Agri

Kim Eng on 14 Aug 2014

  • Maintain BUY and TP of SGD1.38, at 16x FY15E P/E, implying just 0.7x PEG. Catalyst: 21% FFB output CAGR over 2013-16 which is among the highest in the industry.
  • 2Q14 net profit exceeded market and our expectations on higher-than-expected FFB output and ASPs.
  • Continues to guide for 25% FFB growth for 2014.
Boosted by strong FFB output
2Q14 PATMI was IDR293.3b (+90% YoY, -5% QoQ). Excluding unrealised forex translation losses of IDR109.1b, core net profit was an impressive IDR375.1b (+131% YoY, +37% QoQ). This formed 32% of our FY14E forecast and 30% of consensus’. The strong YoY growth was led by: a) exceptional FFB nucleus output of 372,248 MT (+49% YoY, +21% QoQ); and b) higher CPO ASPs of IDR8,715/kg (+29% YoY, -1% QoQ).
BAL maintains its 2014 FFB growth guidance of 25%. It is still trying to ascertain if its 2Q strength (27% of our full-year estimate) was an anomaly (see Fig 2 for historical trends). On the other hand, it has lowered its 2014 new-planting target for the second time this year, to 3–5k ha from 8k ha. This was due to stringent RSPO requirements. With that, BAL slashed its 2014 capex guidance to IDR1tr from IDR2tr. The slower new planting will not affect our FFB output projections for the next three years.
Long-term growth stock; BUY
Pending fresh growth guidance from management and given recent unexpected plunge in CPO prices, we maintain our FY14E EPS. Our lower capex assumptions lead to higher PATMI for FY15E-16E.
We continue to like its long-term value proposition, driven by its young trees of six years on average (which should sustain an FFB output CAGR of 21% over 2013-16), plantable reserves of c.38k ha, and low costs of production.

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