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.

Bumitama Agri

UOBKayhian on 3 Mar 2014

FY14F PE (x): 12.8
FY15F PE (x): 11.8
Bumitama Agri (BAL) reported core net profit of Rp370b (+97.1% qoq, +100.4% yoy) for
4Q13 and Rp879b (+19.4% yoy) for 2013. 4Q13 results were ahead of expectations due
to: a) strong CPO and PK ASP, b) lower cost as fertiliser applications were minimal in
the quarter, and c) a weakening rupiah boosting revenue as sales are in US dollars.
Debt restructuring also led to a substantial decline in interest expense (-50% yoy with
estimated effective interest rate of 1.7% vs 2013’s 4.6%)
Maintain BUY and target price of S$1.40, based on 15x 2014F PE. We like BAL for its
young age profile and best OER to support its 5-year net profit CAGR of 32%.

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.