Highlights

Simons Trading Research

Author: simonsg   |   Latest post: Fri, 3 Apr 2020, 3:08 PM

 

Bumitama Agri - Inexpensive Upstream Player; Keep BUY

Author:   |    Publish date:


  • Bumitama Agri (SGX:P8Z)'s FY19 core earnings were in line with our expectations, coming in at 103% of our FY19 forecast – but below consensus, at 77%.
  • FY20 should be a better year overall, with improved FFB output and higher CPO prices.

FFB Growth for FY19 Fell 2% Y-o-y

  • FFB growth for FY19 fell 2% y-o-y, below management’s 2019 growth guidance of flat output. Unit costs rose 15% y-o-y in FY19 due to lower FFB output and a correction in fertiliser mix in 2H20, where Bumitama Agri added additional magnesium to its fertiliser application, causing costs to rise.
  • Bumitama Agri’s average CPO price fell 4.7% y-o-y to IDR6,696kg, while PK prices dropped by a larger 35.4% y-o-y to IDR3,416/kg.

Briefing Highlights

  • Bumitama Agri is guiding for up to 10% FFB growth for FY20, coming from 4,000ha of new areas coming into maturity and weather normalisation. Weather at its estates in Kalimantan have normalised since mid-Nov 2019, and management is guiding for an FY20 45:55 FFB output ratio in 1H:2H. We have reduced our FFB growth projections slightly for FY20-22 to 8-10% from 9-11% previously;
  • 4Q19 unit cost of IDR4,022/kg was 1.8% higher q-o-q and 4.5% higher y-o-y due to higher fertiliser application – this brought FY19 unit costs to a 15% y-o-y increase. Management is now guiding for FY20 unit costs to rise 5% y-o-y – coming from an 8.5% y-o-y rise in wages, 3.5% inflation increase, and 14% rise in fertiliser prices. We have already conservatively imputed a 5-10% yearly increase in costs for FY20-22;
  • Management does not do any forward selling currently, and has set its CPO price budget at MYR2,600 for 2020. The collection of a USD50.00/tonne levy has started, and refiners have already started to pass down the tax impact to the upstream planters.

We Maintain Our BUY Call

  • We trim our FY20F-21F earnings by 6-8%, after imputing the higher unit costs achieved in FY19. We also introduce FY22 earnings. We maintain our target P/E of 18x 2020F, which is 1SD above its historical average. Our Target Price of S$0.85 implies an EV/ha of USD13,000 – at the mid end of the peer range of USD10,000-15,000/ha.
  • With FFB output recovery being seen at its estates and higher CPO prices, as a pure upstream company, Bumitama Agri will continue to benefit, in our view. We estimate that every MYR100.00/tonne change in CPO prices affects its earnings by 8-10% pa.

Source: RHB Invest Research - 19 Feb 2020

Share this

Related Stocks

Chart Stock Name Last Change Volume 
Bumitama Agri 0.365 -0.015 (3.95%) 1,109 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
 
 

67  247  94  695 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 Rex Intl 0.095-0.001 
 ESR-REIT 0.25-0.015 
 Genting Sing 0.65-0.015 
 Mapletree Com Tr 1.50-0.12 
 CapitaMall Trust 1.52-0.10 
 Interra Resou.. 0.042+0.001 
 SingTel 2.58-0.04 
 Medtecs Intl 0.095+0.005 
 AusGroup^ 0.021-0.003 
 China Medical 0.0020.00 
Partners & Brokers