Simons Trading Research

Author: simonsg   |   Latest post: Tue, 13 Dec 2022, 10:52 AM


Bumitama Agri - 1Q22 Earnings Skyrocket 400% Y-o-y; Reiterate BUY

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  • Bumitama Agri’s 1Q22 results are above our and Street estimates. While the current export ban will be negative for all Indonesian players, we do not expect this to be in place for the long term. We expect earnings to remain robust in FY22, while its market valuation of 5.3x CY23F P/E is unwarranted.
  • Assuming it pays out 40% of earnings, Bumitama Agri's dividend yield is also attractive at ~10% in FY22F.
  • Maintain BUY rating on Bumitama Agri with new S$0.95 target price from S$0.90, 36% upside.

Bumitama Agri Booked a > 400% Y-o-y Rise in 1QFY22 Earnings

  • Bumitama Agri (SGX:P8Z) booked a > 400% y-o-y rise in 1QFY22 earnings on higher ASP’s. This was above both our and Street expectations, at 38-43% of full-year estimates.
  • Bumitama Agri recorded a FFB decline of 2.5% y-o-y in 1Q22, below our projection of +3% and management’s guidance of 5-10% growth. Management is keeping to its 5-10% growth guidance as it has started to see improvements in productivity already, with 1Q22 output rising 19% q-o-q vs the 4Q21 figure.
  • Bumitama Agri expects 1H:2H output to be in the 47%:53% range.

Export Ban Impact Not Seen Yet

  • Bumitama Agri managed to achieve a higher ASP of IDR13,600/kg in 1Q (+0.7% q-o-q and 77% y-o-y). As the export ban was only applicable from end-April prior to the Lebaran holidays in Indonesia, BAL has not seen the impact of this on its ASPs yet, as there have not been any deliveries scheduled yet in May.
  • While Bumitama Agri does expect prices to come off once deliveries commence, it is also able to hold off on selling significant volumes, given its capacity to store one more month of supply in its existing storage facilities.

Unit Cost to Rise 20-25% in FY22F

  • For 1Q22, Bumitama Agri recorded a unit cost of IDR4,500/kg (flattish q-o-q but up 14% y-o-y). It has applied approximately 25% of its fertiliser requirements for FY21 so far.
  • For FY22, Bumitama Agri expects costs to rise by 20-25% y-o-y, given the higher fertiliser prices (by 60- 80% y-o-y). The company has already tendered for its entire FY22 fertiliser requirements, of which 70-80% has been received.

We Raise FY22-23F Earnings by 13-35%

  • We raise FY22-23F earnings forecast for Bumitama Agri by 13-35% after adjusting for higher CPO prices of MYR5,300/tonne for FY22F (from MYR4,300) and MYR4,300/tonne for FY23F (from MYR3,600). As our CPO price assumptions are already lower than prevailing prices, we have not imputed any significant impact from the export ban on Bumitama Agri’s earnings, as we expect this to be short-lived.
  • Maintain BUY rating on Bumitama Agri, with a higher target price of S$0.95 (from S$0.90), after rolling forward our valuation to 8x 2023F P/E. Our target price has already taken into account an ESG discount of 12%, given our in-house ESG score of 2.4.
  • Bumitama Agri's share price is now trading below -2 standard deviation from its 5-year mean (of 9x P/E), which we believe is unwarranted. Assuming the dividend payout is at the maximum 40%, Bumitama Agri's FY22F dividend yield is also attractive, at ~10%.

Source: RHB Invest Research - 13 May 2022

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