Alluring figures. Bumitama Agri (BAL) has figures that can make heads turn. It is the fastest-growing plantation company in our coverage universe, having planted an average of ~9,700 ha of nucleus area p.a. over the past nine years. Sizeable (nucleus planted area of 101,182 ha) with young trees (~5 years old) and robust growth (3-year forward FFB output CAGR of 21%), BAL has it all. It was also the third most profitable planter in our stock universe in 2012. Underappreciated and relatively undiscovered, BAL’s value will rise organically as its young trees mature. Initiate coverage with a BUY and SGD1.24 TP (23% upside) on 16x FY14 PER, implying just 0.9x PEG.

Turbocharged growth. BAL is one of the fastest-growing oil palm plantation companies in the region. Its nucleus planting expanded 87,463 ha between 2004 and 2012, an average of 9,718 ha p.a.. As at 31 Dec 2012, it had ~200,000 ha of land in Indonesia comprising 128,552 ha of planted oil palm area (nucleus: 96,554 ha; plasma: 31,998 ha), and another ~65,000 ha of uncultivated land which will last the group four years based on its new planting target of 15,000 ha p.a..

Impressive operational statistics. With 75% of its estates under seven years of age (immature: 43%; young mature: 32%), BAL is expected to enjoy a robust nucleus FFB output CAGR of 21% over the medium term (FY12-15), and a 19% CAGR over the long term (FY12- 17). Despite its trees’ young age profile of five years on average, BAL achieved an impressive FFB yield of 17.9t/ha (nucleus) and the highest OER (23.8%) in the industry in 2012.

Underappreciated; BUY. BAL has joined the big leagues as one of the best managed plantation companies in the region with its operating profit of ~MYR7,700 per mature nucleus ha (or IDR23.4m per mature nucleus ha) vs the industry average of ~MYR5,600/ha. Its manageable net gearing of 35% (as at end-2012) will help sustain its growth momentum. Even without any new planting, we forecast that BAL will post an FY12-15 net profit CAGR of 18%.

Source: Maybank Kim Eng Research - 02 May 2013