Under-researched. We hosted Bumitama Agri (BAL) on a NDR in Kuala Lumpur (KL) last week in conjunction with Invest Malaysia 2013. BAL remains relatively under-researched as some fund managers met the IR team for the very first time but they were impressed by its operational performance. BAL was the third most profitable planter in 2012 in our research universe. Amidst flattish CPO price outlook, BAL’s robust production growth would be the key earnings driver over the medium term. Maintain BUY with an unchanged TP of SGD1.24 TP on 16x FY14 PER, with implies 0.9x PEG.

Overwhelming interests. There were good interests among Malaysian funds for BAL’s 1-day NDR. A total of 19 fund managers met Ms Christina Lim (Head of IR) and Mr Glenn Ho (IR), with some funds meeting BAL for the very first time. Considering BAL was here in KL only three months ago, last week’s meeting schedule was filled up easily and reflects the growing appetite among Malaysian fund managers on regional plantation stocks given their relatively cheaper valuation vis-à-vis Malaysian plantation stocks which trade at 19x forward PER on average.

Impressive planting speed. Post the NDR, we gathered positive feedbacks on BAL. Fund managers were generally impressed with the speed of BAL’s new planting with ~135,000 ha planted (nucleus area: ~100,000 ha) within a short span of 10 years. And BAL targets another 15,000 ha of new planting for 2013, backed by its plantable reserves of ~63,000 ha and manageable net gearing of 43% (as at 31 Mar 2013).

Stellar FFB growth. Among BAL’s key attraction is its weighted average tree age profile of 5.5 years which promises 21% 2012-15 CAGR in FFB output, we estimate. For 2013, BAL guides for a 25% FFB output growth rate (1Q13: +30% YoY). Even at this young tree age, BAL has delivered a decent FFB yield of 18.8t/ha and a high OER of 23.8% for 2012, translating to an oil yield of 4.47t/ha/yr (+14% YoY).

Source: Maybank Kim Eng Research - 21 Jun 2013