A pleasant visit. We visited Bumitama Agri’s (BAL) PT Windu Nabatindo Lestari oil palm estate in Central Kalimantan recently. The 29,472ha estate has its own mill, a R&D centre, a learning centre, a weather station, a school and accommodation for workers. The journey was surprisingly pleasant and we came away with two key facts: (i) Central Kalimantan is ideal for oil palm planting, given its well-distributed rainfall of 3,000mm a year, 5-7 sunshine hours a day and fertile virgin soil; and (ii) focus first on the community and success will follow. Maintain BUY and TP of SGD1.24, pegged at 16x FY14F PER.

Good infrastructure in Central Kalimantan. Years of plantation and mining boom in Kalimantan have helped alleviate poverty and raise the standard of living among the local communities. The 2.5-hour drive from the airport to the estate was enjoyable as the road condition is good. Our 4WDs could cruise at 120kmh for the most part of the trip. Mobile phone connectivity was just as good, even inside the estate. On the whole, the experience was better than we had anticipated.

Community comes first, success will follow. BAL representatives emphasised several times the importance of looking after the welfare of the local community. Understandably, the community is a critical success factor in the smooth running of all estate operations. The community is employed as workers in the estate and given proper housing. Electricity generated by its mill is used to power up the neighouring housing estates. Within its estate, BAL also operates and funds a primary and secondary school. Workers hope for a better future for their children via good education.

Training future wokrers at the learning centre. Since 2004, BAL has been growing at an impressive rate of ~9,700ha of new nucleus planting each year. Recruiting sufficient skilled labour from the market has become increasingly challenging. To address its labour issues, BAL has set up an in-house learning centre on a 2.7ha land to train future workers for its internal requirements.

Source: Maybank Kim Eng Research - 29 Oct 2013