Trading at Just 10x PER; BUY

• After a slow start, Bumitama Agri’s earnings caught up strongly in 2Q18. We are keeping our FY18 earnings forecast. Bumitama Agri remains a BUY with unchanged Target Price of SGD0.98 on 14x FY18 PER, its 5-year historical mean.
• We continue to like Bumitama Agri for its +9% 3-year FY17-20F CAGR in FFB output and relatively low cost of production.
• An interim DPS of 0.75cents was declared.

Earnings Lifted by Higher Output

Bumitama Agri reported a 2Q18 PATMI of IDR388b (+36% y-o-y, +67% q-o-q). Stripping FX aside, Bumitama Agri reported a 2Q18 core PATMI of IDR413b (+45% y-o-y, +69% q-o-q), bringing 1H18 core PATMI to IDR657b (+18% y-o-y), which met 51%/54% of our/consensus full-year estimates.

Bumitama Agri’s 2Q18 earnings jump was underpinned by higher revenue (+22% y-o-y, +23% q-o-q), which was in turn boosted by FFB output growth (+25% y-o-y, +31% q-o-q) which more than offset lower CPO ASP achieved of IDR7,786/kg (-3% y-o-y, -1% q-o-q).

As at 30 June 2018, Bumitama Agri’s inventory figure rose to IDR724b (+40% y-o-y, +44% q-o-q) but Bumitama Agri was quick to downplay the significance of inventory build-up as it was largely due to fertiliser purchased meant for application in 2H18.

Source: Maybank Kim Eng Research - 14 Aug 2018