• Maintain BUY and Target Price of SGD0.80, 14% upside, as we believe it is an undervalued company with decent 5-year earnings CAGR of 14%. 
• Bumitama’s 1H18 earnings were above expectations, as FFB grew at an admirable 23% y-o-y, while CPO costs fell 17% y-o-y. We raise our forecasts by 3-7% for 2018- 2020, after upping our FFB growth forecasts. 
• Our unchanged Target Price of SGD0.80 is based on the regional peer average 2019F P/E of 11x. Bumitama is trading below its historical average P/E, while the implied EV/ha of USD7,500 is below replacement values.

1H18 Results Beat Expectations

Bumitama’s 1H18 core net profit came in at 53-55% of our and consensus 2018 forecasts respectively. The better-than-expected results came mainly from stronger-than-expected FFB output, while CPO costs fell 17% y-o-y on lower fertiliser application. Bumitama declared an interim dividend of SGD0.0075.

2Q18 FFB output grew 24.6% y-o-y, on 2,539ha of newly matured land in 1H18. FFB growth during 1H was at 22.6% y-o-y – this is above management’s 2018 growth guidance of 15-20%, and our projection of 16%.

Source: RHB Invest Research - 15 Aug 2018