Decent Growth Into FY19

• No surprises to FY18 results. We expect +14% EPS growth for FY19 underpinned by higher output and better prices.
• We like BUMITAMA AGRI LTD. (SGX:P8Z) for its low cost of production.
• Last year, Bumitama Agri raised its dividend payout policy to 40% (from 20%), which offers decent yields of ~4%. A final DPS for FY18 will be announced prior to its AGM.
• Trading at < 10x FY19E PER, -1SD of mean, we maintain our BUY call with a new Target Price of SGD0.97 (+1%) on 13x FY19 PER peg, its updated 4-year historical mean (previously 14x).

No Surprises to Earnings

• Bumitama Agri reported a 4Q18 core PATMI of IDR229b (-34% y-o-y, -21% q-o-q), bringing 12M18 core PATMI to IDR1,176b (+0.4% y-o-y), which met 97%/ 101% of our/ consensus full-year estimates – within expectations.
• Bumitama Agri's FY18 core PATMI was flattish y-o-y as the strong FFB output growth (+28% y-o-y) was offset by industry-wide low CPO (-13% y-o-y) and PK ASPs (-23% y-o-y).

Still One of the Lowest Cost Producers in the Region

• 4Q18’s FFB output growth enjoyed another good quarter (+30% y-o-y, -13% q-o-q, see Fig 2 in the PDF report attached), driven by its young trees. Its 12M18 output (+28% y-o-y) met 102% of our full-year forecast.
• Operationally, Bumitama Agri’s CPO yield rose 22% y-o-y to 4.5t/ha. We estimate its all-in cost of production at IDR3,431/per CPO kg (-2% y-o-y) or ~MYR1,000 per CPO tonne, making it one of the lowest cost producers in the region.

FY19 EPS to be Driven by Higher Output and Prices

• Bumitama Agri guides for up to 15% y-o-y FFB output growth for 2019, which led us to raise our FY19-20 output est. by +6%/+4% to conservatively reflect a +9%/+4% y-o-y nucleus output growth. Growth is driven by its young tree profile of 9.8 years avg., and ~5% of new area coming into maturity.
• Bumitama Agri also guides for its cash cost (per tonne) to be flattish y-o-y as higher fertiliser and labour costs would be offset by improving yields.
• Following the results, we tweaked our financial parameters which led to +5%/+3% change in our FY19-20 PATMI forecasts. Our FY19-20 CPO ASP assumptions remain at MYR2,350/ 2,500/t. We also introduce our FY21 forecast.

Source: Maybank Kim Eng Research - 26 Feb 2019