Attractive Net Dividend Yield of > 6%

• Bumitama Agri (SGX:P8Z)'s 1H21 headline/ core PATMI beat our/consensus expectations on higher-than-expected FFB output. 2H21 earnings growth will be mainly driven by better CPO ASPs in the absence of forward sales, and lower export taxes.
• Following our EPS upgrade, we maintain our BUY call on Bumitama Agri with a higher target price of S$0.93 on unchanged 12x FY22 PER, its 5-year mean (previously S$0.65 on 12x FY21 PER) as we roll forward our valuation year.
• Bumitama Agri trades at single-digit PER with attractive dividend yields of above 6.0%. It has a dividend policy to pay out up to 40% of recurring profits.

Bumitama Agri's 1H21 Beat Our/ Consensus Expectations

• Bumitama Agri reported 1H21 headline PATMI of IDR484b (+10% y-o-y). Adjusted for FX loss, 1H21 core PATMI of IDR569b (+9% y-o-y) met 57%/54% of our/ consensus full-year estimates. The better-than-expected 1H21 PATMI was mainly due to strong FFB nucleus output recovery (+27% y-o-y) which more than offset lower CPO ASP achieved of Rp8,201/kg (-2% y-o-y).
• The CPO ASP achieved was 20% lower than our estimated market price of Rp10,314/kg. This was due to ~200,000t or 70% of its 1H21 nucleus output forward sales earlier at lower ASPs (net of export taxes).
• As for fertiliser, Bumitama Agri managed to apply just ~45% of full-year plan (1H20: ~45%). It also enjoyed lower-than-usual effective tax rate at 22%.

Raising Its Growth Guidance for 2021

• Despite 27% y-o-y 1H:2H output ratio will be 50:50 (historically 45:55) as it experienced a mini-peak in 2Q21 (Figs.2-3).

Forward Sales Mostly Delivered in 1H21

• Bumitama Agri has immaterial Bumitama Agri announced an interim dividend of S$0.0045 (ex date: 8 Sep).

Source: Maybank Kim Eng Research - 15 Aug 2021