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Bumitama Agri - Another Consensus Beater

kiasutrader
Publish date: Mon, 03 Mar 2014, 03:16 PM
We  maintain  our  BUY  call  on  Bumitama  following  its  consensusbeating  FY13  earnings.  Based  on  our  revised  forecast,  the  stock  is trading  at  10.9x  and  9.0x  forward  earnings,  which  is  undemanding compared  with  its production growth of 16.5% and a rising CPO price environment. We believe cheap stocks such as this will become a thing of the past once money starts to flow into the sector more significantly.
  • Ahead  of  expectations.  Bumitama's  core  FY13  earnings  beat  our forecast  by  18%  and  consensus  by  24%.  This  was  despite  production growth falling slightly short of our target of 19%. The 36.6% q-o-q surge in production,  coupled with 12.9% higher CPO price,  contributed to the strong 4Q performance, which exceeded our estimate. Note that by the end of 9M, Bumitama only met 68% of our full year forecast.
  • Production.  Bumitama's  FY13  nucleus  fresh  fruit  bunches  (FFB)production came in at 1.105m tonnes, representing a growth of 16.6% yo-y.  We  had  expected  production  of  1.128m  tonnes,  which  was  a trimmed  down  target.  Despite  the  weaker  than  expected  FY13 production, we are keeping our FY14 production expectation at 1.287m tonnes, which represents a growth of 16.5% vs management's guidance of 25%.
  • New planting target. During the year, the company added 13,770 ha of nucleus planted areas, bringing its total nucleus areas  to 114,952 ha, of which 10,543 ha comprised  new planting and the balance was  acquired in April. For 2014, the company is targeting to plant on 8,000 ha.
  • Raising  forecasts.  Given  the  lower  than  expected  interest  expenses, we raise  our FY14 forecast  by 2.7%  to IDR1,443bn to factor in a lower effective interest rate.  Our FY15 forecast is raised by  a  similar quantum to  IDR1,742bn.  This  lifts  our  FV,  based  on  16x  FY14  earnings,  to SGD1.39  compared  with  SGD1.35  previously.  Based  on  our  revised forecast, Bumitama is trading at very alluring valuations of 10.9x FY14 and 9.0x FY15 earnings. Maintain BUY. 



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Company Profile
Bumitama Agri (BAL) is a high-growth oil palm plantation company with all its plantations in Indonesia. It has 149,683 ha of total planted area. This group, listed on the Singapore Exchange on 12 April 2012, started initial planting in 2004 with 5,023 ha of nucleus  area and has to date planted a total of 114,952 ha of nucleus area across Sumatra and West and East Kalimantan. The company was started and controlled by the Hariyanto family, who currently still holds a 50.9% stake.
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Source: OSK-DMG
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