Earnings  in line.  Bumitama  Agri's  (Bumitama)  9M14  core  earnings  of IDR938.5bn were in line with our forecast and consensus, making up 77-78%  of  full-year  numbers.  3Q14  production  showed  impact  from  a rainfall  deficit  since  July,  falling  by  10.4%  QoQ  against  a  traditionally stronger  3Q.  Despite  that,  earnings remain in line  due  to lower  built-in production  growth  assumptions  and  stronger  than  expected  palm  oil price in IDR terms.  

Key  assumptions  adjustment.  Management  guided  that  production 1H:2H will be 50:50 this year due to the ongoing drought. This implies that production  will  grow  at  23%  rather  25%.  We  are  cutting  our  2014 nucleus FFB production forecast to 23% from the current 27.2%. We are also  reducing  our  FY15  production  to  1.605m  tonnes,  which  still represents  growth  of  18.4%.  We  raise  our  effective  CPO  price assumption  to  IDR8,398/kg  from  IDR8,048  for  FY14,  based  on  a narrower 4% discount (8% before) vs West Malaysian prices. FY15 price is raised to IDR9,169 from IDR8,787.  

Earnings forecasts  largely unchanged.  The abovementioned changes resulted in a marginal change to our FY14-15 earnings forecasts. Our TP is  lifted  slightly  to  SGD1.48  (from  SGD1.45),  based  on  16x  FY15 earnings.  We  have  also  introduced  our  FY16  earnings  forecast  at IDR1,733bn.  

Consolidation  phase.  New  planting  YTD  has  been  slow  at  1,937ha, largely  made  up  of  1,828ha  of  plasma  area.  Nucleus  planting  was deliberately slowed down to consolidate the rather rapid planting  of  the past two years.

Source: OSK-DMG