Bumitama Agri Ltd and Peer Companies: Comprehensive Equity Research Analysis

Date of Report: February 7, 2025

Broker: OCBC Investment Research

Introduction

This report by OCBC Investment Research dives into Bumitama Agri Ltd (BAL), a prominent player in Indonesia’s palm oil industry, alongside its peers: First Resources Ltd, Golden Agri-Resources Ltd, and Wilmar International Ltd. It provides a comprehensive analysis of their financials, sustainability efforts, investment risks, and valuation metrics. Below is a detailed breakdown of each company, their performance insights, and recommendations.

Bumitama Agri Ltd (BAL): A Solid Dividend Yield Play

Overview

Bumitama Agri Ltd (BAL), founded in 1996 by the Harita Group, is a leading upstream producer of crude palm oil (CPO) and palm kernel (PK) in Indonesia. The company operates across 187,628 hectares of plantations in Central Kalimantan, West Kalimantan, and Riau, supported by 15 mills in these regions. BAL listed on the Singapore Exchange in 2012 and has been recognized for its operational excellence with numerous accolades over the years.

Key Investment Highlights

• BAL has established itself as a dividend yield play, with a projected 12-month forward dividend yield of 5.8%.
• The company’s plantations have an average age of 14 years, ensuring high productivity and resilience to industry fluctuations.
• Despite easing CPO prices, BAL benefits from supportive long-term demand dynamics, including Indonesia’s B40 biodiesel mandate and Ramadan-driven consumption.

Financial Performance

BAL’s FY23 revenue reached IDR 15.44 trillion, a slight decline from FY22’s IDR 15.83 trillion. However, profitability metrics remain strong:

• EBITDA: IDR 4.63 trillion in FY23, reflecting a 30% EBITDA margin.
• PATMI: IDR 2.45 trillion, with an EPS of 12.3 Singapore cents.
• Net Income Margin: 19%, underscoring the company’s operational efficiency.

Sustainability Initiatives

BAL has made significant strides in sustainability:

• It aims to reduce GHG emissions intensity by 30% by 2030 from a 2016 baseline.
• Plans to build two biogas treatment facilities annually from 2024 onwards.
• Targeting full Roundtable on Sustainable Palm Oil (RSPO) certification for all units and mills by 2025.
• Social initiatives include the Social Forestry Scheme and the establishment of 41 Bumitama Schools, providing education to nearly 5,901 students.

Investment Risks

• Volatility in CPO prices.
• Execution risks leading to cost overruns.
• Regulatory risks in the palm oil industry.

Recommendation

OCBC Investment Research upgraded BAL’s rating from “HOLD” to “BUY,” with a fair value estimate of SGD 0.915, citing valuation grounds and the company’s strong fundamentals.

First Resources Ltd (FRLD): A Competitive Player

Financial Metrics

• Price/Earnings (P/E) Ratios: 8.4x (FY24E), 8.2x (FY25E).
• Price/Book (P/B) Ratios: 0.5x (FY24E), 1.1x (FY25E).
• Dividend Yields: 5.8% (FY24E), 6.5% (FY25E).
• Return on Equity (ROE): 14.7% (FY24E), 13.9% (FY25E).

First Resources Ltd demonstrates steady financial performance, making it an attractive option for investors seeking income stability.

Golden Agri-Resources Ltd (GAGR): A Focus on Margins

Financial Metrics

• Price/Earnings (P/E) Ratios: 9.3x for both FY24E and FY25E.
• Price/Book (P/B) Ratios: 0.5x (FY24E), 0.4x (FY25E).
• Dividend Yields: 3.1% (FY24E), 3.0% (FY25E).
• Return on Equity (ROE): 19.6% (FY24E), 19.9% (FY25E).

Golden Agri’s lower dividend yield compared to peers is offset by its robust return on equity, making it a solid growth-oriented investment.

Wilmar International Ltd (WLIL): A Diversified Giant

Financial Metrics

• Price/Earnings (P/E) Ratios: 11.8x (FY24E), 9.8x (FY25E).
• Price/Book (P/B) Ratios: 0.7x for both FY24E and FY25E.
• Dividend Yields: 4.7% (FY24E), 5.3% (FY25E).
• Return on Equity (ROE): 6.3% (FY24E), 7.3% (FY25E).

Wilmar International leverages its diversified portfolio to deliver consistent returns. Despite lower ROE, its scale and market presence make it a resilient choice.

Comparative Valuation Analysis

Conclusion

OCBC Investment Research’s analysis highlights Bumitama Agri Ltd as a strong dividend yield play with a favorable valuation, upgrading its rating to “BUY.” First Resources Ltd and Golden Agri-Resources Ltd emerge as solid competitors with compelling financial metrics, while Wilmar International Ltd’s diversified business offers stability. Investors should carefully assess these companies’ prospects, financials, and risks before making investment decisions.