Company Overview
Bumitama Agri (BAL SP) is an investment holding company specializing in the operation of oil palm plantations and mills in Indonesia. The company forms part of Maybank IBG’s coverage universe and is well known for its resilient business model, attractive valuation multiples, and strong contribution to dividend yields. With major shareholders including Fortune Corp. Ltd. and IOI Corp, Bumitama Agri continues to be a focus for investors seeking exposure to the palm oil sector.
Investment Highlights
The report highlights that Bumitama Agri’s results have “beat expectations” on several fronts. The company delivered a FY24 core PATMI that underperformed marginally (-6% YoY) mainly due to lower fresh fruit bunch (FFB) output; however, this was partly offset by higher crude palm oil (CPO) and palm kernel (PK) average selling prices (ASPs). A strong earnings pickup is anticipated in H2FY24, driven by a robust recovery in CPO and PK pricing.
Deep Dive: Financial Performance & Key Metrics
The financial statements reveal several key aspects:
- Revenue: Revenue grew from IDR15,443b in FY23A to IDR16,732b in FY24A, with forecasts pointing towards gradual increase through FY25E to FY27E.
- EBITDA & EBIT: EBITDA stood at IDR4,422.8b in FY24A, while core EBIT margins saw marginal contraction attributed to lower overall FFB output, yet the margins improved in certain quarters due to better CPO price realization.
- Core PATMI & Core EPS: Core net profit fell from IDR2,412b in FY23A to IDR2,276b in FY24A, reflecting lower outputs. The core EPS was reported at IDR1,295 in FY24A compared to IDR1,372 in FY23A, with a forecasted modest bounce in FY25E supported by an improved output outlook.
- Valuation Metrics: With a forecast FY25E PER of 8x and a current trading price of SGD 0.81, the target price has been revised slightly lower to SGD 0.86. The company trades at attractive single-digit P/E multiples alongside net dividend yields exceeding 6%.
- Balance Sheet & Cash Flow: The balance sheet remains robust with steadily increasing shareholders’ equity from IDR13,306b in FY23A to IDR15,371b in FY25E. Strong free cash flow generation is supported by operating cash flow that has recorded consistent growth, alongside prudent capital expenditure planning.
Operational and Production Analysis
Bumitama Agri’s core operations relate to the production of FFB as well as the processing of these fruits into CPO and PK. Key operational insights include:
- The FFB nucleus output saw a decline of 15% YoY in FY24 due largely to factors such as biological tree rest and the lagged impact from the 3Q23 El Nino event. Despite this setback, the management has targeted a recovery with up to a 5% YoY internal growth in FFB for FY25E.
- CPO production witnessed a marginal decline during sales, although the ASP of CPO experienced a significant uplift of 23% YoY in the second half of FY24. Similarly, PK ASPs surged by 74% YoY, indicating the company’s ability to capture higher pricing despite lower volume output.
- The cropping pattern remained consistent with an approximate 45%:55% split between H1 and H2 output in FY25E, suggesting stability in operational planning. The company expects a rebound in nucleus output to be stronger relative to plasma output, underpinning the prospects of a strong recovery in the coming year.
Cost Structure and Dividend Policy
The report outlines a cautious view on unit cash cost of production as it is expected to increase by 3%-5% YoY for FY25E. The rise in cost is attributed to heightened labor expenses and increased fertilizer cost and dosage. On the dividend front, management is anticipating a final dividend per share (DPS) of 4.08 cts SGD for FY24, which would bring the year-end DPS to 5.28 cts SGD under the assumption of a 50% payout ratio.
Price Performance and Valuation
Bumitama Agri’s stock performance has been resilient with the share price trading below its 52-week high of SGD 0.92. The technical and fundamental valuations reflect a consistent model with a 6-year mean PER, providing an attractive entry for investors seeking stable dividend yields and a low valuation multiple. The stock demonstrates an attractive forward PER of 8x FY25 earnings, supporting the BUY recommendation.
Investment Recommendation
Maybank IBG Research recommends Bumitama Agri as a BUY. The company is positioned to benefit from a modest YoY growth in core PATMI with improved FFB output and robust pricing in the downstream products. The attractive valuation, single-digit PER, and high dividend yields (>6% net dividend yield) support the BUY call, despite the anticipated challenges related to lower FFB output in FY24 and the incremental cost pressures projected for FY25E.
Risk Considerations
The report outlines several risks inherent in the palm oil sector and Bumitama Agri’s operations:
- Adverse weather anomalies that might impact output growth.
- Potential lower-than-expected CPO pricing, which could erode margins.
- Import country policies that might negatively influence palm oil demand.
- Unfriendly policies from the Indonesian government affecting upstream operations.
- Fluctuations in crude oil prices impacting the viability of palm-based biodiesel.
- Competitive pressures from alternative oil sources such as soybean and rapeseed.
Historical Performance and Analyst Ratings
Bumitama Agri’s historical price target and rating movements have been steady. The target price has been revised slightly but remains attractive relative to its historical valuation. The study presents a timeline of analyst recommendations showing BUY ratings consistently over multiple periods with target prices ranging from SGD 0.8 to SGD 1.0 at various intervals. This track record reinforces the firm’s credibility and strengthens the confidence in the BUY recommendation.
Conclusion
In summary, Bumitama Agri is well positioned within the palm oil industry, leveraging its operational efficiencies, strong price positioning, and attractive dividend policy. While the company faces near-term challenges from lower FFB output and rising production costs, its strategic outlook, coupled with a focused growth plan for FY25E, supports its long-term potential. Investors are encouraged to consider Bumitama Agri for its solid operational fundamentals, attractive valuation, and robust dividend yield, all of which are underpinned by the comprehensive analysis provided by Maybank Research Pte Ltd.
This in-depth report, released on February 28, 2025 by Maybank Research Pte Ltd, encapsulates a detailed performance review, financial analysis, operational insights, and risk assessment of Bumitama Agri, reaffirming the firm’s BUY recommendation for the foreseeable future.
