SINGAPORE (Nov 16): Maybank Kim Eng is maintaining its “buy” call on Bumitama Agri with an unchanged target price of 95 cents on an unchanged FY17 PER multiple of 14 times, its four-year mean.
This comes after the group’s 3Q17 results came in within estimates, boosted by output recovery over the quarter.
See: Bumitama Agri posts 29% rise in 3Q earnings to $26.4 mil on higher revenue
The research house is keeping its earnings forecasts intact, and continues to like Bumitama for its medium-term growth story while anticipating a 13% CAGR in its 2016-19 fresh fruit bunches (FFB) output, underpinned by its young tree profile of 8.7 years on average.
In a Tuesday report, analyst Ong Chee Ting opines that earnings for the group could come in stronger q-o-q, as 92% of 2017’s fertilising activities had been completed as at end-Sept, as compared to 67% a year ago for 9M16.
This comes in spite of the flattish q-o-q output guidance by Bumitama’s management on the absence of a distinct peak output in 4Q, unlike previous years due to a delay in peak crop towards later part of the final quarter.
“3Q17’s FFB output growth was another good quarter but in part due to the low base last year, and hence unlikely to be sustainable in 4Q17. Its 9M17 output (+41% y-o-y) met 74% of our full-year forecast, and is on track to meet our full-year growth forecast of +22% y-o-y vs. Bumitama’s guidance of +25% y-o-y for the group,” says Ong.
“Given the strong 2Q-3Q output in 2017 so far, the crop pattern may have mirrored 2014, and as such the usual distinct seasonal peak may not happen in 4Q17 this time.”
As at 12:17pm, shares in Bumitama are trading 0.6% lower at 82 cents, or 9.58 times FY18E core P/E.
