SINGAPORE (Nov 15): RHB is maintaining its “buy” call on Bunitama Agri with a target price of 95 cents, after the group recorded strong 3Q17 results.
The group saw earnings increase 29% to IDR266.3 billion ($26.4 million) in 3Q17 from IDR 206.4 billion last year.
Revenue for the quarter increased 37.2% to IDR2.05 trillion from IDR1.49 trillion a year ago, due to improved palm oil and palm kernel production as well as higher average selling price.
See: Bumitama Agri posts 29% rise in 3Q earnings to $26.4 mil on higher revenue
In 9M17, the group recorded strong fresh fruit branches (FFB) output growth of 40.9% y-o-y on the back of some 7,464ha of land that came into maturity during the period.
In a Wednesday report, RHB says that the output growth came in much higher than the management’s guidance of 25% growth and RHB’s forecasted 27% increase.
The group is maintaining its FY17 FFB growth forecast of 25% y-o-y, implying that 4Q17 would see output increase by 9% q-o-q.
However, management cautioned that the peak period may be slightly delayed to closer to end- 4Q17/early-1Q18.
The group’s unit cost in 9M17 was up 8.4% y-o-y to IDR4,526/kg. It applied 93% of its fertiliser application in 9M17.
As for FY17, the group’s management is keeping its overall expectation of a 5% rise in unit costs y-o-y, which implies that costs may decline q-o-q in 4Q17.
However, the group received a biodiesel allocation of 13,900 kilolitres for the Nov 2017 to Apr 2018 period, 9.4% lower than the previous period from May to Oct 2017.
Hence, given the new pricing structure and higher feedstock prices, margins have reversed into the red from less than 2% previously.
Consequently, RHB is cutting its margin assumption for this division.
As at 10.35am, shares in Bumitama Agri are trading at 83 cents or 1.84 times FY17 book with a dividend yield of 2.3%.
