Friday 16 November 2012

Plantation Sector - Key Takeaways from Bumitama’s Conference Call Overweight


- Bumitama Agri Ltd (UNRATED, S$1.035) held a conference call on its 9MFY12 results yesterday. The group’s annualised results were slightly below consensus estimates of Rp795bil for FY12F. Bumitama is currently trading at a FY13F PE of 12.8x according to Bloomberg estimates. 

- Bumitama’s revenue grew 22.6% YoY to Rp2.5trillion in 9MFY12 underpinned by a 28% YoY increase in CPO sales volume and forward sales while net profit climbed 17.5% to Rp558.5bil. 

- Average selling price of CPO edged down 1.2% from Rp7,740/kg (RM2,694/tonne) in 9MFY11 to Rp7,644/kg (RM2,549/tonne) in 9MFY12. 

- Bumitama’s FFB production is expected to improve 30% to 35% in FY12F before slowing down to a 25% growth rate in FY13F. The group’s FFB production was still strong heading towards mid-November. 

- Bumitama had also planted about 10,100ha of oil palm in 9MFY12, which is in line with the group’s new planting target of roughly 13,000ha per year.

- We gather that Bumitama has not faced any problems selling its CPO to the refineries. The group’s storage tanks were only 69% full as at end-September. 

- About 60% to 80% of Bumitama’s CPO production is sold based on long-term contracts to the refineries. These contracts last between six to 12 months.  

- Production costs were about Rp3,289/kg (RM1,097/tonne) in 9MFY12 compared with Rp3,370/kg (RM1,132/tonne) in 1HFY12. We understand that wages of workers in Central Kalimantan would increase by 17% in FY13F. Minimum wage for the West Kalimantan region for FY13F has not been determined yet.  

- In spite of this, Bumitama’s production costs per tonne are envisaged to remain flattish in FY13F on the back of higher palm oil production and relatively unchanged fertiliser costs.

- On the issue of the revocation of its 4,810ha of land in Central Kalimantan, Bumitama has proceeded with the court case to put the revocation on hold. 

- The group is optimistic that the land would be returned back as recently, there was a legal precedent whereby a logging company in a nearby area had the revocation of its land overturned by the court.   

Source: AmeSecurities

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