• Keep BUY and SGD0.95 TP, 13% upside. 3Q24 results are in line with our expectations, but below Street’s. We expect Bumitama Agri’s earnings to increase in 4Q on improving productivity towards the year end and higher ASPs. Valuation remains attractive – BAL is trading at 7.8x FY25F P/E, ie the low end of its peers’ range of 7-11x. Meanwhile, the FY24F dividend yield of 6% is an added advantage.

• 3Q24 bottomline slipped 5% QoQ (-47% YoY), bringing 9M24 earnings to IDR1423bn (-27% YoY). This is in line with our estimates but missed Street’s expectations, at 74% and 69% of FY24 projections.

• BAL recorded nucleus FFB growth of 5% QoQ in 3Q24 (-29% YoY), bringing 9M24 numbers to an FFB decline of 21% YoY, likely due to the lagged negative effect from extreme weather conditions. FFB plasma saw a flattish growth at 0.8% QoQ, bringing 9M24 FFB internal output to -16% YoY. This is below our FY24 assumption of -7.1% and management’s internal output guidance of -5% YoY. BAL expects 4Q24 to see a marked recovery in output, peaking in December, as October output has already seen a rise of >20% MoM. While It continues to expect 2H24 to contribute 55-57% of FY24’s output, it is reducing its full-year output guidance to a high single-digit decline. As such,we also reduce our FFB growth assumption to -9% YoY while projecting FY25-26 growth at 5-6% YoY.

• CPO ASP strengthened in 3Q24. BAL saw a 4% QoQ increase in CPO ASPs in 3Q24 (+18% YoY) to IDR12,700/kg while PK prices rose 16% QoQ (+58% YoY). Management continues to sell mainly on the spot market.

• Unit costs rose 15% QoQ (+31.7% YoY) in 3Q24 to IDR5,400/kg due to weaker output during the quarter and higher fertiliser application. This brought 9M24 unit costs to IDR5,729/kg (+17% YoY). BAL managed to apply c.80-85% of its fertiliser requirements in 9M24, up from 50% in 1H24. With the anticipated spike in output in 4Q24, management is now guiding for unit costs to rise 3-6% YoY from +6-8% previously. Therefore, we reduce our cost assumptions accordingly for FY24.

• We tweak FY24F-26F earnings up by 3.5%, 1.5%, and 2.2% after lowering FFB output and reducing our unit cost assumptions.

• Our TP is relatively static at SGD0.95, based on an unchanged 10x FY25F P/E. This includes an ESG discount of 10%, given our in-house ESG score of 2.6 vs the 3.1 country median. We believe valuations look attractive, as BAL is trading at 7.8x FY25F P/E, which is at the low end of its peers’ range of 7- 11x. BAL also offers a handsome FY24F dividend yield of 6%. We believe the company, being a pure planter, will continue to benefit from the current CPO price movements and IDR appreciation .

Source: RHB Securities Research - 14 Nov 2024

Source: RHB Securities Research - 14 Nov 2024