Bumitama Agri

Bumitama Agri: FY12 results broadly in line. For FY12, core net profit rose 26% y/y to IDR 730b, primarily driven by higher revenues (+26% y/y to IDR 3,526b), supported by lower tax rate (-6 ppt). Revenue growth was in line with higher production (CPO and PK sales volume up 35% and 37% y/y, respectively), which more than offset ASP decline (CPO and PK ASPs down 5% and 27% y/y). Operating margins fell (EBIT margin down 3 ppt y/y) as lower ASPs met higher unit pdtn costs (nucleus cash cost of production per mt of CPO up 11% y/y). For 4Q12, core net earnings fell 4% q/q to IDR 172b, despite higher revenue (up 18% q/q to IDR 996b) due to higher costs and interest expenses (arising from larger debt). Revenue was up despite lower selling prices (CPO and PK ASPs down 15% and 22% q/q, respectively) driven by substantial production and sales volume growth (CPO and PK volume up 40% and 30% q/q). Operating margins fell (-5 ppt q/q) driven by the higher cost of production (nucleus FFB cash cost per ha up 30% q/q due to rehabilitation costs and higher application of fertiliser on marginal areas) as well as higher SG&A costs (distribution using trucks instead of by sea due to vessel shortage and adverse sea conditions). Whilst operating margins were under pressure, the drivers (rehabilitation costs and higher selling expenses due to vessel shortage) are not structural and will disappear with time. Analysts were more impressed that Bumi exceeded its already-lofty production guidance, with impressive y/y growth in 4Q12. They reiterate that Bumi remains a growth stock; see substantial value in the stock. On outlook, Bumi has a planting target of 15kha in 2013 (vs. 13kha previously) and expects a CPO production growth of ~20% for the year 2013. The company is also looking to procure its own vessels/barges in 2013 (as part of its Rp 2 tr capex plan) to overcome the shortage that led to the higher selling expenses Nomura tips a positive stock reaction. Reiterates Buy with TP $1.40. HSBC keeps at Overweight, raises TP to $1.29 to $1.33. CIMB maintains Buy with TP $1.12 (from $1.23).