Bumitama

Bumitama: 2Q13 results behind expectations on higher costs, as net profit fell 19% yoy, though it rose 2% qoq. Bumitama showed strong operating performance, as its internal fresh fruit bunch (FFB) pdtn expanded 14% yoy and the group is on track to add 13k ha of new palm oil acreage in FY13. Overall the group saw a 45% yoy increase in palm oil sales, despite a 16% yoy fall in ASP. With 36% of planted acreage still classified as immature, Bumitama should continue to see healthy FFB output growth in the medium term. However, costs overshadowed the positives, as COGS rose 27% yoy and 21% qoq, extending previous quarters’ escalations. This was due to higher fertilizer costs, and processing costs due to a new mill ramping up, as well as repair costs at an existing mill. HSBC lowers TP to $1.14 (from $1.27), in view of Bumitama’s higher cost profile, but maintains its Overweight rating.