Monday, October 19, 2015

Bumitama Agri

Bumitama Agri: Earnings preview: Guiding for a 19% profit slump in 3Q on lower ASPs

Maybank-KE expects the CPO producer to report a 19% y/y slump in 3Q15 net profit to Rp238b largely due to lower CPO average selling prices (ASP).

That would bring 9M15 earnings to Rp661b, meeting about 71% of the house’s forecast, but only 61% of consensus expectations.

The house notes that the poor 3Q15 results would largely be due to lower CPO ASP of Rp6,770/kg (-17%) as punitive export levies of US$50/ton has been put in force by the Indonesian government since 15 Jul.

This could however be slightly mitigated by higher FFB output. In 3Q15, Bumitama's CPO production hit an all time high of 181,975 MT (+20.8%) fuelled by a 20% jump in FFB harvest.

In addition, the group could could face heightening unrealised FX losses on its USD debt (~Rp4t equivalent) exposure as the IDR has fallen about 10% against the USD during the quarter.

The research house notes that the El Nino weather pattern is casting doubt over Bumitama’s near-term prospects even though CPO output traditionally peaks in 4Q. Despite output possibly missing expectations, the resulting upward pressure on CPO prices could compensate for the supply drag.

Since its low of $0.70 achieved in late Aug, the counter has rallied 17.9% and is about 2.9% away from its TP of $0.85. Given the limited upside catalysts, the house has thus downgraded Bumitama Agri to Hold from Buy.

Aside to Maybank-KE’s update, the street has 8 Buys and 1 Sell ratings on the counter with a consensus TP of $1.17.

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