• Bumitama Agri Ltd (BAL) (UNRATED) has released its 4QFY19 results. The group reported a net profit of Rp686.3bil in FY19. This exceeded consensus estimates of Rp658.4bil as BAL recorded a forex gain of Rp82bil in 4QFY19. BAL’s reported net profit plunged by 37.4% to Rp686.3bil in FY19 as revenue slid by 8.2%.

• BAL’s average CPO price realised declined by 4.7% to Rp6,696/kg (RM1,961/tonne) in FY19 from Rp7,025/kg (RM1,992/tonne) in FY18 while FFB nucleus production fell by 2.0% (FY18: +27.6%).

• BAL’s cash cost was Rp4,361//kg (RM1,277/tonne) in FY19 vs. Rp3,796/kg (RM1,077/tonne) in FY18. The 14.9% increase in cash cost per kg in FY19 was mainly due to higher application of fertiliser in 4QFY19 and the decline in FFB production.

• BAL is currently selling most of its CPO at spot prices. The group did not sell forward significantly.

• BAL’s FFB is expected to grow between 0% and 10% in FY20F. BAL’s mature areas are anticipated to rise by 4,000ha in FY20F.

• The range of the group’s FFB guidance for FY20F is wide as it is increasingly difficult to predict the production patterns of the oil palm trees.

• 1H is anticipated to account for 45% of the full year’s FFB production while 2H is envisaged to make up the balance 55%. We understand that rainfall is sufficient at BAL’s oil palm estates in Kalimantan.

• BAL’s cash cost of CPO per kg is estimated to increase between 0% and 5% in FY20F. Fertiliser costs are envisaged to rise by 14% while minimum wage is anticipated to climb by 8.5% in FY20F. BAL has secured 50% of its full-year fertiliser requirements for FY20F.

• New plantings of oil palm are estimated to be 1,000ha in FY20F vs. 2,402ha in FY19. The approval process for new plantings has become lengthier as the RSPO introduced new guidelines last year.

Source: AmInvest Research - 19 Feb 2020