• Bumitama Agri Ltd (BAL) (UNRATED) has released its 1HFY21 results. On an annualised basis, BAL’s net profit of Rp484.0bil in 1HFY21 was about 7.6% below consensus estimates of Rp1.048tril for the full year. BAL’s net profit expanded by 9.7% YoY to Rp484.0bil in 1HFY21 while revenue jumped by 35.9% to Rp5.4tril.

• BAL realised an average CPO price of Rp8,201/kg (RM2,354/tonne) in 1HFY21 vs. Rp8,328/kg (RM2,447/tonne) in 1HFY20. FFB nucleus production growth was 27.0% YoY in 1HFY21.

• BAL’s CPO cash cost was Rp4,564/kg (RM1,310/tonne) in 1HFY21 vs. Rp5,022/kg (RM1,475/tonne) in 1HFY20. Due to a higher volume of CPO production, BAL’s cash cost is expected to fall by 0% to 5% in FY21E. Looking ahead to FY22F, BAL’s fertiliser costs may increase by 30% to 40%.

• BAL’s FFB production growth is expected to be 10% to 15% in FY21E vs. the previous guidance of 10%. Similar to another industry player, BAL does not think that its FFB production would be stronger in 2HFY21 compared to 1HFY21. Instead, the group’s FFB production in 2HFY21 would be the same as 1HFY21. Comparing against 2HFY20 also, BAL reckons that its FFB production would be the same.

• BAL expects its FFB production to peak in November in FY21E. The volume of production in November may be similar to the mini peak output achieved in April 2021. We understand that BAL’s FFB production was robust in 1HFY21 partly due to good rainfall in FY20.

• BAL has completed the delivery of its forward sales in 1HFY21. The group carried outminimal hedging in 2HFY21. Hence, BAL is expected to benefit from high CPO prices in 2HFY21.

• We understand that there are talks in Indonesia that the government may raise the CPO export tax or/and levy again. This is because the Estate Crop Fund, which is used to subsidise biodiesel, is running low on cash. The increase in CPO export tax or/and levy may take place either in 4QFY21 or 1QFY22. The hike in CPO export tax or/and levy would bring down the realised price of CPO and affect upstream players in Indonesia again.

Source: AmInvest Research - 16 Aug 2021