• Bumitama Agri (BAL) (UNRATED) has released its 1HFY22 results. BAL’s annualised 1HFY22 net profit was 83.8% above consensus estimates of Rp2.3trillion for the full year. The group’s net profit leapt by 4.5x YoY to Rp2.2bil in 1HFY22 on the back of higher CPO prices and production.

• BAL’s nucleus FFB production improved by 8% YoY in 1HFY22. Average CPO price realised jumped 74% YoY to Rp14,327/kg (RM4,234/tonne) in 1HFY22. Also unlike other Indonesian planters, BAL managed to record a higher CPO price in 2QFY22 vs. 1QFY22.

• BAL’s positive FFB production growth in 1HFY22 was driven mainly by the West Kalimantan operations. The group’s estates in West Kalimantan achieved a 27% YoY surge in FFB output in 2QFY22.

• West Kalimantan accounted for 38% of BAL’s FFB production in 1HFY22 while Central Kalimantan made up a larger 62%. The average age of BAL’s oil palm trees in West Kalimantan is 10 years compared with 15 years in Central Kalimantan.

• BAL expects its FFB production to increase by 16%- 18% in FY22E. Rainfall has been good at the group’s oil palm estates in West and Central Kalimantan. Rainfall has been more than 100mm per month so far this year. BAL expects to achieve its highest monthly FFB production in either September, October or November.

• BAL’s cost of CPO production is envisaged to increase by 20% to 25% to Rp5,400/kg to Rp5,625/kg (RM1,596/tonne to RM1,662/tonne) in FY22E due to higher fertiliser costs. BAL recorded a cash cost of CPO production of Rp5,200/kg (RM1,537/tonne) in 1HFY22 vs. Rp4,550/kg (RM1,345/tonne) in 1HFY21. BAL applied 50% of its full-year fertiliser requirements in 1HFY22,

• BAL has not faced any labour shortage in West Kalimantan so far this year. In past years after the Hari Raya break, some workers would not return. However this year, BAL has managed to retain its labour force.

Source: AmInvest Research - 16 Aug 2022