• Bumitama Agri Ltd (BAL) (UNRATED) has released its 1HFY23 results. On an annualised basis, BAL’s 1HFY23 core net profit (excluding forex gains) was 13% above consensus.

• BAL’s net profit dived by 45.4% YoY to Rp1.2bil in 1HFY23 while revenue retreated by 16.4% to Rp7.5bil.

• BAL’s nucleus FFB production slid by 12% YoY in 1HFY23 while average realised CPO price declined by 18% to Rp11,700/kg (RM3,468/tonne).

• BAL expects its FFB to grow by 0%-5% for FY23E vs. the previous guidance of 3%-7%. BAL attributes the unexciting improvement in FFB to tree stress in 1QFY23.

• Also, the group’s FFB production is expected to be stronger in 2H2023 vs. 1H2023. Peak production is envisaged to take place in either September or October. In addition, although rainfall has been declining, it is still above the threshold of 100mm per month.

• BAL achieved a cash cost of CPO production of Rp5,400/kg (RM1,601/tonne) in 1HFY23 and Rp4,400/kg (RM1,339/tonne) in 2QFY23. The group’s cash cost of production is estimated to increase by 0%-5% in FY23E (FY22: Rp5,500/kg (RM1,630/tonne)).

• BAL’s cost of CPO production per kg is anticipated to be lower in 2HFY23 vs. 1HFY23 due to lower fertiliser and fuel costs and a higher volume of production. Fertiliser accounts for 40% of the cost of production while fuel accounts for another 10%-15%. Incidentally, BAL applied 50% of its full-year fertiliser programme in 1HFY23.

• BAL’s replanting target is 1,000ha-1,500ha in FY23E. The group replanted 540ha in 1HFY23. BAL also carried out new plantings of 170ha in 1HFY23.

• BAL is currently trading at a FY24F PE of 8x, which is in line with its 5-year average.

Source: AmInvest Research - 14 Aug 2023