• Bumitama Agri Ltd (BAL) (UNRATED) has released its FY23 results. BAL’s FY23 net profit of Rp2.4tril was within consensus.

• BAL’s net profit slid by 13.3% to Rp2.4tril in FY23 as average CPO price fell by 10% to Rp11,300/kg (RM3,384/tonne) and internal FFB production slid by 4%.

• BAL reckons that its internal FFB production could grow between 2% and 5% in FY24F after falling by 4% in FY23. Although the weather is wet at BAL’s oil palm estates in Central and West Kalimantan currently, it is not a major issue yet. The group’s FFB production is expected to be higher YoY in 1Q2024 but lower QoQ due to seasonal factors.

• BAL’s FFB production is expected to be higher in 2H compared to 1H. 2H is envisaged to account for 55% of FFB production in FY24F with 1H at 45%.

• BAL achieved a cash cost of CPO production of Rp4,900/kg (RM1,468/tonne) vs. Rp5,500/kg (RM1,630/tonne) in FY22. The decline in the cost of production per kg in FY23 is due to lower fertiliser application. BAL only applied 75%-80% of fertiliser requirements in FY23.

• BAL’s cost of production is estimated to increase by 6%-9% in FY24F as the group catches up on its fertiliser application. The increase in the volume of fertiliser application is expected to be mitigated by lower fertiliser prices. The price of fertiliser, which was secured for 1QFY24, was 10% lower than the previous tender.

• BAL’s new plantings of oil palm are anticipated to be 500ha-1,000ha in FY24F (FY23: 500ha). Re-plantings of ageing oil palm trees are estimated to be 1,500ha-2,000ha compared to 800ha in FY23. Cost of replanting until maturity is expected to be US$8,000/ha.

• BAL is presently trading at a FY24F PE of 6x, which is below its 5-year average of 8x.

Source: AmInvest Research - 28 Feb 2024