• Bumitama Agri (BAL) (UNRATED) released its 3QFY17 results yesterday, which came within consensus estimates of Rp1.169 trillion for the full year. The group's net profit surged by 52.7% from Rp543.5bil in 9MFY16 to Rp829.7bil in 9MFY17.

• BAL's group FFB production climbed by 42.4% YoY in 9MFY17 while average CPO price realised rose by 12.4% from Rp7,193/kg (RM2,205/tonne) in 9MFY16 to Rp8,085/kg (RM2,637/tonne) in 9MFY17.

• BAL is sticking to its guidance of an FFB output growth of 25% for FY17F (9MFY17: 42.4%). BAL's FFB production in 4QFY17 may be flat or slightly higher compared with 3QFY17. This is in contrast to previous years when the group's FFB output is usually the highest in 4Q.

• We understand that cropping patterns have changed. BAL is of the view that crops may only reach their highest levels at the end of the year. There is no guidance for FFB production in FY18F yet. BAL will only provide its production outlook in February 2018.

• There are no floods yet although rains have started falling at BAL's oil palm estates in Central Kalimantan. There are no major issues with weather currently.

• BAL's production cost per tonne is expected to increase by 5% in FY17F (FY16: Rp3,665/kg (RM1,142/tonne)). BAL's fertiliser costs are envisaged to rise by 5% in FY18F while average minimum wage in Central Kalimantan is anticipated to climb by 8.7%. BAL has locked in its fertiliser requirements for 1HFY18.

• BAL recorded a production cost of Rp4,526/kg (RM1,476/tonne) in 9MFY17 vs. Rp4,174/kg (RM1,280/tonne) in 9MFY16. The group's production cost was Rp3,948/kg (RM1,633/tonne) in 3QFY17 compared with Rp3,835/kg (RM1,183/tonne) in 3QFY16.

• New plantings of oil palm amounted to 1,712ha in 9MFY17 while replantings of ageing oil palm trees amounted to 3,192ha.

Source: AmInvest Research - 15 Nov 2017