• Bumitama Agri Ltd (BAL) (UNRATED) reported its 1QFY18 results on Tuesday. BAL’s net profit fell by 16.8% YoY from Rp278.4bil in 1QFY17 to Rp231.8bil in 1QFY18. The group’s annualised net profit was below consensus estimates of Rp1,253trillion for the full year.

• BAL’s nucleus FFB production rose by 20% YoY in 1QFY18. However, the increase in FFB production in 1QFY18 could not offset the negative impact of weaker CPO prices.

• BAL’s average CPO price realised slid by 7.6% from Rp8,480/kg (RM2,825/tonne) in 1QFY17 to Rp7,832/kg (RM2,263/tonne) in 1QFY18.

• BAL expects to achieve an FFB production growth of 15% to 20% in FY18F. 2H is estimated to account for 56% of full year’s FFB output while 1H is anticipated to make up the balance 44%. The group is hopeful that operational numbers would still be strong in 2QFY18 in spite of the Hari Raya festive period in June.

• There are no issues with the weather currently. Rainfall at BAL’s estates in Kalimantan is good.

• BAL’s CPO cash cost is expected to increase by 5% to 10% in FY18F (FY17: Rp4,239/kg) due to higher minimum wages and fertiliser costs. BAL’s cash cost is anticipated to rise in the following quarters after falling YoY in 1QFY18.

• BAL achieved a cash cost of Rp4,487/kg (RM1,297/tonne) in 1QFY18 vs. Rp5,343/kg (RM1,780/tonne) in 1QFY17. The YoY decline in the cash cost in 1QFY18 was mainly due to slower fertiliser application.

• BAL only applied 32% of its full-year fertiliser requirements in 1QFY18 compared with more than 50% in 1QFY17. The group’s fertiliser application is expected to pick up in 2QFY18 and 3QFY18.

• New plantings of oil palm are estimated to be 3,000ha in FY18F. BAL carried out new plantings of 770ha in 1QFY18.

Source: AmInvest Research - 14 May 2018