Bumitama Agri - RHB Invest 2023-03-02: Disappointing End To The Year; Downgrade To NEUTRAL

• Bumitama Agri (SGX:P8Z)'s FY22 results disappointed. Although earnings going forward will be boosted by inventory drawdowns in 1Q23, higher unit costs and lower ASP could offset this.
• Bumitama Agri’s current valuation of 6x CY23F P/E is fair, within its peers’ range of 6-10x. Nevertheless, dividend yield at a 40% payout should lend support, implying 6.6% FY23F yield.
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Bumitama Agri booked a 61% h-o-h decline in 2H22 core net profit

• Bumitama Agri booked a 61% h-o-h decline in 2H22 core net profit, bringing FY22 earnings to just 84-90% of our and consensus’ FY22F earnings. The disappointment came from lower-than-expected FFB output, higher-than-expected unit costs, higher-than-expected inventory levels, and higher-than-expected effective tax rate.
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• Bumitama Agri recorded an 18.4% q-o-q decline in FFB output (+17.5% y-o-y), bringing FY22 FFB growth to 14.6% y-o-y, below management’s guidance of +16-18%. For FY23, management is guiding FFB growth of 3-7%, in line with our growth assumptions of 3-5% for FY23-24.

Still higher inventory levels in Dec 2022.

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