Bumitama Agri - DBS Research 2023-07-11: Recovering Earnings Outlook Amid The El Nino Threats

Bumitama Agri - Recovering Earnings Outlook Amid The El Nino Threats

Bumitama Agri (SGX:P8Z) | SGinvestors.ioBumitama Agri (SGX:P8Z)
  • We think Bumitama Agri (SGX:P8Z) is a well-run palm oil company since it has consistently delivered strong CPO yield, profitability, and ROE performance even during the palm oil price downcycle, thanks to its good estate management.
  • - Read this at SGinvestors.io -
  • Following the improving earnings trend in 2024, we believe Bumitama Agri's share price can perform even better going forward, coupled with current undemanding valuation at FY24F P/E of 5.4x, which is 30%- 40% discount vs its older plantation companies’ peers.
  • Beyond 2024, given its prime age palm oil trees production cycle that will keep the overall cash cost low and CPO yield per hectare high, this should thus sustain Bumitama Agri's strong financial and return on equity performance.

Global palm oil price recovery in 2H23 and 2024

  • - Read this at SGinvestors.io -
  • Meanwhile we believe the palm oil price downside risk from current level is limited on improving crude oil price trend, as well as recovering demand from China.
  • Looking at longer term horizon, we estimate Bumitama Agri could generate steady annual dividend at least S$0.02/share in the long run, assuming a CPO price benchmark of at least at US$900 per MT (Rp10,100/kg for domestic selling price).
  • We think Indonesia’s CPO price benchmark can sustain around Rp10,000/kg (US$689 per MT) ahead, driven by Indonesia biodiesel consumption that will help to offset any weakness from overseas CPO demand. We believe our selling price assumption is conservative since it is at discount to our palm oil benchmark price assumption of US$976 per MT (Rp14,600/kg) since Bumitama Agri exposes to Indonesia domestic CPO prices, which the pricing mechanism is net of export levies and taxes.

Earnings revision summary

  • Read more at SGinvestors.io.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.

William Simadiputra DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-07-11

Previous report by DBS:
2023-01-11 Bumitama Agri - Productivity Advantage Over Peers.

Price targets by 3 other brokers at Bumitama Agri Target Prices.

Listing of research reports at Bumitama Agri Analyst Reports.

Relevant links:
Bumitama Agri Share Price History,
Bumitama Agri Announcements,
Bumitama Agri Dividends & Corporate Actions,
Bumitama Agri News Articles


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