FY12F PE (x): 14.6
FY13F PE (x): 11.2
We like Bumitama Agri (BAL) for its young age profile and best oil extraction rate (OER) to support its 5-year earnings CAGR of 33%. Initiate coverage with BUY and target price of S$1.10, based on 13x 2013F PE, a mid-cycle valuation for a mid-cap plantation company. Stock Impact FFB production to double in three years. We expect its fresh fruit bunch (FFB) production to grow at a 3-year CAGR of 24%. This places BAL among the top two companies under our coverage in terms of production growth, after Kencana Agri’s 24.4%. The strong production growth is supported by: a) a 15-20% increase in mature areas every year, b) large young areas (35% of total planted area), and c) progressive new plantings of
13,000ha per year would continue to ensure strong production growth.
We forecast net profit of Rp786m (EPS of 6.4 S cents), Rp1,028m (EPS of 8.3 S cents) and Rp1,054m (EPS of 8.5 S cents) for 2012, 2013 and 2014 respectively based on production growth of 28%, 24% and 20% and CPO price assumptions of RM3,150/tonne, RM3,400/tonne and RM2,950/tonne.
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