13 August 2014

Bumitama Agri Quarterly Report Summary - August 2014

Performance Review

First Half Year 2014 Revenue up 52%  to S$303 million, with net profit increased 96% to S$64 million.

1H14 EPS: 3.68 SG cents, up 97% (compared to 1H13), mainly due to both increase in sales volume and average selling price.

NAV: 40.6 SG cents, up 8% (compared to Dec 2013)

FCF: Positive

Expected ROE ~ 20%

Estimated Annualized PE ~ 15 - 17 X

Company Comment on Outlook

During the last two months, prices of palm oil have adjusted lower in view of the reduced threat of El Nino, anticipated increase in output from Malaysia and Indonesia as well as the softer soybean prices. However these are just seasonal volatilities as the long term prospect of palm oil remains positive.

The Group’s drive towards ensuring sustainable palm oil, strong focus on continuous improvement, and competitive cost management will be instrumental to the continuous growth of this Group.

My Notes

The company share price was increasing over the 1 year period as it is one of the companies that have younger age plantation (weighted average age is about 6 years) which will bring in more revenue in future. The key risk here is the palm oil price fluctuation in between RM2,000 to RM3,000 per tonne this year, partly due to the speculation of El nino effect or the increase of supply of soy beans.

With estimated PE of 15 X to 17 X, I think it is still in reasonable range (although it might not look so attractive now), as long as the palm oil price could be maintained at least at RM2,500 per tonne and above and the company could achieve long term growth rate of about 10% in the sales volume.

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