Bumitama Agri

Analysts are optimistic on Bumitama Agri, even as the Indonesian oil palm plantation operator missed consensus’ earnings estimates in 3QFY2019 ended September.

Bumitama saw the quarter’s earnings plunge 29.7% to IDR189.61 billion ($18.3 million) even though revenue rose 1.4% y-o-y to IDR1.94 trillion. The earnings decline was mainly attributable to low crude palm oil (CPO) average selling price, low palm kernel ASP and weaker-than-expected fresh fruit bunches output growth.

“3QFY2019 earnings missed our and consensus’ estimates on low output and prices. However, that will change in 4QFY2019 with the recent CPO price rally, expectations of flat q-o-q output and lower fertilising costs,” says Ong Chee Ting, an analyst at Maybank Kim Eng Research, in a report on Nov 12.

The way Ong sees it, the counter is a laggard play in the recent CPO price recovery and offers good medium-term growth prospects. Despite a 17.4% rally since late October, shares in Bumitama closed at 64 cents on Nov 13 — 12.9% below its recent peak of 73.5 cents in April.

“We believe the liquidity discount placed on the counter is excessive. Stronger output in the second half of the year should help to provide a buffer to earnings this year,” say DBS Group Research analysts William Simadiputra and Lim Rui Wen in a Nov 12 report. “We believe Bumitama’s share price will ride along with the positive momentum of CPO price in 4QFY2019.”