Bumitama Agri (SGX:P8Z) – This Palm Oil producer is highly under-priced

Palm oil plantation companies has been the talk of the town since past few weeks. Palm oil’s spot price moved up from its multi-year low price level of $576 per mt (in May 2020) to the current level of $1031 per mt (almost 72% return). This is the highest price level in past 10 years.

One of the beneficiaries of this commodity super cycle is “Bumitama Agri Ltd” (SGX:P8Z) , which was founded in 1996 and listed on the Singapore Exchange in 2012. It is one of the leading producers of crude palm oil (“CPO”) and palm kernel (“PK”) in Indonesia.

Bumitama has a total planted area of 187,917 hectares, of which 29.3% are allocated for plasma smallholders, located across the Indonesian provinces of Central Kalimantan, West Kalimantan and Riau. The Group’s oil palm trees are relatively mature, with a weighted average age of 11.6 years as of 1st January 2021. With 92.3% of the planted area in the mature category as of 31 December 2020, Bumitama is poised to take advantage of production growth opportunities as the oil palm trees mature and achieve peak production. Crude Palm oil production has witnessed 10% CAGR over past 5 years.

The Group places strong emphasis on achieving better yields and extraction rates through investments in research and development, technology and effective agricultural practices. Average Crude Palm Oil yield has been close to 4 metric tonnes/Mature Hectare over past 5 years period. Bumitama operates 14 CPO mills, located in close proximity to its plantations, with a total FFB processing capacity of 6.03 million metric tonnes per annum.

Financial Performance

Revenue has grown at CAGR of 8.2% over past 5-year period.

Net Profit has grown at CAGR of 3.5% over past 5-year period.

Debt to Equity ratio has been close to 0.6 over past 5-year period.

Comparative Study with Peers

Bumitama Agri has registered the highest growth among its peers in Fresh fruit Bunch production (7.7%) & Matured planted Area (7.2%) over past 10 years period.

Dividend Yield

It has consistently paid decent dividend since 2013. Its current dividend yield is close to 5%.

Valuation

(As of Mar 2021)

  • P/B of Bumitama Agri < 0
  • Trailing P/E < 8
  • Trailing Dividend Yield > 5%

Near to medium term trigger

Below are few of the near to medium term trigger that will benefit the company –

  • Low stockpile is expected to keep the Palm oil price (CPO) higher in FY21.
  • Stable demand from China to sustain, despite high prices.

Disclaimer

Our content is for informational purpose only. We don’t recommend the stocks by such analysis. You must do your own research before undertaking any investment making decision.

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Published by Amit

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