Analysts at Maybank Kim Eng and RHB have increased their target prices for Bumitama Agri on the back of the plantation player’s strong 1H21 results.
Maybank Kim Eng maintains its “buy” call with a higher target price of 93 cents, from its previous 65 cents. Its analyst Ong Chee Ting highlighted in an August 15 report that Bumitama is trading at a single digit price-to-earnings ratio, with attractive dividend yields of above 6%.
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Meanwhile, RHB analysts maintain “neutral” with a higher TP of 47 cents from the previous 45 cents. The analysts said it expects earnings to improve in the coming quarters, as Bumitama has completed its forward sale contracts.
Bumitama booked a 6% y-o-y rise in 1H21 earnings on higher sales volume for its crude palm oil (CPO) and palm kernel products, which increased at 31% and 20% y-o-y respectively. RHB said the higher-than-expected profits stemmed from higher fresh fruit bunches (FFB) production, which was sustained throughout 2Q21.
Despite the 27% y-o-y FFB output growth in 1H21, Ong noted that Bumitama has conservatively raised its FY21 growth guidance to about 10% to 15% y-o-y. It expects 2021’s 1H and 2H output ratio to be 50:50 versus the typical 55:45, as it experienced a mini-peak in 2Q21.
Ong said Bumitama also has immaterial forward sales in 2H21, which means that the PATMI in the second half of the year will capture the current higher CPO average selling price (ASP).
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Following its 2021 industry-wide CPO ASP revision to RM3,500 per tonne from RM3,100 per tonne, as well as its 2022 to 2023 ASP to RM2,800 per tonne, Maybank Kim Eng has raised its FY21, FY22 and FY23E core PATMI by 35%, 3% and 4%, respectively.
After adjusting for higher FFB output and higher realised CPO prices in 1H21, RHB analysts have raised its FY21 to FY23F earnings by 4% to 14%.
As at 2.00pm, shares in Bumitama are down 1% to 46 cents or 0.9 times FY2021 book value.