RHB Securities has maintained its “neutral” rating and target price of 50 cents for Bumitama Agri, following the plantation company’s weaker than expected results in 1Q.

The brokerage has also retained its FY2021-FY2023 earnings forecasts for the company.

On May 11, Bumitama announced that its earnings declined 36% y-o-y to IDR166.7 billion ($15.6 million).

SEE:Bumitama Agri posts 36% decline in earnings for 1Q21

The brokerage believes the weaker bottom line is likely due to higher costs of external crop prices, as well as lower-than-market crude palm oil (CPO) prices achieved.

Want our latest Singapore corporate news stories for FREE

Follow our Telegram, Facebook for the latest updates round the clock

RHB notes that Bumitama had previously sold forward 75% of its 1H2021 output at a gross price of IDR9,138 per kg or about 35%-40% lower than current price levels.

“With the current tax structure in place, it would be selling CPO at close to cash-cost levels for 1Q2021,” the Singapore RHB research team writes in a note dated May 11.

Nevertheless, RHB expects the company’s earnings to improve in the coming quarters, as it winds down its forward sales positions.

As at 1.50 pm, Bumitama was up 1.5 cents or 3.2% at 48.5 cents with 2.1 million shares changed hands.