Analysts at UOB Kay Hian and RHB Group Research have kept their “buy” calls and raised their target prices for Bumitama Agri (BAL) to 93 cents and 95 cents respectively, on the back of strong 1QFY2022 results.

In 1QFY2022, BAL booked over 400% y-o-y rise in earnings, mainly backed by higher contributions from palm kernel, which prices had increased 40% q-o-q and 80% y-o-y.

BAL managed to achieve a higher average selling price (ASP) of INR13,600 per kilogram during the period, RHB analysts point out. They highlight that the plantation player has not seen the impact of Indonesia’s ban on its palm oil exports — which started in end-April — as there have not been any deliveries scheduled yet in May.

“While BAL does expect prices to come off once deliveries commence, it is also able to hold off on selling significant volumes, given its capacity to store one more month of supply in its existing storage facilities,” they note.

After adjusting for higher crude palm oil (CPO) prices of RM5,300 per tonne for FY2022 and RM4,300 per tonne for FY2023, the RHB analysts have raised their FY2022-FY2023 earnings by 13% and 35%.

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“As our CPO price assumptions are already lower than prevailing prices, we have not imputed any significant impact from the export ban on BAL’s earnings, as we expect this to be short-lived,” the analysts wrote.

While the RHB analysts expect the earnings to remain robust, UOB KH analysts Jacquelyn Yow Hui Li and Leow Huey Chuen expect BAL’s 2QFY2022 earnings growth to be muted, mainly dragged by lower sales volume and net CPO ASP as a result of the export ban.

As oil palm trees are in the yield recovery phase and entering high production cycle, the analysts expect 2QFY2022 production to be higher q-o-q and while sales volume will likely be lower.

“Based on our channel check, refiners are slowing down in receiving CPO deliveries due to the export ban. To recap, Indonesia is a net palm oil exporter with domestic market only taking up about 1/3 of annual production. There is also a risk of seeing lower realised CPO ASP for 2QFY2022 versus 1QFY2022 if the ban prolongs into June,” the UOB KH analysts add.

As at 10.50am, shares in BAL are trading 5 cents higher or 6.75% higher at 79 cents.

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