Brokers’ take: RHB downgrades Bumitama Agri to ‘neutral’ after results disappoint

RHB downgraded Bumitama Agri to “neutral” from “buy”, and lowered its target price to S$0.66 from S$0.80, on Thursday (Mar 2).

This came after the Indonesian palm oil producer’s FY2022 results disappointed, with earnings at just 84 per cent to 90 per cent of RHB’s and consensus estimates, the research team said.

On Wednesday, Bumitama Agri posted a 47.7 per cent year-on-year drop in net profit to 647.4 billion rupiah (S$57 million) for the second half-year ended Dec 31, 2022, bringing its net profit for the full year to 2.83 trillion rupiah.

The disappointment came from lower-than-expected fresh fruit bunches output and higher-than-expected unit costs, inventory levels and effective tax rate, RHB said.

Its new target price of S$0.66 – seven times the research team’s FY2023 earnings estimates – implies a potential upside of 8 per cent from the counter’s last trading price of S$0.61 as at 10.45 am. Bumitama Agri’s shares were trading 0.8 per cent or S$0.005 lower at the time.

RHB noted that the stock is now trading at six times its 2023 earnings, in line with peers, which are trading at between six and 10 times. It also estimates Bumitama Agri’s dividend yield to be at around 6.6 per cent, assuming the group pays out 40 per cent of its earnings. It has yet to declare a final dividend for FY2022.