7 Things You Must Know About Bumitama Agri Ltd Before You Invest

Today, Bumitama Agri Ltd (SGX:P8Z) (Bumitama) is one of the fastest growing palm oil companies in Indonesia. Its roots can be traced back to 1996. In that year, Lim Gunawan Hariyanto had formed Bumitama and acquired its first land bank in Central Kalimantan for palm oil plantation.

Since then, Bumitama has expanded rapidly. It began its planting activities in 1998, commissioned its first palm oil mill in 2003, and had surpassed 100,000 hectares of planted area in 2010. Subsequently, on 12 April 2012, Bumitama was listed on the Mainboard of the SGX.

In this article, I’ll present a detailed account on Bumitama’s success thus far and its outlook for the immediate future. They are:

#1: Stock Information

Ticker Symbol: SGX: P8Z
Market Capitalization: S$ 1.31 Billion (23 September 2017)

Share Price: S$ 0.745 (23 September 2017)

Industry: Palm Oil

#2: The Business

Bumitama has established an integrated business model that involves:

1. Palm Oil Plantations

   Bumitama has grown its planted area from 107,502 hectares in 2010 to 175,243 hectares in 2016. Bulk of these estates are located in West and Central Kalimantan. The remainder of estates are situated in Riau, Sumatera. As such, fresh fruit bunches (FFB) productions had grown from 764,261 metric tonnes (MT) in 2010 to 2,185,440 MT in 2016. These fruits are supplied to its CPO mills for processing.
   

2. CPO Mills

   Bumitama has increased its number of CPO mills to 13 in 2016, up from 6 CPO mills in 2012. They receive FFB from its estates and process them into crude palm oil (CPO) and palm kernel (PK). In tandem with growing FFB production, Bumitama has reported production growth in both CPO and PK. CPO production has grown from 256,883 MT in 2010 to 701,304 in 2016. PK production has grown from 52,989 MT in 2010 to 138,175 MT in 2016.
   

3. Biodiesel

   In 2015, Bumitama has ventured into biodiesels. It owns a biodiesel plant in Gresik, East of Java. In November 2015, Bumitama has secured a contract to supply 20,000 MT of biodiesels to PT Pertamina (Persero) and thus, beginning to derive sales of biodiesels.
   Still, contributions from this venture is relatively insignificant as Bumitama has generated 310 Million Rupiah or 4.7% of total group revenues from sales of biodiesels in 2016.

Figures in ‘000 Metric Tonnes

Year	2012	2013	2014	2015	2016
FFB	1,448	1,620	2,005	2,290	2,185
CPO	462	523	619	743	701
PK	87	99	115	142	138

Source: Annual Reports of Bumitama Agri Ltd

#3: The Financials

As such, Bumitama has reported growth in revenues and shareholders’ earnings over the last 5 years. Revenues have increased from 3.53 Trillion Rupiah in 2012 to 6.63 Trillion Rupiah in 2016. Shareholders’ earnings have increased from 787.9 Billion Rupiah in 2012 to 1,005.1 Billion Rupiah in 2016.

Bumitama has achieved 5-Year return on equity (ROE) average of 15.38% a year. This means, it has made, on average, S$ 15.38 in annual earnings from every S$ 100 in shareholders’ equity during the 5-year period.

Figures in Billion Rupiah

Year	2012	2013	2014	2015	2016
Sales	3,526	4,063	5,757	5,542	6,630
Earnings	788	855	1,153	891	1,005
ROE	16.1%	15.2%	17.8%	12.8%	15.0%

#4: Growth Plans

Bumitama has established a solid foundation for growth. This includes:

1. Young Plantation Profile

   Bumitama has a relatively young plantation profile with weighted average age of 8.7 years. As at 31 December 2016, Bumitama has 27,730 hectares of immature plantations and 143,704 hectares of mature plantations. Currently, approximately 50% of Bumitama’s mature plantations have yet to reach its peak production age. Thus, it is in position to capitalize on future production growth as these trees continue to mature.
   

2. Investments in 2016

   In 2016, Bumitama has made a total investment of 1 Trillion Rupiah. This includes the acquisition of PT Sukses Manunggal Sawitindo, PT Langgeng Makmur Sejahtera, PT Gemilang Makmur Subur, and PT Damai Agro Sejahtera. Collectively, these investments have added approximately 22,000 hectares of land bank in West and Central Kalimantan to Bumitama.
   

3. Replanting in 2017

   Bumitama has revealed its target to plant and replant 5,000 hectares of land bank in 2017.

#5: Risks

Inevitably, Bumitama faces the risk of adverse movements in palm oil prices. This is subjected to a combination of many factors. They include weather, crude oil prices, soybean oil prices, palm oil production and inventory levels. In Q2 2017, Bumitama has reported its average sales prices of CPO, PK, and biodiesels to be 8,057, 5,556, and 10,147 Rupiah per kilogram respectively.

#6: Valuation

As I write, Bumitama is trading at S$ 0.745 a share. In 2016, Bumitama has reported 572 Rupiah in earnings per share (EPS). The current exchange rate between Singapore Dollar (SGD) to Indonesian Rupiah is 9,826 Rupiah per SGD. Thus, Bumitama’s 2016 EPS works out to be S$ 0.058 a share. Its current P/E Ratio is 12.84. Its peers listed in Singapore includes: 

Its peers listed in Singapore includes: 

• Wilmar International Limited (SGX: F34)
• Golden Agri-Resources Limited (SGX:E5H)

As at 30 June 2017, Bumitama has reported to have 4,036 Rupiah in net assets a share. This is equivalent to S$ 0.411 a share. Thus, its current P/B Ratio works out to be 1.81.

#7: Investors Relation

For further enquiries on Bumitama Investors Relation matters, please email to:

Ms. Christina Lim – clim@bumitama-agri.com

Lim Sian Choo – lim.sian.choo@bumitama-agri.com

Glenn Ho – glenn.ho@bumitama-agri.com

#8: Major Shareholders

Two families are substantial shareholders of Bumitama.

The first is the Lim family. Lim Gunawan Hariyanto is the founder of Bumitama. He is a major shareholder through his interest in Wellpoint Pacific Holdings Ltd. Presently, Lim Gunawan Hariyanto is appointed as Bumitama’s Executive Chairman and CEO. His sister, Lim Christina Hariyanto who is the head of Investors’ Relation has just been appointed as an Executive Director of Bumitama on 31 May 2017.

The second is the Lee family. In 2007, IOI Corporation has acquired 33% stake in Bumitama through Oakridge Investments Pte Ltd. It has remained as a substantial shareholder ever since. Presently, Dato’ Lee Yeow Chor who is the CEO of IOI Corporation Bhd sits in the board as a non-executive director of Bumitama.

As at 10 March 2017, their shareholdings are as followed:

– Wellpoint Pacific Holdings Ltd: 51.48%

– Oakridge Investments Pte Ltd: 30.50%

What Do You Think Of  Bumitama Agri Ltd As An Investment? Will You Invest In It? Share Your Views Below

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ian’s personal capacity. It does not in any way represent those of his employer and other related entities. Ian does not own any companies mentioned.

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