Is Bumitama Agri Ltd the best Palm Oil Stock To Own?

Bumitama Agri Ltd (Bumitama) is one of the fastest growing palm oil producers listed in Singapore. Its roots can be traced back to year 1996 when it purchased its first land bank in Central Kalimantan. It grew rapidly and subsequently listed on the SGX in April 2012. In 2017, Bumitama has been recognised by the Edge’s Billion Dollar Club as the ‘Most Profitable Company’ in the Agriculture Sector.

Presently, as at 23 January 2019, Bumitama is valued at S$ 1.2 billion in market capitalization. In this article, I’ll revisit its fundamentals, provide you an update on its latest financial results, and evaluate its investment potential based on its current stock price of S$ 0.70 a share.

Thus, here are 12 things to know about Bumitama before you invest:

1. Plantation Estate:
   In 2017, Bumitama has total planted area of 182,675 hectares, up from 133,367 hectares in 2012. The proportion of its old and mature estates to total planted area had increased to 86.5% in 2017, up from 56.6% in 2012. It indicates, that a significant portion of its plantation is maturing and now starting to bear fruits to Bumitama. For the last 9 months, the company has further grown its total planted area to 184,439 hectares.
   
   
   

Source: Bumitama’s Annual Reports and Quarter Report Q3 2018

1. Palm Oil Mills:  
   In 2017, Bumitama has 14 palm oil mills which combined have capacity to process 5.49 million tonnes per annum (mtpa) of fresh fruit bunches (FFB). It is a substantial increase from 6 palm oil mills which collectively had 2.34 mtpa in FFB processing capacity in 2012.
   
   
   

Source: Bumitama’s Annual Reports

1. FFB Productions:
   Bumitama has grown its FFB production by 27.5% year-on-year to 2.53 million tonnes in 9M 2018, up from 1.98 million tonnes in 9M 2017. As such, Bumitama had continued on its trend of growth in its production of FFB which was built over the past 5 years.
   
   

Source: Bumitama’s Annual Reports and Quarter Report Q3 2018

1. CPO Productions:
   Bumitama’s Crude Palm Oil (CPO) productions have increased by 28.8% year-on-year to 0.79 million MT in 9M 2018, up from 0.61 million MT in 9M 2017. Hence, Bumitama has also sustained its trend of growth in its CPO production which was built since its listing in 2012.
   
   
   

Source: Bumitama’s Annual Reports and Quarter Report Q3 2018

1. PK Productions:
   Bumitama’s Palm Kernel (PK) productions have experienced growth of 32.1% year-on-year to 160,269 MT in 9M 2018, up from 121,368 MT in 9M 2017. Likewise, Bumitama had also continued on its growing trend of PK productions which was built over the last 5 years.
   
   
   

Source: Bumitama’s Annual Reports and Quarter Report Q3 2018

1. Annual Profitability
   Revenues had increased by 22.6% year-on-year to 8,131 Billion Rupiah in 2017, up from 6,630 Billion Rupiah in 2016. It has led to a growth of 18.7% year-on-year in shareholders’ earnings to 1,193 Billion Rupiah in 2017, up from 1,005 Billion Rupiah in 2016. Hence, Bumitama was able to generate sustainable growth in revenue and earnings over the last 5 years. This is attributable directly to its substantial production increase for FFB, CPO, and PK during the period.
   
   

Source: Bumitama’s Annual Reports

1. Return on Equity (ROE)
   Bumitama has 6-Year Return on Equity (ROE) average of 15.49% a year. It means, Bumitama has generated, on average, 1,549 Rupiah in profits a year from every 10,000 Rupiah in shareholders’ equity over the last 6 years from 2012 to 2017.
   
   
   

1. Cash Flow Management
   Over the past 6 years, Bumitama has brought in 7,782 Billion Rupiah in cash flows from operations. It raised 3,275 Billion Rupiah in net equity and net long-term borrowings. Out of which, its main expenditures are as follows:
   
   
   – Spent 3,582 Billion Rupiah in Capital Expenditures.
   – Spent 3,839 Billion Rupiah in Bearer Plants Investments.
   – Spent 1,236 Billion Rupiah in Plasma Receivables.
   – Spent 726 Billion Rupiah in Land Use Rights.
   – Paid Out 1,133 Billion Rupiah in Dividends to its Shareholders.
   
   
   Bumitama has reported cash balance of 217 Billion Rupiah in 2017. It is close to its cash balance of 270 Billion Rupiah at the beginning of 2012.
   
   Hence, I find that Bumitama has been efficient in bringing in cash flows from operations and investing them for greater revenue and profits for the future.
   
   
   
2. Balance Sheet Strength
   As at 30 September 2018, Bumitama reduced its non-current liabilities significantly to 1,193 Billion Rupiah, down from 5,540 Billion Rupiah in Q4 2017. This is due to reclassification of its Revolving Credit Facilities (RCF), Islamic Medium Term Notes (IMTN), and its derivatives financial liabilities from non-current liabilities to current liabilities because they are due in 12 months time.
   
   Collectively, Bumitama has 8,008 Billion Rupiah in total liabilities, both current and non-current, and has 7,458 Billion Rupiah in shareholders’ equity. Thus, its total debt-to-equity ratio is 107.4% presently.
   
   
   
3. P/E Ratio
   Over the last 12 months, Bumitama has generated 1,253 Billion Rupiah in shareholders’ earnings or 716 Rupiah in Earnings Per Share (EPS). As I write, the exchange rate of SGD:IDR is 10,424 Rupiah per SGD. Hence, Bumitama’s current EPS is 6.87 Singapore Cents.
   
   Thus, at current price of S$ 0.70 a share, Bumitama’s P/E Ratio is 10.19 currently, which is the lowest in 6 years.
   
   
   

Figures in Billion Rupiah unless stated otherwise

Period	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Total
Revenue	2,066	1,908	2,350	1,919	8,242
Earnings	364	232	388	270	1,253
EPS (Rupiah)	208	132	222	154	716

Source: Bumitama’s Quarterly Reports

1. P/B Ratio
   As at 30 September 2018, Bumitama has reported net assets a share of 4,286 Rupiah or S$ 0.41 based on today’s exchange rate. Therefore, its current P/B Ratio is 1.71, the lowest in 6 years.
   
   
   

1. Dividend Yield
   In 2017, Bumitama has paid out 2.75 Singapore Cents in dividends per share (DPS). Hence, if Bumitama is able to sustain its DPS at S$ 0.0275, its dividend yield is 3.93% per annum.

VIA’s Verdict

Bumitama stood out among its peers in the agriculture sector as it delivered to its existing shareholders growth in sales and profits and had started to pay out dividends. It is a notable achievement, considering that Bumitama is operating with multiple uncertainties such as, but not limited,

– Global Palm Oil Prices.

– Exchange Rates between SGD and IDR.

– Weather.

– Developments in Usages of Biodiesels and Palm Products in US and Europe.

In terms of valuation, Bumitama is trading at its most attractive figures for the past 6 years – low P/E & P/B and high Dividend Yield. So, is Bumitama at today’s price your ideal investment?

I’ll leave that to you to decide.

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