“With the bulk of Indonesian planters posting stronger-than-expected numbers this quarter, the main differential that sets Bumitama apart is its high dividend payout ratio and yield,” says RHB, adding that the group upped its official payout ratio to at least 60% (from 50%) in 2024, and has been following through on this, paying out 64% of earnings in FY2024 and 50% in 1HFY2025 so far.
The research team believes that the stock is trading at a fair valuation (+2SD) and has reflected a lot of the dividend upside, with its FY2025 dividend yield now at 6% (from about 8% pre-results).
Bumitama’s share price has risen significantly after the announcement of its 2QFY2025 results, which were slightly above expectations – at 57-58% of RHB’s and street FY2025 forecasts.
Meanwhile, RHB has also lifted earnings projections to account for the higher domestic prices of CPO in Indonesia (as Bumitama is a pure domestic Indonesia play), in light of the still relatively tight supply situation there due to the ongoing biodiesel mandate.
“We note, however, that production is improving in Indonesia and is expected to continue to rise in 3QFY2025 – so CPO prices may moderate from current levels over the next few months. Our more conservative price assumption of IDR12,961/kg (1HFY2025: IDR1493/kg) is also reflective of this view,” says RHB.
That said, the group continues to manage increasing its external purchases of fresh fruit branches (FFB), likely due to long-term relationships with smallholders and plasma farmers. In 1HFY2025, its external and plasma FFB purchases rose 23% y-o-y.
In light of the high base in 2HFY2024, RHB projects this growth to moderate to 14% by FY2025. Nevertheless, the strong external FFB purchases should help boost the group’s overall CPO output, as the RHB research team expects nucleus output to grow by a smaller 4.7% in FY2025 (1HFY25: 7%).
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With that, RHB takes into account the slightly higher domestic average selling prices (ASP) and increases FY2025-FY2027 net profit forecast by 6.2%. 7.7% and 3.0% to IDR2.58 trillion, IDR2.6 trillion and IDR2.46 trillion.
“We believe Bumitama should trade closer to its peer average, given its decent earnings prospects and higher-than-peers’ dividend yield. Despite the higher P/E target, we believe its share price has reflected a lot of the dividend upside already, with FY2025 dividend yield now at 6% (versus closer to 8% previously),” says RHB.
As at 11.05am, shares in Bumitama are trading at $1.13.
