“We believe BAL’s positive 2022 earnings prospects are not priced in yet, as it is still trading at a single-digit P/E multiple,” writes the analyst in his March 21 report.
In addition to his higher target price estimate, Simadiputra has also raised his price forecast for crude palm oil (CPO) to US$850 ($1,153.82) per metric tonne (MT) for FY2022 and FY2023, bringing BAL’s earnings estimates to 1.90 trillion rupiah ($179.7 million) for the FY2022 and 2.06 trillion rupiah for the FY2023.
In his report, the analyst notes that the company will be able to manage rising costs this year on the back of efficient operations and strong profitability on its decent nucleus estates CPO yield despite the rising costs of fertiliser.
BAL’s estates are in the prime-age cycle with an average age of just 13 years old, he adds.
That said, the company may face risks in the form of a reversal in the prices of CPO, where prices could decline on the back of stronger-than-expected pressure from soybean price or higher-than-expected CPO output, both in Indonesia and Malaysia in 2022.
As at 3.54pm, shares in BAL are trading 0.5 cent lower or 0.66% down at 75.5 cents.
