Bumitama says was achieved despite unexpected slowdown in Fresh Fruit Bunches (FBB) growth momentum in 4Q17 and a IDR25 billion impairment on its biodiesel plant which is marked for disposal.
The strong FY17 core earnings growth was underpinned by 18% higher FFB output and 10% higher CPO average selling price achieved. Operationally, FFB yield rebounded 12% to 16.4 tonne/ha after El Nino coupled with more areas entering maturity.
However, Maybank was surprised FY17 all-in cost of production came in higher than expected at IDR3,491/kg due to higher wages and unbudgeted water management work.
For FY18, Bumitama expects overall cost to increase by 5-10% on higher fertiliser application and higher minimum wage.
Management has also guided for 15-20% YoY FFB output growth for FY18 driven by its young tree profile of 8.9 years average and with 4% of new area coming into maturity.
"Following the higher cost guidance, we tweaked our financial parameters which led to a 14% cut in our 2018 PATMI forecasts (unchanged for 2019)," says Maybank analyst Ong Chee Ting in a Tuesday report.
For FY18, Maybank expects a 10% core PATMI growth as output continues its growth trajectory. The research house has a "buy" with a higher target price of 99 cents.
Shares in Bumitama Agri are down 1 cent at 74 cents or 10.9 times FY18 forecast earnings.
