OCBC Investment Research

15 May 2025

Bumitama Agri Ltd (BAL): Riding High on CPO Prices – A Strong Start to 2025

Investment Thesis: Bumitama Agri Ltd. (BAL)

• Bumitama Agri Ltd. (BAL) is a leading upstream producer of crude palm oil (CPO) and palm kernel (PK) in Indonesia. [[1]]
• The company operates on 187k hectares (ha) across Central and West Kalimantan, and Riau, with favorable conditions for oil palm cultivation. [[1]]
• BAL’s plantations have an average age of 14.8 years as of 31 Mar 2025. [[1]]
• The company focuses on maximizing current plantations, positioning it to capitalize on supportive long-term industry fundamentals. [[1]]
• Constrained supply and growing demand should provide resilience to CPO prices. [[1]]
• BAL is increasingly seen as a dividend yield play, with a revised dividend policy of a 40-60% payout ratio. [[1]]

1Q25 Performance Highlights

• BAL’s 1Q25 revenue grew 18.6% year-on-year (YoY) to IDR4.6t. [[1]]
• Both CPO and PK segments performed well, supported by tight supply conditions that offset a decline in sales volume. [[1]]
• CPO revenue increased by 12% YoY to IDR4.0t, driven by a 26% jump in average selling price (ASP) to IDR14,700 per kg, which offset an 11% dip in sales volume. [[1]]
• PK revenue nearly doubled (+88% YoY) to IDR626b, in line with ASP (+94% to IDR10,900 per kg), even as sales volume inched down 3%. [[1]]
• 1Q25 EBITDA improved 36% YoY to IDR1.0t, with EBITDA margin expanding 2.8 percentage points. [[1]]
• PATMI (or core profit) was up 41.9% YoY to IDR530b. [[2]]
• BAL’s 1Q25 revenue and PATMI constituted 27.2% and 26% of initial full-year forecasts, respectively, slightly above expectations. [[2]]

Operating Metrics Analysis

• Operating metrics were sequentially weaker QoQ, in line with the low crop cycle, but generally improved YoY. [[2]]
• BAL processed 1.3m tons of fresh fruit bunches (FFB) in 1Q25, a 14% increase YoY but an 18% decrease QoQ. [[2]]
• External contributions spiked 37% YoY (-8% QoQ) to 529k tons, while internal FFB volume increased by a smaller 2% YoY (-23% QoQ) to 784k tons. [[2]]
• FFB yield nudged up 2% YoY (-23% QoQ) to 4.3 tons per ha in 1Q25. [[2]]
• CPO and PK production volumes were up 14% and 12% YoY (down 17% and 15% QoQ) to 292k and 60k tons, respectively. [[2]]
• Oil extraction rates improved 0.4 percentage points (ppt) QoQ but fell 0.2ppt YoY to 22.3%. [[2]]

Revised Fair Value Estimate

• Fair Value (FV) estimate raised to SGD0.975; reiterate BUY rating. [[2]]
• CPO prices have retraced 8.9% month-on-month (MoM) to MYR4,320 per ton in April. [[2]]
• The Malaysian Palm Oil Council (MPOC) expects prices to be supported at around MYR3,900 per ton. [[2]]
• Support for CPO prices is expected from:
  • Recovery in soybean oil prices. [[2]]
  • Inventory replenishment by India and China. [[2]]
  • A slight dip in total palm oil output for the year. [[2]]
• The FV estimate inches up from SGD0.965 to SGD0.975. [[3]]

ESG Updates: Sustainability Journey

• BAL has reduced its greenhouse gas (GHG) emissions intensity versus 2016 baseline by 18% in FY24. [[3]]
• The company remains on track to achieving its 30% reduction target by 2030. [[3]]
• One methane capture facility has been installed at its palm oil mills, with three more in the pipeline. [[3]]
• Trials are being carried out for alternative GHG emissions reduction, such as increasing compositing facilities and rolling out a biocharcoal program. [[3]]
• Target to achieve full Roundtable of Sustainable Palm Oil (RSPO) certification for all existing and newly commissioned mills has been pushed back to 2027. [[3]]
• There were 89 fires within Bumitama concessions during the year, reduced from 151 in 2023. [[3]]

Community Development and Biodiversity Management

• Initiatives are in place for community development and biodiversity management. [[3]]
• The Social Forestry scheme aims to uplift local communities without expanding into new land. [[3]]
• 43 Bumitama Schools provide quality education to more than 4,000 local students as of the end of FY24. [[3]]
• BAL had zero cases of legal non-compliance in 2023. [[3]]

Potential Catalysts

• Favorable weather conditions improving production volumes. [[3]]
• Supportive policies by the Indonesian government. [[3]]
• Accretive acquisitions. [[3]]

Investment Risks

• Unfavorable CPO price movements. [[3]]
• Execution risks resulting in cost overruns, placing pressure on margins. [[3]]
• Regulatory risks affecting the palm oil industry. [[3]]

Valuation Analysis

Comparison of Bumitama Agri Ltd with its peers:

• BUMITAMA AGRI LTD (BUMI.SI): FY25E Price/Earnings 7.3, FY26E Price/Earnings 7.5, FY25E Price/Book 1.1, FY26E Price/Book 1.1, FY25E EV/EBITDA 4.4, FY26E EV/EBITDA 4.4, FY25E Dividend Yield (%) 5.9, FY26E Dividend Yield (%) 6.1, FY25E ROE (%) 16.1, FY26E ROE (%) 15.0 [[3]]
• FIRST RESOURCES LTD (FRLD.SI): FY25E Price/Earnings 7.2, FY26E Price/Earnings 7.5, FY25E Price/Book 1.1, FY26E Price/Book 1.1, FY25E EV/EBITDA 4.6, FY26E EV/EBITDA 4.7, FY25E Dividend Yield (%) 6.5, FY26E Dividend Yield (%) 6.4, FY25E ROE (%) 16.3, FY26E ROE (%) 14.4 [[3]]
• GOLDEN AGRI-RESOURCES LTD (GAGR.SI): FY25E Price/Earnings 9.4, FY26E Price/Earnings 9.4, FY25E Price/Book 0.4, FY26E Price/Book 0.4, FY25E EV/EBITDA 4.1, FY26E EV/EBITDA 4.1, FY25E Dividend Yield (N.A), FY26E Dividend Yield (N.A), FY25E ROE (%) 13.1, FY26E ROE (%) 12.7 [[3]]
• WILMAR INTERNATIONAL LTD (WLIL.SI): FY25E Price/Earnings 10.2, FY26E Price/Earnings 9.4, FY25E Price/Book 0.7, FY26E Price/Book 0.7, FY25E EV/EBITDA 10.1, FY26E EV/EBITDA 9.4, FY25E Dividend Yield (%) 5.5, FY26E Dividend Yield (%) 5.9, FY25E ROE (%) 7.0, FY26E ROE (%) 7.5 [[3]]

Price/Earnings Chart

Historical Price/Earnings ratios are illustrated in a chart spanning from May-20 to May-25. [[3]]

Price/Book Chart

Historical Price/Book ratios are illustrated in a chart spanning from May-20 to May-25. [[3]]

Exhibit 1: Average Monthly CPO Prices

A chart displays the average monthly CPO prices and % MoM change. [[4]]

Exhibit 2: Monthly CPO Production

A chart illustrates monthly CPO production and % MoM change. [[4]]

Company Overview (as of 27 February 2025)

• Founded by the Harita Group in 1996. [[5]]
• A leading producer of crude palm oil (CPO) and palm kernel (PK) in Indonesia. [[5]]
• Engaged in the cultivation of oil palm trees, harvesting, and processing fresh palm fruit bunches (FFB) into CPO and PK. [[5]]
• As at the end of 2022, BAL had oil palm plantations covering approximately 187,628 hectares. [[5]]
• Plantations are spread across Central Kalimantan, West Kalimantan, and Riau. [[5]]
• Operates 15 mills: nine in Central Kalimantan, five in West Kalimantan, and one in Riau. [[5]]
• Listed on the Singapore Exchange in 2012. [[5]]

FY24 Revenue Breakdown

• By geography: Indonesia (100.0%). [[5]]
• By segment: Crude palm oil (89.0%) and Palm kernel (11.0%). [[5]]

EBITDA Margin Trend

EBITDA margins from FY19 to FY24: FY19 (22.0%), FY20 (28.3%), FY21 (28.6%), FY22 (35.9%), FY23 (30.0%), FY24 (26.4%). [[5]]

Earnings Per Share

Earnings per share from FY19 to FY24 (in IDR): FY19 (392), FY20 (645), FY21 (986), FY22 (1,618), FY23 (1,412), FY24 (1,319). [[5]]

Company Financials

Income Statement (In Millions of IDR except Per Share)

Profitability Ratios

Credit Ratios