Record 3Q21 headline PATMI

Results exceeded our/ consensus expectations

9M21 headline/ core PATMI beat our/consensus expectations on better than- expected CPO ASP and lower-than-expected cost. We expect 4Q21 EPS to be relatively good on elevated CPO ASPs. Following our EPS upgrade, we maintain our BUY call with an unchanged TP of SGD0.93 on 11x FY22 PER, its updated 5Y mean (previously 12x FY22 PER). BAL trades at just 6-7x PER with attractive dividend yields of ~6.0% (within its dividend payout policy of up to 40% of recurring profits).

Quarterly EBTIDA surpassed IDR1tr for the first time

Based on an executive summary of key financial information of its 9M21 performance, BAL reported a 3Q21 headline PATMI of IDR589b (+208% YoY, +86% QoQ), bringing 9M21 headline PATMI to IDR1,073b (+70% YoY). Due the a lack of detailed disclosure, we have estimated its unrealised net FX loss at Rp30b which we then estimate its 9M21 core PATMI at IDR1,103b
(+40% YoY); meeting 82%/94% of our/consensus full-year estimates.


Maintaining our 10% FFB growth for FY21

The strong 3Q21 PATMI was underpinned by higher revenue (+47% YoY, -2% QoQ) mainly on higher CPO ASP achieved of IDR10,013/kg (+26% YoY) and higher CPO sales volume (+13% YoY). 3Q CPO ASP achieved was however below domestic spot prices (-18%), likely due to forward sales committed earlier. Unit cost of output was estimated to be lower as fertilizer application slowed due to heavy rainfall in 3Q. A slow 3Q FFB nucleus output (+2% YoY, -10% QoQ) brings 9M FFB output to 1.834mt (+18% YoY). Due to La Nina and recent cropping pattern changes, 4Q FFB output is likely lower YoY. Hence, we maintain our 10% YoY FFB output growth for FY21, at the lower end of BAL’s earlier growth guidance of 10-15% YoY.

Raising EPS forecasts mainly on higher CPO ASP

Following our industry-wide CPO ASP revisions to MYR4,300/t (from MYR3,500/t) for 2021, MYR3,200/t (from MYR2,800/t) for 2022, and MYR3,000/t (from MYR2,800/t) for 2023 respectively, our FY21E/22E/23E EPS forecasts are revised up by 14%/9%/10% respectively after adjusting for forward sales committed (at lower CPO ASP) in FY21, and rising cost pressures (especially fertiliser) in FY22.