- BUY Entry – 0.74 Target – 0.92 Stop Loss – 0.66
- A palm oil play. Bumitama Resources is a leading producer of palm oil and palm kernel in Indonesia. The group has a total planted area of 187,917 hectares and operates 14 CPO mills with a combined processing capacity of 6mn tonnes of fresh fruits bunches annually.
- To the moon. Palm oil, the most consumed edible oil, surged to new all-time highs, topping RM8,000 a tonne, as sanctions against Russia increased worries over global shortages of essential commodities. Alternatives such as soybean oil also rose by 5% yesterday to the highest on record since 1959. The surge in palm oil and soybean oil comes amid disruption of sunflower oil, which is the world’s third most traded vegetable oil. Ukraine is the world’s largest producer and exporter of sunflower oil with a market share of 47% of global exports.
- Earnings upside. Bumitama reported an 81% YoY surge in its 2H2021 net profit to S$117.5mn on the back of higher palm oil prices, despite sales volume dropping by 7% YoY. It was able to achieve a 40% YoY increase in average selling prices of crude palm oil. Earnings in 2022 is forecasted to reach the highest level since its IPO in 2012, as per Bloomberg consensus forecast.
- Positive analysts rating. There are 4 BUY ratings and an average 12m TP of S$0.87, implying a 14.5% return from the last close price. However, shares could surprise on the upside given that Bumitama’s 7.5x FY2022F P/E is the cheapest among the locally-listed palm oil companies.
Palm oil prices
