BUY for its attractive valuation & dividend yields

1Q22 PATMI exceeded expectations. The impact of Indonesia’s export ban
on BAL’s sales is still unclear as it has not made new sales in May, in part
due to the week-long Raya festivities. But it has sufficient storage capacity
to last another month. BAL expects output trend to normalise this year
with 1H:2H FFB output ratio at 47:53. The higher output in 2H will help
weather fertiliser cost pressures (on a per unit cost basis). We make no
changes to our earnings forecasts for now. BAL remains a BUY with
unchanged TP of SGD0.98 on 10x FY23 PER, its 5Y mean.

1Q22 results lifted by high CPO ASP achieved

Similar to last year, BAL provided an executive summary of key financial
and operational information on its 1Q22 performance. It reported a 1Q22
headline PATMI of IDR873b (+424% YoY, +35% QoQ) which met 44%/43% of
our/consensus full-year forecasts. This was achieved on the back of
stronger revenue (+69% YoY, +4% QoQ) buoyed by higher CPO ASP achieved
(IDR11,900/kg; +80% YoY, +40% QoQ). [Note: Recall that 1Q21’s headline
PATMI was hurt by the impact of its forward sales commitment.] We
understand BAL has applied ~25% of its full-year fertiliser requirement in
1Q22. For FY22E, BAL maintains its unit cost of production guidance to be
higher by 20-25% YoY, following fertiliser price hike. BAL has locked-in its
full-year fertiliser requirements which averages 70% higher than last year.

Still guiding for 5-10% FFB growth for FY22E

BAL maintains its +5%-10% FFB growth expectation for FY22E (MIBG
Research: +5% YoY) although 1Q22 posted lower YoY FFB nucleus output
(596,309t; -3% YoY, +19% QoQ) due to the high base effect of last year
(which had an abnormal cropping pattern last year). Still, 1Q22 FFB output
has met 24% of our full-year forecasts, broadly within our expectation.

Export ban impact unclear for now

BAL has not made new sales commitments post the export ban imposed on
28 April. It has storage capacity to last another one month before tanks
“overflow” as it had already made huge deliveries in the month of April.