RHB upgrades Bumitama to 'buy', maintains 'neutral' on First Resources with lower TP

The analysts have raised Bumitama's FY2023 earnings estimate by 30%.

RHB Bank Singapore has upgraded Bumitama Agri P8z to “buy” with a higher target price of 70 cents from 61 cents previously.

In their Nov 15 report, the analysts note that Bumitama’s 3QFY2023 result beat expectations, mainly on higher-than-expected external fresh fruit bunches (FFB) output, higher crude palm oil (CPO) sales volumes and lower-than-expected unit costs.

That said, the analysts expect earnings to be flattish in 4Q as productivity declines. This could, however, be offset by higher average selling prices (ASPs).

To this end, the analysts raise their FY2023 earnings estimate by 30% while lifting Bumitama’s FY2024 and FY2025 net profit by 12% and 15% respectively. This is after increasing their estimates on external FFB output and CPO sales volume assumptions as well as lowering cost assumptions.

Meanwhile, RHB has maintained “buy” on Golden-Agri Resources with a slightly higher target price of 30 cents from 28 cents previously. The analysts note that Golden Agri’s 9MFY2023 earnings fell below expectations at 67% of RHB’s FY2023 earnings estimate.

After imputing lower FFB output, lower CPO output and higher unit costs, the analysts have trimmed their FY2023 earnings estimate for Golden Agri by 12%. However, they largely maintain their earnings forecasts for FY2024 and FY2025.

RHB is also keeping “neutral” on First Resources Eb5 (FR) with a lower target price of $1.45 from $1.50 previously. Although the company’s 9MFY2023 results were largely in line with their expectations, the analysts note that it is below consensus’ FY2023 forecasts.

The analysts expect production to come in lower q-o-q in 4QFY2023 coming off from peak output while costs could come in slightly higher on elevated fertiliser application.

FR’s downstream margins remained negative in 3QFY2023 due to less oil being channelled for the domestic market obligation initiative in the third quarter. However, the analysts believe this will have been offset slightly by lower arbitrage from the decreased tax differentials between upstream and downstream products. “Going forward, management highlighted that margins would only turn positive if prices move up and demand improves,” they add.

RHB has tweaked FR’s FY2023 - FY2025 earnings estimates down by 1%-2% as the analysts trim FFB growth assumptions.

As at 11.33am, shares in Bumitama, Golden Agri and FR are trading at 62 cents, 26.5 cents and $1.41 respectively.

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