Company Name: BUMITAMA AGRI LTD.
| Research House: UOB KayHian | Price Call: BUY | Target Price: 1.10 |
UOB Kay Hian initiated coverage of Bumitama Agri with a “buy” rating and a target price of $1.10, citing the palm oil firm’s production prospects and strong oil extraction rate.
Bumitama shares were up 0.6% at $0.90, about 21% higher than its initial public offering price of $0.745. Bumitama made its trading debut on the Singapore bourse on April 12.
UOB Kay Hian said it expects Bumitama’s fresh fruit bunch (FFB) production to double in three years, driven by a 15-20% increase in mature areas every year, large young areas and progressive new plantings of 13,000 hectares per year.
Bumitama also had a strong oil extraction rate (OER) of 24% in 2011, one of the highest in the industry, mainly due to newer mills and good practices of harvesting and loose fruit collection, UOB Kay Hian said.
The broker noted that a high OER is important as it refers to the total crude palm oil volume each mill can extract from each tonne of FFB.
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