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Trading Ideas: Bumitama Agri And Golden Agri-Resources
Tradeable, Tradeable Ideas | 12 March 2014
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By: Raymond Leung
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By: Nicholas Tan
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The FTSE Straits Times Index gained 2.77 points to close Tuesday’s trading at 3,129.40 as markets traded in a tight range with no economic data in the US and no major news flow.

Among the gainers, Yoma jumped 2.9 percent to close at $0.72 after the company reported signing a definitive agreement with the Hongkong and Shanghai Hotels group to restore the Myanmar Railway Company headquarters into a hotel called The Peninsula Yangon.

The broader market saw 237 gains and 183 losers, with total trading value at $1.1 billion.

Bumitama Agri: Underestimated And Undervalued?
Last week, Bumitama Agri announced its FY13 results which beat consensus estimates. Revenue for the group grew 15.2 percent while net profit increased 8.6 percent year-on-year. The solid performance was attributed to stronger output and a higher crude palm oil (CPO) price which was boosted by a weaker Indonesian rupiah.

Bumitama’s plantation area grew at a healthy rate of 13.6 percent in FY13. After adding 13,770 hectares (ha) of planted areas, the total planted area increased to 114,952 ha which represents 76.8 percent of total land owned by the group. For FY14, Bumitama is targeting to plant on another 8,000 ha of land.

The trees at Bumitama have an average age of 6 years which put them in the range of “young mature”. Output from the company is expected to increase as the trees age to “young prime” (7 to 18 years).

Maybank Kim Eng Research likes Bumitama for its long-term value proposition. With this in view, they reiterated the company’s “Buy” call and raised the target price to $1.38 based on 16 times FY15 price-to-earnings ratio.

Various research houses that are covering Bumitama unanimously gave the company “Buy” calls with a potential average upside of 23.9 percent.

Golden Agri-Resources: Saved By A Strong 4Q13
Golden Agri-Resources (GAR) was another palm oil company that caught analysts’ attention last week. The attention came after the firm announced a strong 4Q13 result which saved GAR’s FY13 performance. A rebound from its China operations and higher CPO price were the main attributes for the better results.

In 4Q13, GAR managed to grow its net profit to $123 million, a 307 percent increase from last year’s $30 million. Despite the better 4Q13, the firm’s FY13 was still 24 percent below FY12. This was mainly due to the depreciation of CPO (mainly in 1Q13 to 3Q13) and lower production rate.

Looking forward, GAR expects palm oil demand to continue to grow with the bio-energy sector as the main driver. CPO prices are expected to continue the uptrend with GAR well-positioned to benefit from it. The firm also plans to expand palm oil plantation by 20,000 to 30,000 ha in the coming year through both organic growth and acquisitions.

OSK-DMG Research maintains their “Buy” call for GAR as the company beats their forecast by 12.7 percent and consensus by 10.6 percent. They believe that GAR is a sector beta stock that is lagging but should gain momentum on CPO’s uptrend. The research house gave GAR a target price of $0.66, giving it a potential upside of 9.1 percent.

GAR is currently trading cum dividend of $0.00515.

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This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

Yoma Strategic Hldgs  0.385 -- --   
Business: Co operates mainly in Myanmar under several business segments. [FY18 Turnover] Automobile (40.5%), real estate (20.8%), real estate services (18.4%), consumer (12.9%), financial services (6.2%), investments & others (1.2%).

Insight: Feb-19, 3Q19 revenue jumped 12.1% to $27m mainly a... Read More
Bumitama Agri  0.600 -- --   
Business: Co produces and trades in crude palm oil (CPO), palm kernel (PK), and related products for refineries in Indonesia.

Insight: Feb-19, FY18 revenue increased 3.1% mainly due to ... Read More
Golden Agri-Resources  0.295 -0.005 -1.67%   
Business: Co is engaged in cultivating & harvesting oil palm trees, processing fresh fruit bunches (FFB) into crude palm oil (CPO) & palm kernel (PK), & refining CPO into industrial & consumer pdts.

Insight: May-19, 1Q19 revenue fell 11% due to softer crude ... Read More

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