Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bumitama-agri-ltd" target="_blank" data-smartkarma-citation="entities:7757:1" rel="noopener">Bumitama Agri (BAL SP)</a> is a pure-play CPO play on SGX which like the rest of its peers has lagged the price of CPO by a mile.</li>
<li>What could be the catalyst to change this? We preview FY21 results which will be announced on 28th February and its dividend outlook going into FY22.</li>
<li>BAL should take a page from the <a href="https://www.smartkarma.com/entities/geo-energy-resources-ltd" target="_blank" data-smartkarma-citation="entities:8717:1" rel="noopener">Geo Energy Resources (GERL SP)</a> playbook and start to pay out aggressive bi-annual dividends to get Mr. Market's attention.</li>
</ul>



Bumitama Agri (BAL SP) is a pure-play CPO play on SGX which like the rest of its peers has lagged the price of CPO by a mile.
What could be the catalyst to change this? We preview FY21 results which will be announced on 28th February and its dividend outlook going into FY22.
BAL should take a page from the Geo Energy Resources (GERL SP) playbook and start to pay out aggressive bi-annual dividends to get Mr. Market's attention.


Bumitama Agri: Lagging CPO Price Action; Large Special Dividend Possible at FY21 Results Briefing

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Palm oil prices are up 177% since May 2020 and 66% since June of last year. Palm oil touched a record high of RM5,700/mt the 31 January.</li>
<li>Yet while palm oil has enjoyed a meteoric price rise, the performance of listed palm oil plays has bifurcated.  </li>
<li>Valuations appear largely constrained by environmental, social, and governance concerns, resulting in plantation stocks trading below their historical averages.</li>
</ul>


Palm oil prices are up 177% since May 2020 and 66% since June of last year. Palm oil touched a record high of RM5,700/mt the 31 January.
Yet while palm oil has enjoyed a meteoric price rise, the performance of listed palm oil plays has bifurcated.  
Valuations appear largely constrained by environmental, social, and governance concerns, resulting in plantation stocks trading below their historical averages.


CPO Plays Lag Palm Oil Prices As ESG Issues Weigh

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/kuala-lumpur-kepong-bhd" target="_blank" data-smartkarma-citation="entities:17039:1" rel="noopener">Kuala Lumpur Kepong (KLK MK)</a> made an offer to acquire <a href="https://www.smartkarma.com/entities/ijm-corp-bhd" target="_blank" data-smartkarma-citation="entities:16784:1" rel="noopener">Ijm Corp Bhd (IJM MK)</a>/IJMC’s entire stake in <a href="https://www.smartkarma.com/entities/ijm-plantations-bhd" target="_blank" data-smartkarma-citation="entities:12967:1" rel="noopener">Ijm Plantations (IJMP MK)</a>/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  <div class="content-highlight">A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  </div>

Kuala Lumpur Kepong (KLK MK) made an offer to acquire Ijm Corp Bhd (IJM MK)/IJMC’s entire stake in Ijm Plantations (IJMP MK)/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  

IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Alpha Factors

Eagle High Plantations Tbk PT / Equity Bottom-Up

INVESTMENT CONCLUSION: We recently met with the IR manager of <a href="https://www.smartkarma.com/entities/eagle-high-plantations-tbk-p" target="_blank" data-smartkarma-citation="entities:4421:1" rel="noopener">Eagle High Plantations Tbk P (BWPT IJ).</a> The company’s message called for a return to profitability in 2H19 driven by higher volumes and improved pricing.  For a stock trading near its 5-year low, this could represent an interesting call-option, however, we see deleveraging taking priority ahead of more shareholder-friendly actions like dividends or growing the business for shareholders.  We label this report as 'Bullish' given that our 12-month price target of Rp.140/sh offers 16% upside.  However, for many investors we expect this risk-adjusted potential return to be too low to tempt them off the sidelines at the moment.

INVESTMENT CONCLUSION: We recently met with the IR manager of Eagle High Plantations Tbk P (BWPT IJ). The company’s message called for a return to profitability in 2H19 driven by higher volumes and improved pricing.  For a stock trading near its 5-year low, this could represent an interesting call-option, however, we see deleveraging taking priority ahead of more shareholder-friendly actions like dividends or growing the business for shareholders.  We label this report as 'Bullish' given that our 12-month price target of Rp.140/sh offers 16% upside.  However, for many investors we expect this risk-adjusted potential return to be too low to tempt them off the sidelines at the moment. 

Eagle High Plantations: ‘A Return to Profits’…but Deleveraging to Be Prioritised

APAC Ex-Japan & China Corporates Analyst, Finsights Research

Nandini Vijayaraghavan, CFA

APAC Ex-Japan & China Corporates Analyst

Finsights Research

Our core competencies include counterparty analysis and credit rating of corporates, banks and government linked entities, debt structuring, credit risk management, and penning financial and investment research.

Counterparty & Credit Analysis

Indofood Agri Resources / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/1140" target="_blank" data-smartkarma-citation="entities:1140:1">Indofood Agri Resources Ltd (IFAR SP)</a>, the smallest SGX-listed plantation company by market capitalization, was also the worst performing SGX-listed plantation stock in terms of one year total return (-3.79%). Ageing plantations have resulted in the company’s operating performance lagging other SGX-listed plantation companies. That Indofood is committed to Roundtable on Sustainable Palm Oil (RSPO) principles, is ranked 10th globally among 50 CPO producers and traders in Environmental, Social &amp; Governance (ESG) Practices, and maintains a stable financial profile does not mitigate the critical risk of a weak operating performance.The company has weathered the 2015 El-Nino and CPO price crash, while simultaneously generating reasonably stable EBITDA per hectare. But ageing plantations necessitate higher replanting expenses. Indofood’s working capital cycle has also risen to 47 days in Q1 2017 from the 23 to 38 days range during the period 2012 to 2015. These factors are likely to result in margin compression and an increase in financial leverage (the ratio of net lease adjusted debt to EBITDAR, where EBITDAR is the sum of EBITDA and operating lease rentals) from the currently moderate 1.95x.

Indofood Agri Resources Ltd (IFAR SP), the smallest SGX-listed plantation company by market capitalization, was also the worst performing SGX-listed plantation stock in terms of one year total return (-3.79%). Ageing plantations have resulted in the company’s operating performance lagging other SGX-listed plantation companies. That Indofood is committed to Roundtable on Sustainable Palm Oil (RSPO) principles, is ranked 10th globally among 50 CPO producers and traders in Environmental, Social &amp; Governance (ESG) Practices, and maintains a stable financial profile does not mitigate the critical risk of a weak operating performance.The company has weathered the 2015 El-Nino and CPO price crash, while simultaneously generating reasonably stable EBITDA per hectare. But ageing plantations necessitate higher replanting expenses. Indofood’s working capital cycle has also risen to 47 days in Q1 2017 from the 23 to 38 days range during the period 2012 to 2015. These factors are likely to result in margin compression and an increase in financial leverage (the ratio of net lease adjusted debt to EBITDAR, where EBITDAR is the sum of EBITDA and operating lease rentals) from the currently moderate 1.95x.  

Indofood Agri Resources: Ageing Plantations Limit Growth Prospects

Singapore

Bumitama Agri is a leading producer of crude palm oil and palm kernel in Indonesia. The Group is principally engaged in the cultivation of oil palm trees, as well as the harvesting and processing of fresh palm fruit bunches into CPO and PK. It was founded in 1996 and listed on the Singapore Exchange in 2012. 

Past extensification efforts, combined with continuous improvement in production processes, have bolstered Bumitama’s FFB (internally sourced) and CPO production volumes to climb significantly over the last ten years, with a CAGR of 11.8%. The Group has consistently stayed on the path towards achieving higher yields and extraction rates by investing in research and development, technology, and best practices in cultivation of oil palm. These efforts have made the Group one of the most efficient producers in the industry today, boasting a CPO yield of 4.2 tonnes per ha in 2021.

In recognition of its operations’ superiority, the Group has received numerous accolades which include having listed as Forbes Asia’s 200 Best Under a Billion 2013, earned Frost & Sullivan Indonesia’s Excellence Award in 2014, and obtained the Best Managed Small Cap Company in 2016 and the Most Outstanding Company in Singapore for the Decade (2010-2019) in 2019 from Asiamoney.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Bumitama Agri (BAL SP)

Bumitama Agri: Lagging CPO Price Action; Large Special Dividend Possible at FY21 Results Briefing

Bumitama Agri will celebrate its 10 year listing anniversary in 2022. This opens the door for special dividends as high CPO prices and unhedged...

Nicolas Van Broekhoven

CPO Plays Lag Palm Oil Prices As ESG Issues Weigh

KLK's reliance on its downstream operations should help reduce palm product prices. The recent acquisition of IJM also extends the age profile of...

David Blennerhassett

IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

KLK MK made an offer to acquire IJMC’s entire stake in IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. If the SPA...

Arun George

Eagle High Plantations: ‘A Return to Profits’…but Deleveraging to Be Prioritised

INVESTMENT CONCLUSION: We recently met with the IR manager of Eagle High Plantations Tbk P (BWPT IJ). The company’s message called for a return to...

Charles Spencer

Indofood Agri Resources: Ageing Plantations Limit Growth Prospects

Indofood Agri Resources Ltd (IFAR SP), the smallest SGX-listed plantation company by market capitalization, was also the worst performing...

Nandini Vijayaraghavan, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)