Is Bumitama Agri Ltd The Best Palm Oil Company In Singapore?


With its year to date share price gain of 27% from S$0.945 to S$1.20, Bumitama Agri Ltd (SGX: P8Z) might be considered as one of the best performing palm oil companies in Singapore this year. By looking at its latest second quarter results published today, you can clearly see why this company has been a recent favourite amongst investors.

Net profit almost doubled

Bumitama Agri is a pure upstream palm oil player in the industry, meaning to say the company’s only in charge of running oil palm plantations and producing crude palm oil (CPO) from the palm fruits.

As of 30 June 2014, the company’s Planted Nucleus area (i.e. its plantation size) remained effectively unchanged at 115 thousand hectares since the beginning of the year. However, more of its palm trees are now coming into maturity, boosting the size of its mature area by 21.2% to 77.2 thousand hectares in the same period. Despite the huge increase in mature area, it should be noted that the weighted average age of its trees is only 6.0 years. Palm trees are usually harvested till they’re between 25 and 30 years old, with the prime age of fruit production usually ranging from between 8 and 17 years.

The huge increase in the number of matured trees lifted the total fresh fruits bunches (FFB) produced to 1.26 million metric ton (MT) for the first half of the year. That is a 26.4% year-on-year improvement. With the jump in fresh fruit bunches, the company’s CPO production also improved by a similar percentage of 24.6% to 293.6 thousand MT.

Bumitama Agri earned IDR2.82 trillion in revenue for the first six months of 2014, some 52% higher compared to a year ago. The company’s gross profit grew at an even faster pace of 73.2% to IDR 1.18 trillion . This is due to higher production and selling prices of its FFB to third parties. To top off a great set of numbers, Bumitama Agri’s profit almost doubled from IDR306 billion a year ago to IDR601 billion.

The only slight blemish could be the company’s balance sheet; its leverage ratio (total assets divided by total equity) has increased slightly from 1.93 at the end of 2013 to 2.12 as of 30 June 2014.It should be noted however, that this is nowhere near being a sign that the company might be facing distress anytime soon.

Foolish Summary

Bumitama Agri has one of the youngest groups of trees amongst its peer group – that’s definitely one of the biggest advantages the company has over the pack. With an average weighted age of only 6.0, the growth potential of this company is not to be taken lightly, especially when more and more of its trees enter the prime production age group.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn't own any shares of companies mention above