MENU

What Investors Should Know About Bumitama Agri Ltd’s Growth, Dividend, and Valuation

Over the past three years, palm oil producer Bumitama Agri Ltd (SGX: P8Z) has seen its stock price fall 17%. While that’s not a good return, the company is actually one of the better stock market performers amongst the palm oil companies listed in Singapore.

In here, I want to look at three aspects of the company’s business that may interest investors, namely, its growth, dividend, and valuation.

1. Growth

The table below shows how Bumitama Agri’s revenue and profit have changed from 2011 to 2015:

bumitama-agri-business-table
Source: S&P Global Market Intelligence

We can see that Bumitama Agri’s revenue and net profit were both growing up to 2014, before declines were seen in 2015. Falling crude palm oil (CPO) prices had affected its business.

2. Dividend

At its current share price of S$0.80, Bumitama Agri has a trailing dividend yield of just 0.6%, which is significantly lower than the SPDR STI ETF’s (SGX: ES3) yield of 3.1%.

To assess the sustainability of the company’s dividend, we can look at two financial ratios: the debt-to-shareholders’ equity ratio and the profit pay-out ratio. Do bear in mind that there are many other things to look at beyond the two ratios.

The debt-to-shareholders’ equity ratio is a gauge for the level of financial risk a company is taking on. Meanwhile, the profit pay-out ratio is the percentage of a company’s profit that is paid out as a dividend. Generally speaking, the lower the two ratios are, the better it could be.

Based on Bumitama Agri’s latest financials (as of 30 September 2016), it has a debt-to-shareholders’ equity ratio of 69%. With its trailing earnings per share of S$0.056 and dividend per share of S$0.005, the company has a pay-out ratio of just 8.9%.

3. Valuation

Bumitama Agri has a price-to-earnings (PE) ratio of 14.3 right now. One important thing to note here is that the ratio is near a three-year low, as shown in the chart below:

bumitama-agris-pe-ratio-over-past-3-years
Source: S&P Global Market Intelligence

The other thing worth keeping in mind is that Bumitama Agri’s current PE ratio is a tad higher than the SPDR STI ETF’s PE ratio of 12.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.