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Bumitama Agri Ltd’s Stock Is Near A 52-Week Low Now: Is It A Bargain?

Bumitama Agri Ltd  (SGX: P8Z) is a palm oil producer. Its primary business activities are the cultivation of oil palm trees, the harvesting of fresh palm fruit bunches, the processing of the bunches into crude palm oil and palm kernel oil, and the sale of the oils to refineries. The company has over 180,000 hectares of plantation land located in three provinces in Indonesia, namely, Central Kalimantan, West Kalimantan, and Riau.

Bumitama Agri’s current stock price of S$0.71 is just 2.9% higher than a 52-week low of S$0.69. This may raise a question among investors: Is the company a bargain right now?

Unfortunately, there is no easy answer. But, we can still get some insight by comparing Singapore Exchange’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.

I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).

Bumitama Agri currently has a PB ratio of 1.68, which is higher than the SPDR STI ETF’s PB ratio of 1.28. But on the other hand, the palm oil company outshines the market when it comes to the PE ratio and dividend yield. Bumitama Agri’s earnings multiple is 10.57 currently, lower than the SPDR STI ETF’s 11.81; meanwhile, the company’s dividend yield is 3.8%, whereas the market’s yield is 2.78%. The higher a stock’s yield is, the lower is its valuation.

Putting it all together, we can argue that Bumitama Agri is trading at a discount to the market, given its lower PE ratio and higher dividend yield.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.