Published on 06 Jan 2023.
RAM Ratings has reaffirmed the AA2/Stable rating of Bumitama Agri Ltd’s (Bumitama or the Group) RM2.0 bil Islamic MTN Sukuk Musharakah (2014/2029).
The ratings are premised on our expectations that Bumitama’s financial performance and credit metrics will remain robust, even under our stressed crude palm oil (CPO) price assumptions. The Group’s operating profit before depreciation, interest and tax (OPBDIT) increased more than three-fold in 1H FY Dec 2022 after rising 35.8% the previous year. This is due to strong CPO prices which averaged higher at RM4,418/MT in 2021 and RM5,232/MT in 11M 2022. Accordingly, Bumitama’s OPBDIT margin was much broader at 42.0% in 1H FY Dec 2022 (1H FY Dec 2021: 21.7%) despite higher production costs and a lower sales volume resulting from Indonesia’s export ban.
Strong cashflow generation allowed Bumitama to significantly pare down debt. As at end-June 2022, debts declined 24% y-o-y, translating into improved gearing of 0.30 times (end-June 2021: 0.52 times). Combined with much higher profitability, the Group’s annualised funds from operations (FFO) debt cover was boosted to 1.61 times as at end-June 2022 from 0.33 times a year earlier. Under our stressed CPO price assumptions of RM3,300/MT and RM3,000/MT for 2023 and 2024, respectively, we expect FFO debt coverage to remain sturdy at about 0.80 times-1.30 times in the next two years. As debt levels are anticipated to ease in the absence of sizeable expansions, gearing is likely to stay below 0.30 times.
Bumitama ranks among the top 10 listed plantation firms regionally (by planted area), with a total cultivated area of 187,238 ha in Indonesia as at end-June 2022. The issue rating is also backed by healthy growth prospects for fresh fruit bunch production in view of a favourable tree profile and good plantation management. A large portion of palms (about 84%) are in the prime-yielding phase. The Group’s inherent vulnerability to volatile commodity prices, the challenging operating environment in Indonesia and rising pressure from environmental issues are moderating factors.
Wong Ee Loo
(603) 3385 2521
Thong Mun Wai
(603) 3385 2522
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Ratings on Bumitama Agri Ltd