Overall production grew in 2013 despite low FFB yields.
Bumitama Agri's fresh fruit bunches (FFB) production growth is on an uptrend since 2009.
According to UOB Kay Hian, this was temporarily stopped by the drought in 2015.
For 2009 to 2015, FFB production growth was supported by new mature areas.
But Bumitama Agri showed production growth in 2013 despite a dip in FFB yield.
UOB expects FFB production to rise by 15% from 2016 to 2019, driven by the FFB yield improvement with the percentage increase of new mature areas now lower than that in 2009-2015.
"This was mainly due to new planting having been reduced significantly since 2014 due to the strict new planting regulations in Indonesia," said UOB analysts Leow Huey Chuen and Ooi Mong Huey.
However, the share price has plateaued in the past two months despite having strong results for Q1 and Q2.
"We believe that BAL is underappreciated by investors," the analysts added.
Here's more from UOB Kay Hian:
About 28% of BAL’s young oil palm trees are in the age range of 4-6 years and are hence in the strongest production growth stage in the FFB yield cycle.
FFB yield for young trees tends to grow exponentially until trees reach the age of 12 where yields experience a peak of 25-26 tonnes/ha.
BAL’s average tree age profile was at 8.7 years as of 1 Jan 17.
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