Bumitama Agri’s new planting to slow to a trickle in H2: analysts

New requirements are a drag on planting activity.

Bumitama Agri’s planting activity will move at a snail’s pace in the second half of the year, due to new and more stringent requirements.

According to a report by UOB Kay Hian, BAL planted 196 ha of new areas in 2Q16, boosting total new planted area to 396 ha in 1H16. However, in view of new planting procedures (NPP), BAL will slow down its new planting activity to make sure that it complies with all the new planting requirements.

Moreover, BAL’s maintaining fresh fruit bunch (FFB) production from nucleus areas is expected to drop 4.4% YoY in 2016. FFB production is likely to be supported by newly mature areas as well as its young oil palm trees approaching the prime age. For 2016, management is expecting 16,000 ha to come to maturity.

Meanwhile, BAL could expand its landbank through an acquisition, though regulations could be a significant roadblock.

“BAL is eyeing brownfield acquisition for growth after scaling down its new planting. However, we understand that an acquisition would not be easy as the acquired areas must comply with stringent environmental and regulatory requirements, while come in at reasonable price,” UOB Kay Hian noted.