Bumitama Agri Limited

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Bumitama Agri Limited

Offer Price: $0.745
Offer Size: 273.334m new shares + 24.236m vendor shares
Public Tranche – 15.0m shares
Placement Tranche – 157.737m shares
Cornerstone Tranche – 124.833m shares
NAV per share (post-IPO): Rp2,342 (Equivalent to S$0.328)
Historical PE: 15.0x (FY11)
Market Cap (post-IPO): S$1.309b
Open: 4 April 12
Close: 10 April 12
Listing: 12 April 12, 9.00am

Bumitama Agri Limited will join the current already-listed
palm-oil related peer like Wilmar, Golden Agri, Indo Agri,
First Resources, Mehwah, Kencana Agri and Global Palm
in SGX this coming Thursday. The company is a pure
upstream oil palm plantation player with operations in
Indonesia, mainly Central Kalimantan, West Kalimantan
and Riau. The company has a total landbank of 191,948ha,
comprising 119,162ha (62%) of planted area and 72,786ha (38%)
of uncultivated land available for new planting. Bumitama
has a young age profile of 5 years for its planted area, and
only 28% of its total planted area is at the prime age.
Currently, it owns and operates five crude palm oil (CPO)
mills in Kalimantan and one in Riau, with a total fruitfresh
bunch (FFB) processing capacity of 2.07m tonnes every year.

The company will raise about S$195.2 million from the listing
of shares and they will use the net proceeds as followed:

(a) approximately S$142.0 million will be committed for capital
expenditure for the expansion and development of our existing
uncultivated land bank and oil palm plantations;
(b) approximately S$12.6 million to repay the Shareholder Loans,
where the majority of the loans were used to increase and
consolidate our shareholding in our subsidiary, BGA, as part of
the Restructuring Exercise;
(c) approximately S$27.9 million to finance our share of the capital
expenditure of subsidiaries under SNA and BAS for cultivation;
and
(d) the balance of approximately S$12.7 million for our working
capital needs.

It is worthy to note that Oakridge, a subsidiary of Malaysia-listed
IOI will hold 30.4% of Bumitama and Asdew Acquisitions Pte Ltd,
Hwang Investment Management Berhad, Target Asset Management
Pte Ltd, UOB Asset Management Ltd, Value Partners Hong Kong
Limited and Wii Pte Ltd (a wholly owned subsidiary of Wilmar
International Limited) will be the cornerstone investor.

At 74.5cts, Bumitama will be listed at a PE of 15.2x for FY 2011
and Price/Book of 3.7 times and gearing of 0.8 times, this is rather
high valuation. Most of its peers are trading at lower valuation
now and I don't see a favourable trading condition for the company
pass the honeymoon period. Just to give an example of what
happened to its last 2 peers listed, Global Palm, a much smaller
producers listed at 46cts and it never see this price again after
listing and is now hovering around half of its IPO price around 23cts.
Mewah listed at $1 and is also trading around 50% of the IPO
around 51.5cts I am not saying that Bumitama will definitely perform
as there are other peers like First Resources and Indo Agri who are
soaring high. I am just saying that Bumitama is listing at a notably
higher and valuation. 

I feel that the stock is priced at a rich valuation but since this
is only the 2nd IPO this year and looking at Cordlife's debut,
we can expect the same reception for the stock as well.
At this price, I will take profits within the first few days of
trading and will not hold on to it for long until I see "value"
in the company again. 
My personal recommendation is to Subscribe for the public
offering with a profit potential of 20-25% from the share.
With 15 million shares for public offering, the chances of getting
the stock is significantly higher and it is worth the punt on the stock.

Source: Bumitama Agri IPO Prospectus, IPO Fact Sheet
by UOB, Straits Times.