Taking into account that Bumitama Ltd's nine months of 2024 (9M24) results were within Maybank Investment Bank Bhd's (Maybank IB)/consensus expectation, the research house maintained its BUY call on the plantation company, with an increased target price (TP) of S$0.90 from S$0.78 previously.

The upward trend for the TP reflects an improved outlook, driven by expectations of a strong earnings rebound in the fourth quarter (4Q) and based on an eight times price-to-earnings ratio, which is in line with the company's six-year historical average

For 3Q24, Bumitama reported a 3Q24 headline profit after tax and minority interests (PATMI) of 598 billion Indonesia rupiah (-32% year-on-year [YoY], +13% quarter-on-quarter), bringing Bumitama's 9M24 headline PATMI to 1,455 billion Indonesia rupiah which met 72%/70% of Maybank IB/consensus full-year estimates.

Despite a challenging 9M24, where the company's output was 21% lower YoY, Bumitama anticipates a recovery in production for 4Q.

As a result, the company revised its full-year expectations, now forecasting a decline of 15% in its nucleus fresh fruit bunch output, a larger drop than the previously expected 9.5%.

On that note, Maybank IB revised its earnings estimates for the coming years. With the higher spot crude palm oil average selling prices, the research house has increased its earnings per share (EPS) forecasts for FY24E, FY25E and FY26E by 4%, 8% and 8%, respectively, to reflect an anticipated positive impact from higher palm oil prices, despite the output decline.

The company's cost management strategies, including more efficient fertiliser application, are also expected to provide further support to its financial performance.

Bumitama continues to be a solid pick for investors, with a strong dividend yield of over 6% and a consistent track record of delivering solid returns, especially given its attractive valuation and the potential for earnings growth in the coming quarters.