Why is Bumitama Agri 'buy' despite weaker 2Q production?

SINGAPORE (July 22): UOB Kay Hian is reiterating its “buy” recommendation on Bumitama Agri (BAL) with a lower target price of $1.25 from $1.30 previously.

The Indonesian palm oil company on Thursday posted a 27.4% y-o-y decline in 2Q16 fresh fruit bunch (FFB) production, which was weaker than what the research house had previously projected.

In a Friday report, UOB’s Singapore research team explains that this was mainly due to the impact from the drought being more severe than expected.

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