Bumitama (SGX: P8Z) might just be my biggest miss of the year.
I first spotted Bumitama through a stock screener while screening for good dividends stocks at cheap valuations but with revenue and profit growth.
Not many companies made the cut, so to find a company that ticked all the boxes was already an exciting find for me. And mind you, I am not a big fan of companies operating in the commodity scene.
The pessimist in me was waiting for a better entry price, as the world was grappling with tariffs and the uncertain Trump administration. But after a few weeks of trading sideways, Bumitama stock prices rallied close to +70% this year.
And the question is, why is Bumitama Agri beating the other palm oil stocks? Even the Goliath Wilmar International Limited (SGX: F34) is losing out to David.
Palm oil business and value chain
The palm oil value chain can be complex. But it all starts with the plantation, growing of oil palm trees. Once the fresh fruit bunch are harvested, it is sent to a mill for crushing to produce crude palm oil (CPO). This is the upstream portion of the palm oil value chain. It then gets shipped to a refinery, which can be in a different country, to refine it into consumable products like cooking oil, margarine and even for soap making.
Most of the Indonesian palm oil companies listed on SGX have a presence in the upstream business, while some have a more integrated end to end value chain. As Indonesia is one of the largest palm oil producing countries, most if not all of these companies have oil palm plantation and milling facilities.
Bumitama counts as one of the smallest companies amongst the other listed companies, and is present only in the upstream producing portion.
CPO prices YTD
While Crude Palm Oil (CPO) prices might look rangebound, it dipped to ~MYR 3,700 per contract briefly and rose to as high as ~MYR 4,700, a difference of MYR 1,000 per contract.
Prices above MYR 3,800 are generally beneficial to upstream players, as producers generally need to exceed their production cost to ensure profitability and sustainable operations. Industry expectations and analyst reports indicate that a price range between MYR 3,800 to MYR 4,500 per tonne is considered favourable for palm oil producers.
CPO prices have fluctuated quite a bit in 2025. The post May rally was driven by several supply-side and demand-side factors. Supply constraints have been significant, such as reduced exports from Indonesia due to policy measures like the biodiesel blend mandate increasing to B40 and plans to reach B50, which raises internal consumption and reduces export volumes. Additionally, adverse weather conditions, including flooding in key Malaysian growing states, have disrupted production, with full normalisation expected only in the latter half of 2025.
How Bumitama took opportunity to grow in 2025
Production yield was fantastic as Bumitama managed to grow its total tonnage on a preceding quarter basis, QoQ and even on a 1H’25 vs 1H’24 comparison. Its internal and external estates all grew, while all the volumes were further buoyed by better FFB yields.
On top of that, most of Bumitama’s oil palm trees are considered matured, with an average age of 14.7 years old. So that gives Bumitama’s output a bit of prospects on a mid term horizon as well.
Why it beats other palm oil stocks?
The palm oil companies’ revenue might trend in tandem, but eagle-eyed investors might spot a key difference.
Bumitama has always been able to outpace its competitors over the last 10 years. It also suffers the least growth contraction when times are bad.
Operating margin wise, Bumitama, together with First Resources Ltd (SGX: EB5) count themselves as the outliers. The other competitors might have a more robust business model due to their presence across the whole value chain, but each segment would negate all the possible risks and rewards, averaging out to result in a lower operating margin.
Bumitama’s ROA is also the best amongst its peers. Every dollar invested into Bumitama’s assets returns 11.37%, so much higher than its peers.
To wrap things up, it is also the least geared – its debt to equity ratio is just 19.39%, which is one of the lowest amongst its peers.
Valuation
Even after its meteoric rise, Bumitama still trades at a trailing dividend yield of 5.58%. The company’s growing DPS is well-supported by its prudent payout ratio.
P/E wise, Bumitama is starting to look premium. It is trading near its historical high P/E – around 12x. It is only cheaper than Wilmar, and trading at a premium compared to its peers.
The commodity sector is notoriously cyclical. High CPO prices will add tailwinds to Bumitama’s performances, while any sudden negative news could spoil it for Bumitama as well.
Verdict
Bumitama caught my eye while it was trading at 5x P/E with a dividend yield of more than 7%. It might not be in a fantastic business, but the company is being run fantastically, and the track record speaks for itself.
It was one of the instances where a fantastic company was trading at a fantastic price.
Sadly, my greed got the better of me, as I did not take a long position before prices rallied.
Even though 11x P/E and 5.6% dividend yield is still attractive, the margin for error has decreased, and there are better opportunities out there now.
Oh well, we don’t always win. So lesson of the day, buying a stock or selling a stock at market price is the best way to go long or short. Queueing adds another luck element, which could see you missing out on the next big stock!
Join our free webinar session to find out how we identify and select the best undervalued and growth stocks. Register now!
