Monday, February 28, 2011

Astra Agro Lestari (AALI)

by CIMB securities

• Broadly in line, maintain NEUTRAL. FY10 core earnings were Rp2,059bn, +18% yoy on Rp8.8tr sales, +19% yoy. Earnings account for 95% of our forecast and 106% of consensus. We deem the results to be in line, with the slight variation due a higher effective tax rate of 29% vs. our 25%. This was probably due to variances at the subsidiary level. Otherwise, revenue and EBIT were about 100% of our forecasts.

We are leaving our FY11-12 earnings estimates unchanged, while introducing FY13 forecasts. Maintain target price of Rp26,800, still based on 16x CY12 P/E. We remain Neutral on account of toppish CPO prices; and AAL’s lower output growth than peers.

• Volume and sales in line. FFB processed grew to 4.8m tonnes, +4% yoy with CPO production at 1.1m tonnes, +3% yoy. Sales volume grew 5.2% yoy to 1.1m tonnes. These are all in line with our forecasts. ASPs grew 12% yoy, also in line. Consequently, revenue of Rp8.8tr constitutes 100% of our forecast.

• Margins in line but tax rate higher. Gross and operating margins were 40.8% and 33.9% respectively vs. our 40.4% and 33.5%. Core earnings grew 18% yoy to form 95% of our estimate. The slight variance was due to an effective tax rate of 29% vs. our 25% estimate. We attribute that to the consolidation process of subsidiaries. 4Q10 was strong on higher third-party FFB purchased (resulting in 17% yoy production volume growth) as well as prices (+14% qoq, +30% yoy). Production rebounded noticeably in Jan 11, as reflected in nucleus/plasma estates’ higher yields, as well as ample third-party FFB. This suggests that production is beginning to normalise. We maintain our FY11 production volume growth forecast of 5% yoy, which appears to offer upside.

• Strong balance sheet. AAL has no debt, with a cash balance of Rp1.24tr by end-CY10, up from Rp611bn a year go. Net gearing was -17% (net cash). Strong cash generation with EBITDA estimated at Rp3.8tr for this year and capex expectations of Rp1.3tr suggest generous dividend payouts of 65%. Yields are now close to 5%, ahead of the market’s.

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