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Tuesday, April 5, 2011

AKR Corporindo.Tbk

by Samuel Securities

Performance as expected

Highlights:

 AKRA recorded 36% revenue growth and 13% net profit growth YoY in FY10. Net revenue was recorded at Rp12.19 trillion and net income was reported at Rp311 billion.
 The company’s FY10 results are relatively in-line with our projection with bottom line slightly below our projection. Net revenue represents 99.6% and net income represents 92% from our FY10 projection.

Comments:


 On full year basis, every division contributed positive top line growth mainly due to increase in volumes across all divisions due to growing demands facilitated by the company’s infrastructure, especially from the petroleum distribution division which represented 61% to total sales. Revenue from petroleum distribution rose 49% YoY due to rising demand from coal mining and power sector also followed by the increase in ASP. In addition, revenue from Basic Chemicals, Manufacturing, and Logistics divisions also went up 18%, 22%, and 17% YoY respectively. Lower corporate tax rate also helped the bottom line figure as free float is more than 40% due to rights issue in 1Q10.
 Meanwhile, on quarterly basis, Logistics division underperformed mainly due to lower volumes handled in China. Overall, the company managed to book 10% revenue growth but net margin slightly fell to 2% in 4Q10. As such, the Logistics division recorded 8% decline QoQ.
 Although the bottom line grew 13% YoY, the company’s gross margin and operating margin declined. This was because of PT Sorini Agro Asia’s (SOBI) drop of gross profit in FY10 as a result of several factors such as high raw material price, inability to pass on the cost, and Rupiah appreciation. Thus, AKRA’s gross and operating margin were affected and pulled down to 8% and 4% respectively.

Action & Recommendation:
 With petroleum distribution as the biggest revenue generator this year, we expect distribution to grow around 30% from Kalimantan and East Indonesia, in-line with the company’s strategy and outlook.
 Currently AKRA is trading at 13.5x Core PE’11F and we maintain our recommendation on the stock and target price which offers 29% upside. BUY

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