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Monday, May 2, 2011

Kalbe Farma - Waiting For Growth Story

by Indopremier Securities

KLBF still benefited from the US Dollar depreciation with its gross margin expanded to 51.9% in 1Q11, higher by 1.4% and 1.7% from gross margin booked in 4Q10 and 1Q10 respectively. With net cash around Rp 2trn, the management proposed incremental dividend payout ratio to 50% for 2010 net profit, however the market was indifferent with the plan.  With changes of discount rate, we come to KLBF’s fair value at Rp 3,300,-, representing 22x PE11F and 13.7x EV/EBITDA 11F.  HOLD

Margin expand with weaker US dollar

We expect the impact of stronger Rupiah would maintain the gross margin above 50% in 2011.  Moreover the company increases sales price by 3% to 7% in 1H11.  The sales, however, only grew by 7,5% YoY, dragged by sales in distribution and packaging division which have shown falling pattern in term of contribution (30.4% in 1Q11 from 34.7% in 1Q10) and gross margin (27.7% in 1Q11 from 31.5% in 1Q10).  The trigger was that during 2010 principals did not increase sales price of their products so that distribution sales did not enjoy additional margin. The management believes that margin from distribution sales will be normalized in 2011 as principals will likely to increase sales price of their product.

Higher payout means bad or good news?

With net cash around Rp 2trn, the management has proposed incremental dividend payout ratio (DPR) from 27% to 50% for 2010 net profit.  There is no pressure on funding for 2011; Capex budget only cost Rp 650billion and KLBF has paid all its long term debt in 2010 and up to 1Q11, there is only short term bank loan of Rp 196billion. The market was indifferent with the plan since acquisition has been a growth story for KLBF in recent years hence the increase of DPR suggests that acquisitions would not happen in short time.   

Maintain HOLD with higher TP

We change some of 2011 assumptions: 1) US Dollar to Rupiah is Rp 8,792 vs previously at Rp 9,100; 2) Lower down revenue growth to 12% from 13.4%; 3) Higher WACC of 13.5% vs 11.2%. We expect that the US dollar depreciation will cushion KLBF’s this year performance while acquisition story is on hold.  With new assumptions, we come to KLBF’s fair value at Rp 3,300,-, representing 22x PE11F and 13.7x EV/EBITDA 11F.  Risk to our call: 1) the depreciation of Rupiah; 2) weaker performance of consumer health division.  Maintain HOLD. 


2008
2009
2010
2011F
2012F
Year End 31 Dec





Sales
7,877.4
9,087.3
10,226.8
11,516.5
12,904.6
EBITDA
1,332.9
1,784.6
2,013.7
2,265.4
2,691.9
Net Income
706.8
929.0
1,286.3
1,524.2
1,883.4
EPS
73.8
99.1
137.2
162.6
200.9
PER (x)
5.4
13.1
22.4
22.0
17.8
PBV (x)
1.1
2.8
5.4
5.0
4.1
EV/EBITDA (X)
2.2
6.1
13.4
13.7
11.1
Dividend Yield
2.5%
1.0%
0.9%
0.8%
0.9%
Source: Company, IPS calculation

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