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Tuesday, June 21, 2011

Nippon Indosari: Targets 20-30% Revenue Growth in 2011

by Credit Suisse Securities

ROTI is seeking Rp240 bn through bank loans and/or bond issue to build bread factories in Jakarta , Palembang (S. Sumatra) and Makassar ( Sulawesi ). ROTI completed the construction of Medan bread factory in May 2011, and this plant is expected to contribute 10-15% to ROTI’s 2011 production. For 2011, ROTI is targeting 20-30% top line growth to Rp735-795 bn.

Sales commentary: ROTI is an interesting small cap name (US$325 mn), in our view. ROTI is 34% owned by the Salim Group, 34% Yap family and 8.5% Shikishima Baking Co. Ltd. – Japan ’s #2 bread producer. ROTI’s execution ability looks good with the recent completion of the Medan factory. Previously, ROTI was able to pass on cost increases to consumers, suggesting growing brand equity. We like stock – it is currently trading at 23.5x 2011 PE with 30% average EPS growth in 2011-13.

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