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Saturday, November 26, 2011

Sampoerna Agro Tbk (SGRO) - Profit Growth 86%

by Lauthandana Sec

HIGHLIGHT EVENTS

SGRO net profit until the third quarter 2011 amounted to Rp 462.1 billion, grew 86% YoY. Meanwhile, sales also posted a 84% YoY increase from Rp 1.4 trillion to Rp 2.5 trillion.

The increase in financial performance SGRO significant in the first nine months of 2011 driven by the impressive growth of TBS by 41% YoY due to improved weather conditions in the area of ​​cultivation, the increase in CPO sales volume by 50% YoY, as well as increased average selling price of CPO +21% YoY and +38% kernel.

COMMENTS

SGRO sales until the third quarter-11 is 78.4% of our projected 2011 sales of Rp 3.2 trillion. Operating profit and net profit reached respectively 73% of our estimates to the end of the year, the operating profit of Rp 878 billion and net profit of Rp 636 billion.

FFB production in 9M11 1.07 million tonnes (+41% YoY), 71.4% of the projected production of FFB in 2011 where we predicted it would break the 1.5 million tons.

CPO sales volume up to September 2011 reached 260.518 tons (+50% YoY), 81.5% of the estimated total sales volume of our CPO until the end of this year reached 319.809 tons. We OER this year rose to 21.4% supported by the improving weather and palm trees age the company was at the peak yield.

SGRO will increase the focus on the business sago. Sago factory estimated to be completed in the fourth quarter of 2011. Later will be processed into sago starch to be sold to multinational companies. But until a few years, sago business revenue contribution has not been significant.

We forecast financial performance SGRO the next few years will increase triggered by: 1) increase in CPO sales volume 5-year CAGR of 13%; 2) the average selling price of CPO SGRO CAGR next 5 years we forecast to grow 7% with an average U.S. $ 984/metric tons; 3) palm trees at the peak phase of productive age (11 years).

Recommendation

We assume SGRO 2011 sales growth by 39% YoY to Rp 3.2 trillion and we are targeting net profit up 41% YoY to Rp 636 billion.

Our recommendation for the stock SGRO BUY with a target price of Rp 4.050 per share using the 10-year DCF with WACC assumption of 12.9%. TP provides a potential upside of 30%. TP value reflects the 2011F and 2012F PE of 12.0x and 7.7x and EV / ha 2011F and 2012F of U.S. $ 8.162 and U.S. $ 7.789. Based on the closing stock price yesterday SGRO, SGRO shares trading at 5.9x 2012F PE and EV / Ha 2012F of U.S. $ 5.966.

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