Friday, January 6, 2012

Favorable CPO Player

by Indopremier Securities

BWPT remained favorable in local CPO universe. 9M11 yoy result stayed solid, but muted on quarterly basis. Long term sector outlook remains compelling since demand will outpace supply, despite recent volatility price caused by uncertain global economics condition. We maintain our BUY recommendation with target price of Rp1,330, as we could see an equivalent result between BWPT’s 9M11 overall margins with our full year forecast.

Strong yoy result, muted qoq

BWPT reported 9M11 earnings of Rp660.8m, up 57.9% yoy and formed 74.2% of our full-year forecast. On quarterly basis, earnings was down 39.6% qoq mostly due to CPO sales volume slackening by 35.1% (CPO formed 92.3% of 3Q11 total sales) combined with lower ASP (-4.8%). Superior cost structure prolonged. Total cost per ton of CPO was Rp3.108m/ton, down 6.5% on yearly basis.

Short term prices are flat with limited movement, but remains intact in the long term view

The average CPO price has fell around 6% qoq in 3Q11, this was in line with global trends and prospects of faltering global economy and serious concerns about the health of European banking system. We see CPO price flattens out, trailing slumping demand. Average price from beginning 4Q until now, is at US$1023/ton, not much difference with 3Q11 average price (US$1078/ton). CPO sales could go back uplifted when soybean oil price rises next year when South America experiencing the drought. Long term sector outlook remains compelling given ongoing global tight supply relative to consumption, with demand underpinned by population growth, rising GDP per capita in emerging economies which means greater consumption, and also biofuel mandates.

Maintain Buy; all-in-all is aligned with full-year forecast

Valuation unchanged, looking at 9M11 overall margins were pretty much in-line with our full-year forecast. With the remaining new mature acreage coming onstream, BWPT should benefit. YTD average price is US$1122/ton, thus we upgrade our full-year forecast at US$1100/ton from previous US$1000/ton. We are still calling BUY for BWPT with target price Rp1,330.

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