Thursday, April 26, 2012

AALI Rekomendasi Hold

Astra Agro Lestari 1Q12 result Earnings fall on lower ASP.... Sales reached Rp 2.5tn in 1Q12 (-6.6% YoY), above our forecast but in line with the consensus. The lower CPO and PK ASP in 1Q12 (-6.9-38.7% yoy) dragged down the 1Q12 revenues despite higher CPO and PK sales volume (+5.6-63% yoy). As a result, the bottom line fell 42.2% YoY to Rp 378bn, 17% of our full year forecast and 14% of the consensus. .... coupled with higher costs and a higher opex to sales ratio Margins were weaker, as expected. The gross margin was down by 1,030bps to 28.6% due to increases in harvesting and maintenance costs (+10% YoY, 32% of costs) as the number of workers increased along with the addition of 17k ha of newly mature areas. The lower margin was exacerbated by the higher opex to sales ratio, up from 5.7% to 8.1% in 1Q12. In particular, the company recorded higher selling expenses (+34% YoY, 37% opex) and higher wage costs (+23% YoY, 25% opex). The operating margin slumped 1,220bps to 20.6%. Strong external production growth FFB harvested reached 1.09mn tons (+4.6% yoy, -19.6% qoq) thanks to the higher external production of 493k tons (+14.6% yoy, -24.2% qoq) while the nucleus production reached 796k tons (+0.7% yoy, -4.7% qoq). The company's intensification program ensured a relatively stable yield of 4.6 tons/ha, slightly down as the newly mature area increased. CPO production reached 289k tons (+5.2% yoy, -14.2% qoq), in line with our forecast while PK production reached 63k tons (+11.2% yoy, -13.5% qoq). New plantings reached 150ha, with replanting of 160ha. Currently AALI is in the process of obtaining land rights in South Kalimantan. Maintain HOLD, TP unchanged For the meantime we maintain our HOLD recommendation, awaiting the 1H12 results. Our concerns are on the limited production growth and weaker margins although its net cash of Rp 558bn and decent dividends (4.5% dividend yield with Rp 995 DPS) do offer some support. Our TP of Rp 23,100 implies FY12-13 P/E of 16.2-14.4x. The shares currently trade at 15.5 x P/E, an 18% premium to its peers.

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