8 August 2008
UNDERPERFORM Maintained
RP2,550 Target: Rp3,000
Mkt.Cap: Rp4,820bn/US$528m
Dry spell..........................oil price of US$120 per barrel.
foreword(序言) is repeated please click here if you want to read
Valuation and recommendation
Cutting earnings forecasts and lowered target price to Rp3,000 from Rp3,900. We have accounted for: 1) higher average prices in rupiah terms stemming from a weaker currency than forecast in 1H; 2) higher volume & ASP for its seed business; 3) higher fertiliser costs going into 2009. We expect fertiliser prices to stay high in 2009 before softening in 2010. All in all, we have downgraded our FY08-10 earnings estimates by 6-7%. We have lowered our forward P/E target to 10x from 14x to account for rising downside risk to CPO prices. Our new target is consistent with the average 3-year P/E for Indonesian plantation companies. As a result, our target price for the stock has been cut to Rp3,000 from Rp3,900.
Downgrade to Underperform from Neutral. Sampoerna Agro’s high plasma exposure and booming seed business are its advantages in a falling CPO price environment. Given a seed shortage in the domestic market, we expect seed prices to remain elevated going into 2009. Sampoerna Agro’s favourable maturity profile also suggests quite robust organic growth going forward. Moreover, we are of the opinion that the current environment favours Sampoerna Agro’s search for acquisition opportunities. This is the basis for our 10x P/E target despite its smaller size compared with Astra Agro and Lonsum. That said, we downgraded our rating for the stock to Underperform as the target share price upside is below market. On a DCF basis, we have a valuation of Rp3,300/share for Sampoerna, or about 11x CY09 earnings.
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