8 August 2008
UNDERPERFORM Maintained
RP6,750 Target: Rp7,000
Mkt.Cap: Rp9,211bn/US$1,009m
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
Maintaining earnings forecasts but lowered target price to Rp7,000 from Rp9,900. We are maintaining our earnings forecasts pending our meeting with management but have lowered our forward P/E target to 10x from 14x to account for rising downside risks to CPO prices. Our new multiple is consistent with the average 3-year P/E for Indonesian plantation companies. As a result, our target price for the stock drops to Rp7,000 from Rp9,900.
Maintain Underperform. Lonsum’s positives include its very good seed business. Given a seed shortage in the domestic market, we expect seed prices to remain elevated going into 2009. But Lonsum’s overall higher costs are likely to remain under pressure from inflation, unless cost cutting from its merger exercise with Indofood Agri produces results sooner than later.
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