• Below; maintain Underperform. Accounting for the consolidation of its Domba
Mas acquisition, Bakrie Sumatra Plantation (BSP) booked Rp525bn of gains f
rom interest write-offs in 4Q10.
This lifted its reported profit to Rp806bn, +219% yoy, though core profit rose a
modest 22% to Rp274bn, 8% short of our estimate and 19% below consensus due
to higher-than-expected operating & depreciation expenses and a higher tax rate.
Balance sheet remained precarious with gross debt jumping from Rp5.6tr to Rp8.2tr
qoq. Near-term solvency is arguably an issue given short-term debt of Rp1.8tr, at 2x
cash on hand (Rp330bn) and Rp606bn short-term investments. We lower our FY11-
12 earnings forecasts by 2% after refining our assumptions, but maintain our target
price of Rp325, based on a 50% discount to NAV. We also introduce FY13
numbers. The key thing to watch is the integration of Domba Mas. A lack of
feedstock and higher CPO prices are negatives for BSP, potentially providing derating
catalysts.
• A confusing end. FY10 core earnings were Rp274bn (+22% yoy), in our
calculation, accounting for 93% of our forecast and 81% of consensus. Variances
were higher-than-expected operating and depreciation expenses, as well as a
higher tax rate which offset better-than-anticipated gross margins. Not helping is a
lack of disclosure on production and sales. The 29% yoy sales growth was probably
spurred by higher ASPs and the consolidation of ARBV. The latter could also have
been behind gross-margin expansion to 43%, +14% pts yoy. Spectacular reported
Mas acquisition, Bakrie Sumatra Plantation (BSP) booked Rp525bn of gains f
rom interest write-offs in 4Q10.
This lifted its reported profit to Rp806bn, +219% yoy, though core profit rose a
modest 22% to Rp274bn, 8% short of our estimate and 19% below consensus due
to higher-than-expected operating & depreciation expenses and a higher tax rate.
Balance sheet remained precarious with gross debt jumping from Rp5.6tr to Rp8.2tr
qoq. Near-term solvency is arguably an issue given short-term debt of Rp1.8tr, at 2x
cash on hand (Rp330bn) and Rp606bn short-term investments. We lower our FY11-
12 earnings forecasts by 2% after refining our assumptions, but maintain our target
price of Rp325, based on a 50% discount to NAV. We also introduce FY13
numbers. The key thing to watch is the integration of Domba Mas. A lack of
feedstock and higher CPO prices are negatives for BSP, potentially providing derating
catalysts.
• A confusing end. FY10 core earnings were Rp274bn (+22% yoy), in our
calculation, accounting for 93% of our forecast and 81% of consensus. Variances
were higher-than-expected operating and depreciation expenses, as well as a
higher tax rate which offset better-than-anticipated gross margins. Not helping is a
lack of disclosure on production and sales. The 29% yoy sales growth was probably
spurred by higher ASPs and the consolidation of ARBV. The latter could also have
been behind gross-margin expansion to 43%, +14% pts yoy. Spectacular reported
net-profit growth of 219% yoy was aided by a Rp525bn gain on interest write-offs,
probably for its Domba Mas acquisition.
• Risks remain high. Net gearing shot up from 60% in 9M10 to 85% at end-2010,
with net debt of Rp7.2tr, up qoq from Rp4.6tr. Gross debt rose to Rp8.2tr, with some
Rp1.8tr in short-term debt and maturities against Rp936bn of cash and short-term
investments. Total assets were Rp18.5tr against sales of Rp3tr. How to lower
balance-sheet risks and make its assets pay reasonable returns to capital would be
challenging, probably preoccupying management for many years to come.
Financial summary of Bakrie Plantation Sumatra
analysis source: CIMB