In line; upgrade to Outperform from Neutral. FY10 core earnings account for
101% of our forecast and 108% of consensus, with the slight variation due to lower
interest expense of Rp42bn (BW capitalised part of its interest) vs. our Rp72bn
estimate. We are leaving our FY11-12 earnings estimates intact, while introducing
FY13 forecasts. Maintain target price of Rp1,480, still based on a 20% discount to
NAV. We upgrade the stock to Outperform from Neutral as we see catalysts from
robust production growth.
• Margin expansion. FY10 core earnings grew 60% yoy to Rp238bn on 22% yoy
revenue growth from significant increases in ASPs (+18%), partially offset by flat
CPO sales volume due to zero third-party FFB purchased. FY10 gross margins
improved by +3% pts to 65%, with 4Q10 gross margins alone amounting to 67%.
The margin expansion was led by zero third-party FFB purchased in FY10, further
backed by higher ASPs and BW’s ability to manage production costs with the help
of mechanisation.
• Strong production. 4Q10 CPO production was 29.3k tonnes, +22% yoy vs. 3Q10’s
23.4k tonnes (+11% yoy). Consequently, FY10 CPO production was flat at 91.k
tonnes, forming 100% of our forecast. The flat production could be blamed on zero
third-party FFB purchases in FY10 vs. 33.3k tonnes in FY09 and also lower yields of
26 tonnes/ha vs. 27 tonnes/ha a year ago. We expect CPO production to improve
going forward with the help of more maturing trees and improving yields.
• Balance sheet. BW had net debt of Rp718bn, up from Rp482bn at end-9M10. Cash
was Rp499bn with debt of Rp1,217bn. Capex spent was Rp656bn, above our
estimate because Rp138bn was spent on prepayment for 2011 new plantings. We
forecast 10,450ha of new plantings annually till the land is exhausted by 2015.
Financial summary of PT. BW Plantation
analysis by : CIMB - 22 March 2011
101% of our forecast and 108% of consensus, with the slight variation due to lower
interest expense of Rp42bn (BW capitalised part of its interest) vs. our Rp72bn
estimate. We are leaving our FY11-12 earnings estimates intact, while introducing
FY13 forecasts. Maintain target price of Rp1,480, still based on a 20% discount to
NAV. We upgrade the stock to Outperform from Neutral as we see catalysts from
robust production growth.
• Margin expansion. FY10 core earnings grew 60% yoy to Rp238bn on 22% yoy
revenue growth from significant increases in ASPs (+18%), partially offset by flat
CPO sales volume due to zero third-party FFB purchased. FY10 gross margins
improved by +3% pts to 65%, with 4Q10 gross margins alone amounting to 67%.
The margin expansion was led by zero third-party FFB purchased in FY10, further
backed by higher ASPs and BW’s ability to manage production costs with the help
of mechanisation.
• Strong production. 4Q10 CPO production was 29.3k tonnes, +22% yoy vs. 3Q10’s
23.4k tonnes (+11% yoy). Consequently, FY10 CPO production was flat at 91.k
tonnes, forming 100% of our forecast. The flat production could be blamed on zero
third-party FFB purchases in FY10 vs. 33.3k tonnes in FY09 and also lower yields of
26 tonnes/ha vs. 27 tonnes/ha a year ago. We expect CPO production to improve
going forward with the help of more maturing trees and improving yields.
• Balance sheet. BW had net debt of Rp718bn, up from Rp482bn at end-9M10. Cash
was Rp499bn with debt of Rp1,217bn. Capex spent was Rp656bn, above our
estimate because Rp138bn was spent on prepayment for 2011 new plantings. We
forecast 10,450ha of new plantings annually till the land is exhausted by 2015.
Financial summary of PT. BW Plantation
analysis by : CIMB - 22 March 2011