Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...

Regional Small/Mid Cap Strategy Q2 2008
Bakrie Sumatra Plantation
Bloomberg: UNSP IJ | Reuters: UNSP.JK
BUY Rp1,810 JCI : 2,419.6
Price Target : 12-Month Rp3,050
Potential Catalyst : Stronger than expected 1Q08 results, higher crude
oil price and CPO price recovery
Analyst
Herry Dion Mahargono +6221 3983 2668
herry.mahargono@id.dbsvickers.com
Price Relative
Rp
2,614.30
2,114.30
1,614.30
1,114.30
614.30
114.30
Relative Index
2004 2005 2006 2007 2008
Bakrie Sumatra Plantation (LHS) Relative JCI INDEX (RHS)
Forecasts and Valuation
FY Dec (Rp bn) 2006A 2007F 2008F 2009F
Turnover 1,181 1,663 2,632 2,841
EBITDA 326 497 841 1,020
Pre-tax Profit 250 336 693 893
Net Profit 173 235 485 625
Net Pft (Pre Ex.) 173 235 485 625
EPS (Rp) 74.2 62.0 128.1 165.0
EPS Pre Ex. (Rp) 74.2 62.0 128.1 165.0
EPS Gth Pre Ex (%) 40 (16) 106 29
Diluted EPS (Rp) 74.2 56.6 116.9 150.6
Net DPS (Rp) 9.0 11.2 23.1 29.7
BV Per Share (Rp) 275.6 516.1 621.1 756.4
PE (X) 24.4 29.2 14.1 11.0
PE Pre Ex. (X) 24.4 29.2 14.1 11.0
P/Cash Flow (X) 23.9 28.7 14.0 10.9
EV/EBITDA (X) 14.8 16.1 9.7 7.7
Net Div Yield (%) 0.5 0.6 1.3 1.6
P/Book Value (X) 6.6 3.5 2.9 2.4
Net Debt/Equity (X) 1.0 0.6 0.6 0.3
ROAE (%) 30.5 18.1 22.5 24.0
Consensus EPS (Rp): 6,282 12,347 14,701
526
476
426
376
326
276
226
176
126
76
Going for a song
Story: Although crude palm oil (CPO) price has tumbled
more than 25% from its peak, it is still 34% higher than
last year’s average and more importantly, 7% higher
than our assumption. However, UNSP’s share price has
fallen by over 35% in three weeks due to the CPO price
trend reversal. We think the share price decline is
excessive. We remain optimistic of CPO prices, backed
by a foreseeable critically low supply of oilseeds
worldwide in 2008/09 and persistently high crude oil
price.
Point: We recently upgraded our average CPO price
(CIF Rotterdam/ton) assumption to US$1,055 (2008),
US$1010 (2009) and US$970 (2010) from US$860,
US$770 and US$730, respectively. We also expect CPO
production to increase by 51% and 15 % in 2008-09,
respectively, led by yield improvement and acquisitions.
Coupled with strong CPO price, earnings should surge
106% and 29% in 2008-09, respectively.
Relevance: UNSP is trading at 15.4x and 12x 2008-09
(FD) PE compared to the broader market’s 14.5x and
11.9x, respectively. Our target price of Rp.3,050 is based
on DCF valuation with WACC of 12.6% and 6%
terminal growth. Our target price implies EV/ha (nucleus
only) of US$16,400 and 2008-09 PE (FD) of 26x and
20x, respectively. The counter is also the cheapest
upstream plantation stock based on EV/ha valuation.
At A Glance
Issued Capital (m shrs) 3,788
Mkt. Cap (Rpbn/US$m)
6,856 / 746
Major Shareholders
Bakrie (BSP) Ltd (%) 28.0
Amerasia Intl. (%) 11.0
Bakrie Brothers (%) 10.0
Free Float (%) 51.0
Avg. Daily Vol.(‘000) 54,542
Sector : Consumer Goods
Principal Business: Plantation
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Refer to important disclosures at the end of this report