Astra Agro Lestari (AALI IJ, BUY, TP IDR29,291) Results Review: Winning Streak Continues - Daily Pack 21 April 2014

Good morning,

Astra Agro Lestari’s 1QFY14 earnings came in better than expected, making up 24% of our full-year forecast vs 18-20% typically achieved in 1Q. We maintain our forecasts at this juncture and keep our BUY call, with an unchanged IDR29,291 FV. Astra Agro Lestari remains a key Indonesian plantation stock to own and the trend of rising palm oil price will provide further upside to the stock price.

¨       Continues to beat expectations. After blowing away consensus forecast for 4QFY13, Astra Agro Lestari continued to deliver strong results this quarter. Its 1QFY14 core earnings made up 24% of our full-year estimate, vs 18-20% typically achieved in 1Q.  

¨       Consensus estimate catches up. Consensus FY14 forecast, which was 6.5% lower than our estimate at end-February, has now caught up with our bullish projection. Our FY15 forecast is some 20% higher than consensus estimate, which means there will be ample room for the stock to re-rate if our forecast is proven correct.

¨       No operational stats yet. Astra Agro Lestari has yet to publish its operational statistics for 1QFY14. Nevertheless, its numbers for the first two months showed a 2% contraction in nucleus FFB and a 17% decline in CPO sales volume, which was more than compensated by a 39% surge in realised palm oil prices.

¨       Valuation. Astra Agro Lestari is currently trading at 17.4x FY14 and 13.2x FY15 earnings, which means at worst, the stock could trade sideways until the FY15 earnings forecast becomes more relevant. We believe the 13x FY15 earnings valuation is not expensive given the rising palm oil price environment.

¨       Sector implication. Astra Agro Lestari was the first to release its March quarter results. Its good performance should set the tone for the sector’s earnings season, ie the majority of plantation companies should deliver results which are in line or better than expected.   (Alvin Tai)

FROM TRADING DESK: JCI today is expected to be traded at 4,905.76 and 4,857.67.

MEDIA HIGHLIGHTS:

SSMS plans to build two palm oil mills worth IDR240bn-300bn

AALI will add 2,000 ha of rubber plantation

BBTN employees protest the acquisition plan

Gajah Tunggal targets export sales contribution of 30%-35%

Waskita Karya review spin-off of concrete and realty units

Fastfood Indonesia to increase selling price by 3%-5% in 2014

ANTM IJ to obtain USD200m worth of funds

CT Corp absorbs government portion in Garuda Indonesia rights issue

Retail mall’s service charge increase by more than 8%

Export of all tin products will have to go through ICDX

BPS Projects a Deflation and Trade Surplus in their Next Publication

Best regards,

RHB OSK Indonesia Research Institute