Corporate Result Flash Delta Dunia Makmur - Bahana

4Q10 performance
§ DOID booked surprising 4Q10 net profit loss of IDR511b, bringing 2010 earnings to negative IDR135.5b compared to positive earnings of IDR456b in our and IDR567b in consensus expectation.
§ Disappointment in 4Q10 earnings mainly stemmed from the impact of loan redemption process and declined in asset value, causing the company to register loss of IDR335b and IDR263b respectively.
§ On the operating front, while 4Q10 revenue grew 8% q-q to IDR1.6t, on the back of higher production, operating profit dropped 4% q-q to IDR282b on higher G&A expenses, slightly higher than our estimate but lower than consensus. This brought 4Q10 operating margin to 17.5% from 19.7% in previous quarter.

Outlook
DOID’s 2010 disappointing earnings would undoubtedly result in major downward earnings revisions. On a more positive note, however, with unchanged 2011 production estimate, we maintain our operating profit growth of 25% y-y to IDR1.3t. On the bottom line, the redemption of high loan cost would result in lower interest expense, reversing net profit to an estimated IDR671b.

Recommendation and valuation
In the interest of being conservative, we have increased our risk premium assumption to 5.5% (WACC: 11.5%), resulting in lower TP of IDR1,600. We believe that the risk on below the line expenses should not be repeated in 2011. Thus, with brighter production outlook ahead, we reiterate our BUY rating on DOID.