AALI Robust 1Q11 HOLD - Samuel

Highlights:
• AALI reported net earnings of Rp682 bn in 1Q11, rose by 140% YoY. Top line surged
69.2% YoY to Rp2,764 bn.
• Margin expanded, with gross and operating margin rose to 38.9% (from 34.3%) and
33.2% (from 26.7%), respectively

Comments:
• Overall, 1Q11 results were inline consensus estimates. Revenue and net profit represents 28.2% and 28.7%, respectively of our FY11 forecast. The excellent results were largely driven by the surge in CPO prices and stronger than expected CPO sales volume.
• CPO sales volume grew by 27.3% YoY to 284,249 ton or 25% of our target. ASP was
Rp8,278/kg or 26.5% higher than last period of Rp6,544/kg. Higher sales volume was due to higher CPO production of 275,099 mn ton (+25.7%) and FFB harvested of 1.0 mn ton (+20.6% YoY).
• AALI still in net cash position of Rp1,979 bn or equivalent Rp1,257/share, supported by its strong cash flow. As of March 2011, cash flow provided by operating activities amounting to Rp1,104 bn, or 92% higher than last period.
• CPO production in 2Q11 should be higher than 1Q11, unless bad weather condition. Hence we maintain our CPO production target of 1.2mn ton. On the other hand, CPO price is expected to remain favorable due to soaring oil price and tight supply.
• According to Oil World, world CPO production increased by 1% to 45 mn ton in FY10. This year, CPO production is expected to grow slightly by around 1% as supply remains tight.

Action & Recommendation:
• No changes in our forecast. We maintain HOLD recommendation on AALI with price target Rp24,500/share. Our target price for AALI is based on 16.0x PER’11. Maintain HOLD