Corporate Result Flash BW Plantation - Bahana

2Q11 performance
§ BWPT reported 2Q11 net profit of IDR116b, up 115% q-q and 118% y-y, bringing 1H11 net profit to IDR171b, up 99% y-y, in line with our (52% of full-year) and consensus expectations (54% of the street’s estimate), as we expect weaker CPO price but higher volumes in 2H11.
§ 2Q11 FFB production reached 140k tons, up 26% q-q and 47% y-y, allowing 2Q11 CPO sales to reach 36k tons, up 51% y-y. Note that BWPT still has around 7k tons of CPO inventory that can be sold in 3Q11. Overall, higher production and ASP allowed 2Q11 revenue to jump 85% y-y to IDR304b.
§ It is worth highlighting that even though BWPT’s gross profit contracted to 67% in 2Q11 as a result of lower selling prices, BWPT was still able to book higher operating margin of 60% in 2Q10 as 1Q11’s performance was skewed towards one-off bonus expense.

Outlook
We believe that BWPT is on track to meet our 2011 full-year earnings target. Additionally, we also believe that the company will continue to deliver the strongest margin and the highest long-term growth in the sector. Therefore, its outlook remains promising in our view.

Recommendation and valuation
BWPT’s valuation is compelling on 2012 PE of 11.7x, 13% discount to the sector, particularly given 2012 PEG of 0.4x, 62% below the sector’s 1.1x. At our TP of IDR1,500, BWPT would be on 2012 PEG of 0.5x, still a 53% discount to the sector. We reiterate BWPT as our top pick in the sector. BUY.