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Rabu, 24 Agustus 2011

BWPT Promising growth = AAA

We initiate our coverage on BWPT with a BUY recommendation on the back of: i) its potential continuous prime age mature trees profile which would ensure higher FFB yield among peers; ii) combining innovation and taking up best practice of plantation management to maximize profitability. We set our target price at 12.4x PE or Rp1,331/share, offering 13% upside potential. BUY.

Sustainable prime age trees
BWPT has enjoyed a high yield of FFB for the last 2 years, with 27.4 and 26.4 ha per tonne. Now, average mature trees are 9.8 years, still on peak producing age of palm oil trees. While onward, immature estate (67% of total planted area) will be gradually converted into mature estate. This, will ensure a continuous high production of FFB until at least the next decade. Not quite up there, new planting plan are intensified until 2014 aiming on around 93,860 ha of mature area by the end of 2018. On our calculation, this would keep the average FFB yield on minimum 22 tonne per ha each year until 2018, still higher than other peers like AALI or LSIP.

Running an effective plantation management
Management combines innovation and remain adopting best practice of plantation management commonly used in the industry. Mechanized plantations, is likely going to be running on BWPT plantation estate in the future. Company confirms running mechanization of harvesting and fertilizing process can improve BWPT’s efficiency cost as well as maximize profitability.

Solid 1H11 result to drive optimist forecast
1H11 results were impressive. Revenue grew 73% yoy, driven by higher sales volume as well as higher average selling price of CPO and PK. Better cost management prolonged in 1H11, resulted on 98.8% yoy gross profit increasing. Our forecast for 2011F revenue is to grow 25% with gross margin rise 66%.

Initiating coverage with BUY recommendation
We derived BW’s fair value with 10-year DCF valuation at Rp1,331/share, implying 12.4x PE 2012F, 7.7% premium to average regional plantation companies. We believe our valuation is justified given its potential growth, high yield and robust profitability margins.

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