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Rabu, 26 Januari 2011

Mandiri Sekuritas INDF: The golden noodle

INDF has just raised noodle ASP by 7-8% from the previous price, or effectively 11%yoy. The extent of this ASP adjustment is above our previous assumption of only 5%yoy; therefore, we upgraded INDF’s FY11F net income by +14.0%. We view that the ASP increase has answered one of the reasons behind INDF’s buyback on ICBP shares at the beginning of this month, which implicitly reflected INDF’s stronger confidence on the outlook of ICBP. Recent ownership restructuring on LSIP will also push INDF’s profit due to lower income tax rate at LSIP. We reiterated our Buy stance and upgrade TP to Rp6,000/share. The stock is trading at cheap PER11-1 2F of 12.1-10.7x.

Boosted by noodle.  This month, ICBP’s noodle ASP has increased by some 7-8% from the previous price. Because the ASP increase happened in the beginning of the year, while last increase happened in 4Q10, we calculated the effective ASP increase is 11%yoy, which is above our previous assumption of only 5%yoy. We calculated that INDF’s net income may increase by 14.0% from our previous estimate due to the noodle ASP adjustment.

A reflection of confidence in ICBP’s outlook.  At the beginning of this month, INDF bought back 26.9mn of ICBP shares or equivalent to some 0.5% of ICBP’s outstanding stake. We view one of the reasons of the buyback is because INDF has stronger confidence in ICBP’s outlook. In addition to that, the ASP increase this year is the most significant adjustment since 2009 during which the company usually did ASP adjustment by only 4-5%. In our view, this reflects the company’s optimism regarding easing noodle industry competition landscape.

Optimizing corporate structure.  INDF has just restructured its ownership in agribusiness division. From this restructuring, LSIP floating shares will be above 40.0% so that it gets 5.0% corporate income tax reduction, which will be an another catalyst for INDF’s profit. In addition, this restructuring also streamlines the corporate structure where the INDF group’s ownership in LSIP is consolidated under Salim Ivomas (previously it was split between IFAR and Salim Ivomas).

Reiterate Buy, upgrade TP. Our DCF valuation with risk-free rate of 7.8%, WACC of 11.3%, and TG of 5.0% results in TP of Rp6,000/share. We maintain Buy recommendation on INDF as it is trading at cheap PER11-12F of 12.1-10.7x. Main risks are commodity price unfavorable movement and industry competition.
Posted by Saham Pilihan at 05.11

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