Corporate Result Flash Astra Agro Lestari - Bahana

1Q11 performance
§ AALI reported 1Q11 net profit of IDR654b, down 17% q-q but up 140% y-y, representing 26% of our full-year 2011 net profit, in line with our estimate as we expect lower contribution in the following quarters on lower CPO prices. Note that our 2011 bottom line is some 6% below consensus.
§ 1Q11 nucleus FFB production reached 791k tons, down 17% q-q but up 21% y-y, allowing 1Q11 CPO production to reach 275k tons, up 26% y-y. However, 1Q11 purchased FFB of 431k tons still represented 35% of total processed FFB, unchanged over 4Q10 level. Overall, higher production and ASP allowed 1Q11 revenue to jump 69% y-y to IDR2,765b.
§ It is worth highlighting that AALI’s gross profit contracted to 39% in 1Q11 on the back of higher fertilizer volumes, costs and 17k ha in new matured area. Hence, AALI’s operating margin fell to 33% versus 39% in 4Q10.

Outlook
As a pure CPO producer, our sensitivity analysis shows that every 10% lower CPO price will cut AALI’s bottom line by 23%. As CPO price has fallen 12% ytd, we expect AALI’s ytd market underperformance (exhibit 4) to persist. Note that in 2012, we expect AALI to book virtually no top and bottom line growth as CPO price will average lower compared to 2011’s level.

Recommendation and valuation
AALI’s valuation is unexciting on 2011 PE of 14.7x, 10% premium to the sector, while its PEG of 1.3x is 44% above the sector’s 0.9x. At our TP of IDR25,000, AALI would be on 2011 PE of 14.6x, 13% premium to the sector, reflecting its big market cap and liquidity. However, with just 9% upside potential to our TP, AALI is a HOLD. We prefer BWPT as our sector pick.