Corporate Result Flash BW Plantation - Bahana

1Q11 performance
§ BWPT reported 1Q11 net profit of IDR54b, down 47% q-q but up 68% y-y, representing 16% of our full-year 2011 net profit, below our estimate as we expect lower contribution in the following quarters on lower CPO prices.
§ 1Q11 FFB production reached 111k tons, down 13% q-q but up 51% y-y, allowing 1Q11 CPO sales to reach 18k tons, up 11% y-y. Overall, higher production and ASP allowed 1Q11 revenue to jump 56% y-y to IDR172b.
§ Note that BWPT’s untimely sales in 1Q11 contributed to negative q-q ASP growth in 1Q11. BWPT’s inventory of around 8k tons also limited BWPT’s 1Q11 earnings growth.
§ It is worth highlighting that BWPT’s gross profit expanded to 72% in 1Q11 on the back of lower fertilizer usage. Hence, BWPT’s 1Q11 operating margin slightly fell to 53% versus 54% in 4Q10 on one-off bonus expense.

Outlook
We will revisit our numbers and assumptions on BWPT’s lower than expected 1Q11 results. However, we believe that as a company, it continues to deliver the strongest margin and has the strongest long-term growth story in the sector. Therefore, its outlook remains promising in our view.

Recommendation and valuation
BWPT’s valuation on 2011 PE of 14.7x is reasonable in our view, given that its PEG of 0.5x is 47% below the sector’s 1.0x. At our TP of IDR1,500, BWPT would be on 2011 PEG of 0.6x, still a 40% discount to the sector. We reiterate our BWPT as our top pick in the sector. BUY.