PT BW Plantation Tbk High Production - AAA

Amidst lower ASP and sales qoq, AALI 1H11 overall performance is still good with sales jumped 50.6% yoy to Rp5.9 tn in 1H11 from Rp3.5 tn in 1H10. The net profit 1H11 is almost double (99%) compared to 1H10. Therefore, we maintain our BUY recommendation for AALI with TP Rp29,513.

± Sales Recorded Impressive Result YoY, Albeit Some QoQ Fluctuation.
Despite lower sales qoq, AALI still recorded an impressive results yoy. On quarterly basis, CPO price experienced an opposite trend in the 2Q11 compared to 1Q11 with ASP decreased 3.2% qoq to Rp8,013/kg 2Q11 from Rp8,278/kg in 1Q11 resulting in 8.4% lower sales of Rp2.53 tn (from Rp2.76 tn qoq). However, the net profit slightly increased 1.4% qoq to Rp663 bn from Rp654 bn due to the decline in other losses (plasma plantation development and foreign exchange loss)

On a yearly basis, the ASP yoy was still strong. The CPO ASP in 1H10 was Rp6,590/kg and in 1H11 was Rp8,013/kg, or increased 21.6% yoy. The PK ASP jumped 82.4% yoy from Rp3,356/kg in 1H10 and Rp6,122/kg in 1H11. This affected the derivative PK product ASPs like PKE and PKO to soar 76.5% yoy and 125% yoy, respectively. Taking into account the usually higher FFB production in the 2nd half of the year, we foresee that CPO price should somewhat stabilize at the current level.

± More Mature Plantation Area by 17,000 ha in 1H11.
AALI FFB production jumped 20.2% yoy to 2,192,837 tons in 1H11 (1H10 1,824,649 tons) while it increased 15.9% qoq to 1,015,522 tons in 2Q11 (1Q11 841,893 tons). The increase production was due to more mature plantation area that reach 220,950 ha as of 1H11, compared to 1H10 was 207,846 ha (up 6.3% yoy). The friendly weather was also the factor that pushed up the yield by 15.7% yoy from 8.59 tons/ha in 1H10 to 9.94 tons/ha in 1H11. Some concern remains though regarding the new planting and replanting as AALI has only planted new area of 669 ha and replanted 249 ha in 1H11.

± Valuation
The result of 1H11 was in line with our estimation and maintained our BUY recommendation at a new TP of Rp29,513. The latter slightly above the previous TP due to some minor adjustment in our calculation. Our TP implies PE of 17.6x, which is still lower than AALI historical PEs (FY09 21.5x and FY10 20.5x). Our TP provides an upside potential of 36% from the current price.