Company update - Losing two drivers - by Liliana Bambang
(LSIP IJ / LSIP.JK, UNDERPERFORM - Downgraded, Rp3,400 - Tgt. Rp3,100, Plantations)
We see a lack of catalysts for Lonsum from two of its businesses, rubber and seedlings. Rubber prices have been hit by sluggish auto demand coupled with more price-competitive synthetic rubber. The seedling business is likely to soften in the next few quarters as not much new plantings are being planned. We downgrade Lonsum to UNDERPERFORM from Neutral with a lower target price of Rp3,100 (from Rp3,200) following our earnings reductions of 1-4% for FY08-10. For exposure to regional planters, we recommend a switch to Indofood Agri for its better trading liquidity and purer exposure to CPO.
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