DBS AALI FULLY VALUED Rp12,100

Our recent visit to Astra Agro Lestari (AALI) indicated that its 2008 net profit might be slightly ahead of our forecast. AALI might also have to consider external funding for capital expenditure because it expects lower cash levels this year. We raised FY09F and FY10F EPS by 47.9% and 14.8%, respectively, after imputing weaker IDR rates. Consequently, our target price is raised to
Rp7,175, based on 10.8x FY09F EPS. Maintain Fully Valued.

4Q08 net profit down q-o-q. Despite this, we estimate 4Q08 revenue from CPO and PK sales at Rp1.4tn, bringing full year revenue from these products alone to Rp7.5tn. Including contribution from other divisions, FY08E revenue could be slightly ahead of our expectations, as will net profit.

Cash remains a concern. AALI expanded its planted area by over 22,000 hectares last year. But it has not decided on its expansion plan for this year, pending further analysis of its cash flow situation. We are retaining our assumption of 25,000 ha expansion this year, but we now expect the group to take on Rp500b new debt to fund its capex.

EPS raised on weaker IDR. After imputing 6.0-14.9% weaker IDR rate for FY09F and FY10F, we raised EPS by 47.9% and 14.9%, respectively. Hence, our target price is raised to Rp7,175, based on 10.8x FY09F PE (upgraded from 7.0x given AALI’s large capitalization).