Improved sales outlook. This year, the company expects its sales to grow by 13% - 14% yoy compared with 12% yoy last year as it believes that the sales of energy drink has levelled off (the sales for energy drink is reported to improve in 4Q08 vs -39.2% qoq average in the previous three quarters). Amid the current unfavorable economic condition, demand for nutrition and ethical products will remain resilient (both took up around 50-55% of the total sales and has grown by 16% and 21% CAGR, respectively! for the past three years), hence any recovery in sales from energy drink will make the targeted sales growth of 13% yoy easy to achieve, in our view. We therefore upgraded our sales growth assumption from previously 10% yoy to 12.6% yoy.
Upgrade TP to Rp600/share. We upgraded our forecast on KLBF on the back of higher sales growth and gross margin. We arrived at net profit of Rp749bn for FY09, an increase of 26.9% from our previous forecast. At the current price, KLBF is trading at 18.0% premium over the market PER compared with at-par valuation for its peers (during 2008, KLBF was also traded at par valuation to the market). Given KLBF’s lower size and EPS growth than its peers and the lingering risks over the company’s performance t! his year, such premium is unjustified, in our view. We believe the stock should be traded at 20% discount to the market, thus resulting in a new TP of Rp600/share at targeted market PER of 10.0x (vs TP of Rp355/share previously). Upgraded to neutral.
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