Pricey acquisition “pays”
Our scenario analysis on London Sumatra (Lonsum) goodwill put uncertainty in Indofood (INDF) earnings as there is a possibility of full impairment should Lonsum is valued at EV/ha of US$3,459. At present, we value domestic plantation at a range of between US$3,020-8,318/ha while replacement cost at US$5,000/ha. We also estimated Rp617bn forex loss in FY08F, leading to net profit of Rp1.1tn (+8.4% yoy, 25.0% below consensus estimate). We re-initiated coverage on INDF with Sell recommendation based on target price of Rp840/share, implying PER09F of 8.5x.
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