Indocement delivered solid FY08 result, with net profit rose 77% YoY to Rp 1.75tn, exceeding Arief's and consensus est'. On flows, investors has stopped selling Asian equities but remained cautious, and inflow into EM remained tiny; Our flow trading rule is still pointing to Neutral at this stage. CPO: India's move to scrap 20% import tax on soybean oil bodes well with Jeffrey's bearish view on CPO px.
INTP solid FY08
FY08 net profit rose 77% YoY at Rp1,746bn, 14% higher than Arief's forecast and 11% higher than consensus'. Solid results was due to combination of robust domestic sales volume growth and sharp increase in avg. domestic selling px. Revenues rose 34% YoY at Rp 9,780bn, or 8% higher than Arief's est'. Operating profit +55% YoY at Rp 2,460, or 6% higher than Arief's. INTP is a beneficiary of the next property boom cycle, which we expect to occur in 2010. INTP also has the most ample unused capacity with utilization at 85%, while peers' capacity will only come on stream at end-2012. Trades at 9.8x '09 PE with 4% EPSg, 19% RoE. Reiterate Buy PxT Rp 8,200.
CPO softness?
Investors holding SGRO, AALI, LSIP or UNSP should be aware of this: India, the world’s biggest buyer of vegetable oils after China, scrapped a 20% tax on imports of crude soybean oil to the bring duties on the commodity on par with palm oil, its main substitute. Jeffrey Ng says this implication means India is likely to slow down CPO purchase, and this development brings our expectations one step closer to reality. CPO discount to soybean oil in India will narrow to 25% (3-yr mean level) against 45% if the tax is imposed. Jeff highlighted 2 possible scenarios to CPO price: 1) Soybean oil px soars to wide the discount and this will limit CPO px’s upside. However, this will not last beyond 31 Mar '09 if US soybean planting intention increases; 2) CPO px has to fall to maintain its px attractiveness.
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