CIMB Ramayana Lestari Result note - 2Q should be better

Ramayana Lestari Result note - 2Q should be better - by Erwan Teguh
(RALS IJ / RALS.JK, OUTPERFORM - Upgraded, Rp445 - Tgt. Rp560, Consumer)

Ramayana's FY08 net profit of Rp430bn, up 17.2% yoy on 12.9% sales growth and 6.5% same-store growth, was in line with consensus and our forecasts. But higher operating expense suggests a challenging cost-control environment for 2009. Consequently, we trim our FY09 EBITDA margin estimate from 9.7% to 9.4% and cut our earnings estimates by 2-3% for FY09-10. That said, the share price appears to have priced in a 22% earnings decline for FY09, which has not occurred before. Such extreme pessimism is one reason we have lifted the stock to Outperform from Neutral with an unchanged DCF target price of Rp560 (WACC 15.8%, LTG 4.9%).