Quick takes - Narrowing discount - by Liliana Bambang
(SGRO IJ / SGRO.JK, OUTPERFORM - Upgraded, Rp1,240 - Tgt. Rp1,400, Plantations)
The company's unaudited CY08 revenue is below ours and consensus, due to ASP at large discount to peers in 4Q08, coinciding with period of depressed export market. But that has changed with discounts narrowing to 2-5% in recent months. A less volatile CPO price should also support margins given its 50% exposure to plasma farmers. That and its net cash cash position are reasons we view its significant discounts in EV/Ha, at 63% and 28% to AALI and LSIP respectively, unwarranted. We upgrade our recommendation to OUTPERFORM from Trading Sell with unchanged target price of Rp1,400, based on 8x CY10 earnings.
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