[BRIGHT INFO] Our Focus Indofood from MILK

We are positive development for Indofood (INDF IJ), who acquired milk company Indolakto at the beginning of 2009.

Now, after acquiring Indolakto for US$350mn in Dec08, the company could enjoy more lucrative margin.

INDF:IJ Chart

It could benefit from higher EBIT margin from manufacturing dairy products. Indolakto would boost EBIT as INDF can enjoy the high margin from product manufacturing compared with previously, only enjoying small margin through distribution subsidiary.

Indolakto revenue grew at average 28.8% yoy for the last two years while Indonesia has great market potential as dairy products consumption per capita is still much lower compared with its neighboring countries.

We think some analysts have been negative on the Indolakto acquisition because of the in-appropriate timing (tight liquidity, high borrowing costs, risks on the Rp/US$).

JAKCONS:IND Chart

We included some recent developments with positive implications for Indofood, strong CPO price, rupiah strength, maintaining their selling price for both flour and noodle products and an easing of the crowd-out effect from bond.

We have seen that Jakcons Index continues to strengthen with TP 405 index.












Maintain Buy Recommendation TP idr 1680 with 14.2x PE’09 (discounted from PE Rolling 19.9x)

[Personal Opinion ]
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DISCLAIMER: This report is issued by [BRIGHT INFO]. Although the contents of this document may represent the opinion of [BRIGHT INFO]. We cannot guarantee its accuracy and completeness.