Credit Suisse PT Matahari Putra Prima FY08A net income wiped out by foreign exchange loss

● MPPA reported a disappointing Rp10 bn FY09E net income, well below our forecasts of Rp172 bn and consensus estimate of Rp199 bn, due to the Rp378 bn foreign exchange loss booked in 4Q08A from its exposure on USD and JPY foreign currency swap, options and forward.
● MPPA’s FY08A sizeable forex loss undermines the operational improvement it achieved in FY08A wherein operating profit came 40% ahead of our forecasts. We increase our FY09E and FY10E operating profit estimates by 12.3% and 24.2%, respectively, but tweak our FY09E earnings estimate down by 4.2% and FY10E earnings estimate up by 3.8% on higher interest expense. Our forecast does not include any future potential foreign exchange gain (or loss) from non-hedging related financial products.
● We maintain NEUTRAL rating on MPPA and target price of Rp530 based on 16.5x 2009E P/E. While we see evidences of operational recovery, we believe that MPPA’s earnings visibility will be low due to its exposure to non-hedging related financial products.