Despite below-than-expected 2008 results, SGRO still managed to book satisfying result with 43.1% YoY sales growth reached Rp 2.28 tr and net income growth of 104.3% YoY up to Rp 439.5 Bn. Those were respectively 4% and 12% below our estimates versus 4.2% and 8.7% below consensus. While the main differentiated factors were the COGS was 2% above our estimates or rose by 37.1% YoY. Total CPO production in FY08 reached 265,468 tons or grew by 8% YoY and CPO sales volume rose by 31% YoY reached 287,164 tons
Valuation and Projection
Based on our new revised key base assumptions, using our DCF valuation model with WACC of 19.5%, We derive a fair value (TP) of Rp 1,400 per share implying an upside of 10% from last traded price of Rp 1,270. SGRO now is trading at its historical PER of 6.3x (exhibit 3). While based on our EPS 09F SGRO PER traded at 9,5x versus consensus estimate PER 09F of 9,6x above our implied JCI at 8.37x (consensus’s EPS has dropped to Rp 133 from Rp 153 inline with our estimates).
In conclusion, we view that commodity sector has come into stable level and global economic crisis is under controlled. However, current market recovery is in its early stage, susceptible and sensitive to any negative global or regional market sentiment. Hence, we remain neutral on CPO sector. We maintain our HOLD recommendation for SGRO with TP of Rp 1,400 implying PER of 10.5x
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