Indopremier BISI MAINTAIN BUY, UPGRADE TP to Rp 2,405

We Maintain our BUY recommendation for BISI and upgrade our TP from Rp 1,940 up to Rp 2,405 considering the prospect for hybrid seeds that remain strong in our view especially come from rice/paddy seeds. Hybrid seed price remain robust given yield advantage. While for Corn we expect that peak harvest would occur in late second half 2009. We adjust some key base assumptions, risk factor and tax rate into our DCF valuation model, resulting earning revised up by 5.5% and 5.1% in 2009F and 2010F.

Hybrid Seeds Prospect Still Promising..
Based on Ministry of Agriculture RI, production CAGR of hybrid rice seeds until 2014 would reach 35.28% which is a good point for BISI long term’s prospect. However, our view and assumption are remain above since we are quite optimist with the hybrid rice seed trend considering the hybrid seed utilization in Indonesia is low compare to peers.

BISI has developed 33,000 ha per Q109 which grew by 36.8% CAGR since 2003. Total farmers have increased up to 108,000, grew by 37% CAGR from 2003 with only 16,300 farmers.

Q109 result not too bad, Corn harvesting peak season estimate occur in late second half 2009
BISI Q109 performance result was not too bad, in our view. Hybrid rice seeds surged up more than expected around 409% YoY to 530,058 kg or realized 29.4% our previous assumption. Hybrid corn seed was the most dampened sales among others down by 71.4% YoY to 2,960,496 tons or realized 10.4% of our original assumption. However based on management guideline, falling corn sales volume in Q109 was due to weather issue. Peak corn harvesting will occur in second semester this year, which we expect it would help to accomplish our estimates. Other products seem dropped modestly and realized our estimates at modest range 18 – 22%., which more predictable.

Rice and Vegetable Seeds growth still strong & kept on track
Sales of rice seeds in 1Q09 grew by 409% YoY up to 530,058 kg and vegetable seeds also booked up to 566,088 kg or grew by 51.7% YoY, which have realized 29.4% and 28.3% of our FY09 old estimates respectively. As seen in exhibit 2, we view that the sales cycle for vegetable and rice seeds would remain on track and are expected to soar in 2Q onwards. While ASP for vegetable seeds was quite volatile and unpredictable, which have surged up to Rp 95,287 per kg as seen in exhibit 3. Corn and rice seeds price are considerably stable.

Maintain BUY upgrade TP to Rp 2,405
Based on our new assumption, our DCF model with WACC 16% arrive new TP at Rp 2,405 per share implying PER09F at 25.5x and PER10F 15.29x. TP at Rp 2,405 offers additional potential upside of 20.8%. Currently BISI price at Rp 1,990 traded at 21.1x PER09F and 12.7x PER10F. Our previous TP at Rp 1,940 has been reached and we still see that currently BISI still traded at attractive price by focusing on 2010F valuation with implied PE of 15.2x (which we estimate that JCI at bullish market in 2010 PE may reach at range 14-15x as well). We maintain our BUY recommendation for BISI.