CIMB Kalbe Farma Company update - Exuding confidence

(KLBF IJ / KLBF.JK, OUTPERFORM - Maintained, Rp1,290 - Tgt. Rp1,900, Healthcare)

We maintain our Outperform rating on Kalbe, earnings estimates and end-CY10 target price of Rp1,900 (DCF at WACC 14.5%, LTG 8%), implying 14.3x and 11.6x of CY10-11 EPS. We believe improving purchasing power and margin expansion from both lower input cost and currency strength should propel Kalbe's earnings growth to 23-39% over the next three years, from 2% over the past three. Additionally, we believe cash generation post-debt repayment and the Enseval tender offer may offer upside surprises. Potential catalysts could come from a possible placement on the treasury shares it has been accumulating since 1Q07. We believe the placement proceeds will be used for another acquisition of a pharmaceutical-related business.