CIMB Ramayana Lestari Result note - Strong cost control

(RALS IJ / RALS.JK, OUTPERFORM - Maintained, Rp570 - Tgt. Rp820, Consumer)

Maintain Outperform on Ramayana. 9M09 results are generally in line. In fact, if Ramayana can maintain its operating expense ratio at 3Q09 levels and if its gross margins do not weaken significantly in 4Q09, this set of results can be said to be 8-10% ahead of our expectations and consensus. In our forecasts, we are assuming that opex could remain under duress from higher promotion expenses in 4Q09, given still-volatile sales. This is the main reason we are maintaining our estimates. But as we roll forward to CY10, our target price rises to Rp820 from Rp750, still DCF-derived but with a lower WACC assumption of 14.3% from 15% on a lower beta, implying 12x and 9x CY10-11 earnings. Key catalysts are expected to be a sales rebound, which should occur by 1H10, as indicated by the strong uptick in the CCI and more robust commodity prices, of CPO in particular.