CIMB Sampoerna Agro Result note - Turning around

(SGRO IJ / SGRO.JK, OUTPERFORM - Maintained, Rp2,275 - Tgt. Rp3,000, Plantations)

Maintain Outperform on SGRO. 3Q09 production was significantly up, in line with industry seasonal patterns but also because SGRO's production is usually skewed towards 2H in years ending with odd digits. 9M09 core profit forms 78-81% of consensus and our full-year forecasts. We deem the results in line, factoring in a seasonally weaker 4Q. We maintain Outperform and believe there could be three imminent catalysts for SGRO: 1) strong production over the next three quarters; 2) a higher-margin outlook as maturing trees comprise more nucleus trees; and 3) upside from seed sales. We upgrade our FY09-11 earnings estimates by 2-34% as we align our production and cost estimates. We have a higher target price of Rp3,000 as we roll over to CY10, now based on 15x CY11 P/E, an 18% discount to our P/E target for Astra Agro, in line with current trading bands. Our CY09 target price was Rp1,940 (10x CY10 P/E).