CIMB London Sumatra Result note - A turnaround year

(LSIP IJ / LSIP.JK, OUTPERFORM - Maintained, Rp9,250 - Tgt. Rp11,200, Plantations)

Maintain Outperform on Lonsum. FY09 core profit was Rp691bn, -24% yoy on Rp3.2tr sales, down 17% yoy. Core profit made up about 100% of our estimate but was 5% ahead of consensus. Higher yoy sales were largely driven by non-palm products and better margins, with the impact offset by higher opex, interest burden and taxes. Higher capex (by some Rp200bn) and the repayment of debt in 4Q09 resulted in an end-2009 cash balance of Rp682bn vs. our estimate of Rp900bn. We are leaving our FY10-11 earnings estimates unchanged, pending further analysis as details become available. We also maintain our target price of Rp11,200, based on 15x CY11 P/E. 2009 was a turnaround year, as reflected in much improved margins and cash flows. We expect further operational improvements to provide share-price catalysts, as well as buoyant CPO prices. Near term, better-than-expected dividends could also be catalysts, with payout currently assumed at 30%.