DBS Astra Agro Lestari: Fully Valued; Rp24,650; TP Rp20,425; AALI IJ

CPO production down 20.3% m-o-m to 62,611 MT

Astra Agro Lestari (AALI) reported a 20.3% m-o-m (-9.3% y-o-y) drop in Feb10 CPO production to 62,611 MT, from 78,524 MT in Jan. The drop was due to a 20.0% m-o-m (-10.8% y-o-y) drop in harvested FFB to 240,642 MT, leading to a 19.9% m-o-m (-13.7% y-o-y) drop in processed FFB to 263,922 MT. We believe that shorter working days was one of the factors contributing to the drop in Feb volumes, while we also understand that 1Q is seasonally the lowest level in CPO production and that 1H production usually contributes smaller than 2H production. By estates, the worst decline was reported in Sulawesi (-22.5% m-o-m), followed by Sumatra (-21.5% m-o-m) and Kalimantan (-16.3% m-o-m).

YTD, CPO production in 2M10 dropped by 4.7% y-o-y to 141,135 MT, accounting for 13% of our full-year forecasts of 1.1m MT. Similarly, the drop was due to a 5.2% y-o-y lower harvested FFB to 593,495 MT. The drop in processed FFB volumes was even more pronounced at 9.5% y-o-y, mostly reflecting lower third party purchases (-38.5% y-o-y) and lower plasma production (-20.4%) as a result of low fertilizer application in 1H09. We currently expect FY10F CPO production growth to slow down to 2.5% y-o-y from 10.3% y-o-y in FY09. Maintain our Fully Valued call and Rp20,425 TP.