DBS Indofood Sukses Makmur: Rec - TP under review; Rp3,975; INDF IJ

4Q09 ahead of expectations
At a Glance
• FY09 net profit doubled y-o-y to Rp2,075.9b, ahead of expectations
• Strong growth was led by Rp731.0b FX gain; core net profit grew only 19.2% y-o-y to Rp1,727.1b.
• Net gearing improved to 80.5% from 96.9% in 3Q09
• Recommendation and TP under review

Comment on Result
FY09 net profit of Rp2,075.9b (+100.7% y-o-y) was ahead of our Rp1,902.2b forecast, boosted by Rp731.0b FX gain (vs Rp713.1b FX loss in 2008),. Revenue was 10% below at Rp37,140.8b (-4.3% y-o-y) due to smaller agribusiness contribution on lower CPO prices and smaller Bogasari contribution following a cut in selling prices (despite stronger IDR). But gross profit grew 12.8% due to lower input costs following stronger-than-expected IDR. The group also reported higher-than-expected interest income on higher cash balance than anticipated.
4Q09 net profit fell 35.6% q-o-q to Rp500.0b on lower gross profit, higher ‘other expenses’, and higher taxation (effective rate rose to 30% from 25% in 3Q09). The drop in gross profit was smaller at 16.1% q-o-q, mainly because of a 10.5% q-o-q drop in revenues on lower volumes in most segments (except dairy, snack foods and plantation). Gross margin dipped 1.8ppt to 26.9% in 4Q09. ‘Other expenses’ also rose 74.6% q-o-q to Rp153.9b and FX gain fell 49.6% to Rp129.4b.
Group net gearing (incl. ST Investments and MI) improved to 80.5% (from 96.9% in 3Q09), due to higher cash balance than anticipated, lower debt level, and a stronger equity base.

Recommendation
We are retaining our financial forecasts pending a review of our forecasts for IndoAgri (IFAR). Our recommendation and TP are under review.