(SGRO IJ / SGRO.JK, OUTPERFORM - Maintained, Rp2,575 - Tgt. Rp3,700, Plantations)
Maintain Outperform and target price of Rp3,700 for SGRO, based on 15x CY11 P/E. Our recent visit clarified what appeared to be weak FY09 results - not as bad as suggested by the headlines - and its investment in sago which should be completed by 1Q10. Palm-oil expansion plans are aggressive, at 72k Ha for the next five years. We still like the company's strategy, arguably still the most comprehensive among the listed agribusinesses. We lower our FY10 earnings by 6% to reflect higher opex assumptions, adjust FY11 estimates a little and introduce FY12 forecasts. We see stock catalysts from better-than-expected CPO prices and production and more light shed on the sago investment.
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