DBS Astra Agro Lestari: Fully Valued; Rp23,200; TP Rp20,425; AALI IJ

Astra Agro Lestari’s 1QFY10 CPO sales in line with expectations

In its latest Investor Bulletin, Astra Agro Lestari announced 1QFY10 CPO sales reached 223,308 MT (-1.2% y-o-y). This represented c.20.9% of our full year target and is within expectations (1Q volumes have historically represented 20-22% of full year number). PK sales, however, dropped by 16% q-o-q to 29,740 MT – slightly below forecast. We expect PK sales to pick up in subsequent quarters, owing to Palm Kernel Oil price’s recovery y-o-y. The group’s average CPO ASP for the quarter was Rp6,544/kg (+19.1% y-o-y); while PK price jumped 46% y-o-y to Rp3,083. Exports accounted for 11.1% of sales.

We are currently reviewing our forecasts to account to Rupiah’s strength and potentially lower smallholders’ production volumes this year, although any revisions are unlikely to be significant. We are maintaining our Fully Valued call with TP of Rp20,425. We believe Astra Agro’s limited plantable reserves would limit its expansion and volume growth going forward, despite efforts to intensify yields.