CIMB Sampoerna Agro Result note - Higher opex, but no worries

(SGRO IJ / SGRO.JK, OUTPERFORM - Maintained, Rp2,700 - Tgt. Rp3,870, Plantations)

In line; maintain Outperform. 1Q10 core earnings form only 15% of our full-year estimate and consensus, due to weaker-than-expected FFB and CPO production (only 14% of our full-year estimates) and higher-than-expected opex. On the positive side, ASPs for CPO and seeds improved 24% and 5% yoy respectively. We maintain our earnings estimates, Outperform rating as well as target price of Rp3,870, still based on 15x CY11 earnings. We continue to believe in three strong catalysts for SGRO: 1) strong production over the next three quarters; 2) higher margins as maturing trees will come more from nucleus rather than plasma estates; and 3) upside from seed sales.