DBS Result Snapshot: Sampoerna Agro: 1Q10 earnings in line; BUY Rp2,700; Price Target : Rp3,275

* 1Q10 net profit doubled y-o-y to Rp42.8b, in line on an annualized basis; FFB volume is 11% of full year target
* New planting achieved is 915 ha; increasing stake in Nasional Sago Prima by Jun 2010
* Maintain Buy call and Rp3,275 TP

Comment on Result
Sampoerna Agro (SGRO) booked 1Q10 net profit of Rp42.8b (+219% y-o-y; -45% q-o-q), representing 11% of our full year forecast. As expected, the sequential drop translated down from a 52% q-o-q drop in revenue to Rp302.2b due to a 49% drop in FFB production volume to 191k MT and 53% drop in CPO sales volume to 38.6k MT. Based on historical trend, 1Q earnings have on occasion accounted for 10-12% of full year numbers (including last year). Hence, the annualized result is within our expectation. We anticipate group total FFB production to increase and reach 1,257.3k MT (+4% y-o-y) by the end of this year.

The lower CPO volume q-o-q was partly mitigated by a 24% jump in CPO ASP, on low-base effect. Higher rubber volume (+60% q-o-q to 129 MT) and ASP (+23% q-o-q) also helped. The group achieved 915 ha of new planting, which is only 9% of our full year target of 10k ha, due to heavy rains in 1Q10.

With ending cash of Rp315.2b and debts totaling Rp237.8b at the end of Mar10, SGRO was in net cash position. The group plans to increase its stake in National Sago Prima from 75.5% to 95% by Jun10 and commence construction of a starch plant by year end. Hence, we only expect contribution from this segment in 2012F. We have not included this contribution in our projections.

Recommendation
Our Buy rating and Rp3,275 target price are intact. SGRO remains the least expensive upstream planter in our coverage. At our target price, it would be trading at 14.9x FY11F PE, which is undemanding given anticipated 12% 3-year earnings CAGR.