Indopremier BWPT - BUY (TP Rp 800)

Good 1Q10 Results
BW posted robust 1Q result with 32.2 bn net profit, rose 15% YoY. Sales volume was below our expectation due to heavy rainfall and no third party purchase. Gross margin was also lower (60% vs 65% in 1Q09) due to ample fertilizer application. We believe this measure would safeguard yield in the coming years. We maintain our EPS forecast for FY10F, Rp51.4/share, swelling 24% YoY. Coupled with much liquidity on the share, we slashed discount to NAV and raise our TP to Rp 800, implying 15.7x PE and USD7089 EV/planted for FY10F. Our TP offers 23% upside potential. We believe BW deserves to be traded in this multiples given superior yield and margin compared to other listed plantation companies. BUY.

Retain our production target
Even though the company only achieve 16-17% of our production target in 1Q10, we still retain our forecast for FY10F. FFB and CPO output should increase in the coming months as weather becomes much more favorable. Production in March and April has shown sharp improvement compared to January-February figures.

…and also margin for FY10F
We also maintain our forecast of 64% gross and 49% EBIT margin as we raise our CPO assumption from USD750 to USD780/ton. In 1Q10, BW has secured ASP of Rp6498/kg and we assume this price level will hold throughout the year.

Mature area expands subtantially
BW’s mature area fetch 15,270 ha, 12% YoY increase. This growth is profound considering the company only added on average 2.2% mature area in 2004-2009. In 2011-2013, BW will append its mature area by 29%, 41% and 50% respectively, in our view. Assuming yield at 24 tons/ha in FY13F, FFB harvested and CPO produced should fetch nearly 1 mn tons and 232,000 tons respectively, more than double that of FY10F.