Mansek Astra Agro Lestari:takeaway from a company visit (AALI,Rp21,250,BUY,TP:Rp24,500)

Although its 1H10 CPO production decreased by 5.7%yoy,AALI still maintains its FY10F CPO production similar to that recorded in FY09.

AALI indicated that its COGS in 1H10 increased by 6%yoy,which we believe was due to newly matured plantation (please note that newly matured plantation was recorded at 12,882 ha in 1Q10 (an increase of 9.2%from FY09).

The cost (fertilizer,maintenance,etc)of newly matured plantation is charged to income statement (while for immature plantation it is capitalized).Meanwhile,the productivity of newly mature plantation is still low around 10 ton FFB/ha compared to its average productivity of 22 ton FFB/ha.

We estimate AALI ’s 1H10 net income will decrease by around 6%-10%yoy.
Currently,AALI trades at PE FY10F and FY11F of 15.3x and 13.1x.