CIMB 2QFY10 Results - BW Plantation - 2H could be stronger

Maintain Outperform on BWPT. 1H10 core earnings of Rp81bn, -23% yoy and +82% qoq, form only 37% and 32% of our FY10 estimates and consensus respectively. The shortfall was due to FFB production which came in at only 44% of our FY10 estimate and higher-than-expected costs, while we would have been more comfortable with a 50% contribution from 1H10 based on seasonality. Management maintains its production-growth target of 4-5% yoy for this year, barring bad weather. This is the main reason we are maintaining our forecasts and target price of Rp950, based on 12x CY11 P/E. We expect catalysts from firmer CPO prices and production. To top it off, a more fragmented shareholding structure than peers and more attractive valuations could render BWPT an acquisition target if the industry consolidates over environmental issues, for instance. This is a mid-term probability.