Vera has just written a report on BW Plantation (BWPT IJ), a well managed plantation estate with good FFB yields (outstanding 24.7t/ha FFB in 2009, though we expect this to decline going forward). The stock still looks attractive at US$8,800EV/ha and 10.1x 2011 PER, one of the cheapest plantation stocks in the industry.
Key points from the report:
BWPT is a well managed plantation with significant potential growth. Mature hectare will grow by 32% CAGR until 2013, lifting FFB production to 700k tonnes, doubling last year’s production.
The company plans to plant around 10,000 ha of additional palm oil area every year which will require around Rp400-500bn of investments. With the aggressive expansion plan, total planted area should double the current size by 2013.
Edible oil structural outlook supporting CPO price. Demand for CPO remains strong, while unfavourable weather condition in several key edible oil producing countries will disrupt supply. In addition, CPO price looks very attractive from technical analysis point of view. In US$ term, it has just broke its resistance after a long term consolidation.
Our target price is Rp1,100, based on blended valuations of 13,000 EV/ha and 11x 2011 PER.
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