Pending 2Q results, at Rp9,150- LSIP is trading on 13.8x-14.9x 2010F-11F PER and in line to Target Price Rp9,200 (based on 13.9x 2010F PER and 15x 2011F PER). we recommend Hold LSIP and Prefer IFAR SP!
· Teddy Oetomo (Daily attached): The current heavy rainfall may curb FY10E productions due to potential logistic disruptions, though likely to be favourable for FY11E output yield. We cut our FY10E CPO output by 2.7% but increase FY11E output by 2.7%. We tweak up our FY10E earnings by 1.4% (on higher CPO price but lower output), tweak down FY11E earnings by 3.4% (on lower CPO price but higher output).
· LSIP is currently trading merely at a 3% discount to IFAR, based on 2011E P/E. Given the higher quality of IFAR’s standalone plantation, combined with its higher daily traded value, we prefer IFAR over LSIP. We downgrade LSIP from Outperform to NEUTRAL given softer CPO price outlook. We reduce our target price for LSIP from RP10,800 to Rp9,213. Our target price for LSIP implies 13.9x 2010E P/E and 15x 2011E P/E.
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