Mansek London Sumatra:1H10 results were within ours and consensus estimates (LSIP,Rp9,300,Buy,TP:Rp10,200)

LSIP reported 1H10 net income of Rp418bn (+45.7% yoy), represented 44.5% of our FY forecast and and 44.3% of consensus estimates. These results were within our expectation. Historically, 1H net income in 2006, 2007 and 2009 represented between 30% and 41% of FY net income.

Revenue increased by 8.3% yoy. 2Q10 revenue was higher than 1Q10 by 30.3% qoq. Operating margin in 2Q10 reached 38.1%, which improved from 34.3% in 1Q10, it is higher than our target for FY10 of 35.3%.

COGS decreased by 3.3% yoy mainly due to decrease in upkeep and cultivation cost from Rp150bn in 1H09 to RpRp125bn in 1H10, which mainly due to lower fertilizer application in 1H10, therefore we expect the upkeep and cultivation cost will increase in 2H10.

There is a cost-saving initiative by reducing lavish bonus payment to employees, which paid in 1H. It results a decrease in remuneration and employee benefit expenses in G&A from Rp123bn in 1H09 to Rp108bn in 1H10.

At current price, LSIP is trading at 2010F and 2011F PER of 13.3x and 11.9x. We maintain our BUY recommendation on the counter.