CIMB Initiating Coverage – Indofood CBP – Premium meal

Initiate with TRADING BUY and target price of Rp6,500 for FY11. ICBP benefits from robust market appetite for consumer stocks and strong expected 3Q results, which provide near-term buffers. In the mid term, ICBP may supplement sub par organic growth with acquisitions. Therein lie risks, as the group has proven to be a fearless acquirer, willing to pay significant premiums. Its premium valuations, despite it being effectively just a manufacturing unit of Indofood, are justifiable only if it produces above average growth, in our view. We initiate coverage on ICBP with a TRADING BUY call and an FY11 DCF-based target price of Rp6,500 (WACC 12%, LTG 5%), implying earnings of 22x for FY11 and 21x for FY12 and EV/EBITDA of 11x for FY11 and 12x for FY12.