CIMB Astra Agro Lestari Quick takes - A closer look at costs

(AALI IJ / ALII.JK, OUTPERFORM - Maintained, Rp22,650 - Tgt. Rp29,200, Plantations)

Reiterate Outperform on AALI with an unchanged target price of Rp29,200, based on 18x CY11 earnings. We have examined AALI's costs and are even more convinced that its cost trend should be benign over the next three quarters, unless fertiliser prices shoot up by June (a low probability) and production does not grow (if so, CPO prices are likely to move up, offsetting lower production). No change to our earnings estimates. If production should start to improve in April, we see a potential share-price catalyst. Given that it is a widely held stock and there could be imminent consensus earnings downgrades, AAL may continue to face selling pressure. We'll take this as a buying opportunity.