FOCUS London Sumatra Company Update 7 May 2014

Transcription

1 FOCUS BW Plantation Company Update 25 April 2014 FOCUS London Sumatra Mandiri Sekuritas Analyst Hariyanto Wijaya, CFA, CPA SECTOR: PLANTATION BUY Current Price Rp2,375 Price Target Rp3,200 (+34.8%) 52-Week range Rp1,000 - Rp2,450 Stock Data Bloomberg Code LSIP IJ Mkt.Cap (Rpbn/US$mn) 16,204.3 / 1,407.0 Issued Shares (Mn) 6,822.9 Avg. Daily T/O (Rpbn/US$mn) 74.5 / 6.5 Major shareholder Salim Ivomas Pratama 59.5% Public 40.5% EPS consensus Mansek Cons Diff 2014F F F Share price performance 3m 6m 12m Absolute (%) Relative to JCI (%) Strong 1Q14 results. Potential positive surprise from seed. Inline with our view when we upgraded LSIP to BUY on 29 Aug 13 (report newly mature curbs FY13 profit, to bear fruit in FY14 when LSIP was traded at Rp1,350), LSIP s operating margin expanded sizably in 1Q14, the highest increase among plantations under our coverage. LSIP booked strong 1Q14 results and we think recovery in lucrative seed business should boost operating profit in coming quarters. We reiterate BUY with TP: Rp3,200. Strong 1Q14 results (+109%yoy). LSIP s operating margin expand sizably, the highest increase among plantation companies under coverage. LSIP s 1Q14 net income of Rp212bn (+109.7%yoy), which is slightly above expectation as 1Q represents 19.2% and 22.8% of ours and consensus FY. Historically, on average its 1Q represents 18.8% of FY). Its operating margin expands (from 12.8% in 1Q13 to 23.6% in 1Q14) the most among plantation under coverage, which is inline with our expectation as we expect its FY12 & FY13 newly mature would start to contribute profit since FY14. Analyzing the components of operating profit, its 1Q14 operating profit from CPO improved by 467.5% yoy, but the significant improvement was partially offset by very slow seed sales in 1Q14 (see Figure 8). Due to slow seed sales in 1Q14, contribution seed to consolidated operating profit decreased from 37.9% in 1Q13 to just 1.5% in 1Q14 (seed s operating profit: Rp4.6bn in 1Q14 vs Rp44bn in 1Q13). Recovery in lucrative seed business should boost operating profit in coming quarters. Although contribution from seed sales to revenue less than 5%, the contribution of seed business to consolidated operating profit quite significant because seed business is a lucrative business, which may generate operating margin around 70% vs CPO around 30%. LSIP booked very slow seed sales of 1.08mn seeds in 1Q14 vs 4.62mn seeds in 1Q13. We believe management guidance on seed sales volume of 12 mn up to 14 mn seeds for FY14 is achieveable. Recovery from slow seed sales in coming quarters should boost consolidated operating profit. Fine-tune seed sales assumption. Reiterate Buy with TP of Rp3,200. We fine-tune seed sales assumption from 15mn seeds to 12.5mn seeds. We reiterate Buy with TP of Rp:3,200, which is based on PE Target of 15.5x applied to our FY15 EPS forecast (+0.1 SD to 8-year mean). FINANCIAL SUMMARY EBITDA 1,570 1,302 1,744 2,180 2,282 Net Profit 1, ,101 1,415 1,476 Fully-Diluted EPS (Rp) Fully-Diluted EPS Gr. (%) (34.4) (31.1) P/E Ratio (x) EV/EBITDA (x) P/B Ratio (x) Dividend Yield (%) ROAE (%) Source: Company ( ), Mandiri Sekuritas ( ) Please see important disclosure at the back of this report Page 1 of 7

2 London Sumatra At a Glance FIGURE 1. SALES BREAKDOWN, 2014F FIGURE 2. OPERATING PROFIT BREAKDOWN, 2014F Palm products 88% Rubber 7% Palm products 81.9% Rubber 3.7% Seed 4% Others 1% Seed 14.3% FIGURE 3. NUCLEUS OIL PALM PLANTED AREA FIGURE 4. PROFITABILITY COMPARISONS, 2014F (Ha) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 FY11 FY12 FY13 FY14F FY15F FY16F 60% 50% 40% 30% 20% 10% 0% AALI BWPT LSIP SGRO Mature Immature Gross margin Operating margin Net margin FIGURE 5. EPS GROWTH TREND FIGURE 6. LEVERAGE TREND (Rp) FY11 FY12 FY13 FY14F FY15F FY16F 80% 60% 40% 20% 0% 20% 40% 60% (x) FY11 FY12 FY13F FY14F FY15F FY16F 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% EPS (LHS) EPS Growth (RHS) Net gearing (RHS) Interest coverage (LHS) Please see important disclosure at the back of this report Page 2 of 7

3 FIGURE 7. LSIP BOOKED STRONG 1Q14 RESULTS DESPITE SLOW LUCRATIVE SEED BUSINESS IN 1Q14 LSIP 3M14 Results Rp bn 1Q14 4Q13 QoQ (%) 3M14 3M13 YoY (%) Our FY14% of FY14F FY14F Cons % of Consensus Avg 1Q to FY in the last 5 years Revenue 1,280 1, , , , Gross profit (12.5) , n.a n.a Operating Profit (31.0) , , Pretax profit (32.1) , , Net profit (net of MI) (35.0) , Gross margin % n.a. Operating margin % Pretax margin % Net margin (net of MI)% Production volume: FFB nucleus (ton) 308, ,811 (19.4) 308, , FFB external (ton) 124, ,950 (20.0) 124, , FFB processed (ton) 432, ,728 (19.9) 432, , % FFB from external 28.9% 28.9% 28.9% 29.5% CPO (ton) 100, ,337 (19.3) 100,330 88, PK (including PKO) (ton) 24,244 30,309 (20.0) 24,244 20, Rubber (ton) 3,569 3, ,569 3, Sales volume: CPO (ton) 113, , , , PK (including PKO) (ton) 24,299 31,229 (22.2) 24,299 22, Rubber (ton) 3,266 2, ,266 3, OP seed sales vol (ths seeds) 1,087 2,824 (61.5) 1,087 4,620 (76.5) Source: Company FIGURE 8. STRONG CPO OPERATING PROFIT GROWTH IN 1Q14 WAS PARTIALLY OFFSET BY SLOW SEED SALES IN 1Q14. RECOVERY IN SEED SALES BUSINESS IN COMING QUARTERS SHOULD BOOST LSIP S CONSOLIDATED OPERATING INCOME. Rp bn 3M14 3M13 YoY (%) Revenue CPO 1, rubber (2.2) seed (71.9) others 5 7 (28.9) CONSOL 1, Operating profit CPO rubber 8 18 (56.4) seed 5 44 (89.5) others (61) (7) CONSOL Composition of operating profit CPO 116% 53% rubber 3% 15% seed 2% 38% others -20% -6% CONSOL 100% 100% Seed business OP seed sales vol (ths seeds) 1,087 4,620 (76.5) Source: Mandiri Sekuritas analysis We believe company guidance on seed sales volume of 12mn up to 14mn seeds in FY14F is achievable Please see important disclosure at the back of this report Page 3 of 7

4 FIGURE 9. LSIP PROFIT MARGINS EXPAND THE MOST AMONG PLANTATION COMPANIES MOSTLY BECAUSE ITS FY12 & FY13 NEWLY MATURE START TO CONTRIBUTE PROFIT SINCE FY14 1Q14 1Q13 Change Gross margin (%) AALI BWPT In audit process LSIP SGRO SSMS Source: Company, Mandiri Sekuritas Operating margin (%) AALI BWPT LSIP 23.6 In audit process SGRO SSMS FIGURE 10. NEWLY MATURE PLANTATION USUALLY GENERATE LOSS BECAUSE IT STILL GENERATE LOW FFB YIELD Although contribute to volume growth, newly mature usually contribute net loss due to high cost per unit palm product contribute to volume growth due to higher FFB yield and to net income due to lower cost per unit palm product 20 FFB yield/ha/year Age of plantation (years old) Source: Mandiri Sekuritas analysis All expenses during immature are capitalized to Balance sheet All expenses after reclassification to mature are recorded as expenses in income statement FIGURE 11. NEWLY MATURE PLANTATION USUALLY GENERATES LOSS. MATURING TREES SHOULD GENERATE HIGHER PROFIT MARGIN DUE TO HIGHER PRODUCTIVITY, I.E. HIGHER FFB YIELD. 1st year 3rd year mature mature Cost per Ha (Rp full) a 20,000,000 20,000,000 FFB yield (ton/ha) b 7 16 Oil Extraction rate c 23.0% 23.0% CPO (ton/ha) d = b X c Kernel Extraction rate e 4.0% 4.0% Kernel (ton/ha) f = b X e Palm oil products (ton/ha) g = d + f Cost of palm products/kg (Rp) h = (a / g)/ ,582 4,630 Selling price assumptions : CPO (Rp/kg) i 7,500 7,500 Kernel (Rp/kg) j 3,375 3,375 Selling price of Palm Oil products (Rp/kg) k =((d X i)+(f X j))/g 6,889 6,889 Gross profit/ (gross loss) (Rp/kg) l = k - h (3,693) 2,259 Gross profit margin/(gross loss margin) -54% 33% Source: Mandiri Sekuritas analysis Please see important disclosure at the back of this report Page 4 of 7

5 FIGURE 12. OPERATIONAL STATISTICS HISTORICAL AND ASSUMPTIONS FY11A FY12A FY13 FY14F FY15F FY16F Key variables Average foreign exchange (Rp/US$) 8,776 9,380 10,452 11,500 11,400 10,800 Volume Palm oil Nucleus' FFB production ('000 tons) 1,291 1,315 1,250 1,340 1,402 1,536 FFB from external parties ('000 tons) Total processed FFB ('000 tons) 1,923 1,989 1,728 1,822 1,993 2,171 % FFB from external to total processed 33% 34% 28% 26% 30% 29% CPO production volume ('000 tons) CPO sales volume ('000 tons) Rubber Rubber production ('000 tons) Rubber sales ('000 tons) Seeds sales volume (in million seeds) ASP Malaysia-based CPO price (MYR/ton) 3,274 2,866 2,377 2,800 3,100 3,100 LSIP's CPO ASP (Rp/kg) - net of VAT 7,542 7,376 7,152 8,603 9,222 8,736 Rubber price (US$/ton) (RG1 CMDTY) 4,814 3,377 2,790 2,250 2,250 2,700 LSIP's rubber ASP (Rp/kg) 42,078 31,046 27,857 24,718 24,503 27,856 Seeds sales price (US$/seed) Nucleus' cost per ha (Rp mn) Financials (Rp bn) Revenue 4,687 4,212 4,134 4,639 5,309 5,512 Gross profit 2,362 1,681 1,253 1,839 2,261 2,365 Operating profit 2,006 1,324 1,026 1,457 1,865 1,943 Net profit 1,702 1, ,101 1,415 1,476 EPS (Rp) Mandiri Sekuritas Consensus Difference (%) Gross margin (%) Operating margin (%) Net margin (%) Please see important disclosure at the back of this report Page 5 of 7

6 London Sumatra Profit and Loss Revenue 4,212 4,134 4,639 5,309 5,512 Gross profit 1,681 1,253 1,839 2,261 2,365 Operating profit 1,324 1,026 1,457 1,865 1,943 EBITDA 1,570 1,302 1,744 2,180 2,282 Net Interest Interest expense (4) (3) (3) (3) (3) Interest income Forex Losses/Gains Net Other (37) (73) (73) (73) (73) Pre-Tax Profit 1, ,428 1,836 1,914 Income Tax (257) (228) (327) (421) (438) Others n/a n/a n/a n/a n/a Minority Interests n/a n/a n/a n/a n/a Net Profit 1, ,101 1,415 1,476 Cashflow Statement Operating Profit 1,324 1,026 1,457 1,865 1,943 Oth.Recurring Income/(Exp) 48 (29) (29) (29) (29) Depr & Amort n/a n/a n/a n/a n/a Other Gain / Loss n/a n/a n/a n/a n/a Tax (257) (228) (327) (421) (438) Change in Working Capital (37) (14) 11 Other Operating Cash Flow n/a n/a n/a n/a n/a Operating Cash Flow 1,324 1,137 1,410 1,717 1,825 Capital Expenditure (819) (505) (573) (563) (507) Free Cash Flow ,154 1,318 Other Investing Cash Flow (153) Cash Flow From Investing (972) (494) (570) (560) (504) Net Change in Debts Net Interest Received / (Paid) n/a n/a n/a n/a n/a Equity Funds Raised Other Financing Cash Flow (624) (491) (268) (401) (527) Cash Flow From Financing (617) (491) (268) (401) (527) Non-Recurring Income (Exp) Extraordinaries Income (Exp) Net Change in Cash (266) Cash at beginning 2,064 1,799 1,951 2,523 3,279 Cash at End 1,798 1,951 2,523 3,279 4,073 Valuation YE Dec 2012A 2013A 2014F 2015F 2016F PER (x) EV/EBITDA (X) P/BV (X) P/CF (X) Dividend Yield (%) Balance Sheet Cash and ST Investment 1,799 1,951 2,523 3,279 4,073 Acct Receivable Inventory Others Current Assets 2,594 2,547 3,143 3,978 4,796 Investments n/a n/a n/a n/a n/a Fixed Assets 4,474 4,703 4,989 5,236 5,405 Others 6,504 6,997 7,567 8,127 8,632 Total Assets 7,552 7,723 8,602 9,681 10,664 Current Liabilities Acct. Payable ST Borrowings Others Long-Term Liabilities Long-Term Payable Others Total Liabilities 1,272 1,127 1,214 1,319 1,394 Shareholder's Equity 6,280 6,596 7,389 8,363 9,271 Key Ratios Growth (% YoY) Sales (10.1) (1.8) EBIT (34.0) (22.5) EBITDA (29.5) (17.1) Net Profit (34.4) (31.1) Profitability (%) Gross Profit Margin Oper. Margin EBITDA Margin Net Margin ROAA ROAE Leverage Net Debt / Equity (%) (28.6) (29.6) (34.1) (39.2) (43.9) EBITDA / Gross Interest (x) Per share data (Rp) EPS CFPS BVPS , , ,358.8 DPS Please see important disclosure at the back of this report Page 6 of 7

7 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28 th Floor, Jl. Jend. Gatot Subroto Kav , Jakarta 12190, Indonesia General: , Fax : (Equity Research), (Equity Sales) RESEARCH John Rachmat Head of Equity Research, Strategy john.rachmat@mandirisek.co.id Tjandra Lienandjaja Banking tjandra.lienandjaja@mandirisek.co.id Handoko Wijoyo Construction, Toll Road handoko.wijoyo@mandirisek.co.id Hariyanto Wijaya, CFA, CPA Plantation, Heavy eq., Energy hariyanto.wijaya@mandirisek.co.id Herman Koeswanto, CFA Consumer, Poultry herman.koeswanto@mandirisek.co.id Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id Ariyanto Kurniawan Telecom, Coal & Metal Mining ariyanto.kurniawan@mandirisek.co.id Rizky Hidayat Property, Media rizky.hidayat@mandirisek.co.id Vanessa Ariati Tanuwijaya Banking, Health Care vanessa.tanuwijaya@mandirisek.co.id Aldian Taloputra Economist aldian.taloputra@mandirisek.co.id Leo Putra Rinaldy Economist leo.rinaldy@mandirisek.co.id Aditya Sastrawinata Research Assistant aditya.sastrawinata@mandirisek.co.id Wisnu Trihatmojo Research Assistant wisnu.trihatmojo@mandirisek.co.id INSTITUTIONAL SALES Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id Jane Theodoven Sukardi Institutional Sales jane.sukardi@mandirisek.co.id Janefer Amanda Soelaiman Institutional Sales janefer.soelaiman@mandirisek.co.id Karmia Tandjung-Nasution Institutional Sales karmia.tandjung@mandirisek.co.id Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id Vera Ongyono Institutional Sales vera.ongyono@mandirisek.co.id Yohan Setio, CFA Institutional Sales yohan.setio@mandirisek.co.id Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id RETAIL SALES Ridwan Pranata Head Retail Equities ridwan.pranata@mandirisek.co.id Boy Triyono Jakarta Branch boy.triyono@mandirisek.co.id Yohanes Triyanto Kelapa Gading Branch yohanes.triyanto@mandirisek.co.id Hendra Riady Mangga Dua Branch hendra.riady@mandirisek.co.id Umar Abdullah Pondok Indah Branch umar.abdullah@mandirisek.co.id Indra Mas ari Bandung Branch indra.mas ari@mandirisek.co.id Yuri Ariadi Pontianak Branch yuri.ariadi@mandirisek.co.id Ruwie Medan Branch ruwie@mandirisek.co.id INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last published report, are: Buy (10% or higher), Neutral (-10% to10%) and Sell (-10% or lower). DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number or fax ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.