EQUITY RESEARCH

Thursday, 17 February 2011

PLANTATION SECTOR/COMPANY UPDATE

HOLD
Bloomberg Code Price, Rp Market cap, Rp bn Target Price, Rp Merlissa P. Trisno (62-21) 350 9888. ext. 3512 merlissapt@danareksa.com AALI IJ 22,300 35,117 24,500

Astra Agro Lestari

AALIs January production
Highlights:
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FFB production reached 259,499 tons for nucleus and 74,083 tons for plasma. This is 11.1%10.2% higher than January 2010s production. Supporting the growth is the substantial improvement in the FFB yield to 1.5ton/ha, up from 1.4ton/ha last year (+7.1% YoY) thanks to robust production growth in Sumatra and Kalimantan at 11.8% and 27.8%, respectively. The CPO extraction rate (OER), however, declined slightly to 22.8% in January 2011, from 23.8% in January 2010. CPO production, consequently, reached 92,116 tons (+17.3% YoY) helped also by FFB processed from third parties.

Last Recommendation
Rec. 17-Feb-10 22-Dec-10 07-Sep10 14-May-10 18-Mar-10 HOLD HOLD HOLD BUY BUY Target Price
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Rp 24,500 Rp 24,500 Rp 21,700 Rp 28,000 Rp 28,000

Comments:
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AALI relative price to JCI Index

Rp 29,000 26,000 23,000 -20 20,000 17,000 12/24/10 2/17/10 7/22/10 9/13/10 11/3/10 2/15/11 4/9/10 6/1/10 -30 -40 AALI (LHS) Relative to JCI Index (RHS) % 10 0 -10

More third party purchases. Note that the companys third party purchases have increased to around 20% of the internal production from 10% in May 2010. This is largely because of the aging plantations profile. As such, third party FFB purchases increased by 143% to 70,163 tons in January 2011. The FFB yield is likely to decline slightly to 19.4ton/ha.Annualized, the implied yield would be around 19.9ton/ha, assuming Januarys production is about 7-8% of the total annual production. We, however, conservatively estimate a lower yield of 19.4ton/ha (much lower than BWPTs yield of more than 25.0ton/ha). This owes to the aging plantations profile, exacerbated by a lack of fertilizer application in plasma areas and bad weather. Land bank is still an issue. Mid-term production growth is likely to come from the 2007 plantings of 16,800ha, which shall begin to mature this year, albeit still yielding a low 3-4ton/ ha. Extraction rates of palm oil and palm kernel are likely to stay at the 22-23% and 5% levels, respectively. We therefore expect CPO production to reach 1.1mn tons in 2011, up a mere 4.7% YoY. Expansion will slow as new land bank is limited. Maintain HOLD. Our TP of Rp24,500 is based on 16.5x 2011E PER, a 1.0x std-deviation to the sectors 7-year mean, taking into account the current CPO price momentum as supply constraints prevail.

Year to Dec, Rp bn Sales, Rp bn EBITDA, Rp bn Core profit, Rp bn Core profit growth, % Core PER, x EV/EBITDA, x EV/Ha, US$ 000/ha Dividend yield, % Net gearing, %

2008 8,161 3,584 2,599 31.5 13.5 9.6 17.3 2.3 -16.8

2009 7,424 2,853 1,752 -32.6 20.0 12.0 16.0 2.4 -12.7

2010F 7,407 2,575 1,613 -7.9 21.8 13.2 16.9 2.3 -17.5

2011F 8,973 3,607 2,336 44.9 15.0 9.2 15.8 3.3 -25.5

2012F 9,607 3,880 2,533 8.4 13.9 8.2 14.4 3.6 -36.3

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17 February 2011

Astra Agro Lestari Company Update

Exhibit 1. AALIs monthly nucleus FFB production

'000MT 500 450 400 350 300 250 200 150 100 50 0 Oct-07 Oct-08 Oct-09 Apr-07 Apr-08 Apr-09 Apr-10 Oct-10 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jul-07 Jul-08 Jul-09 Jul-10 Nucleus FFB prod (LHS) MoM growth (RHS) 80% 60% 40% 20% 0% -20% -40% -60% -80%

Source: Company

Exhibit 2. AALIs monthly plasma FFB production

'000MT 160 140 120 100 80 60 40 20 0 Oct-07 Oct-08 Oct-09 Apr-07 Apr-08 Apr-09 Apr-10 Oct-10 Jul-07 Jul-08 Jul-09 Jan-07 Jan-08 Jan-09 Jan-10 Jul-10 Jan-11
50% 40% 30% 20% 10% 0% -10% -20% -30% Oct-07 Oct-08 Oct-09 Apr-07 Apr-08 Apr-09 Apr-10 Oct-10 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jul-07 Jul-08 Jul-09 Jul-10

Plasma FFB prod (LHS)

MoM growth (RHS) 500% 400% 300% 200% 100% 0% -100% -200%

Source: Company

Exhibit 3. AALIs CPO production

'000MT 140 120 100 80 60 40 20 0 CPO production (LHS) MoM growth (RHS)

Source: Company

17 February 2011

Astra Agro Lestari Company Update

Exhibit 4. AALIs PK production

'000MT 30 25 20 15 10 5 0 Apr-07 Apr-08 Apr-09 Apr-10 Jan-07 Jan-08 Jan-09 Jan-10 Oct-07 Oct-08 Oct-09 Oct-10 Jan-11 Jul-07 Jul-08 Jul-09 Jul-10 PK production (LHS) MoM growth (RHS) 50% 40% 30% 20% 10% 0% -10% -20% -30%

Source: Company

Exhibit 5. AALIs CPO price vs international price

Rp/kg 12000 10000 8000 6000 4000 2000 0 Oct-06 Oct-07 Oct-08 Oct-09 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Oct-10 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 AALI mthly CPO price CPO mthly Rotterdam price, CIF

Source: Bloomberg, Company

17 February 2011

Astra Agro Lestari Company Update

Financial summary
Exhibit 6. Projected profit and loss (Rp bn)
Rp bn Palm product YoY growth, % Rubber product YoY growth, % Others Net revenues YoY growth, % Cost of good sold % of sales Gross profit YoY growth, % % of sales EBITDA YoY growth, % % of sales Depreciation Operating profit YoY growth, % % of sales Forex Interest expenses Interest income Others Total other income (loss) Pretax profit Income tax Net income YoY growth, % % of sales Core income YoY growth, % % of sales No of shares, mn EPS YoY growth, % Core EPS YoY growth, % DPS Dividend payout, % Margins (%) Cost of good sold Gross profit Operating profit EBITDA Pretax profit Net profit Effective tax rate Growth rates (YoY, %) Sales Gross profit Operating income Net income EPS Source: Company and Danareksa Sekuritas 2008 8,012 36.8 132 48.1 0 8,161 36.9 4,358 53.4 3,803 19.3 46.6 3,584 16.2 43.9 207 3,377 16.2 41.4 78 0 129 365 572 3,949 -1,234 2,631 33.3 32.2 2,599 31.5 31.8 1,575 1,671 33.3 1,650 31.5 505 47.6 53.4 46.6 41.4 43.9 48.4 32.2 31.2 36.9 19.3 16.2 33.3 33.3 2009E 7,353 -8.2 59 -55.2 12 7,424 -9.0 4,322 58.2 3,102 -18.4 41.8 2,853 -22.7 38.4 243 2,610 -22.7 35.2 -111 -31 58 -26 -110 2,500 -771 1,661 -36.9 22.4 1,752 -32.6 23.6 1,575 1,055 -36.9 1,112 -32.6 530 50.2 58.2 41.8 35.2 38.4 33.7 22.4 30.8 -9.0 -18.4 -22.7 -36.9 -36.9 2010E 7,357 0.1 49 -16.5 0 7,407 -0.2 4,540 61.3 2,867 -7.6 38.7 2,575 -12.5 34.8 290 2,285 -12.5 30.9 0 -5 61 -34 22 2,307 -646 1,592 -4.1 21.5 1,613 -7.9 21.8 1,575 1,011 -4.1 1,024 -7.9 508 50.2 61.3 38.7 30.9 34.8 31.2 21.5 28.0 -0.2 -7.6 -12.5 -4.1 -4.1 2011E 8,923 21.3 51 2.5 0 8,973 21.2 5,012 55.9 3,961 38.2 44.1 3,607 42.7 40.2 346 3,261 42.7 36.3 0 0 104 -5 100 3,361 -941 2,336 46.7 26.0 2,336 44.9 26.0 1,575 1,484 46.7 1,484 44.9 745 50.2 55.9 44.1 36.3 40.2 37.5 26.0 28.0 21.2 38.2 42.7 46.7 46.7 2012E 9,549 7.0 58 15.1 0 9,607 7.1 5,381 56.0 4,226 6.7 44.0 3,880 6.6 40.4 405 3,475 6.6 36.2 0 0 172 -5 167 3,642 -1,020 2,533 8.4 26.4 2,533 8.4 26.4 1,575 1,609 8.4 1,609 8.4 808 50.2 56.0 44.0 36.2 40.4 37.9 26.4 28.0 7.1 6.7 6.6 8.4 8.4

17 February 2011

Astra Agro Lestari Company Update

Exhibit 7. Projected Balance sheet (Rp bn)

Current assets Cash and cash equivalent Short term investment Receivables Inventories Prepaid taxes and expenses Advances Total Current Assets Plantation - mature Plantation - immature PPE Goodwill - net Other assets Total Non Current Assets Total Assets Liabilities and Equity Current Liabilities Short term loan Payables Accrued expenses Current maturities of LT debt Others Total Current Liabilities 2008 868 0 25 781 37 264 1,976 601 1,337 2,002 74 531 4,544 6,520 2009E 789 0 157 610 37 122 1,714 729 1,885 2,445 62 736 5,857 7,571 2010E 1,228 0 22 641 31 130 2,052 1,009 2,166 2,552 57 566 6,350 8,402 2011E 2,088 0 28 707 45 145 3,013 1,578 1,882 2,770 52 566 6,849 9,862 2012E 3,432 0 28 759 49 156 4,424 2,213 1,272 2,773 48 566 6,872 11,297

0 301 98 0 617 1,016

0 249 107 0 582 939 0 206 206 200 787 83 5,356 6,226 7,571

0 261 114 0 533 909 0 206 206 269 787 83 6,148 7,019 8,402

0 288 127 0 707 1,123 0 206 206 352 787 83 7,310 8,181 9,862

0 308 137 0 762 1,207 0 206 206 442 787 83 8,571 9,442 11,297

Non Current Liabilities Long term debts - net of current maturities 0 Others 167 Total Non Current Liabilities 167 Minority interest Stockholders Equity Capital stock Additional paid-in capital Retained earnings Total Stockholders Equity Total Liabilities and Equity Source: Company, Danareksa Sekuritas 180 787 83 4,285 5,156 6,520

17 February 2011

Astra Agro Lestari Company Update

Exhibit 8. Projected cash flow (Rp bn)

Cash Flow From Operating Activities Cash receipt from sales Cash payment to suppliers Interest received Tax Others Net Cash From Operating Activities 2008 8,155 -4,658 101 -1,285 -226 2,087 2009E 7,412 -4,053 48 -1,035 -387 1,985 -1,284 0 -10 0 -1,293 0 -27 0 -640 0 -666 25 -104 0 868 789 2010E 7,542 -4,643 61 -688 -17 2,255 -1,011 0 0 0 -1,011 0 -5 0 -800 0 -805 440 0 0 789 1,228 2011E 8,970 -5,293 104 -841 0 2,940 -906 0 0 0 -906 0 0 0 -1,174 0 -1,174 860 0 0 1,228 2,088 2012E 9,606 -5,672 172 -993 0 3,112 -496 0 0 0 -496 0 0 0 -1,273 0 -1,273 1,344 0 0 2,088 3,432

Cash Flow From Investing Activities Additional PPE and planting -1,279 Changes in ST investment 0 Acquisition of subsidiaries 538 Others 0 Net Cash Flow From Investing Activities -741 Cash Flow From Financing Activities Changes in LT debt Interest expenses Cash from issuance of shares Dividend payment Others Net Cash From Financing Activities Changes in cash and cash equivalent Effect of forex Cash from acq. Subs. Beginning balance Ending balance Source: Company, Danareksa Sekuritas -5 0 0 -1,581 10 -1,577 -231 86 0 1,013 868

Exhibit 9. Selected ratios

2008 Inventory turn Inventory days Payable days Receivable days Cash cycle Prepaid expense days Accrued expense days Other payable days Account payable, % of inventory Interest coverage Working capital Working capital % of sales Total debt Net debt Debt/equity, % Net debt/equity, % Cash and ST per share Book value per share Extended Dupont ROE Operating margin, % Interest burden Tax burden Total asset turnover Financial leverage ROE, % Source: Company, Danareksa Sekuritas 7 49 9 3 43 1 5 1 39% 20,025 92 1 0 -868 0.0 -16.8 551 3,274 41.4 1.2 0.7 1.4 1.3 57.1 2009E 6 58 11 4 51 1 8 1 41% 93 -13 0 0 -789 0.0 -12.7 501 3,954 35.2 1.0 0.7 1.1 1.2 29.2 2010E 7 50 10 4 44 1 8 1 41% 499 -85 -1 0 -1,228 0.0 -17.5 780 4,457 30.9 1.0 0.7 0.9 1.2 24.0 2011E 7 48 9 1 40 1 8 1 41% #DIV/0! -197 -2 0 -2,088 0.0 -25.5 1,326 5,195 36.3 1.0 0.7 1.0 1.2 30.7 2012E 7 49 10 1 40 1 8 1 41% #DIV/0! -215 -2 0 -3,432 0.0 -36.3 2,179 5,996 36.2 1.0 0.7 0.9 1.2 28.7

17 February 2011

Astra Agro Lestari Company Update

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