Result Commentary

Visit our website at www.trimegah.com 01 May 2007

Astra Agro Lestari

CPO Price Surge Salvaged Cost Increase
(AALI.JK/AALI IJ - Rp15,750) - HOLD
Result
z AALI's 3M07 revenue grew by 16.4% YoY to Rp1.0tr, on the back of a 37.5% price increase to Rp4,591/kg or
US$505/ton (net of tax). CPO sales volume declined by 13.8% YoY to 192,844tons, due to an 8.3% fall in
company's own FFB production to 808,475tons and a 23.4% drop in FFB purchases from third parties.

z Higher fertilizer and labor costs brought about a 22.4% YoY increase in total production cash cost to Rp2,675/
kg or US$294.0/ton. Given higher selling price increase versus cost, gross, operating, and net margins expanded
to 45.3%, 39.0%, and 26.5%, respectively.
z The company's bank loans increased by Rp60.9bn to Rp81.3bn, mostly used for its plantation expansion program
in East Kalimantan. AALI's current debt to equity ratio is 0.2x.

Comment
Equity Research

z AALI's 3M07 sales of Rp1.0tr is only 20.2% of our FY07 estimate, due to actual 3M07 CPO sales volume of only
19.4% of our FY07 forecast. CPO production volume is 20.2% of our FY07 estimate and 21.8% of the company's
guidance. We believe we have underestimated the impact of the El Nino weather phenomenon in 4Q06 to the
company estates' productivity. FFB production volume of 808,475tons is only 18.6% of our FY07 estimate.
Meanwhile, CPO selling price of US$505/ton is 2.0% higher than our forecast. Given currently strong CPO price
(YTD average of CPO Rotterdam CIF is US$629/ton), we believe AALI's selling price should rise. In 3M07 there
was still some carry over export contracts from last year; hence, a lower export price of US$450/ton versus
domestic US$522/ton in 3M07.
z Cost became apparent as a concern in 4Q06, as cash cost rose from US$244 in 9M06 to US$255/ton for FY06.
We previously expected that costs would alleviate in 1Q07, yet AALI's results signals otherwise. On a quarterly
INDONESIA

basis, cash cost rose slightly from US$290 in 4Q06 to US$294/ton in 1Q07. Labor cost increase is the primary
contributor to the increase, while fertilizer cost remains fairly stable according to the company. Despite higher
selling price, cost increases convey to a 3M07 net profit that is only 18.0% of our FY07 forecast.
z AALI is planning to enlarge its CPO planted area by 17,000ha. this year, which is 2,000ha higher than our current
estimate. The company is also in the process of developing a seed garden in Central Kalimantan. We have not
included the seed garden project in our valuation due to uncertainties surrounding such project and the ambiguous
associated timeline.

z We currently maintain our DCF-driven TP of Rp14,900 yet reduce our recommendation from BUY to HOLD
due to cost concerns and recent price appreciation. Additionally, current CPO futures contract in Rotterdam
of US$740/ton is 0.6% higher than its edible oil counterpart, soybean oil, which is traded in Chicago. In the past
two years, CPO traded at a daily average of a 26.1% discount to soybean.

Stock Data Financial Summary Y-o-Y and Q-o-Q Profitability Performance

Target Price: Rp14,900 (Rpbn) 3M06 3M07 Chg (%) 4Q06 1Q07 Chg (%)
P/E (x): 16.6
P/BV (x): 6.7 Sales 873 1,016 16.4 959 1,016 5.9
Div. Yield (%): 3.0 Gross Profit 345 460 33.3 342 460 34.5
Operating Profit 278 396 42.5 265 396 49.4
Net Profit 182 269 47.6 164 269 63.7

Gross Margin (%) 39.5 45.3 35.7 45.3

Sebastian Tobing Op. Margin (%) 31.9 39.0 27.6 39.0
Tel: (6221) 515 2727 Net Margin (%) 20.9 26.5 17.1 26.5
sebastian.tobing@trimegah.com Source : Company

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 Result Commentary - Astra Agro Lestari

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2 PT Trimegah Securities Tbk - 01 May 2007