Asiatic Development - 1QFY08 results seasonally above expectations (Results Note)
Price: RM8.45
Target Price: RM10.10
Recommendation: BUY
· 1QFY08 net profit of RM114.2m was seasonally above expectations at 23% of our earnings estimates of RM497.4m and 25% of consensus estimate of RM464.6m. Revenue, EBIT and pretax profit were all seasonally above expectations comprising between 21% and 22% of our full year estimates.
· 1Q net profit of plantation companies typically comprise between 10% and 20% of full year estimates due to seasonally lower FFB/CPO production. Asiatic Development recorded 1QFY08 average CPO selling price of RM3,403/MT, above our FY08 average CPO selling price assumption of RM3,100/MT.
· Reaped the full benefits of higher CPO selling prices. 1QFY08 net profit of RM114.2m was 146% higher YoY primarily due to higher average CPO selling price of RM3,403/MT compared to RM1,925/MT in 1QFY07.
· QoQ, 1QFY08 net profit of RM114.2m was 6% lower despite higher average CPO selling price as FFB production seasonally declined by 26% QoQ to 259,950MT. We are conservatively maintaining our earnings estimates for Asiatic Development as average CPO selling prices for subsequent quarters are expected to be lower.
· Some 1,800ha from its 70% JV with the Sepanjang Group of Indonesia is expected to mature by FY10 but as young palms typically record low FFB yields, we estimate that these palms will not contribute much more than RM1.0m to net profit. Therefore, we are not imputing earnings contributions from that JV into our earnings estimates.
· Maintain BUY call and RM10.00 target price based on an undemanding 15x FY08E PER. As current CPO selling prices are above RM3,600/MT or 16% above our FY08 average CPO selling price assumption of RM3,100/MT, downside risk to our earnings estimates is very remote.
· We may re-rate target price and earnings higher, should CPO selling prices maintain above our FY08 average CPO selling price assumption of RM3,100/MT. If we rebase our average CPO selling price assumption to the current CPO selling price of RM3,600/MT, the FY08E PER will fall from an already attractive 13x to only 11x.
KENANGA INVESTMENT BANK BERHAD (15678-H)
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Showing posts with label Asiatic. Show all posts
Showing posts with label Asiatic. Show all posts
Saturday, 21 June 2008
HLG: 29 May 2008 Asiatic
HLG: 29 May 2008 Asiatic - Results in-line, maintain HOLD
Asiatic Development Berhad HOLD
Price target RM9.70
Share price at 28 May RM8.45
Investment summary
Q108 results were within HLG/market expectations. We maintain our HOLD rating: (1) valuation discount to big-caps is fair given lower liquidity/smaller market cap (EV/ha of RM106,000 against RM160,000 of big-cap planters); (2) passive capital management. With RM0.66/share in net cash and RM0.35/share in annual FCF, net DPS of RM0.10/share is too low, in our view. We are neutral on the plantation sector, and advocate switching from IOI/KLK to small/mid-cap planters such as Kulim, which offer better value/yield. Given the tight global supply of edible oil and grain, we expect CPO price to stay firm in the next 6 months.
Quiet stock
Low-beta stock with minimal newsflow. However valuations offer little upside for arbitrage gains, especially without near-term clarity on capital management or M&A.
Asiatic Development Berhad HOLD
Price target RM9.70
Share price at 28 May RM8.45
Investment summary
Q108 results were within HLG/market expectations. We maintain our HOLD rating: (1) valuation discount to big-caps is fair given lower liquidity/smaller market cap (EV/ha of RM106,000 against RM160,000 of big-cap planters); (2) passive capital management. With RM0.66/share in net cash and RM0.35/share in annual FCF, net DPS of RM0.10/share is too low, in our view. We are neutral on the plantation sector, and advocate switching from IOI/KLK to small/mid-cap planters such as Kulim, which offer better value/yield. Given the tight global supply of edible oil and grain, we expect CPO price to stay firm in the next 6 months.
Quiet stock
Low-beta stock with minimal newsflow. However valuations offer little upside for arbitrage gains, especially without near-term clarity on capital management or M&A.
Tuesday, 1 April 2008
kimeng: 27 mar Asiatic (buy)
Expects CPO prices to hover between RM2800-3200/mt in 2008 Asiatic expects CPO prices to hover between RM2800-3200/mt in 2008, in line with our projections of RM3000/mt for FY08 and RM2900/mt for FY09. It has largely continued with last year's policy of selling on the spot market where the average selling price for the first 3 months of 2008 was above RM3200/mt, having missed out on aggressive forward sales during the two-week window when prices spiked above RM3600/mt. Meanwhile, FFB and CPO production is expected to grow by ~5% in FY08 to about 1.27m tonnes and 265,000 tonnes respectively.
Keeping EPS forecasts unchanged; BUY maintained
We are maintaining our EPS forecasts for FY08 and FY09 although there is potential upside risk to our forecasts if CPO prices stay above RM3500/mt. According to management, every RM100/mt increase in CPO prices will raise plantation EBIT by ~RM25m or EPS by 2.5 sen. Plantations will contribute about 93% to group operating profit in FY08, followed by property development with 5%. We are keeping our BUY recommendation with a price target of RM9.90 based on 18x FY08 EPS of RM0.549.
Keeping EPS forecasts unchanged; BUY maintained
We are maintaining our EPS forecasts for FY08 and FY09 although there is potential upside risk to our forecasts if CPO prices stay above RM3500/mt. According to management, every RM100/mt increase in CPO prices will raise plantation EBIT by ~RM25m or EPS by 2.5 sen. Plantations will contribute about 93% to group operating profit in FY08, followed by property development with 5%. We are keeping our BUY recommendation with a price target of RM9.90 based on 18x FY08 EPS of RM0.549.
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