SINGAPORE (May 3): DBS Group Research is maintaining Indofood Agri Resources at “hold” with a target price of 56 cents, pending changes in its forecasts.
“We believe any downside price movement could be a good opportunity to collect IndoAgri,” says analyst Ben Santoso in a Tuesday report.
IndoAgri booked 1Q17 PAT before non-controlling interests of Rp376 billion ($39.4 million) or 25% of DBS’s full-year expectations.
Reported PATMI came in at Rp171 billion, 80% higher y-o-y. This was driven by higher crude palm oil (CPO), palm kernel (PK), and rubber revenues.
The group booked 1Q17 CPO sales volume of 227,000 tonnes, up 6% y-o-y.
Edible Oils & Fats revenue expanded 29% y-o-y to Rp2.7 trillion. However, EBITDA from this segment dropped 48% on the back of higher raw material costs.
IndoAgri’s own FFB production reached 743,000 tonnes for the quarter – a 16% rebound y-o-y – though this is still 18% lower q-o-q.
“We understand FFB yield recovery is expected to continue into 2Q17 and 3Q17 to deliver FY17F FFB growth of at least about 10% y-o-y,” says Santoso, “We continue to expect 12% volume growth, driven by both yield recovery and new maturities.”
IndoAgri’s FY17F and FY18F earnings have been left unchanged, as CPO price forecast is reviewed with a slight downside bias.
“Based on our current forecasts, IndoAgri’s internal EBITDA should improve slightly towards Rp3.7 trillion this year,” says Santoso.
Shares of IndoAgri are trading at 49 cents.
