Towards Financial Freedom
Indofood Agri - Healthy FFB growth of 7% YoY BUY
We are keeping our BUY recommendation on Indofood Agri Resources (IndoAgri), with a lower fair value of S$1.63/share based on a 20% holding company discount to RNAV.
IndoAgri's 9MFY12 results were below expectations and consensus estimates, mainly due to a 9.3% QoQ fall in the EBITDA of the edible oils and fats division in 3QFY12.
After a healthy growth in 2QFY12 driven by the Hari Raya Puasa festivities, earnings of the edible oils and fats division eased in 3QFY12 partly due to a weak performance from the coconut oil segment. The edible oils and fats division sells coconut oil products, cooking oil and margarine.
Revenue of the edible oils and fats division fell 14.7% QoQ to Rp2.3tril in 3QFY12. Sales volume of the division declined 9.7% from 217,000 tonnes in 2QFY12 to 196,000 tonnes in 3QFY12.
Plantation EBITDA expanded 8.2% QoQ to Rp821bil in 3QFY12, underpinned by contribution from the sugar sub-segment. Revenue of the plantation division (including inter-segment sales) inched up 2.3% QoQ to Rp2.3trillion in 3QFY12.
IndoAgri realised an average CPO price of Rp7,677/kg (RM2,560/tonne) in 9MFY12. This was only 1.5% lower than the average price of Rp7,796/kg recorded in 9MFY11.
The relatively flattish CPO prices realised by IndoAgri in Indonesia in 9MFY12 implies that the price differential between CPO in Malaysia and Indonesia has narrowed. The difference between CPO price in Malaysia and Indonesia shrank from an average of RM661/tonne in 9MFY11 to RM523/tonne in 9MFY12.
IndoAgri's FFB processed (including FFB purchases) rose 8.5% YoY in 9MFY12 while the group's CPO output climbed 5.4% YoY. In 3QFY12, FFB production grew at a robust 16.6% QoQ. In spite of this, sales volume of IndoAgri's CPO slid 1.4% QoQ to 217,000 tonnes in 3QFY12.
We understand that the increase in the group's CPO inventory in September was not due to the lack of demand. Instead, it was mainly due to the rise in palm oil production in September while at the same time, refineries were slowing production after the end of the festive period. Refineries have started ramping up production again in October.
Source: AmeSecurities
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