Please consider the rating criteria & important disclaimer
CPO prices are estimated to remain volatile
underlined by such global and
fundamental uncertainties as weather conditions, hiking vegetable oils,
fluctuating demand of major markets, and geopolitical uncertainties.
1Q17 into IDR868 billion in 1Q18. It was attributable to the decline of 33%
in the CPO production from 120 million tons in 1Q17 into 80 million tons in
1Q18. Besides, CPO selling prices also experienced the correction of 9.6%.
To maintain the profitability level amid the uncertainties of CPO
selling
prices, LSIP is committed to
becoming the low–cost producers
by adopting
the best management practices.
Target Price of IDR1,380
Domestic Economy: Sustainer of CPO Industry
The CPO industry in 2018 is estimated to be sustained by the positive growth in the
domestic economy along with Indonesia’s fiscal policy on the infrastructure sector and
social securities, as well as the increment in the domestic consumption as Indonesia is
the world’s second
-
biggest palm oil consumers.
A Glance at LSIP
LSIP know as “Lonsum” was founded in 1906 when Harrisons & Crossfield Plc, London–
based general trading and plantation management services firm cultivated its first
plantation situated near to Medan, Sumatera Utara.
Now, LSIP furthers into one of the world leading plantation firms with the total core
plantation areas of 115,695 hectares of which 85% consists of oil palm plantation, and
the remaining 14% and 3% are rubber, cacao, and tea plantations. It currently operates
12 palm oil mills operating at the full capacity of 2.5 million fresh fruit bunch (FFB) per
year.
It’s commitment to safe and traced products is reflected in its continuous efforts in
accomplishing Roundtable Sustainable Palm Oil (RSPO) and Indonesia Sustainable Palm
Oil (ISPO) certificates. In 2017, its total RSPO certificates reached 240,000 tons or around
62% of its total CPO production.
LSIP’s Competitiveness in ASEAN
Although LSIP is estimated to experience the decline in the 2018’s profit, it has the
second
-
highest net profit margin after First Resources Ltd. Besides, now, LSIP is traded at
the cheapest valuation of 11,7x in ASEAN. Having robust trade balance with no debt, LSIP
has the highest dividend yield of 4.1%.
Kuala Lumpur Kepong Bhd
6,914
4,619
-
16.6%
4.8%
8.5%
28.0x
2.3x
2.0%
IOI Corp Bhd
7,711
4,193
99.6%
5.3%
20.8%
20.3x
4.7x
2.0%
Singapore
Wilmar International Ltd
15,308
40,933
25.4%
2.8%
8.0%
12.5x
1.0x
2.2%
Golden Agri
-
Resources Ltd
3,489
8,138
-
81.5%
1.0%
1.8%
48.1x
0.9x
3.9%
Source: Company, NHKS Research
LSIP CPO Sales Volume |
2015
-
2018
Source: MPOB, Bloomberg, NHKS Research
Malaysia Palm Oil Inventory (000’ tons) |
2016
-
2018
Source: MPOB, Bloomberg, NHKS Research
Malaysia Palm Oil Production Data (000’ tons) |
2016
-
2018
Source: Bloomberg, NHKS Research
CPO CIF Rotterdam (IDR/kg) |
2011
-
2018
Source: Company, NHKS Research
LSIP Sales Breakdown |
1Q18
Source: Company, NHKS Research
Multiple Valuation
Forward P/E Band |
Last 3 years
Source: NHKS research
Rating and target price update
Source: NHKS research, Bloomberg
Target Price Revision
Analyst Coverage Rating
Source: Bloomberg
Date
Rating
Target Price
Last Price
Consensus
vs Last Price
vs Consensus
07/10/2017
Buy
1,970 (Dec 2017)
1,430
1,705
+37.7%
+15.5%
10/12/2017
Buy
1,970 (Dec 2018)
1,440
1,700
+36.8%
+15.9%
01/05/2018
Buy
1,540 (Dec 2018)
1,320
1,750
+16.7%
-
12.0%
05/16/2018
Buy
1,380 (Dec 2018)
1,100
1,650
+25.5%
-
16.4%
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1.
Period: End of year target price
2.
Rating system based on a stock’s absolute return from the date of publication
Buy
: Greater than +15%
Hold
:
-
15% to +15%
Sell
: Less than
-
15%
Dynamic Forward P/E
band
| Last 3 year
Source: NHKS research
Closing and Target Price
Summary of Financials
DISCLAIMER
This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees, and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for errors, omissions, misstatements, negligence, inaccuracy arising herefrom.
In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 12.9% 14.0% 11.4% 11.4%
