INDOFOOD AGRI RESOURCES LTD.
5JS.SI
Indofood Agri Resources - Prefer SIMP for direct exposure
- IFAR’s FY15 core net profit was 10% below our and consensus forecasts.
- Weaker FY15 results were due to higher associates losses and effective tax rate.
- It guides for 0 to 5% output growth for FY16, as the new areas coming on stream offsets El Nino impact. It sets new planting target of 5,000 ha for 2016.
- We cut FY16-17 EPS by 38-41% to factor in higher depreciation charges to reflect the revision to the accounting policy for biological assets.
- Our SOP-based target price falls to S$0.45, as we account for a lower target price for 72%-owned SIMP. Maintain Hold, with share price support from its low EV/ha.
■ Lower plantation earnings and losses from CMAA hurt 4Q
- Indofood Agri's (IFAR) 4Q15/FY15 core net profit (excluding forex loss) fell 43%/52% yoy due to weaker plantation earnings, as well as losses from CMAA (its 50% sugar JV in Brazil).
- The group’s 4Q15/FY15 share of losses of Rp14bn/Rp172bn from CMAA was due to lower sugar prices and selling prices of electricity generated.
■ Forex loss and higher effective tax rates impact FY15 earnings
- The group posted higher net forex gain of Rp191bn in 4Q, which helped to reduce FY15 forex loss to Rp289bn, arising from translation loss on its US$250m debt as the rupiah weakened during the year.
- IFAR’s 4Q/FY15 effective tax rate of 43%/57% was due to non-deductible expenses and share of losses of associates and JV companies, which were not available to offset against profit from other entities.
■ Plantation earnings negatively affected by lower CPO prices
- 4Q15 plantation EBITDA fell 14% yoy/6% qoq, as lower average selling prices for CPO (-23% yoy/-10% qoq to Rp5,957/kg) more than offset the higher FFB output from its nucleus estates (+14% yoy/ 4% qoq).
- Its edible oils and fats (EOF) division was the star performer for the group, posting strong earnings growth due to higher profit margin.
■ Targets zero to 5% FFB output growth due to new mature areas
- The group targets zero to 5% yoy rise in FFB output growth for FY16. The group revealed that its estates in Sumatra and Kalimantan received 25-30% less rainfall in 2015 compared to the last five years’ average. This is expected to reduce its FFB yield in 2016.
- It is bracing for weak output in 1Q and expects new mature areas of 15k ha to offset the weaker yield.
- We gathered that its Jan 16 output was flat yoy, which is in line with its target. It also guided for 8% rise in costs and new planting rate of 5,000ha for FY16.
■ We lower our earnings forecasts but keep Hold rating
- We lower our net profit forecasts to reflect higher depreciation charges due to changes in the accounting policy for biological assets.
- IFAR revealed that the changes in accounting policy could reduce FY15 net profit by Rp160bn on proforma basis and cut shareholders’ equity by RM3.4tr. The stock remains a Hold, as it trades in line with its revised SOP.
- We prefer SIMP for direct exposure to the group’s plantation assets.
Ivy NG Lee Fang CFA
CIMB Securities
|
http://research.itradecimb.com/
2016-02-29
CIMB Securities
SGX Stock
Analyst Report
0.45
Down
0.60
