The lower YoY revenues were primarily due to lower prices, which were partly offset by higher volumes produced.
After taking into consideration two distorting items (ie, bio-asset revaluation and forex gains for a US dollar-denominated balance sheet/revenue cross-hedge), the results were slightly better than our expectation. As a result, we have raised our FY09 adjusted net-profit forecast (excluding bio-asset revaluation) by 9.6%. Our new adjusted net-profit forecasts are now in line with Bloomberg consensus. Including the bio-asset revaluation, we have raised our FY09 net profit forecast by 50.9%. No major surprises were announced at the company’s analyst briefing.
Our six-month quantitative-model-derived target price is S$1.08. The downside reflects our assumption that IndoAgri’s stock price will follow the crude palm oil (CPO) price lower to our projected target level of US$525/tonne by 31 December 2009 from its current level of around US$700/tonne.
We have a Sell rating on IndoAgri, based on our view that CPO prices may decline by year-end. This anti-consensus view is based on our thesis that global CPO supply will rise HoH in 2H09 due a recovery from impaired yields from ‘tree stress’ and the seasonal peak growing season.
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