CPO producer PT BW Plantation Tbk (BWPT) is a well managed company and is one of the fastest growing palm oil plantation companies in Indonesia.
According to a research report published by CLSA Asia-Pacific Markets todat, BWPT is aggressively planting its estate area.
By the end of 2012, total mature area will double in the current size to 26,000 ha. However, assuming Rp370 billion-Rp550 billion of capital expenditure (capex) for the next 3 years, BW Plantation will be generating negative free cash flows of around Rp50 billion-Rp170 billion per year.
"Thus, we forecast the company to raise fund through debt to sustain expansion and by the end of 2012, net gearing will increase to 33%," Vera Ongyono and Wilianto Ie, CLSA analysts, said in their report.
In addition, as more area is entering young low yielding maturity, CLSA expects fresh fruit bunch (FFB) yield to decline going forward.
Assuming a conservative 19.6 FFB yield (vs. the current yield of 27.4) in 2012, this will take its total production to more than 500k tonnes per year, increase by 50% within 3 years.
"We expect the company to generate around 25% of ROAE, while earnings could grow by 30% CAGR," the report said.
While operational performance shows that BW Plantation is among the best in the region, the market is currently valuing the company at US$8,500 EV/ha, is still among the cheapest in the industry.
Based on a blended valuation of US$13,000 EV/ha and 13x 2011 PER, we came up with a target price of Rp1,100 per share.
Based on a blended valuation of US$13,000 EV/ha and 13x 2011 PER, we came up with a target price of Rp1,100 per share.
BW Plantation is a small but extremely fast growing palm oil plantation with the highest FFB yield in the industry.
By end-2012, the total mature plantation area will double in size, to around 26,000 ha. This will translate into above average earnings growth and shareholder returns, with earnings forecast to grow by 30% CAGR until 2012. The company is also one of the most leveraged to CPO price movements. While, at US$8,500 EV/ha, the company is still among the cheapest in the industry with recommendation buy.
BW Plantation has a total land bank of 94,000 ha of which the total planted palm oil area is 39,000 hectares. As of 2009, 13,000 ha or 33% of the total planted area has reached maturity and will double in current size to 26,000 ha within 3 years. The company is aggressively planting its estate area and by 2013, total planted area should double the current size to 80,000 ha. Now, BWPT is traded 4% higher to Rp780 per share.
2 comments:
Keep on writing.
Very interesting articles you posted here.
Thank you Helen...I'll try to provide stories that might not be covered by others dot com.
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