Nov 8, 2010

BW Plantation & Pefindo target price

Palm oil producer PT BW Plantation Tbk (BWPT) is targeted to reach Rp1,350-Rp1,490 per share by PT Pemeringkat Efek Indonesia (Pefindo). BWPT stocks today reached the new highest record at Rp1,080/share, nearly representing a 100% capital gain from the IPO price.
In a company research report published by Pefindo today, In 2007-2009, the company's mature tree was only around 12,000 hectares which starts to increase in 1H 2010 with 14,011 hectares. 
Since BW Plantation has 28,121 hectares of immature trees that will gradually mature in upcoming years (considering 3 years of palm trees commercial maturity), Pefindo estimated that BWPT’s mature trees will liven-up excessively start in 2012. 
In line with mature trees growth, BW Plantation production will rise sharply in the next 2 years. "In 2010, We estimate FFB production could reach 10.9% YoY growth to the level of 391,600 tons. In 2012, we estimate BWPT’s FFB production can reach around 600,000 tons or grow CAGR 19.3% from 2009 figure of 353,000 tons." 
"With stable CPO OER in around 23% figure, we estimate BWPT can produce about 151,000 tons CPO in 2012 or grow CAGR 18.3% from 2009 figure of 91,382."
Higher margin
BW Plantation's efficient cost control makes better profit margins than peers, in 1H 2010 BWPT managed a higher profit margin than average of plantation companies. 
Gross margin, operating margin and net margin of BWPT during 1H 2010 were 59.8%, 44.9% and 31.0% respectively, while the average margin of peers were 42.0%, 30.5% and 21.3% respectively. 
Its production efficiency has made BWPT as the best in the margin. BWPT’s CPO oil extraction rate (OER) is one of supporting factors. 
In 2009 BWPT record average CPO OER of 22.8%, a bit above peers average of 22.7%, and in 1H 2010 BWPT average CPO OER is increase to 23.0%. 
"With better CPO OER in 1H 2010, we estimate BWPT can maintain production efficiency so we believe they can book about 61% gross margin and 27% net margin in FY10."
Until 1H 2010, in line with the rise of global CPO price, BW Plantation recorded a 10.3% average CPO price growth. 
"We estimated that until the end of 2010 BWPT’s CPO price will increase to reach 12.5% YoY growth. With 10.9% YoY FFB production growth and 12.5% average CPO price growth, we estimate BWPT can book 25.9% YoY sales growth in 2010."
BW Plantation is an oil palm plantation and processing company. Currently, BWPT owns a total of 95,182 hectares of land, consisting of 7 oil palm plantations, each managed by the company's subsidiaries.
About 46,048 of 95,182 hectares are already planted with 15,270 hectares of mature trees (84% in prime age), the average age of BWPT’s mature tree are 9.8 years. 
BWPT also owns two palm oil mills with the total production capacity of 105 tons of fresh fruit bunches (FFB) per hour, equal to 630,000 tons of FFB annually. 
In 2009, BWPT record a very good FFB production with average of 27 tons per hectares compared to peers average of about 20 tons per hectares.

Disclosure: No position at the stock mentioned above.

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