Analisa Saham LSIP | 4 Maret 2019

Mirae Asset Sekuritas Indonesia Company Update

PP London Sumatra (LSIP IJ) -  4Q18 review: Discouraging results by Andy Wibowo Gunawan (andy.wibowo@miraeasset.co.id)

PP London Sumatra (LSIP IJ) -  4Q18 review: Discouraging results

For full-year 2018, PP London Sumatra Indonesia (LSIP) posted below-consensus results, with net profit of IDR331bn—representing just 68.6% of our 2018 forecast and 58.4% of the full-year consensus. This weak attainment has stemmed from a lower ASP although LSIP could boost its sales volume in 4Q18. Nevertheless, we leave our assumptions unchanged and, hence, maintain our target price of IDR1,310. We maintain our Hold call, as the target price now implies 7.4% upside potential. In our view, LSIP’s strongest competitive edge is its clean balance sheet. One short-term downside risk would be weaker-than-expected global CPO prices.

Low 4Q18 operational numbers

In 4Q18, LSIP’s FFB nucleus production declined to 430,600 tonnes (-4.0% QoQ; +29.6% YoY), given higher average numbers of rainy days in Sumatra and Kalimantan (18.9 days and 16.9 days, respectively; +73.5% and +84.4% QoQ, respectively). As a result, 4Q18 CPO production decreased to 130,300 tonnes (-4.2% QoQ; +28.8% YoY). Cumulatively, LSIP’s full-year FFB nucleus and CPO production reached 1.5mn tonnes and 453,100 tonnes, respectively (+18.5% and +16.4% YoY).

Also weak in financial numbers

In contrast, LSIP’s 3Q18 CPO sales volume increased to 145,000 tonnes (+20.9% QoQ; +39.1% YoY), while LSIP’s 3Q18 CPO ASP dropped to IDR6,018/kg (-12.1% QoQ; -26.4% YoY, respectively). Still, LSIP’s revenue slightly increased to IDR1.1bn (+3.2% QoQ; -1.5% YoY) in 4Q18. Unexpectedly, LSIP’s 4Q18 bottom line posted loss of IDR13bn, from IDR120bn net profit in 3Q18. Cumulatively, LSIP’s full-year 2018 net profit achieved 68.6% and 58.4% of our and consensus’ targets.  

Leave our earnings estimates unchanged

We leave our assumptions unchanged, thus keeping our revenue forecasts at IDR3.8tr in 2019 and IDR4.1tr in 2020 and our gross profit forecasts at IDR845bn in 2019 (+23.7% YoY) and IDR897 in 2020 (+6.2% YoY). We also keep our full-year net profit forecasts at IDR427bn in 2019 (+30.3% YoY) and IDR462bn in 2020 (+8.3% YoY).   

Maintain Hold with unchanged TP of IDR1,310 

As we leave our assumptions unchanged, we maintain our target price of IDR1,310. We reiterate our Hold call as the target price now implies 7.4% upside potential. We derived the target price using a target EV/ha at USD6,096/ha and a discount of 10.0%. In our view, LSIP’s strongest competitive edge is its clean balance sheet. One short-term downside risk would be weaker-than-expected global CPO prices.