CompanySM

Indofood Snapshot 27 August 2010

1H10: Blessed by stronger Rupiah and bullish CPO
INDOFOOD SM
1H10: Blessed by stronger Rupiah and bullish CPO

Why is It Interesting?
Not Rated
Rp4,575 INDF reported strong earnings in 1H10, beating market consensus in both top
and bottom line despite the flat revenue. The company highlighted three key
supporting points for its strong performance: higher inflation in 1H10,
Stock Data
strengthening currency, and higher CPO price. Meanwhile, the management
Reuters code INDF.JK refused to elaborate more on its plan to spin off the consumer branded
Bloomberg code INDF.IJ products (CBP) unit through IPO leaving the issue remains unclear. Valuation
Issued shares (m) 8,780 wise, INDF is trading at FY10E P/E ratio of 17.6x. Based on historical valuation,
Market cap (Rpbn) 40,170 the counter can be traded as high as P/E of 19.0x, suggesting to a share price
52-week low/high (Rp) 4,725/2,475 of Rp5,050. Looking at current price of Rp4,575, the abovementioned share
price gives a 10.4% upside potential, still attractive for trading play.

Major Shareholders
Key Catalysts
CAB Holdings Ltd. Seychelles 50.1%
Public 49.9% • Consumer branded segment supported
supported by strong food seasonings and snack. nack.
Contribution from consumer branded product (CBP) improved to 48% with strong
Consensus 10E 11F growth in snack and food seasonings which each grew by 33% and 31% YoY.
Meanwhile, sales on noodles, the biggest contributor in CBP, grew by only 7.5%
Revenue (Rpbn) 40,220 44,243
YoY. Looking at margin in each segments, dairy products recorded the strongest
Opr profit (Rpbn) 5,550 6,136 growth in margin to 13.4% from previously 7.4% last year due to lower inventory
Net profit (Rpbn) 2,230 2,571 cost. The snack foods also recorded improved margin to 6.7% as the company
EPS growth (%) 26.5 15.5 imported more potatoes last year due to poor harvesting in the domestic market. In
the mean time, food seasonings recorded lower margin as price of chili rising.
Div. Yield (%) 1.9 2.1
P/E (x) 17.2 15.1
• Bogasari’s margin improved, thanks to stronger Rupiah.Rupiah. The flour production unit
recorded lower sales in 1H due to price adjustment in 2Q10. The sales dropped by
EV/EBITDA (x) 8.1 7.4 nearly 13% YoY while volume falling by 4% YoY. However, EBIT surged by nearly
P/BV (x) 3.5 3.0 85% YoY due to stronger Rupiah against US$. Despite the falling sales, flour unit
recorded significant jump in margin reaching over 15% as compared to only some
Source: Bloomberg
7% last year. Going forward, Indofood would continue focusing on margin rather
than volume considering tight competition in the industry. Going forward, the
Company Description company has less concern over the increased imported flour, citing that its
products are more specific than its competitors. The company produces two kinds
Indofood SM (INDF) is a leading of flour; low protein flour and high protein flour for different kinds of products.
processed food company providing total
food solutions through its four strategic • Bullish CPO prices lifted agribusiness unit.
unit. The agribusiness units recorded nearly
business groups: consumer branded 5% YoY increased in sales with strong increased on the commodity and plantation
products (CBP), Bogasari (flour lines. Apparently, CPO production was lower, falling by about 10% YoY to some
producer), agribusiness, and 421K tons. But the increased CPO prices to US$810 per mt in the current period
distribution. Its strongest legacy today is from US$656 per mt last year have supported the agribusiness unit greatly. In the
the strength of its brands including mean time, tight competition on the cooking oil has put pressure on the line, giving
variety of brands of instant noodles, only a little over 1% YoY growth.
dairy, wheat flour, cooking oils, • Distribution unit was flat with stable margin.
margin. The distribution unit was flat marking a
margarine, and shortenings. growth of less than 1% YoY to Rp1.42tr in 1H10 from Rp1.41tr in the same period
last year. EBIT also fell by 2.5% YoY to Rp20.9bn suggesting to stable margin of
Share
Share Price 1.5%.

6 0%
• Indofood CBP IPO remains unclear.
unclear. The management refused to give comment on
INDF JCI JAKCO NS
its plan to spin-off its CBP unit. INDF intends to launch 20% of its stakes at ICBP
5 0% some time this year to public. Indofood CBP consists of instant noodles, dairy, food
4 0% seasonings, snack foods, and nutrition & special foods.
3 0%

2 0% Financial Highlights
1 0% 2008 2009 %Chg 1H09 1H10 %Chg
0% Revenue (Rpbn) 38,799 37,141 (4.3) 18,077 18,123 0.2
Ja n- Feb- Ma r- Apr- Ma y- Jun- Jul- Aug-
-1 0% 1 0 10 10 10 10 10 10 10 Gross profit (Rpbn) 8,977 10,122 12.8 4,721 5,882 24.6
-2 0% Operating profit (Rpbn) 4,341 5,004 15.3 2,225 3,120 40.3
Net profit (Rpbn) 1,034 2,076 100.7 800 1,411 76.4
Mardesiana Gross margin (%) 23.1 27.3 4.1 26.1 32.5 6.3
mardesiana@-kgs.com Operating margin (%) 11.2 13.5 2.3 12.3 17.2 4.9
(6221) 5152889 Net margin (%) 2.7 5.6 2.9 4.4 7.8 3.4

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 Indofood SM
1H10: Blessed by stronger Rupiah and bullish CPO
Financial Highlights in 1H10
1H09 1H10 % Chg 1Q10 2Q10 % Chg 1H10 FY10E %FY
Sales (Rpbn) 18,077 18,123 0.2 9,309 8,814 94.7 18,123 40,220 45.1
Gross profit (Rpbn) 4,721 5,882 24.6 2,795 3,087 110.4 5,882 n.a n.a
Operating profit (Rpbn) 2,225 3,120 40.3 1,411 1,709 121.1 3,120 5,550 56.2
Net profit (Rpbn) 800 1,411 76.4 632 779 123.2 1,411 2,230 63.3
Gross margin (%) 26.1 32.5 6.3 30.0 35.0 5.0 32.5 n.a
Operating margin (%) 12.3 17.2 4.9 15.2 19.4 4.2 17.2 13.8
Net margin (%) 4.4 7.8 3.4 6.8 8.8 2.0 7.8 5.5
ROA (%) 4.0 6.7 2.7 6.2 7.5 1.3 6.7 5.8
ROE (%) 18.1 26.3 8.1 29.1 29.1 0.1 26.3 21.5
Net gearing (x) 1.7 1.0 (0.6) 1.7 1.1 (0.6) 1.0 0.8
Source: Company

Revenue Breakdown per Segment

1H09 1H10
Distribution
Dist ribut ion
6.3%
6.4%

Agribusiness
Agribusiness CBP
26.3% CBP
25.3% 36.4%
39.8%

Bogasari Bogasari
31.9% 27.6%

Source: Company

Capital Expenditure Budget 2010

Division Rpbn
Agribusiness 2,463
CBP 1,096
Bogasari 588
Distribution 109
Total 4,257
Source: Company

Segment Performance
Sales (Rpbn) Volume EBIT (Rpbn)
1H09 1H10 %Chg 1H09 1H10 %Chg 1H09 1H10 %Chg
CONSUMER BRANDED PRODUCT
Noodles (bn packs) 5,753 6,184 7.5 5.6 5.8 4.1 636 961 51.3
Dairy
- Solid based (000 tons) n.a n.a n.a 81.4 88.3 8.5 n.a n.a n.a
- Liquid based (m ltr) n.a n.a n.a 42.2 44.6 5.7 n.a n.a n.a
- Total Dairy 1,495 1,645 10.1 111 221 100.2
Food Seasonings (000 tons) 252 329 30.7 29.9 35.0 17.1 13 10 (21.5)
Snack Foods (000 tons) 358 476 33.1 7.4 9.9 33.7 20 32 63.6
Nutrition & special food (000 tons) 203 236 16.2 6.1 7.5 21.5 26 22 (13.7)
Total Consumer Branded 8,060 8,871 10.1 804 1,247 55.0

BOGASARI
Agribusiness
- Plantations ('000 tons) 2,677 2,883 7.7 467 421 (9.9) 753 806 7.0
- Cooking oil & Fats ('000 tons) 2,526 2,554 1.1 285 272 (4.7) 110 13 (88.1)
- Commodity ('000 tons) 392 434 10.6 70 84 19.6 (23) (11) (51.1)
- Total Agribusiness 5,595 5,871 4.9 840 808 (3.9)
Distribution 1,405 1,416 0.7 21 21 (2.3)
Total Bogasari 7,057 6,157 (12.7) 507 936 84.7
GRAND TOTAL 18,078 18,123 0.2 2,225 3,120 40.3
Source: Company

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION 2
AND
. IMPORTANT DISCLOSURES AT THE END OF THIS REPORT
 Indofood SM
1H10: Blessed by stronger Rupiah and bullish CPO

P/E band:
band: Still Attractive for Trading Play

30

25

20 SD+1.0 = 19.0x ~ Rp5,050

Current = 17.2x
Rp4,575
15 Average = 14.2x

10
SD-1.0 = 9.4x

0
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

Source: Bloomberg, Kresna Research

Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
could affect objectivity of this report. Hence, this report should form as one of many others factors in making investment decisions. PLEASE SEE ANALYST CERTIFICATION 3
AND
. IMPORTANT DISCLOSURES AT THE END OF THIS REPORT
 Indofood SM
1H10: Blessed by stronger Rupiah and bullish CPO

IMPORTANT DISCLOSURES AND DISCLAIMERS

This report has been produced by PT Kresna Graha Sekurindo Tbk (Kresna Securities), Indonesia.

Definition of ratings :
BUY = stock return > 10% over the next 12 months (excluding dividend)
HOLD = stock return -10% to 10% over the next 12 months (excluding dividend)
SELL = stock return <10% over the next 12 months (excluding dividend)

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Kresna Securities may seek to do business with companies covered in its research reports. Investors should therefore be aware that the firm may have a conflict of interest that
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