Daiwa raises Indofood Agri Resources (5JS.SG) peer multiple-based target to $2.77 vs $2.31, due to combination of peers’ increased PERs for 2011, revised 2011 net profit forecast.
Raises 2011E, 2012E net profit by 13.6%, 12.9%, respectively, due to revisions to CPO-price forecasts, which rise to US$1,000($1,286) /US$1,100/US$1,100 for 2010/2011/2012, respectively (from US$850/US$950/US$950).
Adds, 2010, 2011 forecasts below consensus as some may have not taken into account time delay between when palm commodity prices rose, when they are reflected in revenue.
Keeps stock at Hold: “while we think that IndoAgri should be a key financial beneficiary if CPO prices rise in the future, we are concerned about its PER on our 2011 EPS forecast (16.7X), which assumes already some CPO price inflation.”
Prefers stocks like Golden Agri Resources (E5H.SG), rated Buy, First Resources (EB5.SG) rated Outperform, which trade currently at lower 2011 PERs.