Mirae Asset Sekuritas Indonesia Company Update

Sawit Sumbermas Sarana (SSMS): Staying energetic by Andy Wibowo Gunawan (andy.wibowo)

Apr 9, 2018

Sawit Sumbermas Sarana (SSMS): Staying energetic

For 2017, Sawit Sumbermas Sarana (SSMS) booked net profit of IDR787bn, achieving 108.6% and 107.2% of ours and consensus’ target on the back of higher CPO sales volume. Thus, we maintain our full-year net profit forecasts at IDR1.0tr (+27.3% YoY) and IDR1.3tr (+28.4% YoY) in 2018F and 2019F, respectively.

Growth of YoY operational numbers in 2017

Cumulatively for 2017, SSMS posted higher total FFB production that reached 1.5mn tonnes (+19.9% YoY), thanks to better weather condition during 2017. We note that SSMS’ FFB production growth driver was third party’s purchases that reached 254,166 tonnes (45.4% YoY), while FFB production from nucleus only accelerated by 15.7% YoY to 1.2mn tonnes. Given higher full-year 2017 total FFB production, SSMS’ CPO and palm kernel production increased to 343,059 tonnes and 62,240 tonnes, respectively (+18..4% and +15.2% YoY, respectively).

2017 earnings expand amid higher FFB purchasing and fertilizer costs

Given higher CPO production, SSMS’ full-year 2017 CPO sales volume expanded to 325,468 tonnes (+22.1% YoY), while its full-year 2017 palm kernel sales volume went down to 42,911 tonnes (-26.7% YoY). Furthermore SSMS’ CPO ASP reached IDR8,467/kg (+7.8% YoY). Therefore, SSMS’ full-year 2017 revenue expanded to IDR3.2tr (+19.0% YoY). Following expansion in the top line, SSMS’ full-year 2017 gross profit still grew although SSMS’ YoY cost of revenue growth was faster than its YoY revenue growth (please see Table 1). The faster YoY cost of revenue was due to higher FFB purchasing from 3rd parties and fertilizer costs that reached IDR433.1bn and IDR365.3bn, respectively (+116.6% and +62.9% YoY). Overall, SSMS’ full-year operating and net profits reached IDR1.1tr and IDR787bn, respectively (+11.7% and +33.0% YoY).

Retain full-year 2018 – 19F earnings estimate

We maintain our full-year revenue forecasts at IDR4.2tr (+28.3% YoY) and IDR4..9tr (+17.3% YoY) in 2018F and 2019F, respectively. Furthermore, we retain our 2018 – 19F gross profit estimates at IDRIDR2.1tr and IDR2.6tr, respectively. We also believe that SSMS’ 2018 – 19F operating profit will expand to IDR1.5tr and IDR1.9tr, respectively. Overall, our full-year net profit target is to reach IDR1.0tr and IDR1.3tr in 2018F and 2019F, respectively.

Maintain TP of IDR2,000; Reiterate Buy call

As we leave our 2018F-19F earnings estimates unchanged, we maintain our target price of IDR2,000 on SSMS and reiterate our Buy call. SSMS is currently trading at 2018F-19F P/Es of 13.6x and 10.6x, respectively. The only short-term downside risk is a decline in global CPO prices.

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Research

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