Refer to Important disclosures in the last page of this report Stock Data Target price (Rp) Rp1,800 Prior TP (Rp) Rp2,100 Shareprice (Rp) Rp1,530 Upside/downside (%) +17.6 Sharesoutstanding (m) 3,000 Marketcap. (US$ m) 344 Free float (%) 45.9 Avg. 6m dailyT/O (US$ m) 0.1 Price Performance 3M 6M 12M Absolute (%) -16.8 -14.0 -15.5 Relative to JCI (%) -19.9 -23.0 -23.2 52w high/low (Rp) 2,010 - 1,530 Major Shareholders Agrindo Pratama 31.0% Midsummer Corp 23.1% Estimate Change; Vs. Consensus 2017F 2018F Latest EPS (Rp) 73 140 Vs. Prior EPS (%) (49.4) (17.6) Vs. Consensus (%) (44.8) (20.2) Source: Bloomberg Frederick Daniel PT Indo Premier Sekuritas [email protected]+62 21 5793 1170 Temporary low productivity Weak 1H17 results as margins deteriorated. Lower productivity in 2Q17 due to heavy rainfall. Temporary impact from lower production, LT demand remains strong. Maintain Buy with lower TP of Rp1,800 (from Rp2,100). Weak 1H17 results. BISI recorded 1H17 earnings of Rp87.8bn, down 36.4% yoy, formed only 22% of our and consensus full-year earnings forecasts. Gross margin, operating margin and net margin dropped to 29.5%, 11.3% and 10.3%, respectively in 1H17, from 40.7%, 23% and 18.6%, respectively in 1H16. Revenues in 1H17 improved 14.7% yoy on the back of strong sales in 1Q17 (+41% yoy) while sales in 2Q17 dropped 23% qoq and 7.5% yoy to Rp372bn. Revenues deterioration in 2Q17 was mainly caused by lower agrochemical sales which dropped 39% qoq and 12% yoy. Agrochemical sales represent 47% of BISI’s total revenues in 1H17 and 38% in 2016. Production hampered by heavy rain. Rainfall in BISI’s seed production plants was higher than normal in 2Q17, resulting in lower productivity in the period. Given high demand for BISI’s hybrid corn seed (1H17 sales +15% yoy) for government’s seed provisioning program, seed inventory decreased significantly in 1H17. The combination of low productivity, high inventory costs and slightly higher production costs, translated to BISI’s 36% yoy higher COGS in 1H17 which result in 17% decrease in gross profit. However, according to BISI’s management, rainfall in July has returned to the normal level, inline with the data (Fig. 1&2) from Indonesian Meteorological, Climatological and Geophysical Agency (BMKG). Temporary impact, demand remained strong. As fixed costs represent 55%- 60% of BISI’s production costs, low productivity will translate to higher costs and lower margins. We view that the impact of low productivity in 2Q17 as temporary. We downgrade our forecast for BISI’s earnings by 49% and 18% in FY17-18F, respectively; but maintain our positive LT outlook for corn seed industry in Indonesia. Please note that after Indonesia corn self-sufficiency which will be achieved in 2017, the government targets Indonesia will become corn exporter to the global market. Ministry of Agriculture has raised subsidy budget for corn farming from only Rp100bn in 2014 to Rp3.5tn in 2017. In 1H17, BISI’s sales to the government seed provision program represent 72% of total corn seed sales. Maintain Buy with lower TP. We maintain our Buy recommendation for BISI with 18% potential upside to our new DCF-based (WACC: 12.7%, TG: 4%) target price of Rp1,800 (from Rp2,100). We forecast BISI’s earnings momentum to be strong in 2018F as productivity normalized, cost per unit dropped and inventory return to the normal level. Bisi International (BISI IJ) 01 August 2017 Results Note BUY (Unchanged) Year To 31 Dec 2015A 2016A 2017F 2018F 2019F Revenue (RpBn) 1,438 1,852 1,972 2,146 2,268 EBITDA (RpBn) 313 472 269 535 625 EBITDA Growth (%) 38.9 50.6 (43.0) 98.8 16.8 Net Profit (RpBn) 264 336 220 419 486 EPS (Rp) 88 112 73 140 162 EPS Growth (%) 60.0 27.4 (34.5) 90.2 16.1 Net Gearing (%) (17.3) (18.4) (11.3) (22.8) (29.0) PER (x) 17.4 13.7 20.8 11.0 9.4 PBV (x) 2.5 2.2 2.1 1.9 1.6 Dividend Yield (%) 1.4 2.2 2.9 1.9 3.7 EV/EBITDA (x) 12.4 9.1 14.1 7.0 5.6 Source: BISI, IndoPremier Share Price Closing as of : 31-July- 2017 Equity | Indonesia | Commodities 80 85 90 95 100 105 110 115 120 Jul-16 Aug-16 Sep-16 Oct-16 Oct-16 Nov-16 Dec-16 Dec-16 Jan-17 Feb-17 Feb-17 Mar-17 Apr-17 Apr-17 May-17 Jun-17 Jul-17 Jul-17 BISI-Rebase JCI Index-Rebase
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Refer to Important disclosures in the last page of this report
Acct. Receivables TO (days) 160.3 156.0 182.7 182.3 184.9 Acct. Receivables - Other TO (days) 31.9 8.8 0.7 1.0 1.0
Inventory TO (days) 1.4 1.5 1.7 1.4 1.5 Payable TO (days) 43.7 42.3 39.0 47.8 44.4 Acct. Payables - Other TO (days) 8.8 10.6 11.6 13.8 12.8
Debt to Equity (%) 0.0 0.0 0.0 0.0 0.0 Interest Coverage Ratio (x) 0.0 0.0 0.0 0.0 0.0 Net Gearing (%) (17.3) (18.4) (11.3) (22.8) (29.0)
Source: BISI, IndoPremier
Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167
INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period
ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any
responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or
sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this