AKR Corporindo TP Rp3,825

Beneficiary of oil price hike
Stronger FY11 result has been anticipated. AKR reported strong core net profit growth of 97% YoY to Rp611b, and revenue growth of 82% YoY to Rp18,806b. Both numbers were in line with our expectations. Higher revenue was supported by all division units, particularly petroleum distribution, which recorded 99.6% YoY revenue growth to Rp14.9t, and chemical distribution, where revenues were up 36.9% YoY to Rp2.65t. Sales volumes of both divisions grew by 50% YoY and 9% YoY to 2m KL and 1.24m MT respectively.

Eyeing better petroleum distribution sales amid higher oil prices.
We foresee that revenues at the petroleum distribution unit will be better this year amid higher oil prices. Up to end-March 2012, the average price of crude oil was US$103 per barrel or 10% above the average price in FY11 of US$95 per barrel. High crude oil prices (to the end of this year) would support AKR’s petroleum distribution sales. Based on our calculation, if crude oil prices (NYMEX) increase by 10%, sales and net profit will each increase by 7%.

Revising ASP of petroleum distribution in anticipation of higher oil prices this year. We upgrade our revenue assumptions by 6% to Rp24.1t in FY12 and by 12% to Rp28.1t in FY13 as we raise the ASPs of the petroleum distribution to Rp7,500 per litre in FY12 and FY13 (from Rp7,000 per litre in FY12, and from Rp6,500 per litre in FY13), amid anticipated higher oil prices. Our assumptions for the petroleum distribution prices are based on a crude oil price of US$98 per barrel, below the 3M12 average of US$103 per barrel. Meanwhile, we maintain our sales volume growth assumptions of 26% for petroleum distribution to 2.5m KL this year, and 15% to 2.95m KL in FY13.

Raising TP to Rp3,825, maintain HOLD. We raise our TP to Rp3,825 (from Rp3,600) in anticipation of higher oil prices. With the share price up 42% ytd, we believe the market has been too optimistic about AKR’s prospects. We are waiting for new catalysts to boost AKR’s earnings
growth. Maintain HOLD.


[summary earnings table]


Stronger FY11 result has been anticipated
AKR reported strong core net profit growth of 97% YoY to Rp611b, and revenue growth of 82% YoY to Rp18,806b. Both numbers were in line with our expectations. Higher revenue was supported by all division units, particularly the petroleum distribution division, which recorded 99.6% YoY revenue growth to Rp14.9t, while revenues at the chemical distribution rose 36.9% YoY to Rp2.65t. Sales volumes of both divisions grew by 50% YoY and 9% YoY to 2m KL and 1.24m MT respectively. FY11 gross margins declined to 5.4% from 5.9% in FY10, mainly due to
an increase in the revenue contribution of petroleum distribution to 79% from 72% in FY10. In addition, it is important to point out that management had separated out forex gains from petroleum purchase transactions in the COGS. If forex gains had been included in the COGS, AKR’s gross margin would have been 5.9%, in line with our expectation. Positive operating cash flow was supported by relatively low working capital requirements. While A/R turnover was 34 days, inventory turnover was 21 days and A/P turnover was 54 days, all of which were in line with our estimates. Capital expenditure in FY11 reached Rp390.8b, in line with our expectations after we changed our capital expenditure assumption last year from Rp859b to Rp400b, with the
remaining Rp459b to be carried forward to this year. We maintain our estimate of capital expenditure this year at Rp1.37t. We believe the capital expenditure will be financed by internally-generated cash, as up to end-FY11 the company still has cash on hand of Rp1.3t, while our FY12 EBITDA estimate is around Rp1.2t.

source: KIMENG dated 30 March 2012