IP BISI 20170731 - indopremier.com

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

| C

om

moditie

s

80

85

90

95

100

105

110

115

120

Jul-

16

Aug

-16

Sep-1

6

Oct-

16

Oct-

16

Nov-1

6

Dec-1

6

Dec-1

6

Jan-1

7

Feb-1

7

Feb-1

7

Mar-

17

Apr-

17

Apr-

17

May-1

7

Jun-1

7

Jul-

17

Jul-

17

BISI-Rebase JCI Index-Rebase

BISI Results Note

2 Refer to Important disclosures in the last page of this report

Fig. 1: Rainfall in April 2017 Fig. 2: Rainfall in June 2017

Source: BMKG Source: BMKG

Fig. 3: Corn seed sales volumes Fig. 4: Corn seed sales

Source: BISI, IndoPremier Source: BISI, IndoPremier

Fig. 5: Pesticide sales Fig. 6: Revenue breakdown

Source: BISI, IndoPremier Source: BISI, IndoPremier

10.1

12.7

8.59.5 9.3

14.3

18.619.6

22.123.2

-

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F

k to

ns

308

417354

439 422

599

816912

1,089

1,212

0

200

400

600

800

1000

1200

1400

2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F

(Rp

Bn

)

330 342 325

419

523568

756 756 756 756

-

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F

(Rp

Bn

)

782 895

999 866

1,056 1,156

1,438

1,852 1,972

2,146

-

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F

Rp

bn

corn seed fruit & vegie rice seed fertilizer & pesticide other

BISI Results Note


Fig. 7: 2Q17 results summary table

(Rp Bn) 1H17 1H16 % Y-Y 2Q17 % Q-Q % Y-Y FY17F 1H17 vs FY17F

Revenues 852.7 743.2 14.7 372.2 (22.6) (7.5) 1,971.8 43.2

COGS 601.2 440.5 36.5 285.8 (9.4) 24.2

Gross profit 251.4 302.7 (16.9) 86.4 (47.7) (49.8) 619.9 40.6

G&A expenses 40.0 34.6 15.6 19.3 (6.5) 8.9

Selling expenses 115.1 96.8 18.8 60.7 11.8 2.1

Operating profit 96.4 171.2 (43.7) 6.3 (93.0) (93.4) 284.0 33.9

Net interest inc. (exp) 10.7 6.7 59.0 6.7 65.0 141.5

Forex gain (loss) - - - - - -

Other 5.3 (2.3) (333.5) 1.4 (64.2) (127.0)

Pretax profit 112.4 175.7 (36.0) 14.3 (85.4) (84.5) 297.5 37.8

Tax 24.5 37.7 (34.8) 2.7 (87.6) (86.4)

Minority Interest 0.1 0.0 17.4 0.0 (68.3) (48.0)

Net profit 87.8 138.0 (36.4) 11.6 (84.7) (84.0) 220.2 39.9

GPM (%) 29.5 40.7

23.2

31.4

OPM (%) 11.3 23.0

1.7

14.4

Pretax mgn (%) 13.2 23.6

3.9

15.1

NPM (%) 10.3 18.6

3.1

11.2

Source: BISI, IndoPremier

Fig. 8: Earnings revision

(Rp Bn) FY17F FY18F

old new (%) change old new (%) change

Corn seed sales vol (tons) 19,614 19,614 - 22,094 22,094 -

Corn seed sales (Rpbn)

Horticulture sales 908 912 0.4 1,089 1,089 -

Agrochemical 317 290 (8.3) 290 290 -

Other 757 756 (0.2) 756 756 -

40 14 - 12 12 -

Revenues

Gross profit 2,022 1,972 (2.5) 2,146 2,146 -

Operating profit 869 620 (28.6) 1,017 944 (7.2)

Net profit 536 284 (47.0) 628 552 (12.0)

435 220 (49.4) 508 419 (17.6)

Margins (%)

GPM

OPM 43.0 31.4 (11.5) 42.9 44.0 1.0

NPM 26.5 14.4 (12.1) 26.5 25.7 (0.8)


BISI Results Note


Year To 31 Dec (RpBn) 2015A 2016A 2017F 2018F 2019F

Income Statement

Net Revenue 1,438 1,852 1,972 2,146 2,268

Cost of Sales (875) (1,048) (1,352) (1,203) (1,238)

Gross Profit 562 804 620 944 1,030

SG&A Expenses (270) (356) (376) (435) (432)

Operating Profit 292 448 244 509 597

Net Interest 11 13 13 13 13

Forex Gain (Loss) (2) 0 0 0 0

Others-Net 31 (7) 40 44 46

Pre-Tax Income 332 454 298 566 657

Income Tax (68) (118) (77) (147) (170)

Minorities 0 0 0 0 0

Net Income 264 336 220 419 486

Balance Sheet

Cash & Equivalent 315 380 242 565 810 Receivable 722 949 1,032 1,123 1,187 Inventory 713 689 889 791 814 Other Current Assets 29 24 27 29 31

Total Current Assets 1,778 2,042 2,189 2,507 2,841 Fixed Assets - Net 293 318 321 324 328 Goodwill 0 0 0 0 0

Non Current Assets 38 18 19 20 22 Total Assets 2,142 2,416 2,572 2,900 3,240 ST Loans 0 0 0 0 0 Payable 121 122 0 148 153 Other Payables 159 179 204 212 223

Current Portion of LT Loans 0 0 0 0 0 Total Current Liab. 279 302 370 360 375

Long Term Loans 0 0 0 0 0 Other LT Liab. 47 51 57 63 71

Total Liabilities 326 353 427 424 446 Equity 394 405 400 400 400 Retained Earnings 1,421 1,659 1,745 2,076 2,394 Minority Interest 0 0 0 0 0

Total SHE + Minority Int. 1,815 2,064 2,145 2,476 2,794 Total Liabilities & Equity 2,142 2,416 2,572 2,900 3,240


BISI Results Note


Year to 31 Dec 2015A 2016A 2017F 2018F 2019F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 264 336 220 419 486 Depr. & Amortization 20 25 23 25 26 Changes in Working Capital (45) (188) (225) (12) (78)

Others (14) (12) (7) (2) (4) Cash Flow From Operating 225 162 12 429 430

Capital Expenditure (39) (29) (28) (29) (30) Others 12 14 14 14 14

Cash Flow From Investing (27) (15) (13) (15) (16) Loans 0 0 0 0 0 Equity 0 6 0 0 0 Dividends (63) (99) (134) (88) (168) Others 0 4 (5) (1) (1)

Cash Flow From Financing (63) (89) (139) (89) (169) Changes in Cash 135 58 (140) 326 246 Financial Ratios

Gross Margin (%) 39.1 43.4 31.4 44.0 45.4

Operating Margin (%) 20.3 24.2 12.4 23.7 26.3 Pre-Tax Margin (%) 23.1 24.5 15.1 26.4 29.0

Net Margin (%) 18.4 18.2 11.2 19.5 21.4 ROA (%) 13.2 14.8 8.8 15.3 15.8 ROE (%) 15.4 17.3 10.5 18.1 18.5 ROIC (%) 16.1 18.1 11.2 18.8 19.0

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)


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

report.

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IP BISI 20170731 - indopremier.com