HCM has upgraded PT Sinar Mas Agro Resources & Tech Tbk , JAK:SMAR to a strong buy on local tax incentives, high demand and Unilever Deal. Shayne Heffernan has issued a 2012 price target of 10,000 IDR on the stock.

Indonesia’s tax change from Sept. 15 cut production costs for Indonesian refiners, which could enjoy a price advantage of between $72 and $129 a ton, said Mohammad Jaaffar Ahmad, chief executive officer of Palm Oil Refiners Association of Malaysia.

With Indonesia more than halving its refined palm oil export taxes and keeping crude palm oil taxes virtually unchanged, more of the edible oil will get channeled to its plants, limiting supply for Malaysia and raising feedstock costs.

According to Malaysian Palm Oil Board data, refined palm oil exports in 2010 made up 70 percent of total shipments at 16.6 million tons. Indonesia’s processed palm oil exports stood at 43 percent from 15.6 million tons.

Unilever Indonesia, the country’s largest listed consumer goods maker, may resume purchasing crude palm oil from Sinar Mas Agro Resources and Technology following an 18-month halt after the palm oil producer made improvements to abide by Unilever’s guidelines for responsible environmental practices.

Sancoyo Antarikso, corporate secretary of Unilever Indonesia, said Wednesday that Unilever would consider the commercial purchase of palm oil from Sinar Mas Agro Resources and Technology, should the company known as Smart follow through on raising its environmental standards.

According to Sancoyo, Smart would also conform to guidelines set by the Roundtable on Sustainable Palm Oil, a non-governmental organization made up of planters, green groups and consumers. RSPO sets green standards for the palm oil industry, but does not impose sanctions on members who violate its voluntary standards.

PT SMART Tbk is one of the largest, publicly-listed, integrated palm-based consumer companies in Indonesia which is committed to sustainable palm oil production.

Founded in 1962, SMART’s palm plantations have a total coverage area of approximately 137,500 hectares (including small holders). SMART also operates 15 mills, four kernel crushing plants and four refineries. SMART listed its shares on the Indonesia Stock Exchange in 1992.

SMART’s primary activities are cultivating and harvesting of palm trees, processing of fresh fruit bunches into crude palm oil (“CPO”) and palm kernel, and refining CPO into value-added products such as cooking oil, margarine and shortening.

Besides bulk and industrial oil, SMART’s refined products are also marketed under several brands such as Filma and Kunci Mas. Today, these brands have been recognised for their high quality and command significant market share in their respective segment in Indonesia.

SMART is a subsidiary of Golden Agri-Resources Ltd (“GAR”), which is one of the largest palm-based companies in the world which is listed on the Singapore Exchange. SMART also manages all of GAR’s oil palm plantations, which has a total planted area of 445,100 hectares (including small holders) in Indonesia, as at 31 March 2011.

This relationship benefits SMART with its economies of scale in plantation management, information technology, research and development, sourcing of raw material, and access to a wide domestic and international marketing network.

	Palm Plantations 2010 2009 2008 2007 2006 Total Planted Area (hectares) Young (4 – 6 years) 29,885 26,939 16,579 7,761 4,809 Prime (7 – 18 years) 72,202 70,955 72,547 74,897 73,610 Old (> 18 years) 21,801 19,825 17,118 13,117 13,116 Total Mature Plantations 123,888 117,719 106,244 95,775 91,535 Immature Plantations 14,206 16,759 22,573 29,415 26,515 Total Planted Area 138,094 134,478 128,817 125,190 118,050 Nucleus Planted Area (hectares) Young (4 – 6 years) 26,876 24,034 13,925 5,136 2,753 Prime (7 – 18 years) 58,416 55,672 55,538 55,603 54,281 Old (> 18 years) 14,015 14,003 13,588 13,117 13,116 Total Mature Plantations 99,307 93,709 83,051 73,856 70,150 Immature Plantations 9,282 13,751 20,364 26,588 24,581 Total Nucleus Planted Area 108,589 107,460 103,415 100,444 94,731 Plasma Planted Area (hectares) Young (4 – 6 years) 3,009 2,905 2,654 2,625 2,056 Prime (7 – 18 years) 13,786 15,283 17,009 19,294 19,329 Old (> 18 years) 7,786 5,822 3,530 - - Total Mature Plantations 24,581 24,010 23,193 21,919 21,385 Immature Plantations 4,924 3,008 2,209 2,827 1,934 Total Plasma Planted Area 29,505 27,018 25,402 24,746 23,319 FFB Harvested (tonnes) Nucleus 1,977,461 1,972,085 1,676,382 1,688,383 1,575,068 Plasma 475,066 487,127 408,806 336,627 322,739 Total FFB Harvested 2,452,527 2,459,212 2,085,188 2,025,010 1,897,807 Average FFB Yield (tonnes per ha) 19.8 20.9 19.6 21.1 20.7 CPO Produced (tonnes) 625,335 640,264 534,988 509,095 490,870 PK Produced (tonnes) 139,218 141,500 119,266 111,637 103,911 OER (%) 23.09 23.50 23.31 23.33 23.38 KER (%) 5.14 5.19 5.20 5.12 4.95 Plantation Locations (hectares) Sumatra Nucleus 41,132 41,254 39,505 39,210 38,984 Plasma 24,260 23,815 23,349 23,200 23,319 Total Sumatra 65,392 65,069 62,854 62,410 62,303 Kalimantan Nucleus 67,457 66,207 63,910 61,234 55,747 Plasma 5,245 3,202 2,053 1,546 - Total Kalimantan 72,702 69,409 65,963 62,780 55,747

	Company	Industry	Sector	S&P 500
Return on Assets (TTM)	14.98	8.31	4.17	7.37
Return on Assets – 5 Yr. Avg.	11.10	8.90	8.14	6.49
Return on Investment (TTM)	21.76	15.62	7.03	9.63
Return on Investment – 5 Yr. Avg.	15.19	19.82	14.09	8.61
Return on Equity (TTM)	30.51	19.77	10.25	25.22
Return on Equity – 5 Yr. Avg.	24.09	25.66	18.29	20.85

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com

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Posted by Shayne Heffernan on Sep 21st, 2011and filed underAgriculture, Analysis, ASEAN News, Asia, Equities, Heffernan Capital Management, Indonesia, Latest News, Palm Oil, Research, Shayne Heffernan.You can follow any responses to this entry through theRSS 2.0Responses are currently closed, but you can trackback from your own site.