PP London Sumatra Indonesia ($LSIP), Beneficiary Of Rubber Price Upcycle
We believe the street has yet to factor in the recent rubber price rally and expect a round of consensus earnings upgrade ahead. Rubber prices have rallied 29.3% since Nov-16. We expect Lonsum’s rubber business to book operating profit of IDR2.6bn in FY17 despite having booked 9M16 operating losses of IDR99bn (25% of 9M16 consolidated operating profit). We raised our earnings forecasts by 6-9% for FY16-18F and reiterate our BUY call with a new TP of IDR2,200 (previous IDR2,050, 31% upside). Consensus earnings upgrade should be a positive catalyst for the stock.