Proposed acquisitions announced. Indofood Agri (IFAR) recently announced a few proposedacquisitions by its 90%-owned subsidiary, PT Salim Ivomas Pratama (SIMP) and its listedsubsidiary, PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Lonsum).

No significant impact on earnings in the near term. They serve to enhance IFAR’s integratedagribusiness model and improve its operating efficiency through (i) the integration of its seedbreeding operations and development of plantation land, (ii) securing additional land bank for futureexpansion and (iii) operation of its own bulking station at a strategic location. The proposedacquisitions are targeted to be completed between Dec 08 and Apr 09

Total approximate consideration for the purchases is IDR131.7b (about S$15.8m, which includesSIMP’s obligation to settle outstanding loans estimated to be IDR43.5b in one of the acquisitions)and US$16.4m (about S$25.1m). Between SIMP & Lonsum, they would be obtaining 161,300 haof land (of which 11,800 ha is planted and 6,275 ha (53%) is mature), an oil palm seed breedingfacility that produces 6m seeds per year and a bulking facility located at the port of Dumai in theprovince of Riau, with a total storage capacity of approximately 7,500 tonnes of CPO. IFAR’smanagement indicated that the intention is to fund the purchases via internal funding. We do notsee this as an issue for Lonsum, which has IDR851b of cash as at 30 Sep 08 for its IDR48bproposed acquisition.

Maintain buy, fair value of S$1.12. Current CPO futures’ prices (Dec delivery) is RM1,650/tonne,against our CPO price assumption of RM1,500/tonne. We are maintaining our fair value of S$1.12and buy call for IFAR, with the stock trading at 2.7x our forward earnings.