Indofood Agri

Indofood Agri: JPM notes SIMP’s transition to IFRS has no negative implication. Notes investor concerns that the transition of SIMP from Indonesian GAAP to IFRS may see negative cash flow impact from potentially higher cash tax, but says this is not true...

Says, no cash tax is being paid on the biological gain (for plantation assets) that passes through the P&L, despite the need to recognize accounting tax expense per the accounting standards, as this is offset by a corresponding increase in deferred tax liabilities on the balance sheet...

Separately, adds that under IFRS, SIMP’s plantation assets need not be amortized (Indonesian GAAP amortizes over 20-25 yrs), hence the financial impact would be positive. Notes in FY10, amortization of plantation assets accounted for 13% of SIMP’s profit before tax.
Keeps Overweight rating, and TP $2.