Nomura Indonesia Flavour: Indo Strategy, BRI, Garuda

Market might not go straight up, but JCI is at tail end of the correction, in our view. The stability of rupiah will help to calm market down and earnings growth will eventually take the driving seat.

Indonesia is a net exporter of both soft commodities and energy. Therefore, rising commodity prices, while potentially creating short-term inflation and challenges, ought to benefit Indonesia in the long run. The 2002-07 rally in commodity prices was, in many respects, accompanied by good times for Indonesia. More than 90% of Indonesian farmland is owned by small farmers; hence rising agricultural prices are beneficial to rural incomes.

Astra International, Bank Mandiri, Adaro, ITMG, and London Sumatra are our five top picks in anticipation of a rebound in JCI. In our view, the underlying fundamentals of these companies remain strong and they are beneficiaries of acceleration in GDP growth and of higher commodity prices.


Local news paper quoted BRI CEO, Sofyan Basir, saying that Bank Rakyat Indonesia (BBRI IJ - Buy) net profit rise 15% to Rp8.3 tn (US$922m) in 2010. The bank’s President Director Sofyan Basir stated that the figure is in line with target set at the beginning of the year and purely obtained from operational income during the year. Basir added that for 2011, the bank targeted growth of 15% in profit and 20% credit financing.

Garuda Indonesia scale down their offering to public from 36.5% to 26.67% and with this, it is 1.3 times oversubscribed. Local investors will be allocated 80% of the shares which was priced at IDR 750. The national airlines company raised IDR 4.75tn (USD 528 million) from the IPO, lower than their initial target of Rp7.0tn – Rp10.3tn.