ASII and cement stocks - JP Morgan Indo

Research call: Astra International – a solid buy still
Aditya Srinath (analyst) is hearing that January 4W sales may come in between 74-75k, a record month that would show 24% yoy growth. He has also published a detailed valuation analysis on ASII, looking at core business (ex UNTR and AALI) valuation relative to interest rate and growth prospect. His conclusion: the current 11.6x consensus P/E (core, 12mo forward) looks undemanding vs. the long term average of 10x, considering the current long bond yield of 8.9% vs. long term average of 10.8%. He is forecasting core Astra profit growth of 15.4% in 2011 and 13.8% in 2012, in-line with the long term average growth (historical) of 14%. In his view, the lower interest rate environment alone should justify 13-15x P/E multiple for Astra, supporting his Rp60k price target (holding UNTR and AALI share prices constant).


Sales call: infrastructure stocks (cement)
Two articles in Investor Daily paper caught my attention today.

#1. Medan-Kuala Namu toll-road construction (22.4km) to start in May 2011. More than 60% of land need has been cleared.

#2. Jasa Marga (JSMR) submitted beauty contest material for section E1 Rorotan-Cilincing, part of the Tanjung Priok port toll-road access (3.4km).

Indonesia’s 4Q10 GDP came-in better than expected on government consumption, and momentum seems to be there. Cement sales volume has been weak due to weather; potential pent-up demand when the rain clears? Indocement and Semen Gresik have taken a beating. Earnings expectations may be too high for Indo cement stocks, but the market may have discounted the bad news by now.