Construction Materials : Land reform is still on track for completion in 1H11 - Deutsche Bank

Still on track for completion in 1H11
The parliament has established a special committee to speed-up the reviewon proposed land acquisition bill, which is scheduled for completion in April 2011. Thus far, according to vice head of Commission V in the parliament (Muhidin Mohammad Said), the discussion are currently going normal as there is no disagreement among the members, who are committed to the realization of land aquisition law. In the event this review could not finish by 8 April 2011, the discussion would continue until June/July 2011 in a bid to pass this draft bill into Law in mid-2011.

Positive progress on land reform
We rate this development as encouraging progress even though we realize that there is still potential delay in its completion given political process. We expect the enactment of this land acquisition law on-time could bring greater optimism on the outlook for economic growth and cement demand given it could remove the current bottlenecks by fastening the land acquisition process and hence, faster infrastructure realization particularly for toll road.

Semen Gresik and Indocement are our favorites in the sector
We believe Semen Gresik to benefit from above condition supported by its well-timed expansion adding 40% new capacity to 27mn tons p.a. by 2013F coupled superiority in brand equity, and distribution network. Meanwhile, we expect Indocement as main beneficiary from surging cement demand given its ample and flexible capacity, strong brand equity and extensive distribution network.