INVESTOR DIGEST Equity Research | 22 February 2011 - Mandiri Sekuritas

Construction: Parliament to speed-up discussion on law of land clearance
for public usage (Underweight)
 The Indonesian Parliament is said in the news today that they have formed a specialized committee (Pansus) purposed to speed-up discussion on draft of law concerning land clearance for public usage, which targeted to be completed by April this year. The parliament also expects for the draft can be signed by end of 1H this year, thus can be as tool to accelerate infrastructure progress of the country that has been important growth of the economy.
 We are positive with the effort, nonetheless, our skeptical view remains. In addition, please note that there will also a government regulation required for the implementation of the law that this commonly takes for at least one year to be issued.
 At this juncture, we maintain our underweight call for, both, construction and building materials sector. For the latter, despite of the stuttering demand, companies of this sector, this year, is also clouded by the inflationary pressure that may impact to the production cost, thus growth is seen rather minimal.

Ramayana : January sales Rp455bn, 1 % off from company’s target (RALS, Rp780, Buy, TP: Rp1,100)
 Ramayana first month of the year sales was 6.6% of their FY11F projected sales of Rp6,850bn (Mandiri Sekuritas FY11F revenue estimates : Rp6,811bn). RALS usually has weak sales and profitability performance in 1Q10 due to post festive season. In FY10 RALS booked Rp6,047bn in revenue 1.5% below our FDY10 revenue target. At Rp780, RALS is trading at FY11F and FY12 PER of 13.4x, and 11.7x, respectively with EV/EBITDA of FY11F and FY12F of 7.6x, and 6.5x. Higher commodity prices is expected to boost RALS sales on commodity region areas, however we are growing cautious on the impact of recent Saudi Arabian trade union decision to suspend recruitment for Indonesian overseas workers, and recent unrest in Middle East which might affect Indonesian workers remittances.

Delta Dunia: Lower coal extraction but significant higher SR (DOID, Rp1,220, Buy, TP: Rp1,600)
 Delta Dunia reported lower coal extraction in January 2011 of 2.6Mt coal, -18.8% mom, but followed with higher much higher stripping ratio (SR) of 9.9x with overburden (OB) removal of 25.8mm bcm, -5.5% bcm.
 Significant higher SR in January 2011 was due to prioritized coal extraction done by big coal producers to catch up in pit inventories in last month FY10.
 Higher SR would suggest higher mining cost for those big coal producers in FY11, but it’s positive for mining contractor like Buma.
 Currently we have Buy recommendation on DOID. DOID trades at 11.3x PER11F.

United Tractors: Robust growth in heavy equipment sales volume (UNTR, Rp23,450, Buy, TP: Rp28,100)
 As we expected, UNTR booked robust growth in heavy equipment sales volume. UNTR booked heavy equipment sales volume to mining sector of 514 units, the highest sales volume to mining sector in its history. Jan’11 heavy equipment sales volume of 731 units represented 10.4% of our FY11F assumption of 7,000 units. This Jan’11 heavy equipment sales volume is significant above consensus estimate’s of 6,000 units.
 Overburden removal and coal production in Jan’11 were slightly below our estimate. Jan’11 overburden removal and coal production represented 7.6% and 7.6% of our FY11F assumption of 727mn BCM and 83mn coal.
 We have a Buy recommendation on UNTR. Currently, UNTR is trading at PER FY11F of 14.4x.

Bank BCA recorded unaudited net income of Rp8.37 tn in FY10 (BBCA, Rp6,250, Neutral, Rp7,300)
 As published in Bank Indonesia’s website, BBCA reported unaudited net profit of Rp8.37tn in FY10, which was above our expectation yet inline with consensus estimates.
 Our latest talk with the management highlighted the possibility of discrepancy between unaudited and audited figures as last year was the first year of implementing the PSAK 50/55 ruling.
 At current price, the stock is trading at 2010F P/BV of 4.1x and PER of 15.6xx. We maintained our neutral rating on the counter.

Medco Energi: Oil players to close down Libya, Medco holds on still (MEDC, Rp3,150, Buy, TP: Rp4,600)
 Oil production in Libya is likely to drop dramatically as some major international oil companies and sub-contractors evacuate their staff from there. Companies like BP, Wintershall, Statoil, and Royal Dutch Shell began to shut down their operation and evacuate their staffs and families.
 What about Medco? Along with Eni (Italian oil companies) and some others, MEDC decided to keep the operation ongoing and does not have any plan yet to evacuate the staff. MEDC argued, as we expected before, that MEDC’s Block 47 is currently secure since it is far from the main unrest hub (Benghazi, East Libya), while MEDC always keep monitoring the situation there. Moreover, MEDC is currently at exploration phase, during which it requires less staff than producing phase.
 We view that MEDC’s position is out of harm's way, however negative sentiment may hamper MEDC performance since if the condition is getting more severe (intense civil war), it is very possible that MEDC will also shut down its exploration
activities.
 We still maintain a Buy on MEDC on the back of rising commodity prices. MEDC is currently traded at EV/2P US$5.8/boe, PER 11F 20.1x, and PBV 11F 1.5x

Multistrada Arah Sarana: Shareholders approved rights issue plans (MASA, Rp280, Buy, TP: Rp520)
 MASA is planning to conduct a rights issue to raise funds amounting to US$50mn -100mn. The shareholders have approved the plans through extraordinary shareholders meeting held yesterday. Such funds will be used to perform a subsidiary engaged in rubber plantation and rubber processing factory. Currently, MASA is still looking the rubber plantation area for acquisition. Rubber price is expected can be pressed by around 10-15% by this plans. Yet, no further information related with the rights issue plans and the acquisition process.
 Based on current market cap of Rp1.7tn or US$191.0mn, the approximately rights issue ratio are 19.1 old shares for 5.0 until 10.0 of new shares.
 We see the plans as an appropriate step to ensure the availability and to cut the price of raw materials. We have a buy recommendation on MASA, its trades at PER11F of 9.1x.
Maria