Sales Daily 22 Feb: INDF, SAR SP, Prefer TBIG over TOWR, UNTR, DOID, BBCA, and Sales Focus! - UBS INDO

Indofood Sukses Makmur (INDF Buy PT 6,650): Plan to list another plantation unit
Analyst Bonny Setiawan is generally positive on INDF’s plan to list Salim Ivomas Pratama (SIMP) on the Indonesian Stock Exchange. SIMP is the holding company for INDF’s palm oil and sugar business, both at the upstream and downstream. INDF effectively owns 60% of SIMP. Bonny thinks that SIMP’s IPO proceeds will be used for debt reduction and/or business expansion.

Sales comment: It is interesting to note that the valuation of SIMP would be partially driven by London Sumatra Indonesia (LSIP Buy PT 19,100), in which SIMP owns 56% stake. LSIP is splitting its stock with a ratio of 1:5, effective on February 25, 2011. Though the listing of SIMP is positive for INDF, we would be a buyer of LSIP at this point. Please let us know if you’d like the report.

First Read: Straits Asia (SAR SP Buy PT SGD 3.40) : Strong 2010 finish
SAR SP ended 2010 on a strong note, ahead of our expectations. Despite revenues and net income being down 2% and 34% YoY due to the high-base effect of SAR’s record contract prices last year, Q4 earnings grew 31% QoQ on account of price and production growth. Average selling price fell 11% YoY to US$72.8/t, while cash cost increased 15% to US$46.9/t.

Sales comment: Let us know if you’d like a copy of the First Read.

Telco Towers: Why we prefer TBIG over TOWR
Sarana Menara (TOWR Buy PT 15,200) 2010 results: inline revenue of Rp1.356 tn vs UBSe Rp1.350 tn but disappointing earnings of Rp100 bn vs UBSe Rp232 bn on increase in financial charges and lower forex gain. Separately, Fitch rates competitor Tower Bersama (TBIG Buy PT 3,300) 'BB' with Stable outlook.

Sales comment: We remain bullish on independent tower firm given structural growth in Indonesia's tower industry. Reiterate our preference of TBIG (which we also think deserves a premium to SMN) as: 1) TBIG has higher growth potential and lower leverage levels compare to SMN; and 2) TBIG’s high quality tenants ensure stable income source. Fitch rating shall allow TBIG to have more warchest to acquire towers and/or to grow organically.

United Tractors (UNTR Sell PT 23,100): Strong Jan operational results
UNTR’s January 2011 machinery sales came very strong at 731 units (+116% YoY, +134% MoM). Slight weakness, however, was seen in UNTR’s January coal extraction, which amounted to 6.1 mn tons (+5% YoY, -10% MoM). UNTR January coal sales amounted to 307k tons (+32% YoY, -7% MoM)

Sales comment: We like UNTR, especially for its strong machinery sales, which is projected to grow 28% YoY in 2011 on strong replacement demand. Please note that the lead time for machinery sales in Indonesia now stands at 18-24 months, vs the normal lead time of 6-12 months.

Delta Dunia (DOID Buy PT 2,230): Weak Jan operational results
DOID January 2011 coal extraction amounted to 2.6 tons (-4% YoY, -19% MoM), whereas the OB removal amounted to 25.8 mn bcm (+36% YoY, -5% MoM).

Sales comment: Weather remains as a challenge for DOID’s January 2011 operations. DOID share price is correcting heavily in the market, since the beginning of January, but has yet reached the oversold region. We’ll wait for better entry point in the counter at the current juncture.

Bank Central Asia (BBCA Sell PT 5,820): Inline 2010 unaudited results
BCA reported a 2010 unaudited net profit of Rp8.3 tn +22% YoY.

Sales comment: Inline with Consensus and UBSe of Rp8.3 tn and Rp8.0 tn. In the sales desk, we believe current sentiment is on BCA side and we think BCA should outperform other banks in the short term (1) Arguably the best deposit franchise; (2) Beneficiary in a rising rate environment: every 1% increase in policy rate, BCA earnings +4%; (3) With US$12mn liquidity and arguably the best managed bank in the country, this is one of a few stocks I would own if I need an exposure to Indonesia economy – good exposure for the global funds.