Infrastructure & Automotive - DBS Vickers

Infrastructure

Evaluation of toll road projects to be concluded by end of March 2011
The evaluation of 24 toll road projects around Indonesia is still in progress. It has been reported that the evaluation will be concluded by the end of this month whereby the government will also decide on any amendments on the agreements. Based on 2010 review, the total cost for all the projects has increased by more than 30% from the initial forecast due to land acquisition costs and inflation. According to the news, the government is likely to help to offset the additional cost by extending the concessions but not the funding. The concession owners would need to absorb and fund the additional costs. It remains to be seen whether the concession owners will accept the amendments and how this will impact the overall timing of the projects.


Automotive

Slight Drop in February 4W sales
4W sales for February declined 5.9% m-o-m to 69,489 units (+24.8% y-o-y), likely caused by fewer working days in February. Although this is lower than the average monthly sales forecast of 71,373 units, which is based on 856,475 units for 2011 (+12%), historically, the earlier months in the year are usually the slowest for the industry with sales gradually increasing and reaching its peak just before Eid ul-Fitr. Gaikindo 4W sales forecast for this year is 820,000 units (+7% y-o-y), which translates into average monthly sales of 68,333 units. Thus, considering the seasonal effect, actual 4W sales for February exceeded Gaikindo's forecast by a comfortable margin. We expect sentiment on the stock to be positive given the stronger than anticipated monthly sales results.

Separately, according to Toyota Motor Corporation Japan , production of parts for overseas production has resumed on 21 March. With this update, we believe that the temporary supply chain disruption of auto parts from Japan would have only a limited impact on ASII.