Sector and Company News - UBS Indo

Semen Gresik (SMGR Buy PT 10,900): 2010 results: In-line
SMGR 2010 net profit came-in at Rp3.63 tn (+9% YoY, +24% QoQ). SMGR 2010 top line and EBIT stood at Rp14.3 tn (flat YoY, +11% QoQ) and Rp4.49 th (+3% YoY, +11% QoQ) respectively. EBIT and net margin stood at 31% (+100 bps YoY, flat QoQ) and 26% (+200 bps YoY, +400 bps QoQ) rspectively.

Sales comment: SMGR 2010 earnings are in-line with UBS and consensus forecast of Rp3.73 tn and Rp3.61 tn respectively. We like SMGR on its expansion story, adding annual cement production capacity by 30% (to 22 mn tons) over the next two years -- 2.5 mn tons towards the end of 2011 and 2012 respectively – providing the company with the flexibility to meet market’s accelerating cement demand.

Medco Energi (MEDC Buy PT 4,800): Uncertainties in Libya poses risks to MEDC
The military campaign in Libya risks inciting the ravaging of foreign assets in the country by the Gaddafi’s regime. Most of foreign-owned oil assets in Libya have halted their operations, while expatriates working in the country have been evacuated – including MEDC.

Sales comment: MEDC has also evacuated all their staffs in Libya, and there is no activity in their field right now. With the increasing uncertainty as to when the war in Libya would end, the worst case scenario for MEDC would be contracts cancellation, where the company would have to write down US$170 mn of Libyan assets on its book (17% of market cap).

Bank DKI (Not listed): Targeting IPO at the end of 2011
Bank DKI is targeting to launch IPO at the end of the year, following its bond issue in May 2011. In the bond issue, Bank DKI is issuing Rp450 bn senior bond and Rp300 bn sub-debt to fund its working capital and loan growth – targeted at 20-25%. In 2010, Bank DKI reported 75% YoY growth in earnings to Rp352 bn, supported by 28% loan growth to Rp8.7 tn.

Sales comment: if the IPO plan materializes at the end of the year, Bank DKI will be the second regional bank listed on the IDX.