MSCI Semi-Annual Review: Indonesia: Adding EXCL, Float Increase for ADRO, Float Decrease for BUMI - Credit Suisse

Based on the changes, we believe there is a good chance for: 1) buying activities for EXCL; and 2) trade switching from BUMI into ADRO in the coal space.

· The highlights in the latest MSCI Semi-Annual Review, which would be effective on May 31, 2011, are as follows:
o Inclusion of XL Axiata (EXCL. OW, PT Rp7,200)
o Free float decrease for Bumi Resources (BUMI, Not Rated)
o Free float increase for Adaro Energy (ADRO, UW, PT Rp2,050)
o Share decreases for Bank Rakyat Indonesia (BBRI, OW, PT Rp8,350), Bank Mandiri (BMRI, OW, PT Rp8,950), Bank Negara Indonesia (BBNI, OW, Rp5,000) and Bank Danamon (BDMN, OW, TP Rp7,000)


2) Cement Sector (Maintain OW): Positive cement consumption in April
SMGR is our preferred pick in the sector. SMGR’s capacity expansion is progressing well (82% completion per mid-May 2011), which should provide the company with the flexibility to meet Indonesia’s growing cement demand as early as 3Q11. SMGR is currently trading at 14.4x 2011 P/E with 13.9% average EPS growth for 2011-12.

· Indonesian Cement Association (ASI): Indonesia’s April cement consumption reached 3.8 mn tons (-3.1% MoM, +6.8% YoY), driven by the domestic market (92% of total sales, -0.9% MoM, +17% YoY).
· Indonesia’s 4M11 total cement consumption amounted to 14.8 mn tons (+6.9% YoY), also driven by domestic market (97% of total sales, +11% YoY).
· 4M11 domestic cement sales of 14.3 mn tons amounted to 33% of (in-line with) analyst Ella Nusantoro’s forecast. Ella is projecting Indonesia cement sales volume to grow 6.0% with 7.5% ASP increase this year.
· Semen Gresik’s (SMGR, OW, PT Rp11,000) 4M10 market share declined to 40.9% (-2.3 ppt YoY), while Indocement’s (INTP, N, PT Rp17,400) flat at 31% and Holcim Indonesia’s (SMCB, N, PT 2,400) expanded to 15.2% (+1.6% ppt YoY).