SMGR Losing steam, switch to INTP - UOBKH

Buy Semen Gresik, SMGR, TP: Rp10.820, Share Price: Rp9,250, Upside: 17%
Revised down Target price, due to lower 2011 net profit forecast by -2% to Rp3.9tn, due to lower ASP increase.
Bumpy ride in the past few months:

- Fire at Tonasa IV cement plant last week from damage in electrical cables, but no significant cost damage from this incident. 2 mills have stopped operation for a week but yesterday 1 mill have resumed operations. Impact should be limited.
- Other insignificant problem is regarding the political issue for Semen Tonasa's new managing director (MUST be of a Sulawesi origin) and protests from surrounding neighborhood on dust pollution from Tuban plant.

Losing steam! The biggest threat for Semen Gresik is still the heavy competition in the east Java area, with new threat coming from Holcim Indonesia, China Triumph International Engineering Company and Lafarge who are also planning to build a 1.9mt, 2mt and 1.6mt respectively cement factory in East Java.
No more pricing power! SMGR increased 3% ASP this year, but lost 2% of market share because of this to Bosowa, selling at a 10% discount in ASP. Increased supply in the near future from the new plants will further erode down ASP and pricing power.