Market Flash: iSHARES MSCI Indonesia Investable Market Index Fund (EIDO:US) PRICE: 28.530 USD Down -0.360 (-1.246%) >>> BI: Rupiah Melemah Akibat Kondisi Eropa >>> Pertemuan FED pertimbangkan langkah baru dorong ekonomi >>> KIJA akan Terbitkan MEN Valas USD150 Juta >>> PT Indika Energy Perusahaan Teladan Dunia 2011 >>> Govt Promises Revision of Cost Recovery Regulation >>> BPMigas Demands PGN to Pay US$6 per MMBTU >>> Jababeka to Raise US$150 Million from Debt Markets >>> SCG Chemicals buys Chandra Asri >>> Solusi Tunas eyes Rp380 bio IPO >>> SMR Utama scouts Rp300 bio IPO >>> Alam Sutera picks two bond arrangers >>> ASII Tetap Rajai Penjualan Mobil Agustus 2011 >>> Perusahaan Thailand kuasai Saham TPIA senilai Rp 3,76 Triliun >>> Agis Main ke Tambang, Sahamnya Masuk Dalam Pengawasan >>> ACES Mendekati The Northern Agar Mau Kurangi Kepemilikan >>> IHSG masih harus berjuang terus bertahan diatas MA200 >>> Melirik Peluang Akumulasi di Saham Perbankan >>> Analisa Saham BUMI: Kuat Bertahan & Berpeluang Kembali Uptrend >>> Analisa Saham JSMR: Bertahan Di Support, What Next? >>> INDF Tertahan Di Area Support Kuat, Berpeluang Rebound >>> ASII Break Minor Support, Sell on Strength >>> ADRO Membentuk Descending Wedges, Berpeluang Rebound Terbatas >>> Wall Street ends flat as early gains evaporate >>> Fed begins policy meeting, tiptoes toward easing >>> Fed meeting to help decide on long-term Treasuries >>> Greece Makes 'Good Progress' in Reform Talks: EC >>> China worried Europe debt crisis will hit trade >>> China could roll out 4.65tr yuan stimulus package >>> IMF sees Mideast stagnation >>> NYMEX-Crude ends higher at Oct contract expiry >>> Asian Crude Palm Oil Up On Technical Buying, Soyoil >>> Foreign net Sell - 61.785.746

Sabtu, 22 Januari 2011

Bahana Sekuritas FW: Bahana Spotlight: Bumi Resources - From hate to love (BUMI-BUY-IDR3,050-TP:IDR4,200) - Good report

Higher TP of IDR4,200; 2% hike in 2011 earnings; Reiterate BUY In the past nine months, Bumi Resources (BUMI) has been transformed from one of the most hated stocks to a loved one (exhibit 5), partly helped by the entrance of Vallar.  As we like BUMI fundamentally and given buoyant coal prices, we reiterate our BUY call on the stock with higher DCF-based target price of IDR4,200/ share (no CG discount).  Within our model, we made a number of changes: (1) Production schedule from 72.5-87.3-108-109m tons to 66.1-79.7-100.3-109m tons over 2011-2014 respectively, inline with management’s guidance; (2) Raise benchmark price from USD100-105-108-111-115 to USD115-110-108-116-124 for 2011 to 2015 (inflation of only 1% thereafter); (3) Revise tax rate from 40% to 45%; (4) Fuel price from USD88-93-96-99-103/bbl to USD95-103-111-119-127. The net impact of these changes is 2% higher earnings in 2011 and 27% cut in 2012.  

2010 net income guidance: USD280-290m, in line with our estimate In 2010, BUMI provided guidance of a strip ratio of 10.3x, coal mined of 60.9m tons, coal conveyed of 60.46m tons, coal sold of 60.1m tons, ASP of USD70.2/ton and inventory of 4.5m tons. Net income is expected to reach around USD280-290m, in line with our estimate.  In 2011, BUMI expects 15% contracted volume and price (exhibit 9), implying substantial upside assuming coal prices remain strong throughout 2011.  BUMI provided ASP guidance of USD77/ton (using a benchmark price of USD110/ton), compared to our estimate of USD81.4/ton using USD115/ton benchmark price.  Our sensitivity analysis shows that every USD5/ton change in the coal benchmark price would impact our 2011 earnings by 14%.  

Building to overcapacity the entire supply chain BUMI plans to increase combined production from KPC and Arutmin from 64-65m tons in 2011 to 100-101m tons by 2014.  To back this, BUMI is adding capacity over its entire supply chain, from mining to transportation to ship loading.  (1) By adding more heavy equipment, it is increasing its mining capacity at KPC from the existing 50m tons to 70-80m tons while at Arutmin from 23-24m tons to 30-40m tons by end of 2012. (2) BUMI is raising its transportation capacity by building one overland conveyors (OLC) (i.e. from the processing unit to the port) and six feeder conveyors, allowing increased total conveyor capacity from the existing 13.5km to 58.7km by 2013 and 91.7km by 2015 (exhibit 8). (3) The company is also doubling its stock piling capacity by 2015. (4) It is increasing port capacity from the current 92m tons to 130-150m tons by 2013. (5) BUMI is constructing shallow panamex birth to accommodate 60-70m tons of panamax vessels. (6) The company has in 2010 expanded its ship loading capacity from 4,500tph to 7,500tph, and is now planning to install second ship loaders to increase ship loading rates. (7) To support all of the conveyor belts and ship loaders, BUMI is planning to install three individual 15MW power plants to reduce fuel cost.

CLSA Clipan Finance, Pedal to the metal - initiating with a BUY - Tp1,100

This is not a typo here.  Target price does translates to a whopping 100% upside.  I know in this current volatile environment it is not the best time to push a small cap idea (US$150m with US$1m+ daily turnover) but the story of here is too good to ignore. 

Clipan Finance is the most profitable multifinance company in terms of profit per branch and per employee.  Its unique ownership structure (by Panin Bank and Panin Insurance) ensures steady funding (still saw positive in 2008) and incentives for loan origination from car dealers.  By focusing on the less crowded used car market, their interest rate moves pretty much inline with cost of funding. 

Our target price represents 10x and 1.6x 11CL PE and PBV (big discount to Indian peers).  Not demanding for 17% ROE this year going to 20% in 2012 by leveraging up balance sheet.

For those who don't mind going against the wind (rising interest rates), there is a lot of value on the table here for the longer term investor. 

AAA Securities PT Astra International Tbk

ASII membukukan pertumbuhan penjualan mobil pada FY10 sebesar 52% yoy vs industri 57% yoy dan penjualan motor naik 26% yoy vs industri 25% yoy. Di 2011, pertumbuhan penjualan mobil dan motor diprediksi masing-masing sebesar 5% yoy dan 13%, atau mengimplikasi pertumbuhan pendapatan ASII yang juga lebih rendah namun dari segi valuasi ASII masih terdiskon 10% dari valuasi JCI.

FY10, Astra Booked 52% yoy Sales Growth on 4W vs 26% yoy on 2W
ASII berhasil mempertahankan pangsa pasar penjualan mobil di 2010 sebesar 55%, atau masih diatas rata-rata pangsa pasar selama empat tahun terakhirnya, yakni 50%. Saat ini penjualan mobil masih menjadi mesin utama penghasil penjualan ASII yang paling besar, atau 40% dari total pendapatan di 9M10. Dengan demikian, pertumbuhan penjualan mobil keluaran ASII sebesar 52% yoy di FY10 vs 20% yoy di FY09, memberi sinyal pendapatan ASII akan naik sangat signifikan tahun ini. Sementara itu, penjualan roda dua keluaran ASII tidak terlalu signifikan, bahkan mengalami penurunan kinerja yang ditunjukkan oleh: 1) turunnya pangsa pasar menjadi 42% vs 9M10 46% vs FY09 47%. 2) penurunan pertumbuhan penjualan unit motor di bulan Desember -16% yoy meskipun secara kumulatif penjualan motor di 2010 meningkat 26% yoy dibanding FY09 -6% yoy.

Industrywide, Sales of Car and Motorcycle Rose 57% yoy and 26% yoy Respectively
Secara industri, penjualan mobil dan motor di tanah air mengalami pemulihan dibanding 2009 masing-masing sebesar 57% yoy menjadi 764.633 unit mobil dan 25% yoy menjadi 7,3 juta unit motor. Hal tersebut kami lihat disebabkan oleh beberapa faktor antara lain: 1) rendahnya inflasi sehingga meningkatkan daya beli konsumen. 2) stabilnya suku bunga sebab 60%-70% penjualan mobil dan motor dilakukan secara kredit.

Valuation, Still at Discount
2011, meski masih positif namun pertumbuhan penjualan mobil diprediksi akan lebih rendah dibanding 2010 yang lebih banyak disebabkan oleh dua faktor utama yakni peningkatan inflasi, bunga kredit dan pembatasan BBM bersubsidi. Total penjualan mobil 2011 diprediksi bisa mencapai 800.000 unit ( 4 5% yoy) dan total penjualan motor 8,3 juta unit ( 4 13 % yoy).
Dengan potensi pertumbuhan penjualan divisi otomotif ASII yang kemungkinan lebih rendah dibanding 2010, maka pertumbuhan pendapatan ASII dari divisi otomotif berpotensi juga lebih rendah dibanding 2010 namun demikian secara valuasi saat ini ASII masih ditransaksikan pada PE 12,7x lebih rendah dibanding PE JCI di 14,0x atau masih memberikan potential upside sebesar 10% ke level Rp52.692.

Mandiri Sekuritas Bumi Resources : 2010 revenue estimated at US$4.8bn, higher than consensus of US$4.1bn (BUMI, Rp3.050, Buy, TP : Rp3,665)

􀂄 Investor Daily, quoting, Bumi Resources IR , also mentioned the company is expecting a revenue growth of 10% on the assumption of 10% yoy average selling price (ASP) increase from 2010 ASP of US$70/ton and 10% yoy increase in volume from 2010 of 60-61Mt. We will hold on to our current 2010 forecasted revenue of US$3.8bn and net income of US$280mn (consensus: US$262mn). At Rp3,050, Bumi is trading at FY10F PER and FY11F PER of 23.9x, and 13.8x, respectively. We are estimating a revenue of US$5.0bn and net income of US$518mn for FY11 based on volume sales of 67.5Mt (2010F: 62.6 Mt) and ASP of US$83/ton (2010F : US$69/ton).

Mandiri Sekuritas Agung Podomoro Land: APLN indicates 2010 earnings to in line with our expectation and to further acquire several new projects in 2011 (APLN, Rp360, Buy, TP: Rp430)

􀂄 We went visit to APLN’s several main projects yesterday, including Podomoro City, Kuningan City (KC), Green Bay Pluit (GB), Green Lake Sunter (GL) and the newly acquired Green Permata, Pos Pengumben (GP), and took some highlights as follow:

􀂄 APLN pleased us with its 2010 sales data fact. Total marketing sales was booked at Rp2.8tn, coming from its company’s current 12 pipe-line projects, incl. GL, a project which land the company recently acquired in Dec10 using proceed of its IPO. The company set an ambitious 5.5tn sales target in 2011, which will be expected mainly from GB and CP, and also to include the newly acquired GP.

􀂄 The highly expected 2010 chunk sales contributor, Central Park (CP) and KC apartments reportedly booked portion of sales that leaving only 31% and 9% out of total 1,026 and 960 units, respectively, in line with our estimation for KC although slightly below for CP, yet this was offset by the strata-title office sales that remained 25% out of total 44,869m2 NSA. Projects’ % of completion run as expected (CP apt: 66%; KC apt: 57%), which our 2010 earnings target of Rp242bn was assured to be achieved. The figure implies to ROE 10F of 9.2%, but this expected to increase to 12.7% in 2011.

􀂄 Following recent GP 14.3ha land acquisition, the company indicated that they are now in a close discussion of 6 new potential projects, which among others a project located in prime area of Jakarta and a 40ha project in outskirt Jakarta. Such active expansion that we expect continuously seeing from company going forward having minimal land bank that it holds. Furthermore, Trihatma Haliman, the CEO and also company’s founding shareholder, envisaged that he is now seeing APLN to be his only focused business in the future, putting aside the Agung Podomoro Group, where this is in order to show his commitment in ensuring further growth of APLN business being a public company

􀂄 APLN is our property top pick. We have buy on the stock, currently trades at an attractively PE11F 13.7x and 24% discount to our RNAV11F.

Mandiri Sekuritas Coal sector: GoI may ban low-rank coal export in 2014

􀂄 Government of Indonesia (GoI) plans to ban exports of coal with caloric value less than 5,600kcal/kg (GAR) since 2014. The ban is aimed to help PLN secure coal supplies when the additional 10,000 MW of powerplants are completed in 2014.

􀂄 Mr Witarto Soelarno, the secretary to the director general of coal and minerals at the Ministry of Energy and Mineral Resources said that they will release the regulations later within this year. This regulation encourages coal producers to increase their CV by blending their coal. However, this is not valid for some coal producers that only have homogenous low rank coal reserve.

􀂄 This regulation seems inconsistent with the previous ministerial regulation on the Preferential Supply of Domestic Mineral and Coal Demand (“Permen No 34/2009), otherwise known as the domestic market obligation (DMO).

􀂄 We don’t think such regulation is effective to implement, since inline with future robust production growth, domestic market will be unable absorb all those production increase in our view. DMO regulation is more valid in our view.

􀂄 ADRO, BRAU and INDY (Kideco) are the most affected companies in the industry if such regulation applied due to its highest exposure to low rank coal output. While ITMG, BUMI, PTBA and HRUM have lower exposure due to its higher sold coal qualities.

NISP Sekuritas Daily 21 Jan 2011 (Economy, BMRI, BUMI, ISAT, MASA)

Government delays increase in import duty for a year
·          The government has decided to delay increase in 57 food commodity related tariffs which includes wheat, feed material and fertilizer, for a year after increasing it last December. This step is taken to curb inflation due price increases.
·          This follows the erasing of import duty for rice in early January. 
·          We consider the impact is neutral to the current inflation outlook since it only reverses the previous increase in December. Head of BPS shared that inflation in January may increase by 0.5% MoM following rice price that have increased by 1.3% in the past 3 weeks. This translates into 6.60% YoY inflation.

Bumi revenue indicates 50% YoY revenue increase (BUMI, Rp3,050, Buy),
·          Bumi Resources indicated that revenue in 2010 may have reached US$4.8bn from US$3.2bn in 2009. The company sold 60-61mn tons with ASP at US$70 per ton. If realized, this makes results 17.1% above consensus expectation of US$4.1bn and our expectation for US$3.7bn.  
·          This year the company targets revenue to increase by 10% YoY to US$5.2bn in line with coal price that is expected to increase also by 10%. While sales and production volume is expected to increase to 66mn and 67mn tons.
·          The company did not share net income projection. 
·          BUMI is trading at 2011F PER of 14.4x and EV/EBITDA of 5.6x, Buy.

Bank Mandiri may book Rp8.50tn net income in 2010 (BMRI, Rp5,800)
·          The Minister of SOE, Mustafa Abubakar, indicated Bank Mandiri may have booked a record net income, booking Rp8.5tn in 2010. If realized, this is in line with consensus expectation of Rp8.67tn.
·          Previously the Minister also indicated that Bank Mandiri and Bank Rakyat Indonesia booked a total of Rp17.00tn of net income in 2010, opening possibility that Bank Rakyat Indonesia may also have booked Rp8.50tn in 2010.
·          In other news, another Ministry of SOE official stated that Bank Mandiri’s right issue may have oversubscribed more than 2x. Therefore discount to the new shares could be limited. Price will be set on January 24, 2011.
·          BMRI is trading at 2011F consensus PER of 11.7x and PBV of 2.5x.

Indosat indicates 2010 revenue rose by 12% YoY (ISAT, Rp5,000)
·          Indosat indicated that its revenue in 2010 may have reached Rp20.60tn from Rp18.39tn in 2009, or up by 12.0% YoY. The company’s subscribers reached 50 mn subscribers from previously 33mn subscribers.
·          Management did not share bottom line projection.
·          Consensus expectation is for Rp20.09tn.
·          ISAT is trading at 2011F consensus PER of 17.8x and EV/EBITDA of 4.5x.

Multistrada to maintain margins (MASA, Rp295)
·          Multistrada Arah Sarana, has increased  price by 7.5%-15% to compensate for rising increases of rubber, synthetic rubber, and steel wire. The new pricing has been applied since the beginning of this year, where local pricing has increased by 10%-15% while export pricing has increased by 7.5%.
·          The company is targeting daily capacity to increase by 28.6% to 22,500 car tires in 1H11 and to 28,500 tires by the end of this year, from currently 17,500 car tires per day.
·          MASA is trading at 2011F consensus PER of 7.8x and EV/EBITDA of 4.4x.

News article BHP faces six-month flood disruption

By Peter Smith in Sydney

Published: January 20 2011 08:32 | Last updated: January 20 2011 08:32

BHP Billiton said widespread floods in Australia were likely to disrupt its extensive Queensland coal operations for another six months as the world’s biggest miner reported a 24 per cent decline in coking coal production for the quarter to the end of December compared with the three months to September.

Nearly all the big mining groups operating in Queensland, including Rio Tinto, Peabody, Anglo American and Xstrata, have been hit by heavy rains and flooding that have swamped mines and shut down rail and port infrastructure.

The comments are the first from BHP on the impact of the Queensland floods that have triggered a large rise in coal prices on world markets. Spot cargoes of coking coal, used to make steel, have traded near $350 a tonne, up 55 per cent from quarterly contracts agreed in recent weeks. BHP shares fell nearly 2 per cent, down 89 cents to A$45.16.

BHP Billiton Mitsubishi Alliance, a joint venture between the miner and Japan’s Mitsubishi Development, is Australia’s largest exporter of seaborne coking coal, an ingredient for steelmaking.

Earlier this week, Rio Tinto said production of coking coal had fallen by 6 per cent in the three months to December, compared with the quarter ended September.

BHP and Rio, however, also announced record iron ore production from their operations in the Pilbara region of Western Australia.

BHP’s iron ore production rose 4 per cent compared with the three months to September, while iron ore shipments from Western Australia, on an annualised basis, rose to 148m tonnes a year.

BHP expressed optimism about the outlook in its latest production report.

“Robust growth in developing economies remains the primary driver of commodity prices and further positive signs are emerging in the US following the Federal Reserve’s ongoing efforts to stimulate the economy,” it said.

It added that supply side constraints had been exacerbated by weather resulted in disruptions to operations in Australia, Latin America and South Africa.

BHP said its Queensland mines had suffered from water accumulation and persistent heavy rains had restricted its activities.

“When combined with disruption to external infrastructure, we expect an ongoing impact on [coal] production, sales and unit costs for the remainder of the 2011 financial year,” BHP said.

QR National, Australia’s biggest rail freight operator, estimated coal haulage could fall by 20m tonnes in the three months ending March due to the floods and damage to its network.

JP Morgan Indo : more negative noise for PTBA

Profit taking candidate: PTBA
More negative noise for sellers of domestic coal
JCI index selling (and possibly shorting) continues perhaps on technical reason (lack of technical support and new stock issuance). Indonesia market ETF (IDX US, Market Cap US$503mn) fell 3.6% overnight on record volume of US$53mn.

Profit taking candidate from the desk today is the domestic coal supplier PTBA, a company with a habbit of disappointing market expectations in Q4 (on cost) and Q1 (on selling price). So far, politicans want to appear as though they are doing everything they can to keep electricity price from going-up further (for popularity perhaps). This morning they talk about stopping the export of low CV coal, following the statement from PLN regarding their 2011 coal price negotiation. The development favours high CV coal producers.

Secretary of DG Minerals Witoro Sularno was quoted in the press this morning as saying that there is a plan to stop the export of thermal coal with CV under 5600kcal. The government will require the coal to be crushed and upgraded, before they got exported. There was a parliamentary hearing on the matter yesterday for DPR commission VII.

This event follows the 13-Jan press statement from PLN’s energy director, Nur Pamudji, saying that PLN wants to utilize energy ministry decree no 17/2010, allowing them to set 2011 contract price using the average benchmark price in 4Q10.

This series of events could spell trouble for PTBA. Stevanus Juanda (analyst) recently raised his year 2011 ASP assumption for PTBA, from US$81.6/ton to US$92.4/ton, compared to year 2010 ASP forecast of US$68.0/ton. On his new forecast the stock trades on 15.3x 2011 P/E, versus peer average of 12.3x. His FY10 EPS is 9% below consensus, while his FY11 EPS is 5% below.

His US$92.4/ton ASP assumption could be at risk. Implied from Steve’s FY10 forecast is the ASP of US$72.8/ton for 4Q10. If PLN wins the case and use 4Q10 ASP to price its coal for year 2011, the realized ASP can be more than US$10/ton lower (vs Street’s assumption) for PTBA.

Steve rates PTBA O/W and top pick, but on a rising coal export price environment my personal preference goes to the more leveraged plays and INDY.

Jumat, 21 Januari 2011

UBS INDO: significant selloff in bonds and MSCI Indo overnight - interesting trading day ahead!

We expect Indo equities to have a rollercoaster day today:

1. The bond market sold off aggressively overnight (chart below) with bond yields rising to above 9% 

In and of itself, such a move is not out of the ordinary in the illiquid Indonesian bond markets. However, there are other market moves afoot….

2. There was a major selloff in the iSHARES MSCI Indo ETF last night, closing down 5% on record volume (chart below)

Note: Our order pad shows no sell side flow of note – this ‘sell off’ is not yet broad-based. 

3. What triggered the sell off in bonds and the ETF overnight?

There does not seem to be a clear trigger to these market moves – it may simply be that the selloff in the bonds market triggered a fund (or funds) to aggressively hedge their Indo equities exposure.

Another theory is that a surprise rate cut in Turkey overnight, where the central bank is also perceived to be ‘behind the curve’ on inflation and is reluctant to cut rates as it battles inflows. Turkey, Indo and India have been grouped together as the inflation trade of late, and our team suspect that they made be part of a correlated ‘inflation’ macro basket trade.

As ASEAN economist Ed Teather put it:

“Indonesia is a proxy for the inflation trade at present.”

4. How does the UBS team feel about the bond market at present?

We’ve argued before that in this inflation-focused environment, equities will take their lead from the bond market. Accordingly, we look to our rates strategist Sid Mather for his thoughts:

·         Indo bond selloffs are always ugly, big crowd/small door and all that. Positioning is still very heavy, so this selloff can easily extend several more days. What is needed, I think is for (1) CPI readings to drop in line with yesterday's guidance (see below), and (2) for BI to demonstrate a sensitivity to investor concerns. The next BI meeting is Feb 4, so until then expect bond markets to stay nervous.

·         Medium term, support for Indo could come from: (1) lower CPI, as mentioned above, (2) 'sensible' BI rhetoric, (3) strong exports growth, to ease fears of a rapid current account deterioration, (4) BI putting to good use the FX reserves it has accumulated, (5) debt management office highlighting the fiscal flexibility they possess (large cash surplus), and (6) any demonstration that the 'bond stabilization fund' is credible.

While Sid feels value is emerging, Ed Teather thinks that at 9% yield, Indonesia becomes attractive.

5.  Steps in the right direction: Whisper inflation number is positive, administrative measures announced

The statistics bureau yesterday said that it expects softer CPI inflation in Jan vs. Dec (indicatively 6.6%y/y vs. 7%) and reducing price pressures from the start of the harvest season in Feb and Mar.

Also yesterday, the government removed tariffs on 57 imports of food related products to mitigate commodity price increases. Categories include wheat, soy bean, fertilizer raw material and animal feed raw material. The measures will see tariffs fall from an average 5% to zero for 1 year and will be effective from 1 Jan 2011

Indonesia Today Indonesian Stocks Crashed, Composite Index Falls 4% - Composite index of Indonesia Stock Exchange (IDX) crashed 4% to 3313 this morning on delayed correction of blue chip stocks.
Astra International, the largest company on IDX by market cap, opened lower by 4.5%, while Indo Tambangraya crashed 7.9%. 
Perusahaan Gas Negara (PGAS), Adaro Energy, Bank Mandiri, Semen Gresik, Bumi Resources also tumbled in the opening minutes of trading. Semen Gresik, for example, dropped 8%, while Mandiri slashed 6%.

Unilever tumbled 7.54% in the opening minutes, while Bank Rakyat Indonesia (BRI) dropped 2.61%. Bank Central Asia, third largest company by market cap, also lost 4.4%. Adaro dropped as much as 5.1%, while Kalbe, Gudang Garam, United Tractors, and Gudang Garam dropped more than 5% each.

Trading volume is relatively heavier this morning. In the first ten minutes of trading, BUMI shares volume trading already reached 53 million. 

Other markets in the region are mainly in red zone with KOSPI drops 1%, while Hang Seng declines further by 0.49%. Australia's All Ordinaries has lost 0.81% so far, while Shanghai is the only major emerging market in positive territory, but with only 0.03% gain.

European markets ended mainly lower yesterday on negative sentiments from falling commodities. FTSE 100 conceded 1.82%. DJIA and Nasdaq also ended lower by 0.02% and 0.77% respectively last night. 

Indonesia Today Inco Argued to Stop Operating in Pomalaa, Southeast Sulawesi - Nur Alam, regent of Southeast Sulawesi province, argues PT International Nickel Indonesia Tbk (INCO) to stop its nickel mining operation as the company has violated the contract agreement, Investor Daily reported this morning.
He said the government of Southeast Sulawesi province had obliged Inco to build nickel smelter in Pomalaa. "Inco is not allowed to sell raw materials as the mining area awarded to Inco aims to supply nickel to the smelter," Nur Alam said.

He added Inco has also mined in the protected forest area without government's license.

Inco had cancelled plan to build nickel smelter in Pomalaa in May 2009 as nickel price was too low,  making the smelter  as uneconomic investment.

Inco targeted the smelter to produce 30,000 tons of nickel per year. The smelter construction is expected to cost US$1.2 billion and to commence production in 2014.

Nur Alam said President Soesilo Bambang Yudhoyono has argued to take legal action to arbitration court against Inco.

Indonesia Today Bumi Expects 50% Growth in Revenue in 2010

Coal miner PT Bumi Resources Tbk (BUMI) expects to book revenue of US$4.8 billion in 2010, increased 50% from US$3.2 billion in 2009, Investor Daily reported this morning.

Dileep Srivastava, Bumi's director, said the revenue increase was mainly supported by the increase of coal price and sales volume.

He said Bumi sold 60-61 million tons of coal with average selling price reching US$70 per ton.

For this year, Dileep said the company targets revenue to grow by 10% to US$5.2 billion in line with the expected 10% increase of coal price to US$77 per ton.

He said Bumi targets to produce 67 million and sell 66 million ton of coal this year.

Bloomberg Indonesia Stocks Fall to Four-Month Low on China, Inflation

Indonesia’s stocks fell, driving the benchmark stock index to a four-month low, after Chinese economic reports fanned concern the world’s biggest energy user will tighten monetary policy and slow commodities demand.

PT Adaro Energy, Indonesia’s second-largest coal producer, fell the most in a month as UBS AG lowered the stock to “neutral” from “buy.” PT Aneka Tambang, Indonesia’s second- biggest nickel producer, dropped 3.2 percent as the price of the metal slumped. PT Astra International, the nation’s largest auto retailer, dropped 2.5 percent amid speculation the Indonesian central bank will follow China in increasing interest rates to combat rising consumer prices.

The Jakarta Composite index fell 2.3 percent to 3,454.12 as of the 4 p.m. local-time close. The measure has lost 8.8 percent since closing at a record-high on Dec. 9 as faster inflation raised concern the central bank has fallen behind regional neighbors in lifting borrowing costs.

“China’s economy has a significant impact on commodity exporting nations such as Indonesia,” said Finny Fauzana, who helps manage about $58 million in assets at PT PNM Investment Management in Jakarta. “Interest-rate sensitive stocks in the property, consumer and banking sectors remain under pressure because of inflation.”

China today reported economic growth of 9.8 percent in the fourth quarter, exceeding the 9.4 percent median estimate in a Bloomberg News survey.

Ratings Lowered
Mining companies were the biggest drag on the Jakarta Composite, with the mining gauge tumbling percent. Adaro dropped 7.6 percent to 2,450 rupiah, the most since Dec. 17. PT Bumi Resources, Asia’s biggest exporter of power-station coal, lost 3.2 percent to 3,050 rupiah.
 UBS cut Adaro to “neutral” from “buy” and Bumi to “sell” from “buy,” citing “near-term seasonal weakness and a ‘‘correction’’ in coal prices.

Aneka Tambang, a gold and nickel producer, fell 3.2 percent to 2,275 rupiah. Nickel futures slipped 1.7 percent to $25,670 a metric ton in London yesterday, the steepest drop since Dec. 23.
A gauge tracking agricultural stocks retreated 3.2 percent. PT Astra Agro Lestari, Indonesia’s largest listed plantation stock, declined 4.3 percent to 23,450 rupiah and PT Bakrie Sumatera Plantations fell 2.7 percent to 365 rupiah.

Borrowing Costs
Bank Indonesia Governor Darmin Nasution said Jan. 14 the central bank may raise its benchmark interest rate from a record low of 6.5 percent as core inflation, which excludes food and energy prices, accelerates.

The country ordered banks to set aside more cash as reserves to reduce inflationary pressure in 2010, while refraining from joining Malaysia, Thailand and India in boosting borrowing costs.

Indonesia’s consumer prices rose 6.96 percent in December from a year earlier, exceeding the 6.71 percent median forecast in a Bloomberg News survey of 14 economists.

Astra International, which sells Toyota Motor Corp. cars, lost 2.5 percent to 47,800 rupiah and PT Lippo Karawaci, Indonesia’s biggest property developer, lost 5 percent to 570 rupiah.

To contact the reporter on this story: Berni Moestafa in Jakarta 

Bloomberg Oil Falls Most in Nine Weeks on China Rate Concern

Crude oil fell the most in two weeks on concern China will raise interest rates to combat inflation, slowing economic growth and demand for energy.

Oil dropped 2.2 percent after China said inflation was 4.6 percent in December and that the economy of the world’s biggest energy-consuming country grew 9.8 percent in the fourth quarter. Prices also declined after the Energy Department said that U.S. crude supplies rose for the first time in seven weeks.

“Worries about what actions China will take to slow the economy are sending the market lower,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Any
Chinese move could lower demand growth.”

Crude oil for February delivery fell $2 to settle at $88.86 a barrel on the New York Mercantile Exchange, the biggest decline since Jan. 4. Oil is up 14 percent from a year ago.
February futures expired today. The more active March contract slipped $2.22, or 2.4 percent, to settle at $89.59.

Brent crude oil for March settlement dropped $1.58, or 1.6 percent, to end the session at $96.58 a barrel on the London- based ICE Futures Europe exchange. March Brent futures traded at a $6.99 premium to the Nymex contract for the same month.

China’s economic expansion topped the 9.4 percent median estimate in a Bloomberg News survey of economists and compared with a 9.6 percent annual gain in the previous three months, a statistics bureau report showed.   more ...

Bloomberg Commodity Currencies Fall as Concern About China's Growth Weighs on Demand

Currencies of commodity-exporting countries tumbled versus the U.S. dollar as speculation increased that China will take more measures to cool economic growth, curbing appetite for raw materials.

The U.S. currency extended gains versus most of its 16 major counterparts after jobless claims fell more than forecast for the latest week and existing home sales increased more than projected in December. South Africa’s rand and the New Zealand, Australian and Canadian dollars dropped as prices for crude oil, gold and copper slumped.

“The Chinese numbers were the catalyst for the risk-off day,” said Paresh Upadhyaya, head of Americas Group of 10 currency strategy at Bank of America Corp. in New York. “The concerns of further Chinese tightening gathered momentum and you saw the commodity bloc currencies come under pressure.”

The South African rand fell 1.3 percent to 7.0815 per dollar at 5 p.m. in New York, from 6.9931 yesterday. It touched 7.1127, the weakest since Dec. 1. New Zealand’s dollar dropped 1.5 percent to 75.70 U.S. cents and the Aussie lost 1.4 percent to 98.71 U.S. cents.   more ...

CLSA Feng Shui Index 2011 YEAR OF THE RABBIT 4708 Sector Forecasts

Rubble, rubble, soil in trouble? Not that bad, but the outlook for property purveyors is more flat than high rise, with March hare-raising.
Auction action about October may augur well, with plots to build on. Nicole Wong says the party is over for Hong Kong residential, but there’s life yet in office and retail.

Resources GREAT YEAR

This is a bit of an ether-ore: extraction is earth (bumpy), but processing is metal (great). Which suggests that
seams are has-beens. Hold on, says Andy Driscoll, who won’t be bullied out of a bullish call, albeit a miner one, by a bearphased bunny. Coal is red hot, he reckons. Lode up.

Technology GOOD YEAR
You don’t need an ether man to know which way the wind blows. Bhavtosh Vajpayee has been well
ahead of the pack in tipping this year as tops for tech. If our reading of the elements is on the money,
the upgrade-replacement-capex perfect storm should hit about mid-year. Fill your boot-ups.

Telecoms/Internet GOOD YEAR
Our HK & China sector coverage has a tendency towards the toasty, with four of nine being fire. Not
a bad thing this year, as luck would have it. Elinor Leung is hot on the net but, while positive about telcos, she
prefers a selective than a broadbrushfire approach.

Transport GREAT YEAR
stock had much in common, but gaming and transport are in for a great year with stunning
water views. Rob Bruce has been weighing anchor long enough to know that, come hell or high
water, September tends to sea a surge in the Baltic Dry Index.

Utilities GOOD YEAR
Whether you consider them as water or fire, utilities should be set for a surge this year. Rajesh Panjwani is sceptical, although he notes the low valuations of the Chinese utilities. He no longer burns for nuclear
(tough classification), as the stocks have run well

UBS INDO Indo Tambangraya Megah (Neutral, PT Rp57,000, 12% upside)

ITM’s shares have risen 61% since January 2010, which is an overall outperformance versus the sector. We maintained a Buy on the company throughout most of last year before downgrading to Sell in November 2010. Our investment case was primarily based on the company’s ability to extract higher coal prices and further increase its reserve life.

However, as coal prices kept rising along with assets prices, we were disappointed that ITM was unable to grow reserves beyond its 12-year reserve life. Consequently we downgraded the rating as the company was trading at 14-15x PE implying 14-15 years of earnings, despite only 12 years of earnings left in reserves. Given our 2011 Japanese benchmark contract upgrade, we raise our rating from Sell to Neutral, as we raise our earnings estimates.

􀁑 Price revision. We revise our 2010-12 ASP assumption from US$71/t, US$83/t and US$80/t to US$74/t, US$99/t and US$84/t, in line with our higher contract estimate. We believe ITM is currently receiving over US$110/t for its 6,200kca/kg product, while 75% of 2011 volumes are still un-priced.

􀁑 Production weakness. The excess rain in H210 is likely to have pressured production throughout 2010. In our experience, production pressure in one year negatively affects the subsequent years due to overall infrastructure capacity constraints, and thus we downgrade production from 23mt, 25mt and 27mt to 22mt, 24mt and 26mt in 2010-12.

􀁑 Cost inflation. Sector costs remain under pressure from higher fuel prices as well as costs associated with H210 deteriorating weather. We increase our 2010-12 cash cost estimate from US$35/t, US$36/t and US$37/t to US$41/t, US$42/t and US$44/t respectively, excluding royalties. ITMG’s production costs are relatively less exposed to fuel price volatility versus the sector, given the implementation of a mine-site coal-fired power plant.

Our earnings estimate is 12% below and 9% above consensus forecast for 2010 and 2011, respectively.
With a 2011 earnings sensitivity of 2.1% for a 1% change in coal prices, ITM is in the low end of the Indonesian sector range.

We raise our price target from Rp44,000 to Rp57,000 per share, which incorporates our earnings revision, a lower risk-free rate from 10% to 7.6% and a lower beta from 1.4x to 1.2x, which reduces the WACC from 10.1% to 9.7%.

The higher price target also reflects a 12-month earnings rollover from a lower mid-2011 to a higher end-2011 EPS. We employ a 12-month target PE valuation multiple of 12.0x, which is in the upper band of the historical trading range. For a check on our PE valuation, we run a life-of-mine DCF valuation based on
the UBS VCAM model, which renders a valuation of Rp56,000 per share, in line with our price target.

UBS INDO Bumi Resources (Sell, PT Rp2,800, 11% downside)

Bumi’s shares have risen 30% since January 2010, which is an overall underperformance versus the sector, while we maintained a Buy on the company throughout most of last year. Our investment case was primarily based on the company’s ability to extract higher coal prices and recover from its trough of 2009.

However, although Bumi maintains control of high quality assets that are likely to exhibit strong production growth in the medium term, we believe there is a major overhang risk pertaining to the government’s current tax investigation.

More specifically, Bumi is being investigated for tax evasion in 2007, while additional tax evasion charges are not unlikely pertaining to years prior to 2007. Following the company’s aggressive debt-raising throughout 2010, we downgrade our rating from Buy to Sell, as we revise our earnings estimates.

􀁑 Price revision. We revise our 2010-12 ASP assumption from US$72/t, US$88/t and US$85/t to US$80/t, US$99/t and US$90/t, in line with our higher contract estimate. We believe Bumi is currently receiving over US$100/t on average for its 5,600kca/kg product, while 75% of 2011 volumes are still un-priced.

􀁑 Production weakness. The excess rain in H210 is likely to have pressured production throughout 2010. In our experience, production pressure in one year negatively affects the subsequent years due to overall infrastructure capacity constraints. Furthermore, we believe it will take 18-24 months to complete the current conveyor belt expansion after existing capacity is shut down for maintenance. Thus we downgrade production from 67mt, 74mt and 81mt to 60mt, 63mt and 66mt in 2010-12.

􀁑 Cost inflation. Sector costs remain under pressure from higher fuel prices as well as costs associated with deteriorating weather in H210. We increase our 2010-12 cash cost estimate from US$34/t, US$36/t and US$39/t to US$44/t, US$48/t and US$50/t respectively, excluding royalties. Furthermore, Bumi raised US$3bn over the past 18 months with a weighted average cost of debt above 10%, which is putting downward pressure on net earnings. As such, we note that the potential for refinancing the high-cost CIC debt would serve as a positive catalyst.

Bumi is highly exposed to fuel price volatility on account of its high stripping ratio, which requires significant overburden removal per tonne of coal mined.

Our earnings estimate is 3% and 5% above consensus forecast for 2010 and 2011. With a 2011 earnings sensitivity of 3.3% for a 1% change in coal prices, Bumi is in the high end of the Indonesian sector range.

We lower our price target from Rp3,200 to Rp2,800 per share, which incorporates our earnings revision, a lower risk-free rate from 10% to 7.6% and a lower beta from 1.8x to 1.4x, which reduces the WACC from 15.1% to 13.4%. We employ a 12-month target PE valuation multiple of 12.1x, which is in the upper band of the historical trading range.

For a check on our PE valuation, we run a life-of-mine DCF valuation based on the UBS VCAM model, which renders a valuation of Rp2,900 per share, slightly above our price target.

UBS INDO Bukit Asam (Sell, PT Rp20,000, 13% downside)

Bukit Asam’s (PTBA) shares grew 33% from January 2010, which is an overall underperformance versus the sector. We maintained a Buy on the company throughout the year, as our investment case was primarily based on the company’s ability to extract higher coal prices and further develop its muchawaited infrastructure projects.

However, we were disappointed to learn that management is expecting an ASP in the mid-60s per tonne for 2010, which is approximately 15% below the sector’s US$70-75/t//t. Furthermore, the delay in PLN’s construction of the 2,400MW Bangko Tengah power plant from 2014 to post-2017 is likewise disappointing. The plant was scheduled to off-take 10-12mt of thermal coal from PTBA, equivalent to 20% of sales volume.
PTBA has rallied close to our price target and we consequently downgrade the rating from Buy to Sell, while revising our earnings estimates for 2010-12.

􀁑 Price revision. We revise our 2010-12 ASP assumption from US$74/t, US$88/t and US$80/t to US$67/t, US$85/t and US$72/t, in line with continuous disappointing domestic selling prices. We note that domestic prices appear to have stayed approximately 15% below export prices in 2010, which reduces PTBA’s earnings leverage from coal price momentum versus the sector. To date, 75% of 2011 volumes are still un-priced.

􀁑 Production weakness. The excess rain in H210 is likely to have pressured production throughout 2010. In our experience, production pressure in one year negatively affects the subsequent years due to overall infrastructure capacity constraints, and thus we downgrade production from 15mt to 14mt in 2011. In the longer term, we postpone the 10-12mt off-take from the Bangko Tengah power plant five years to 2018.

􀁑 Cost inflation. In addition to overall fuel cost pressure, costs are likely to increase further as a result of higher railway tariffs, which are likely to increase 6-9% in the near term. We raise our 2010-12 cash cost estimate from US$33/t, US$35/t and US$36/t to US$43/t, US$45/t and US$46/t respectively, excluding royalties. PBTA’s production costs are highly exposed to fuel price volatility due to its railway utilisation.
Our earnings estimate is 17% below and 2% above consensus forecast for 2010 and 2011, respectively.
With a 2011 earnings sensitivity of 2.7% for a 1% change in coal prices, PTBA is in the middle of the Indonesian sector range.

We lower our price target from Rp25,500 to Rp20,000 per share, which incorporates our earnings revision, a lower risk-free rate from 10% to 7.6% and a slightly higher beta from 1.2x to 1.4x, which reduces the WACC from 11.3% to 9.6%. We employ a 12-month target PE valuation multiple of 13.7x, which is in the upper band of the historical trading range. For a check on our PE valuation, we run a life-of-mine DCF valuation based on the UBS VCAM model, which renders a valuation of Rp18,000 per share, slightly below our price target.

UBS INDO Adaro Energy (Neutral, PT Rp2,800, 8% upside)

Adaro remained our top Indonesian coal pick throughout last year, while shares grew 51% from January 2010. Our investment case is primarily based on the company’s high-quality infrastructure, which should allow Adaro to reach its target to double production in the medium term. Thus, seeing that much of the capex will require mobile equipment rather than land acquisition investment, capital expenditure should remain relatively low thus resulting in superior free cash flow generation.

However, Adaro has rallied close to our price target and we consequently downgrade the rating from Buy to Neutral, while revising our earnings estimates for 2010-12. We incorporate the most recent beta values to reflect changes since the timing of our last valuation for the individual companies.

􀁑 Price revision. We revise our 2011 average selling price assumption (ASP) from US$66/t to US$67/t in line with our Japanese benchmark contract upgrade. We note that the increase in our ASP estimate is limited as Adaro has priced 50% of its 2011 sales volume based on the 2010 benchmark price,
while remaining volumes have yet to be priced.

􀁑 Production weakness with reserve potential. Excess rain in H210 is likely to lower management’s initial production target of 45-46mt for the full year. In our experience, production pressure in one year negatively affects the subsequent years due to overall infrastructure capacity constraints, and thus we lower production estimates from 44mt/50mt/58mt to 42mt/47mt/52mt in 2010/11/12. Incremental production growth is likely to be sourced from the Wara mine as the Tutupan mine appears to have reached maximum production capacity of 42-44mt. Wara coal is significantly lower quality and lower cost coal than Tutupan, which will reduce Adaro weighted average selling prices in the long term, all factors being equal. Following the continuous exploration of Wara, we anticipate additional reserve upgrades over time.

􀁑 Cost inflation. We note that Adaro’s management has revised its infrastructure development plan once more, which now entails the muchdebated conveyor belt transporting growing overburden volumes to the
landfills rather than coal to the Barito river. The decision is based on growing land constraints to offload over 200mt of annual overburden, which will increase hauling distances and in turn overburden costs. We increase our 2011 and 2012 cash cost estimate from US$38/t and US$40/t to US$39/t and US$41/t, respectively.

􀁑 Tax revision. Based on 9M10 results, we note that Adaro is currently paying 53% corporate taxes, well above its contractual 45% obligation. Management attributes the additional expense to a significant amount of goodwill amortisation, which is non-deductable and putting downward pressure on earnings.

Our earnings estimate is 13% and 5% below consensus forecast for 2010 and 2011, respectively.  We raise our price target slightly from Rp2,700 to Rp2,800 per share, which incorporates our earnings revision, a lower risk-free rate from 10% to 7.6% and a slightly higher beta from 1.0x to 1.1x, which reduces the WACC from 9.5% to 8.3%. We employ a 12-month target PE valuation multiple of 15.5x, which is in
the upper band of the historical trading range.

For a check on our PE valuation, we run a life-of-mine DCF valuation based on the UBS VCAM model, which renders a valuation of Rp2,500 per share, slightly below our price target.

UBS INDO Indonesian Coal: We downgrade our ratings for most of the Indonesian coal names and turn neutral (from positive) on the sector in the near-term

Moving to neutral on the sector
􀂄 Neutral over the near-term
We downgrade our ratings for most of the Indonesian coal names and turn neutral (from positive) on the sector due to: 1) near-term seasonal weakness; 2) strong 6-month performance; and 3) potentially weak Q410 results. We anticipate a correction in March/April between Chinese domestic and international prices.

􀂄 Chinese arbitrage provides weakness and price support
As China emerged as a thermal coal net importer in 2009, domestic prices aligned with international import prices (Newcastle spot). One month ago, import prices significantly exceeded domestic prices due to winter coal supply disruptions, but as near-term weather improves, we suspect spot prices will correct.

􀂄 Mid-2011 weakness could be buying opportunity
We think the 2012 coal price risk is to the upside on account of growing demand and continuous supply tightness. More specifically, power capacity will continue to grow in order to sustain economic growth in Emerging Asia, while supply remains under pressure from a major railway capacity shortage in China and an only partial recovery of Australian production.

􀂄 Buy Straits Asia and Sell Bukit Asam (PTBA)
Straits Asia is our top Buy pick following the preliminary Sebuku approval, which is likely to result in a re-rating to the top of the sector. The company currently has the greatest earnings upside risk. Bukit Asam is our top Sell pick given low selling prices, our earnings estimates are 17% below consensus, and another three-to-fouryear delay in the Bangko Tengah power plant that is supposed to off-take 20% of Bukit Asam’s volumes.

Neutral over the near-term
We downgrade our ratings for most of the Indonesian coal names and turn neutral (from positive) on the sector in the near-term on three primary reasons:
􀁑 Seasonal weakness. As the winter on the Northern Hemisphere weakens over the next few months, so will thermal coal demand while Australian and Indonesian supply partly recovers from excess rain.

􀁑 Strong 6-month performance. The Indonesian coal sector has rallied over 35% over the past six months along with thermal coal prices, and valuations now reflect current price levels of US$120-130/t.

􀁑 Weak Q4 results. We expect Q4 results to be weak due to: 1) fuel cost inflation; 2) production pressure; and 3) relatively low price execution as the quarter was contracted and priced before the current momentum.

Shanghai Indonesia's Alfindo Plans $100 Million Retail Deal

SHANGHAI—Indonesia's PT Sigmantara Alfindo is selling 343 million shares in retailer PT Sumber Alfaria Trijaya for about US$100 million, a person familiar with the matter said on Tuesday.

The shares are being sold within a range of 2,700 and 3,025 Indonesian rupiah ($0.30 to $0.33), spanning a discount of 10% to premium of 0.8% to the last closing price of 3,000-per-share rupiah on Indonesia's stock exchange.

Sigmantara Alfindo is an investment holding company.

Swiss bank UBS AG is the sole bookrunner on the deal.

Korea Times Asian retail market may continue to grow (Korea Times, 19 Jan 2011, 17:24)

By Cathy Rose A. Garcia
Korea's retail sales are expected to grow at a moderate 2 percent through 2014, according to a report by PriceWaterhouse Coopers (PwC).

The report ``Strong & Steady: 2011 Outlook for the Retail and Consumer Products Sector in Asia'' showed that sales growth in South Korea was seen as weak in 2010, reaching less than one percentage point.

This year is expected to be better with growth averaging 2 percent through 2014.

``Nonetheless, Korea is home to one of Asia's most dynamic and largest retail markets, ranking fourth in U.S. dollar terms behind Japan, China and India, and a relatively wealthy population," the report said. The report was based on a study conducted by PwC and the Economist Intelligence Unit.

Korea's retail market is also seen as shifting from small outlets to hypermarkets, which are now a one-stop shop for consumers. Currently, 70 percent of the sector is made up of small outlets.

Online retailing has always done well in Korea, with more online shops and product diversity. ``Korea has the highest internet penetration rate in the world and a dynamic communication services industry, which accounts for its status as one of Asia's fastest growing online retail markets,” the report said.

``The challenges of operating in Asia are great, but the opportunities outweigh the challenges. Demand is growing across the board and this will be encouraged not just by rising incomes but also rising access to technology,'' said Carrie Yu, China and Asia-Pacific retail and consumer leader at PwC, in the report.

Overall, the outlook for Asian retail sales is positive, with average growth of about 6 percent for 2011 ― 2 or 3 percentage points higher than the global average. Total retail sales are expected to hit more than $8.5 trillion by 2014.

China will set the pace for the region, with 14.6 percent growth for 2011 and 12.4 percent in 2012. This is a far cry from Korea’s 2 percent growth forecast for 2011 and 2.4 percent in 2012.

In Asia, there are several trends to watch out for, such as the consolidation of operations for some multinational retailers; and the growing demand for fast fashion and online retailing.

Major retailers Carrefour and Wal-Mart are expanding in China. Korean retailer Lotte Shopping is also expanding in other countries, buying Makro chains in China in 2007 and Indonesia in 2008. It bought a stake in Chinese supermarket and hypermarket chain Times in 2009.

Lotte is also planning on making a bid to buy the hypermarket business of Indonesia’s Matahari Putra Pirma PT, which the group hopes to get for $1 billion.

The demand for fashion and apparel in Asia is expected to continue to grow in 2011, with average annual demand growth of about 5 percent through 2014.

Department store retailer Lotte is planning to enter the Chinese market with a wholly owned store in Tianjin in 2011 and expects to have 20 department stores in China by 2018.

2010 also marked a strong rebound for luxury sales in Asia, and prospects are good for 2011. China will be the most important market in Asia and around the world for luxury goods. The China Association of Branding Strategy estimating 250 million in China can now afford to buy luxury goods.

``The opportunities are enormous, but as in other sectors, the challenges can be considerable. Shiny new shopping malls notwithstanding, at present, there is a dearth of high-end retail space, few well-trained sales staff and rising competition,’’ the PwC report said.

The online retail market in China is on the brink of exploding, with 60 percent growth in internet sales in just the first half of 2010. A few Asia companies like China's Taobao and Japan's Rakuten have found success in the market. Korean online retailers, who have enjoyed success at home, have yet to make any inroads in China.

Fast-moving consumer goods firms will be facing challenges, especially with the rise of private label goods. "As they expand into less developed areas, they will run into inadequate infrastructure and distribution networks, and in some cases, high levels of market competition. In addition, less expensive private-label goods

Korean hypermarkets have private label brands, Lotte Mart's WiseSelect and Shinsegae E-Mart's Fresh and Best, which offer good quality products at competitive prices

Reuters SK Telecom, KDDI bidding for Indonesia's First Media-sources

SINGAPORE/JAKARTA | Wed Jan 19, 2011 3:33am EST

SINGAPORE/JAKARTA Jan 19 (Reuters) - South Korea's SK Telecom Co and Japan's KDDI Corp have submitted first-round bids for Indonesian cable TV and internet firm First Media which its parent Lippo Group is trying to sell for $400-$500 million, sources said. "SK Telecom and KDDI have submitted bids along with local telcos," said one of the sources with knowledge of the deal.     The sources declined to be named because the deal is not public.

Indonesian conglomerate Lippo Group had hired Bank of America's Merrill Lynch to  advise on the sale of First Media, sources had earlier said. Deutsche Bank is advising SK Telecom, sources said.     SK Telecom said it is interested in First Media, but has not made any decision. It declined to comment on the bid. "We are looking at various (investment) opportunities overseas, and it (First Media) is just one of the options under consideration," a company official said.  A KDDI spokesman in Tokyo declined to comment. Merrill and Deutsche also declined to comment. (Reporting by Saeed Azhar in SINGAPORE, Janeman Latul in JAKARTA and Hyunjoo Jin in SEOUL; additional reporting by Junko Fujita in TOKYO; Editing by Anshuman Daga)

JP Morgan Indo : BRMS, MLPL, CTRA market moving news


* Buy Bumi Resources Minerals (BRMS) – Parliament may veto the central government’s plan to acquire the 7% stake in Newmont: Parliament’s commission VII has formed the decision to veto central government’s plan to create a central investment pool to acquire the 7% stake in PTNNT, urging them to let the regional government takes-on the buying opportunity. Representatives from the regional government have been quick to respond, saying that their consortium MDB (a subsidiary of BRMS) is ready to buy when the opportunity comes. (Kontan).

* Buy MLPL – James Riady and the Korean investors: Maybe it is time to take a serious look at Mr.Riady’s flagship company PT Multipolar Tbk (MLPL), that holds a 34% stake in First Media (KBLV), 50% stake in Matahari (MPPA), and 1.8% stake in Lippo Karawaci (LPKR). Mr. Riady appears to be in the mood to sell assets or seek strategic buyers, an event that can help crystalize his asset values. Reading the two articles below (one by Reuters and another by Korea Times), SK Telecom, KDDI, and local telcos have reportedly put-in preliminary bids for the cable TV company First Media, while Lotte Shopping appears to be following-up with potential strategic partnership with Matahari’s Hypermart. MLPL’s latest NAV stands at around Rp718/share (vs current share price of Rp315), a calculation that only accounts for Matahari, First Media, and Lippo Karawaci’s valuation (ignoring the net cash and value of unlisted subsidiaries). The asking price for Matahari and First Media stands significantly above their respective share prices, suggesting upside if any of Mr. Riady’s plans come through.

* Buy Ciputra Development (CTRA): CTRA’s management disseminated their fresh 2011 guidance to analysts yesterday, and the guidance is looking upbeat. They aim to grow marketing sales by 60% yoy in 2011, targeting Rp200bn net income in 2010 (vs. JPM at Rp176bn) and Rp260bn in 2011 (vs JPM at Rp249bn). If the 60% yoy growth in marketing sales can be achieved (vs. JPM estimate at around 40% yoy), then 2012 net income may grow above 40% (vs JPM growth forecast of 34%). Property sector is one sector that has been sold-off (due to their illiquidity and small cap nature), despite solidly improving fundamentals.

Kamis, 20 Januari 2011

Bloomberg Indonesia Stocks: Bank Mandiri, Indofood, Intraco, Unilever

Shares of the following companies had unusual moves in Indonesian trading. Stock symbols are in parentheses. Prices are as of 4 p.m. local-time close, according to data on the Indonesia Stock Exchange website.

The Jakarta Composite index dropped 14.37 points, or 0.4 percent, to 3,534.28.

PT Adaro Energy (ADRO IJ), Indonesia’s second-biggest coal producer, slid 0.9 percent to 2,650 rupiah. State utility PT Perusahaan Listrik Negara said it will ask coal suppliers, including Adaro, to reduce the price of the fuel this year.

PT Bank Mandiri (BMRI IJ), Indonesia’s largest bank by assets, climbed 2.7 percent to 5,750 rupiah. PT CIMB Securities Indonesia rated the stock its top pick among Indonesia’s big banks, citing “recent market pressures.” Shares of Mandiri have fallen 12 percent so far this year.

PT Indofood Sukses Makmur (INDF IJ), the parent company of Indonesia’s biggest instant-noodle maker, dropped 1.1 percent to 4,725 rupiah. Wheat gained the most in six weeks. Wheat futures for March delivery advanced 2.6 percent to settle at $7.9325 a bushel in Chicago yesterday, capping the biggest gain since Dec. 3. Indofood uses wheat to produce instant noodles.

PT Unilever Indonesia (UNVR IJ), which produces Lifebuoy and Lux soaps, fell 2.5 percent to 15,700 rupiah. Palm oil futures rose for a third day, gaining as much as 1.8 percent to 3,735 ringgit ($1,224) a metric ton in Kuala Lumpur. Palm oil and its derivatives are used in making personal-care products.

To contact the reporter on this story: Berni Moestafa in Jakarta