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

Kamis, 21 April 2011

Indonesian Telcos: 1Q11 Preview - 1Q seasonally weak but Street missing FY11 EBITDA margin upside - JP Morgan

• 1Q is seasonally the weakest quarter: We expect 1% QoQ growth in revenues for ISAT/EXCL while 9% for TLKM due to restatements in 4Q10. We expect 40-93% YoY growth (-12% to 38% QoQ) in 1Q11 recurring profit for Indonesian Telcos. Please see Figure 2 for revenue growth trends. EXCL is reporting 1Q11 results on 29-Apr-2011.

• Expect 8-11% upside to Street’s 2011 net estimates for Indonesian Telcos: We are 5% and 2% below the Street on 2011 revenues for TLKM and ISAT while 1% ahead for EXCL. Margin improvement /stability is our key call vs. the Street. We are 40-360bps ahead of the Street’s 2011 EBITDA margin forecasts. Please see Figure 1 below for EBITDA margin improvement trends.

• Management guidance in line for ISAT, below JPM for EXCL: ISAT’s guidance at 8-10% revenue growth is in line with our estimates. EXCL is guiding for 8-9% revenue growth vs. JPMe at 15%. 2011 capex is guided to remain largely flat as compared to 2010 for TLKM and EXCL.

• Wireless ARPU decline to continue in 1Q11: We expect 7-14% YoY decline in wireless ARPU’s for Indonesian Telcos. OpEx/min is expected to decline by 20% and 11% for Telkomsel and ISAT while the declines for EXCL have stalled out. Fixed line revenues are expected to grow by 4% for TLKM while fixed line EBITDA is expected to increase by 27% YoY on improving margins.

Upgrade TP PTBA menjadi Rp 27.300, BUY - Danareksa

- Kami masih menyukai PTBA karena valuasinya yang menarik yaitu dengan P/E FY11-12F sebesar 13,5-11,8x dan prospek pertumbuhan jangka panjang yang bagus dengan adanya penyelesaian 2 railway baru. Lebih jauh, kami juga memasukkan kenaikan harga untuk pengiriman batubara kepada PLN sehingga mengangkat estimasi EPS kami untuk FY11-12F sebesar 16,5-11,6%. Rekomendasi BUY tetap kami pertahankan dengan menaikkan TP menjadi Rp 27.300, yang mengimplikasikan P/E FY11-12F sebesar 16,6-14,5x.

- Margin PTBA di FY10 turun dilatarbelakangi oleh turunnya ASP. PTBA berhasil menurunkan cash cost produksi sebesar 1,8% , yaitu dengan lebih berfokus pada produksi overburden removal pada 3 kuartal pertama di FY10. Untuk FY11, penurunan cost dapat berasal dari penyelesaian pembangkit tenaga listrik sebanyak 3x10MW, yang diperkirakan mulai beroperasi pada 1H11.

- ASP di FY11F dapat mencapai US$ 84,9/ton sehingga akan mendorong ASP domestik di FY11F menjadi Rp 758.300/ton (naik 23,8%). Untuk ekspor batubara, kami berekspektasi penyelesaian harga pengiriman batubara JF11 antara Chugoku Electric dan Xstrata serta meningkatnya pengiriman batubara dengan CV tinggi di 2011, akan menaikkan ASP ekspor 33,4%menjadi US$ 87,7/ton.

- Target penjualan batubara untuk FY11F kami lebih konservatif yaitu sebesar 15,4 Mt vs. target manajemen sebesar 16,0Mt.

Indonesia Bank State-owned banks to lower dividend payout - DBS Vickers

Dividend payouts to be lowered to fund growth and boost capital. Jakarta Post reported today that dividend payouts for state banks will be reduced. The State-Owned Enterprises Ministry is finalizing its plans to reduce dividend payout ratio for state banks to boost capitalization and lending. Four state banks –
BMRI, BBRI, BBNI and BBTN have filed recommendations to the ministry. BBRI requested that its dividend payout ratio to be reduced to 10% from 35%, other banks have different recommendations. The plans would be finalized before the state banks
begin their respective annual shareholders meetings in May. This quote came from State-Owned Enterprises Minister Mustafa Abubakar..

Positive move for state owned banks. We see this as a positive move for the state owned banks. Rather than making cash calls via rights issues or tapping on the
sub-debt market, lower dividend payout would be a cheaper alternative to fund growth. Dec-10 CAR ratios for the 4 state-owned banks are as follows:
BMRI – 13.5% (post rights CAR will increase to 18%), BBRI – 13.8%, BBNI – 18.6% and BBTN – 16.7%. Of all the state-owned banks, BBRI’s CAR ratio is the lowest and hence justifies their request for a lower dividend payout to boost capital for further growth, in our opinion. If BBRI successfully lowers its dividend
payout to 10%, it might not need to raise the much anticipated sub debt in 2H11.

BBRI (Buy, TP Rp7,700) remains our top pick. BBRI remains our top pick among the Indonesian banks under our coverage. While NIM is likely to trend down as cost of funds may rise in view of a tighter liquidity environment and as inflation mounts, we remain confident that BBRI’s micro lending business model remains resilient. We believe its high yielding micro loans will ensure earnings growth exceeding 15%
over the next three years. In addition, BBRI’s President Director, Sofyan Basyir stated that BBRI’s 1Q11 net profit could reach Rp4trn, which is 86% higher than
the previous corresponding quarter. He also mentioned that BBRI’s disbursed loans would rise by 22% in 1Q11, much higher than 18% growth in credits for the same period last year. We have a Buy call for BBRI with a TP of Rp7,700.

Indonesia – Riding the rupiah - CLSA

Tony Nafte visited Jakarta and he likes the fact that Bank Indonesia has astutely employed exchange rate appreciation. For greater reassurance, Tony thinks that Bank Indonesia should be raising interest rates while the govt should be preparing the public for a domestic fuel price hike.

Key points from the report:
We remain confident that real GDP growth will be sustained at 6 – 6.5% over the next two years.
It is tempting to disregard government policy entirely and assume that the economy will continue to grow at this rate, led by the private sector.
Stress factors include rising fuel subsidies, declining oil output, volatile capital flows, and latent inflationary pressures.
The policy response to these challenges could either calm or unsettle the market.
Bank Indonesia has astutely employed exchange rate appreciation as its choice policy instrument to address these challenges.
A strong exchange rate will mitigate both inflation and fuel subsidy pressures.
However, as a solitary policy instrument it will not be sufficient.
As the pressures mount, market sentiment could shift and actually undermine the exchange rate.
For greater reassurance, Bank Indonesia should be raising interest rates while the government should be preparing the public (and the market) for a domestic fuel price hike.

Global Equity Strategy - View From The Road: Tokyo - Citigroup

Global investing has become an increasingly detached profession. Given vast financial databases and instant news access, many key decisions are made thousands of miles away from the markets they impact. For those needing a little local colour, a phone call to a regionally based broker or analyst is easy enough.

While we global strategists can run our valuation models, attempt to forecast EPS, and come up with some recommendations from afar, sometimes that isn’t enough. Sometimes you just have to go there. Japan is one of those places right now. We took a flight (80% full incidentally) to see Citi clients and colleagues in Tokyo last week. This short note is a simple summary of our observations from that trip.

It’s tough to be positive if you’re Tokyo-based The first point is that Tokyo is still shaking, quite literally. While activity levels are generally falling, there are still around 10 aftershocks each day. And these aftershocks would be meaningful earthquakes elsewhere in the world. For example, just last Monday there was a 6.6 magnitude quake. To put that into context, the earthquake that devastated Auckland in February measured 6.1.

The fact that these aftershocks are not causing Auckland-style destruction is, of course, testimony to the extraordinary level of architectural preparedness. However, we could see that that the continual shakes were having a more damaging impact upon investor sentiment. It’s difficult to focus on the value in the Japanese equity market if your office building is literally shaking. Add to that the increase in the crisis level of the Fukushima Daiichi power plant to a Chernobyl-equivalent level 7 and it’s perhaps easy to see that the mood of Tokyo-based investors is still very edgy. And with power outages likely to limit air conditioning, it’s likely to be a long and uncomfortable summer.

This helps us to understand why most of the post-quake buying is coming from overseas. Ongoing aftershocks provide Tokyo-based investors with a regular reminder of the significant challenges that face the Japanese economy and corporate sector. That’s what keeps them cautious. More distant foreign investors have been buying for some time. The earthquake has not put them off. If anything they seem to buying even more.

IHSG Siap Senggol Level 3.800 - Detikfinance

Jakarta - IHSG kemarin berhasil mencetak rekor baru mendekati level 3.800 setelah ditutup melesat 62 poin. Investor terus berburu saham-saham mengantisipasi keluarnya laporan keuangan.

Pada perdagangan, Rabu (20/4/2011), IHSG ditutup 62,112 poin (1,66%) ke level 3.794,762. Sementara Indeks LQ 45 melonjak 13,566 poin (2,02%) ke level 682,197.

Kini sentimen positif kembali hadir di lantai bursa, yakni dari penguatan bursa Wall Street. Namun mengingat posisi IHSG yang sudah terlalu tinggi, profit taking pun mengancam. IHSG pada perdagangan Kamis (21/4/2011) diprediksi akan menyenggol level 3.800 sebelum akhirnya akan melemah karena profit taking.

Bursa Wall Street tadi malam semarak berkat kejutan dari laporan keuangan perusahaan-perusahaan besar. Kejutan itu langsung menutup rangkaian sentimen negatif sebelumnya,

Pada perdagangan Rabu (20/4/2011), indeks Dow Jones industrial average ditutup melonjak 186,79 poin (1,52%) ke level 12.453,54. Indeks Standard & Poor's 500 juga menguat 17,74 poin (1,35%) ke level 1.330,36 dan Nasdaq menguat 57,54 poin (2,10%) ke level 2.802,51.

Bursa Jepang pagi ini juga langsung menguat, indeks Nikkei-225 mengawali perdagangan Kamis dengan kenaikan 87,46 poin (0,91%) ke level 9.694,28. More ...

DAVO Tak Jadi Diakuisisi Uniflora - TopSaham

PT Uniflora Prima menyatakan menunda Rencana akuisisi 51,86 persen saham PT Davomas . Pasalnya, Uniflora masih mengalami kesulitan pendanaan untuk akuisisi tersebut.
Direktur Utama Uniflora Johanas Heriamto dalam suratnya yang disampaikan ke BEI Rabu (20/4) mengatakan, pihaknya masih mencari pendanaan melalui penerbitan surat utang berdenominasi dolar AS. "Namun mengingat kondisi penerbitan dan investor internasional yag kami tawarkan tidak cukup kondusif, maka rencana penerbitan surat utang tersebut untuk sementara ditunda," jelasnya.

Akibatnya, penyelesaian transaksi tertunda. Tapi, dia menggarisbawahi bukan berarti transaksi tersebut batal. "Saat ini kami tengah berupaya untuk mencari alternatif pendanaan lain yang lebih menguntungkan bagi Uniflora," imbuhnya.

Dia juga menjelaskan, untuk mengakuisisi 6,4 miliar saham atau 51,86 persen kepemilikan di Davomas, Uniflora juga harus melunasi kewajiban Davomas. Di mana anak usaha Davomas, Davomas International Finance Company Pte Ltd memiliki utang berdenominasi dolar AS..

Metropolitan sets IPO at Rp240-Rp300 - Insider Stories

Property developer PT Metropolitan Land Tbk (Metland) has set its 30% stake of initial public offering at Rp240-Rp300 per share.

Referring to the price range, Metropolitan is able to seize Rp568 billion proceed, said DBS Vickers Director Rudy Budiarjo after a public expose today. Metland is planning to sell 2.27 billion shares, representing 30% of its enlarged capital, during initial public offering (IPO) in May 13.
The IPO is consisting of 1.89 billion of new shares issuance and divestment of 378.97 million shares from Metland existing shareholder Netstar Holdings Limited, a British Virgin Island-based company, which currently owns 19.76% stake.
Metland has picked PT Mandiri Sekuritas and PT DBS Vickers Securities Indonesia as the IPO's lead underwriters.

Metland plans to spend Rp522 billion of capital expenditure, of which will be financed by a combination of the IPO proceed and internal generated cash.
The company will develop seven projects which require Rp750 billion of investment up to 2013. The projects are Metland Cibitung, Metro Grand Mall, M Gold Residences, Horison Bekasi-Extension, Horison Jakarta, @Hom Hotel, and Horison Seminyak Bali.

Revenue this year is expected to grow above Rp70% from Rp331.38 billion. The biggest revenue contributor is Metland Menteng and Metland Tambun.

Laba Bersih KKGI Jadi Rp81,9 M di Kuartal I -

PT Resource Alam Indonesia Tbk (KKGI) membukukan laba bersih pada kuartal 1 2011 sebesar Rp81,9 miliar.

Hal ini lebih baik bila di bandingkan dengan periode yang sama tahun 2010 sebesar Rp21,8 miliar. Sedangkan laba bersih per saham menjadi Rp82 per lembar.

Saham KKGI pada perdagangan kemarin ditutup naik Rp250 ke Rp4.725 dengan volume perdagangan mencapai 4.686 saham senilai Rp10,7 miliar sebanyak 209 kali transaksi.

Mandom to distribute Rp340 dividend - Insider Stories

PT Mandom Indonesia Tbk (TCID), a cosmetic products maker, will distribute Rp340 per share dividend or Rp68.4 billion in total, reflecting a 52% payout ratio.
Mandom booked Rp131.45 billion or Rp654 per share last year, a 5.48% increase from Rp124.61 billion a year earlier, said a press statement.
Mandom, maker of men's hair product dubbed Gatsby, booked 5.61% increase in net sales to Rp1.47 trillion from Rp1.39 trillion.

Glencore Gives Investors Perfect Chance to Pass - Bloomberg

Good article on Glencore IPO - trying to make sense of all the hype around it, analyze timing of IPOs in the past and gives some background on the company

It is the blockbuster share sale of the year. When it lists in London next month, the Swiss commodities company Glencore International AG may well be valued at more than $60 billion. It will be too big to ignore. But like any initial public offering, it raises a crucial question: If the owners of the business are selling, is this the right time to be buying?

The answer is no. Glencore is essentially a trading company. It has a lot more in common with an investment bank, a hedge-fund manager or a private-equity firm than it does with a mining conglomerate. And the one thing traders are supposed to be good at is timing the market, so they are more likely to know the right moment to sell shares to unsuspecting buyers. Glencore will be a fantastic business one day. Don’t believe any of the warnings about the commodities boom being over. It still has a long way to run. But the time to buy the shares will be after all the hype has subsided -- not when it is at its peak.

After three decades as a closely held partnership, Glencore, which changed its name from Marc Rich & Co. when management bought out fugitive U.S. financier Marc Rich in 1994, is about to enter the public spotlight. It has a compelling investment case to make: Glencore owns big stakes in resources companies, employs 2,700 people in its trading units around the world, and about 54,800 people at its industrial subsidiaries.

$24 Billion
It is the largest shareholder in Xstrata Plc -- that holding alone is worth $24 billion. That is an attractive collection of assets, and one that should excite investors. And yet it is going to be a hard business to value. Nothing else like Glencore really exists, so there are no easy comparisons to make. And, of course, the commodities rally may have a few speed bumps along the way. Goldman Sachs Group Inc. last week recommended investors reduce such holdings, predicting that prices for oil, gold and copper will fall over the next three to six months. There is probably some truth in that. Oil and gold have had a good run in the last few months. If there is any sign that growth will slow in China, or any of the other major emerging markets, commodity prices will be hit hard.

Bull Market
Even so, this isn’t a three-to-six-month trade. Over time, the bull market in raw materials will continue. As living standards in the emerging economies approach those of the developed world, people will consume a lot more. Factories will need more stuff coming in to ship things out the other side. Even if supply rises to keep up with demand -- and that won’t always be possible -- this will still be a much larger industry in five years than it is today. So it is a good place to invest.

The main concern about Glencore isn’t the state of the commodities business. It is about timing. The record shows that when trading businesses come to the market, investors usually get outfoxed. Take Goldman Sachs, for example. No one disputes that it is a great bank. But if you bought shares in its IPO in May 1999 and sold in November 2008 you would have lost money, though there would have been better selling opportunities along the way. How about Fortress Investment Group LLC? The manager of hedge and buyout funds sold shares at $18.50 in February 2007. They are now valued at less than $6. Blackstone Group LP, the world’s largest private-equity firm, priced its IPO at $31 in 2007. The shares now trade at less than $19.

Mixed Bag
The underlying message is always the same: Trading firms are great for the senior dealmaker, but they are a mixed bag for outside investors. There is no great mystery about that. First, the people on the inside inevitably know more about what the immediate prospects are than anyone on the outside. Senior managers may well have lock-ins that stop them from selling shares for a set period, as Glencore’s do.

“Is it the top of the cycle?” Chief Executive Officer Ivan Glasenberg said in an interview with Bloomberg reporter Jesse Riseborough last week. “Who knows, who cares? We are only potentially selling out in five years’ time, so let’s worry about the market in five years’ time.” It doesn’t make any difference. They will still choose a point that looks like a peak in the market to sell. They can’t help themselves: cashing in at the top is in their blood. Second, there is always the risk of key staff drifting away. For the best traders, a partnership is a more satisfying place to work than a publicly traded company. There is more freedom and greater rewards: things that traders want most. Who wants to be tied up with a lot of boring rules for less money?

If the star traders start to move elsewhere, though, the business immediately loses value.
Glencore will be a big company for a long time to come. But pick up the shares cheaply in a few months’ time. That, after all, is what its traders would do.

Rabu, 20 April 2011

Coal Sector (OVERWEIGHT) Black is beautiful - Danareksa

Aggressively priced JFY11F contracts
We upgrade our FY11F coal price assumption to US$129.8/t, in line with the recent coal price settlement between Chugoku Electric and Xstrata. We also upgrade our FY12F coal price assumption to US$110/t, while maintaining our FY13-14F coal price assumption at US$105-100/t. We view the recent settled price as aggressive since Japan doesn’t have much generating capacity to crank up its coal power generation, although it may underline the tight supply in the market. As we expect there will be resistance from the Japanese power producers, we apply a higher discount to the benchmark for this year. On the production side, the outlook is more upbeat given that the La Niña weather phenomenon is expected to end by winter 2011 (or June 2011 in Australia). This will result in better availability of coal in the market, putting downward pressure on the coal price from FY12F onwards.

Short-term expansion program at risk
The recent earthquake in Japan - which damaged some of the Komatsu and Hitachi Construction Machinery Japan plants - has raised concerns about short-term heavy equipment procurement. Consequently, the expansion plans of coal miners/mining contractors for 2011 might be at risk, as the damaged plants are designated to manufacture large-type heavy equipment for the mining industry. Against this backdrop, we trim our FY11-12F coal production target by 5.1-5.4%, and we also expect lower realized capex for the acquisition of heavy equipment this year.

Not much room for Japan’s coal power generation to grow
Nearly all available Japanese coal-fired power plants are being used, as shown by Japan’s total coal-fired power plants power output in JFY09 of 237.9TWh vis-à-vis its total coal-fired power plants capacity of 38.0GW, or equal to 332.4Twh in one year (around 71.6% of total generating capacity). Also, the recent earthquake has damaged the Hirono, Haramachi and Hitachinaka coal-fired power plants, which amounts to power generation capacity loss of 3.6GW, or equal to 31.5Twh in one year. As a result, we don’t expect the recent nuclear crisis to immediately lead to an increase in coal demand from Japan. Furthermore, we see that China and India will continue to lead the demand growth for coal going forward.

Who will perform this year?
We maintain our OVERWEIGHT call on the coal sector, as we believe higher coal prices will lead to higher ASP booked by coal companies this year, consequently leading to higher margins and growth since production won’t improve that much. PTBA is our top pick in the sector, given that: 1) cost advantage of relatively low exposure to fluctuations in the oil price, 2) it has less exposure to Japanese heavy equipment, 3) the domestic sales price is expected to increase 23.8% thanks to price settlement with PLN and 4) it has a long term growth strategy of expanding its railway capacity by forming alliances with regional railway players.

Bank Rakyat Indonesia (BUY): Indicated Rp4t net profit in 1Q11 - Kim Eng

According to Dow Jones News Wire, BRI’s CEO, Mr. Sofyan Basir, indicated Rp4t net profit in 1Q11, up 86% y/y from Rp2.2t in 1Q10.
The robust profit was achieved on the back of 18%-22% y/y loan growth.
BRI is planning to hold an AGM on 28 April 2011 where it will propose for 10% total dividend payout (yield: 0.8%) of its Rp11.5t profit in 2010. This implies Rp1.2/share final dividend payment in addition to Rp45.9/share that has been distributed as interim dividend in December 2010.

We are waiting for confirmation from the bank on the indicated profit which stood far above our estimate.
BRI’s 1Q11 financial result will be announced on 29 April 2011. Details will be given on the analyst meeting that follows.
We see a possible upgrade on our valuation should the indicated profit were accurate. Currently, we estimate Rp12.8t FY11 net profit, up 11.7% y/y from Rp11.5t in 2010.
At the moment we recommend BUY for BRI with TP at Rp7,200/share (13.7x 2011F PER; 3.8x 2011F PBV), implying 15.6% upside potential from yesterday’s closing of Rp6,250/share. The TP has not put into account the abovementioned possible

Strategy Alert - Burgeoning middle income - Deutsche

A survey conducted by the Nielsen Company Indonesia highlighted increasing consumption in what is regarded as premium products. For example; cheese (50 grams packaged) up 118%yoy in 2010, frozen meats (chicken, beef and fish) up by 23‐32%yoy, and disposable baby diapers up 93%yoy, supporting the overall FMCG industry to grow by 12% in 2010. The country's demographic profile is certainly conducive to economic growth where private consumption makes up two‐thirds of it.

The increased demand for such products has also led to higher advertising spend; i.e. 2010 adspend in cheese products was up 32%yoy, frozen foods up 39%yoy, whilst baby diaper adspend was up a whopping 70%yoy. This suggests that business confidence is also rising, with companies willing to spend for product awareness and increase its brand equity.

Separately, data from the World Bank noted a continuous reduction in poverty rates, falling from 15.4% in 2008 to c.13% in 2010 (see chart below). The government targets a further contraction in the poverty rate going forward, expecting it to decline to 11.5% by 2012. The government's master plan to speed up infrastructure development and connectivity through its economic development corridor scheme certainly supports this case.

The above development is consistent with one of our four investment theses. In terms of stock selection, companies that have strong pricing, and importantly price leverage to earnings, such as Indofood CBP (Buy, IDR5,400) and Gudang Garam (Buy, IDR43,500) (1:7 and 1:5 price to earnings leverage), should benefit most from rising incomes. Companies that cater to the rising middle‐income demographic should also do well.

Visit to DOID - a turnaround story (increase ROE - reducing debt) - CIMB

We visited Delta Dunia Makmur (DOID IJ, market cap US$1bn) yest and basically we liked what we heard. It is a turn around story from negative earnings to positive earnings this year high ROE and significant reduction in leverage.

1. Revenue from BUMA, the wholly owned mining contracting subsidiary (similar to PAMA in UNTR) should increase because the stripping ratios in most of their clients are going up. With coal price of above US$90/t, mining companies can afford to operate on high stripping ratio areas, this usually would increase the margins for the mining contractors (as they move more earth). Berau Coal (BRAU IJ) is their major client with 29% of the mining contracts.

2. BUMA have ordered their heavy equipment during 2010 (mostly Catepillar machine). With these equipment, they would be able to increase the capacity by 25%. Consequently we could expect that volume would still be growing with better weather condition this year compared to last year.

3. They have no issue with spareparts supply as these spare parts from Hitachi have already arrived and Komatsu has committed to deliver by 3Q this year.

4. They just appointed Mr Sjamsi Josal to be their operation manager. It is an internal promotion and this guy used to for Theiss for more than 6 years.

5. Going forward..

DOID is focussing on debt refinancing (around US$600mn) to release them from the debt covenant which has 'waterfall' clause thus limit their capex capability. The waterfall payment last year was 10% of the principal and this year would be 10% of the principal (around US$60mn); and 13% for FY11 (US$78mn). The interest of 5.6% pa would be around US$34mn, resulting in total outflow of around US$94mn. A right issues would come in nicely in this kind of situation :)

After 3 years of not spending much on capex, the company needs to consider further expansion. In 2010, they spent US$209mn capex and plan to spend US$230mn this year, mostly funded by their internal cash flow (BUMA's EBITDA last year was US$227mn and this year is projected to be around US$250-260mn).

Let's work out the math. With EBITDA of US$260mn and debt repayment of US$94mn, the company would have US$166mn cashflow. Therefore, to finance US$230mn capex this year, they would still be short of around US$64mn financing. In order to execute the capex, they could do two things:
(a) they could ask for grace period on their loan ... (very unlikely they would get it, but with powerful shareholders everything is possible)
(b) a rights issue - our favourite solution :)

6. Valuations
The cash and equivalent as of Dec 31, 2010 was Rp553bn and total debt to Rp6,494bn, equity Rp135bn, resulting in net debt to equity of 44x .... hmmm so high. Net loss in FY10 was Rp159bn, slightly lower than Rp160bn net loss in FY09 on high financing charges. EBIT was Rp1.0tn in FY10, down from Rp1.2tn in FY09.

According to Bloomberg, analysts's average net profit for FY11 is Rp738bn and Rp945bn, which would give P/E of 12x for FY11 and 9x for FY12, looking attractive. So, analysts expect turnaround in earnings this year. Based on these figures, the net debt to equity would decline to 7x (from 44x) and ROE to reach 147%.

7. Share price performance + a liquid stock
The stock price performed strongly yesterday, up by 9% and 3% today. Over the last six months, the stock price rose 19% and 18% relative to JCI. The stock is also considered liquid with US$6.9mn daily turnover in the last six months.

8. Strong shareholders
Northstar holds a 40% stake in DOID with 60% freefloat. Under Northstar, there are Texas Pacific Group (TPG), GIC and CIC.

KLBF Though fundamentals is sound, valuation is expensive, time to take profit - UOB

Analyst Adrian downgrade Kalbe Farma to Hold with a slightly lower target price of Rp3,900 based on 1x 2012 PEG . Though fundamentals is still sound, with the current valuation nearing 1X PEG, there seems to be limited upside from this stock.

Hold Kalbe Farma, KLBF IJ, TP: Rp3,900, Share Price: Rp3,675, Upside: +6.1%
Positive catalyst – when Kalbe Farma announce further details on acquisition plans, thus may increase earnings forecast.
The company is currently improving its business development strategy through acquisition, JV and Mergers.
No details of it yet, but it is looking into acquiring around 10 companies in Indonesia and Southeast Asia, with size of US$20-50m, ROE of 20-25% concentrating in consumer health segment, possibly some that focuses on natural herbal companies.
Financing for the acquisition – amount could be about Rp0.5tn-1tn. May resell 781mn of its treasury stocks.
Lifts dividend payout to 50%, higher than last year's 25% and our 30% expectation. Total dividend will be Rp643bn or Rp69/share, 1.9% yield.
Increased dividend payout assumption results in lower interest income, hence Adjust EPS forecast by 0.3% in 2011 and 0.9% in 2012

BUMI Growing, de-leveraging - CIMB

(BUMI IJ / BUMI.JK, OUTPERFORM - Maintained, Rp3,350 - Tgt. Rp4,000, Coal Mining)
Reiterate OUTPERFORM. We believe that Bumi is poised for further re-rating as its outlook is supported by 1) strong growth potential from its coal assets given available reserves and ongoing infrastructure and capacity expansion to support strong volume growth (11% CAGR), and 2) balance-sheet deleveraging, which would substantially reduce its cost of capital. We reiterate our OUTPERFORM call at current 12.9x forward P/E and NAV-based target price of Rp4,000.

Asian Stocks Rise as U.S. Housing, Earnings Boost Confidence; BHP Advances - Bloomberg

Asian stocks rose for the first time in four days as U.S. housing starts gained and earnings beat estimates at companies including Johnson & Johnson, signaling the world’s biggest economy is recovering.

Advantest, Japan’s largest maker of chip-testing equipment, gained 1.7 percent after Intel Corp. (INTC) forecast quarterly sales that may top estimates. BHP Billiton Ltd. (BHP), the world’s biggest mining company, gained 0.9 percent in Sydney after metal and oil prices rose. Samsung Electronics Co. gained 3 percent in Seoul after agreeing to sell its computer hard-disk drive business. LG Chem Ltd. (051910), South Korea’s biggest chemicals maker, jumped 6 percent after posting a 27 percent gain in first-quarter profit.

The MSCI Asia Pacific Index advanced 0.6 percent to 135.04 at 9:26 a.m. in Tokyo, with about seven shares gaining for each that fell on the 1,023-member gauge. The measure fell 0.5 percent last week, reversing three straight weeks of gains.

“You’re seeing signs the U.S. and Europe are still on track for recovery,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “That’s helped to ease nerves.”

Japan’s Nikkei 225 (NKY) Stock Average advanced 1.3 percent. Australia’s S&P/ASX 200 Index climbed 0.7 percent and New Zealand’s NZX 50 Index increased 0.5 percent. South Korea’s Kospi index rose 1.2 percent.

To contact the reporters on this story: Anna Kitanaka in Tokyo

Indonesia's Indo Tambangraya sees Q1 coal output at 5.5 mln T - Reuters

Indo Tambangraya Megah , a unit of Thailand's Banpu , expects coal production in the first quarter to be 5.5 million tonnes from all of its units, finance director Edward Manurung said on Tuesday.

The firm said earlier that it aimed to produce 25 million tonnes of coal this year, up from 22 million tonnes last year, and it planned to buy a coal mine in Kalimantan with annual capacity of 1 million tonnes.

Astra Otoparts pecah saham 1:5 - Bisnis Indonesia

JAKARTA: PT Astra Otoparts Tbk, produsen suku cadang otomotif dari Grup Astra, berencana melakukan pemecahan nilai nominal saham atau stock split dengan rasio 1:5 guna membuat saham perseroan menjadi likuid.

Direktur Astra Otoparts Robby Sani mengatakan rencana pelaksanaan stock split itu akan diajukan saat RUPS perseroan pada 27 April 2011. "Tujuan perseroan melakukan stock split ini adalah agar perdagangan saham perseroan menjadi lebih likuid dan dapat mendukung terselenggaranya perdagangan yang wajar, teratur, dan efisien," jelasnya melalui keterbukaan informasi ke bursa, hari ini.

Dia juga mengharapkan agar stock split yang dilakukan dapat menunjukkan kinerja perseroan yang sesungguhnya. Saham Astra Otoparts berkode AUTO itu pada perdagangan hari ini ditutup Rp15.800, melemah 50 poin dibandingkan dengan sehari sebelumnya Rp15.850.

Pada hari ini, Astra Otoparts juga mengumumkan pembentukan perusahaan patungan PT Astra Visteon Indonesia, bekerja sama dengan VIHI LCC asal AS. Astra Otoparts dan VIHI masing-masing memiliki 50% saham di perusahaan patungan itu.

CPO futures end marginally higher - Business Times


CRUDE palm oil futures on Bursa Malaysia Derivatives closed marginally higher yesterday in line with higher soyaoil prices on the Dalian Commodity Exchange, dealers said.

May 2011 rose RM11 to RM3,310 a tonne, June 2011 increased RM17 to RM3,277, July 2011 added RM9 to RM3,255 and August 2011 edged up RM5 to RM3,250.

Turnover increased to 25,047 lots from 19,154 lots on Monday while open interest declined to 103,905 contracts from 106,835 previously.

On the physical market, April South was slightly higher at RM3,320 from RM3,310 a tonne on Monday.


LONDON: Brent crude oil futures fell below US$120 (US$1.00 = RM3.02) yesterday, pressured by concern over the economic outlook and the risk that high prices could erode demand.

By 1318 GMT, Brent crude was trading US$2.20 lower at US$119.41 a barrel. US crude for May fell US$1.16 to US$105.96.

Expectations that Greece will restructure its debt added to a bleak economic picture, a day after ratings agency S&P cut its outlook for US credit.

“There’s still a few worries in Europe, Monday’s downgrading of the US didn’t help and I think we’re going to have to look at tomorrow’s energy figures to give us impetus,” said Rob Montefusco at Sucden Financial.


THE rubber market closed lower yesterday in line with weaker Tokyo rubber futures, dealers said.

The market’s underlying fundamentals remained intact due to limited supply in major producing countries, they added.

At 12pm, the Malaysian Rubber Board’s official daily physical price for tyre-grade SMR 20 fell 29.5 sen to 1,480.5 sen a kg from 1,510.0 sen on Monday and latex-in-bulk lost 9.5 sen to 1,044.5 sen.

The unofficial sellers’ closing price for tyre-grade SMR 20 slipped 32.5 sen to 1,463.0 sen from 1,495.5 sen on Monday and latex-in-bulk eased 14.5 sen to 1,034.0 sen compared to 1,048.5 sen previously.


THE tin price on the Kuala Lumpur Tin Market (KLTM) closed lower by US$200 at US$32,600 per tonne yesterday as players took cue from the sharp fall in tin price on the London Metal Exchange (LME), dealers said.

They said the tin price on the LME was sharply lower as players were worried over the outlook of the US economy, after rating agency Standard & Poor''s lowered its US credit outlook to negative.

The tin price on the LME, which influences global prices, dropped US$730 to US$32,375 per tonne.

At the opening bell on the KLTM, offers outpaced bids by 86 tonnes to 20 tonnes. Turnover declined to 30 tonnes from 56 tonnes on Monday with buying interest from Japanese, European and local traders.

The price differential between the KLTM and LME widened to a premium of US$675 per tonne from US$145 per tonne on Monday.

Steel use to surge by 5.9% to 1,359 mmt in 2011: World Steel - Commodity Online

LONDON(Commodity Online) : Apparent steel use will increase by 5.9% to 1,359 mmt in 2011, following 13.2% growth in 2010— The World Steel Association said Monday in its April 2011 short range outlook (SRO) for 2011 and 2012.

In 2012, it is forecast that world steel demand will grow further by 6.0% to reach a new record of 1,441 mmt.

This forecast suggests that by 2012, steel use in the developed world will still be at 14% below the 2007 level whereas in the emerging and developing economies, it will be 38% above. In 2012, the emerging and developing economies will account for 72% of world steel demand in contrast to 61% in 2007.

The World Steel Economics Committee met in Beijing in March 2011 to discuss the SRO, just before the natural disaster in Japan. The forecast has not been revised yet due to the difficulty of assessing the impact of the earthquake and tsunami.

Commenting, Daniel Novegil, Chairman of the World Steel Economics Committee said, “2010 saw a steady recovery of steel demand which began in the second half of 2009 driven by stimulus packages globally, the resilience of emerging economies and an overall market recovery. In 2011, we expect to see a further 5.9% growth in world steel demand.

Our forecast is based on a stable and steady recovery of the world economy. There are however uncertainties deriving from financial fragilities in Europe, unrest in some oil producing countries in the Middle East and the earthquake in Japan, which could have a negative impact on the recovery and thereby affect steel demand. At our World Steel board meeting last week the industry again expressed its condolences and support to its Japanese members.”

China’s apparent steel use in 2011 is expected to increase by 5.0% to 605 mmt following 5.1% growth in 2010. Given the pace of steel production in the first quarter of 2011, Chinese apparent steel use could be even higher. However, it is expected that the Chinese government’s efforts to cool down the overheating economy, particularly the real estate sector, will impact Chinese steel demand somewhat later this year.In 2012, Chinese steel demand is expected to maintain 5.0% growth, which will bring China’s apparent steel use to 635 mmt.

Indiais expected to show strong growth in steel use in the coming years due to its strong domestic economy, massive infrastructure needs and expansion of industrial production. In 2011, India’s steel use is forecast to grow by 13.3% to reach 68.7 mmt. In 2012, the growth rate is forecast to accelerate further to 14.3%.

The rebound in apparent steel use in the US is forecast to continue with growth of 13.0% to 90.5 mmt in 2011, reflecting the second round of quantitative easing and new fiscal policy initiatives that gave a boost to economic activities and sentiments in industrial and energy markets. Construction markets remain at depressed levels. In 2012, steel use in the US is expected to grow by 6.9% to 96.7 mmt, bringing it back to 90% of the 2007 level. For NAFTA as a whole, apparent steel use will grow by 10.9% and 6.3% in 2011 and 2012 respectively.

In Central and South America, apparent steel use is forecast to grow by 6.6% in 2011 to 48.8 mmt. In 2012, the region’s apparent steel use is forecast to grow by 8.3% to 52.8 mmt, almost 30% higher than the 2007 level.

Apparent steel use in the EU is forecast to grow by 4.9% to 151.8 mmt in 2011 on the back of an export-driven industrial rebound. The largest economy eurozone countries like Germany and France are forecast to enjoy solid recovery in steel use mainly in the automotive and machine building sectors. Other economies (i.e., Greece, Ireland, Portugal and Spain) are projected to show slow growth in steel use particularly as a result of weak construction activity. In 2012, the region will see an increase of 3.7% to 157.5 mmt in its apparent steel use, bringing it back to 80% of the 2007 peak.

Japan’s steel use was expected to decline by -1.2% to 63 mmt in 2011 as stimulus measures expire. However, the forecast was prepared before the natural disaster and it is too early to fully grasp the implications of these recent tragic events. In 2012, apparent steel use in Japan was forecast to remain around 63 mmt, 78% of the 2007 level. The impact of the earthquake and tsunami points to a significant downward adjustment in steel use for 2011 and upward adjustment for 2012.

The recovery of steel use in the CIS has been surprisingly healthy due mainly to an unexpectedly strong rebound from steel-using sectors in Russia. As domestic demand and business investment continue to grow healthily in the region, apparent steel use is expected to grow by 7.5% to 52.1 mmt in 2011 and then by 8.9% to 56.7 mmt in 2012.

Steel demand in the MENA region is expected to remain stagnant in 2011, mainly due to downward revisions from North African countries. However, boosted by high oil prices, steel use in MENA is forecast to resume growth in 2012 at a rate of 7.9%. Given the political situation in the region, there are considerable uncertainties to the current forecasts.

Also, The World Steel Board of Directors formally approved the appointment of Edwin Basson as Director General of the World Steel Association, effective from August 2011.

Edwin Basson(51) joined the steel industry in 1994 and has held various positions at world leading steel companies. At Iscor Ltd, he started as Chief Economist and later managed coated products and flat steel products, before moving on to Strategic Initiatives.

From 2004 to 2006, he was responsible for Marketing Strategy and Commercial Research & Market Segmentation at Mittal Steel (now ArcelorMittal). He joined worldsteel from ArcelorMittal where he held the position of Vice President, Commercial Co-ordination, Marketing and Trade Policy.

Subsidi BBM dan Listrik Bisa Bengkak Rp 50 Triliun di 2012 - Detikfinance

Pemerintah memperkirakan anggaran subsidi BBM dan listrik bakal bengkak Rp 50 triliun di 2012 seiring dengan makin meningkatkan konsumsi listrik maupun BBM di dalam negeri.

Hal ini disampaikan oleh Wakil Menteri Perencanaan Pembangunan Nasional (PPN)/Bappenas Lukita Dinarsyah Tuwo seperti dikutip dari situs Kementerian Keuangan, Selasa (19/4/2011).

"Subsidi listrik dan BBM untuk tahun depan akan mengalami kenaikan dari tahun sebelumnya. Diperkirakan naik sekitar Rp 50 triliun," ujar Lukita.

Akibat kenaikan tersebut, Lukita mengatakan kenaikan subsidi listrik dan BBM bakal mencapai Rp 187 triliun di 2012. Ini naik dibandingkan subsidi di 2011 yang mencapai Rp 136,6 triliun.

Di 2011, subsidi BBM mencapai Rp 95,9 triliun sementara subsidi listrik Rp 40,7 triliun.

Sebelumnya, Lukita menilai kondisi ekonomi Indonesia akan membaik pada 2012, di tengah kondisi ekonomi global yang belum menentu. "Antara lain situasi meningkatnya harga komoditas yang sama seperti tahun 2008, seperti minyak," ujarnya.

"Ini target kita di 2012. Pertumbuhan setidaknya mencapai sekitar 6,6-6,8%. Menekan angka pengangguran ke 6,4%, dan menurunkan angka kemiskinan jadi 11,5%. Untuk PDB per kapita diharapakan bisa US$ 3.005," ucapnya.

Sebelumnya pemerintah telah menyiapkan empat opsi pengendalian BBM bersubsidi, mulai dari kenaikan harga premium mencapai Rp 6.500/liter sampai menahan harga pertamax di Rp 7.500 per liter.

Indonesia's Regulator Says 21 Extra LNG Cargoes May Go to Quake-Hit Japan - Bloomberg

Indonesia, the world’s third- largest exporter of liquefied natural gas, may send as many as 21 additional cargoes of the fuel to Japan this year, an official at the nation’s energy regulator said.

PT Pertamina, Indonesia’s state oil and gas company, has agreed to ship seven cargoes from its Bontang plant in East Kalimantan province to Tohoku Electric Power Co. in April and May, said an official at BPMigas, asking not to be identified as the sales haven’t been made public. Three cargoes for May to June delivery are under negotiation with buyers and 11 are available for June to December, the official said.
Nanang Untung, senior vice president of gas at Jakarta- based Pertamina, said the plan is being discussed by the government, declining to give further details. Gde Pradnyana, a spokesman for BPMigas, said the shipments will come from cargoes slated for the spot markets.

Japan, which relies on fuel imports for most of its energy needs, is seeking to expand supply of alternative sources after the nation’s biggest earthquake recorded on March 11 forced the shutdown of 20 percent of the country’s nuclear output. The nation consumed 35 percent of the world’s LNG in 2009, more than any other country, according to BP Plc’s Statistical Review.
Indonesia may divert cargoes to Japan from BP’s Tangguh LNG plant in West Papua province that were originally to be shipped to Sempra Energy (SRE)’s terminal in Mexico’s Baja California, Energy and Mineral Resources Minister Darwin Saleh said March 23.

LNG is natural gas chilled to liquid form for transportation by ships to places not connected by pipelines. Qatar and Malaysia are the world’s largest and second-biggest exporters of the fuel, respectively.

Mandiri Tunas Finance: Pondasi yang kokoh - Mandiri

Kunci berinvestasi
q Dukungan penuh dari pemegang saham. Bank Mandiri menguasai 51% saham Perseroan bersama PT Tunas Ridean sebesar 49% menjadi keunggulan tersendiri bagi Perseroan. Bank Mandiri mendukung Perseroan dalam hal pendanaan dengan joint financing 95% vs 5 %, sementara PT Tunas Ridean sebagai anak perusahaan Jardine Cycle & Carriage Ltd, pemegang saham utama PT Astra International Tbk, mendukung Perseroan dalam hal sumber unit melalui jaringan dealer kendaraan bermotor. Sehingga, perDes10 new booking mencapai Rp4.5triliun bertumbuh 132%yoy dari Rp1.9triliun di 2009.

q Portofolio kredit yang berkualitas dan terjaga. Keberhasilan Perseroan dalam memperbaiki dan menjaga kualitas kreditnya terlihat dari NPR selama empat tahun terakhir terjaga di bawah level 1%, yang mana rata-rata industri adalah 3%. Sementara itu, net loss terhadap rata-rata piutang mengalami perbaikan dari 2.9% di tahun 2007 menjadi 1.8% di tahun 2010.

q Likuiditas yang terjaga. Kemampuan Perseroan dalam menyesuaikan profil usia aset dan kewajiban ditunjukkan dari jumlah piutang jauh tempo yang lebih besar dibandingkan kewajiban yang harus dipenuhi. Per Desember 2010, total piutang pembiayaan konsumen adalah sebesar Rp2,174miliar dengan total kewajiban Rp1,260miliar. Hal ini menunjukkan bahwa selama tidak terdapat piutang yang bermasalah, Perseroan mampu memenuhi kewajibannya.

Risiko yang dihadapi
q Persaingan yang semakin ketat. Persaingan di industri pembiayaan saat ini semakin meningkat. Pada tahun 2010 Bapepam LK telah memberikan izin kepada lima perusahaan baru. Hal ini pada gilirannya dapat mempengaruhi pangsa pasar Perseroan di masa datang. PT Tunas Ridean sebagai anak perusahaan Jardine Cycle & Carriage Ltd, pemegang saham utama PT Astra International Tbk, mendukung Perseroan dalam hal networking guna memperoleh booking-boking baru atas unit kendaraan yang akan dibiayai.

q Kenaikan suku bunga. Seiring dengan ekspektasi inflasi yang lebih tinggi di tahun 2011 dan BI rate yang baru saja naik 25 bps, maka leasing rate yang saat ini terendah dalam lima tahun terakhir juga diperkirakan akan naik. Portofolio pembiayaan Perseroan tidak hanya mengandalkan mobil baru tetapi juga mobil bekas. Pelanggan dari pembiayaan mobil bekas mempunyai karakteristik emotional buyer yang tidak sensitif terhadap pricing. Sementara itu, untuk pembiayaan sepeda motor pengaruh kenaikan suku bunga pinjaman tidak signifikan pengaruhnya terhadap kemampuan bayar pelanggan. Hal ini dikarenakan kenaikan 1% bunga pinjaman hanya berdampak pada kenaikan angsuran sepeda motor sebesar lima sampai sepuluh ribu Rupiah.

PNBN:Risk of narrowing NIM - Mandiri

Even though PNBN’s loans growth is projected to remain high in the future, we foresee a threat of lower NIM due to tightening liquidity position in the sector which will push the bank to offer higher TD rates, while at the same time BI’s initiatives to reduce lending rates will lead to a lower loan yield. We therefore maintain our neutral stance on the counter.

Strong loan growth is expected to continue … For the past two years, PNBN recorded higher- than- commercial banks’ loan growth. The bank expects this trend to continue this year with projected loan growth of 25% yoy, which will still mainly be extended to the consumer and commercial segments. The bank expects its market share in the commercial segment to increase from currently 7% to around 9%.

.. supported by strong growth in deposits. Such strong loan growth was supported by the rise in total deposits. Please note that the bank’s growth in deposits has been consistently above the industry's performance for the past four years. This year, the bank targets deposit to grow slightly below that of loans, hence the minimum LDR requirement of 78% will likely be achieved.

Worsening asset quality... PNBN reported higher NPL of 4.4% at end 2010 from 3.2% at end 2009, or an increase of 87.0% yoy in terms of absolute amount. The management claimed this increase came from 4 corporate debtors. Furthermore, the bank also wrote off around Rp462.9 bn of bad assets in 2010, which came from commercial and corporate debtors. Targeting its corporate loans to second-tier type of corporate customers (as the first-tier corporate customers will likely be served by five largest banks in Indonesia), the bank is basically prone to lower asset quality. This has been reflected on increasing NPL from corporate loans in 2010. As restructuring process in currently ongoing, we expect NPL to decline to 3.3% at end 2011.

Threat of lower NIM in the future. As BI rate is projected to increase, PNBN will have its cost of funds increasing, in our view, as over 50% of the bank’s funding is in the form of time deposits. Meanwhile, BI’s initiatives to reduce lending rates and tighter competition in the commercial segment will push the bank to cut its lending rates which will hurt its yield on earning assets. Consequently, NIM is projected to decline to 4.6% in 2011 from 5.0% in 2010.

Maintain neutral. We slightly downgraded our earning forecast for the bank to take into account higher interest rate and more competitive environment. Despite that, we maintain our TP of Rp1,200/share for the bank, thus our neutral recommendation.

Selasa, 19 April 2011

Asean Frontpage, 19 April 2011 : : ASEAN Telcos, JSMR - JPM View


• Jasa Marga : Downgrade to Neutral due to short-term uncertainty Mr. Frans S. Sunito has served as JSMR’s president director for two terms, which renders him ineligible under Indonesian SoE rules to seek re-election at the upcoming AGM. The new president director will be announced in mid-June. The current management, in our view, has been able to select attractive toll road concessions. We believe there is a risk of a change in strategic direction or toward more aggressive toll road acquisitions from other toll road operators. We believe that this may not be fully priced in at this time, and would be reluctant to add new positions to the stock. We have also taken down our numbers reflecting changes to account system IFRS. PT lower to Rp3450 (vs Rp3600 previously).

• Domestic cement demand for the month of March +11% YoY driven by strong demand from Java. SMCB made the most with 20% growth YoY, INTP 8% and SMGR is flat. SMCB also announced to pay div 23/sh (1% yield). Sales view: Reiterate our positive view on Indo cement stocks. Buy into weakness.

• Indo Idea: Buy PGAS: Boris Kan launched a new regional monthly product today on Asia's Utilities and Power equipment companies. Top Idea this Month is PGAS: The stock has underperformed the market by 10% YTD on the back of recent headwinds on gas supply concerns. We believe most-ves are now priced in and see more upside going forward because we expect (1) a price increase in 2Q11, as rising oil prices makes it easier for PGAS to raise prices with overall energy cost surging; (2) a 40% increase in gas supplies from FY13-FY17 with the 2 LNG terminals coming into operation, and (3) a ramp-up of gas supplies from Lematang and Kramasan Gasfields from 30-40MMScfd currently to the full contracted volume of 70MMScfd by FY11E. Valuation is undemanding as well at 12x/10x 2011E/12E PER with a 5% dividend yield.

Sales volume hit record high number Buy United Tractors, UNTR, TP: Rp25,900, Share Price: Rp22,300, Upside: 16.1% - UOB

Komatsu sales volume in March hit 789 units, a +14.8% mom jump, contributed by the strong demand for commodities, esp. mining sector
Strong 1Q11 sales volume,a 71.1% qoq increase to 2,207 units. This number accounts for 36.8% of our 2011 assumption.
In general, we are positive on coal production and prices (production projected to rise 12% yoy to 280mn tonnes in 2011) – hence positive on heavy equipments and mining contracting sector in 2011.

How about Komatsu's supply disruption from Japan?

Sales volume of big machineries imported from Japan accounts for 10% of total Komatsu sales in Indonesia
But major Komatsu plants will start production in less than a month, and the others will catch up delayed production by end of May.

And share price overhang from rights issue plan?
The Rights issue plan to raise Rp6.1tn for expansion is expected to list on 16th of May 2011. And 90% of the proceeds will be used for business expansion and 10% for working capital and general expenses.
- - Share price have dropped because of this news, but fundamentals remains strong in the long term as high commodity prices and increased demand will serve as a positive catalyst for this sector.

ON THE PLATTER: AKR Corporindo (AKRA IJ; BUY; TP IDR1,880) Initiation of Coverage: Building a Solid Backbone - OSK Group

AKRA, a leading distributor of energy products and the first private distributor of refined petroleum products in Indonesia, is set to post an earnings CAGR of 56% from FY10-13f. Post divestment of Sorini, the company will be mainly leveraging on its logistics and infrastructure assets as the backbone of growth of its petroleum and chemical distribution business, as well as coal business. As such, we initiate coverage on AKRA with a BUY rating and fair value of IDR1,880/share, based on a DCF valuation, with WACC of 12.8% and a growth rate of 3%. This translates into an upside potential of 23%, implying a 15.8-11.4x PE11-12f.

· Market opportunities abound. Around 45% of AKRA’s estimated equity value of IDR7.4trn comes from petroleum business. We expect revenue from its petroleum business to grow by 67%-37% in FY11-12f given the fact that the company is adding 76,900 kilolitres (kl) of infrastructure facilities to capitalize on growth opportunities in the petroleum downstream sector. This allows AKRA’s petroleum sales to grow by a CAGR of 31% from FY10-13f, thus expanding its current 7% share of the unsubsidized fuel market. Please note that Indonesia’s annual consumption of refined petroleum products amount to 65m kl, with 40% being unsubsidized industrial fuels.

· Entering the coal business. AKRA owns five coal mine sites (total 24,388ha) in South Barito district, East Kalimantan, with estimated coal reserves of more than 50m tonnes of low calorie coal (GAR: 5,000 Kcal). It is currently developing a 4,000 ha coal concession in Muara Tewe in Central Kalimantan, which is expected to initially produce 300,000-500,000 tonnes in FY11f. Having no experience in coal mining, the company will hire a mining contractor and focus only on what it is are good at, i.e. developing logistics coal infrastructure. The development will include the construction of two coal terminals along the Barito River. This will maximize the synergy by integrating coal and petroleum infrastructure logistics in Central Kalimantan.

· Sitting on a cash hoard. The company plans to invest about USD110m in capex for the next 2 years. The financing will be internally funded, with the company is expected to maintain its strong cash position even after paying a cash dividend, which would still leave it with the IDR 1.7trn from Sorini’s divestment. In addition, the company just raised IDR530bn from a rights issue in FY10. We also expect it to generate a healthy FCF of IDR479bn over the next 2 years, or around 8% yield. The company’s short cash conversion cycle of 10 days in FY11f should keep its working capital low.

Indonesia Banks: US Marketing Feedback – Inflation and Valuations - Citigroup

 Selective exposure — Our marketing theme was that Indonesia banks’ medium-term growth prospects were strong, but valuations were expensive (ranging from +0.4 to +2std). We recommended during our marketing trip selective exposure through Bank Mandiri (our Top Pick) and Bank Rakyat (recently upgraded to Buy) on a 12-month view. Our Top Sell was Bank Central Asia (expensive valuations), while maintaining Sells on Bank Negara and Bank Danamon.

 Key takeaway(s) — Inflation and valuations were the main investor concerns. They agreed that inflation has eased recently, but risks of a second wave remain. Sustainability of high ROAs was also questioned, due to declining loan yields.

 BBCA: Pushback on Sell call — Investors argued that Bank Central Asia (BBCA) has a strong franchise, low LDR and historically high valuations. Our argument was that the stock is trading +2std above its mean and regulatory changes were squeezing NIMs (restrictions on SBIs plus risks of lower returns on deposits with BI). Management’s decision to cut deposit rates (savings by 25bps) may lead to better NIM and LDR, but at the expense of earning assets growth.

 BBRI: Mixed views on Buy call — Some investors were skeptical on Bank Rakyat (BBRI) due to its high LDR, low CAR and deteriorating asset quality in a favorable environment. Some found its valuations attractive on P/E. Next trigger would be 1Q11 results to assess interest income and asset quality trends, expected on April 29. Consensus 2011E EPS has been raised 12% since Feb 2011.

 BMRI (Buy) and BBNI (Sell): No major pushback — We highlighted that our Sell on Bank Negara (BBNI) was due to its expensive valuations and weak operating performance. Restructuring appears priced in as current BBNI forward multiples are higher than Mandiri’s (BMRI) average in 2006-07 (restructuring phase).

 Bond yields to remain range-bound — Our economist, Johanna Chua, had a separate US marketing trip meeting Fixed Income clients. She felt: “Investors are getting bit cautious about bond yields following the recent price rally, and we've seen some profit-taking, but the overall underlying view on the country remains positive. Real money indexed investors are neutral on Indonesia and still seeing
net inflows in LCY bond funds, so we expect any pullback on IDR bonds to be shallow given offshore demand. The bias of US accounts is to stay shorter duration, up to 5yrs for carry. However, some short tenor yields have gotten very low, such that local demand is very limited given that yields are below cost of funds of local banks. Thus, the main driver of this market will be continued offshore inflows to play on the currency. This is fine in the near-term while inflation is manageable, but we expect it to become more vulnerable when inflation risks rise by mid-year. Thus, we would prefer the longer end (20yr paper) when yields cross the 9.25% range.”

ACE Hardware Indonesia (Initiating coverage with Outperform) - A great story… - MACQUARIE RESEARCH

Initiating with an Outperform and Rp3,500 valuation
We initiate coverage of ACE Hardware Indonesia (ACES) with an Outperform recommendation and Rp3,500 valuation/price target (DCF driven), equivalent to a FY11E PER of 27.6x. We believe ACES represents a compelling retail roll-out story that offers investors first-class leverage to rising Indonesian consumption, and we believe the stock remains very reasonably priced relative to its growth potential. Our view is materially more bullish than consensus, which has three holds and three buys on the stock (and a price target range of Rp2,450–3,100).

A retail roll-out play still in its infancy
ACES is an emerging specialty retailer of home improvement/lifestyle/DIY products in Indonesia, with a growing range of merchandise now exceeding 70,000 SKUs. The company's retail model appears to be working, with sales having grown at a robust 30% CAGR since FY04A, amidst a steady store roll-out profile that has seen its store numbers rise from 17 in FY05A to 46 at present.

We believe the growth outlook for ACES remains bright. ACES targets the mid- to high-end market, or consumers with incomes exceeding US$4,000 pa (currently c10% of Indonesia's population), and ACES expects this segment to double in size during the next five years. Furthermore, ACES's FY11E sales represent only US$1 per capita, compared to Home Depot's almost US$200 per capita in the US, suggesting that ACES is still scratching the surface of its long term growth opportunity. We believe these dynamics should allow ACES to comfortably grow sales by at least 15–20% pa well into the foreseeable future.

Competitive conditions remain benign
In addition, ACES currently enjoys a strong competitive position and faces only a modest range of local chain store competitors who are focused directly on its core segments. Longer term, the prospect of new entrants represents a risk, but we believe the prospective pie is large enough to share with other entrants, and in the meantime ACES will continue to extend its competitive head start. We also believe the business is well placed to deliver further medium-term margin expansion (with FY10A EBIT margins having already risen to 12.9% from 10.9% in FY07A) on the back of rising economies of scale. As an importer of 80% of its retailed product, ACES will also be a direct beneficiary of any IDR appreciation.

FY11E growth outlook remains favourable
ACES enters FY11E with strong organic growth momentum (20.9% sales growth in FY10A) and a continuing robust economic backdrop. In addition, the company has also recently opened a 15,000sqm store in Banten (West Java) – well above the company's 3,000sqm average store size, and the company's largest to date – which is likely to contribute positively to FY11E sales and profit growth.

Valuation remains very reasonable in our view
ACES is currently trading on FY10A and FY11E PERs of 23.8x and 19.9x, respectively. We do not view these multiples as expensive, despite this being a material premium to the JCI FY11E average of c14x, given the company's rapid growth profile, its relatively low earnings risk, and importantly, the likely duration of its excess growth window. We actually see scope for a further upward multiple re-rating in time as ACES's liquidity steadily improves, which will increase the range of investors who can purchase the stock (pushing out the demand curve).

Plantations Sector Update - Unsustainable - Bahana

Decoupling between robust 4Q10 results and price performance
Recent 4Q10 results from plantation companies under our coverage showed robust growth on higher sales volumes and average selling prices (ASP), which brought industry’s gross margin to around 47.4% from 46.8% in 3Q10. BWPT experienced the biggest y-y increases in sales, operating and net profit due to strong growth in production (exhibit 21). SGRO reported better than expected recovery in its productivity and efficiencies with higher yield and higher gross profit. Apart from UNSP, which reported one-off restructuring gains, other companies mostly experienced positive surprises (exhibit 22). Nevertheless, exhibit 3 shows that the sector has continued to underperform the market by 10% ytd. This decoupling suggests that investors share our concerns on declining performance in 2H11 and beyond on higher CPO supplies.

CPO price outlook: Weighed down by higher supplies
Two CPO supply indicators we follow (exhibit 6 & 7) show supply recoveries are in the making starting February 2011, and likely to persist into 2Q11. As the stock-to-demand ratio moves closer to the historical average of 0.10, we expect CPO price to fall further from current levels. Exhibit 6 shows 8% drop in price since our February sector rating cut, and we expect worse CPO price performance to come. The risk to our call would be slower soyoil planting resulting in higher soyoil prices ahead (exhibit 32). Nevertheless, CPO historical discount to soyoil has varied based on supply disruptions in each of these edible oils (exhibit 31); thus, we do not see CPO price to be much affected by soyoil price hikes, although we do expect the discount to expand from its average of 12%.

1Q11 results: Short-term positive to use as an exit mechanism
In 1Q11, we expect high volumes and high ASP to persist, causing robust results for the industry given that average 1Q11 CPO CIF price reached USD1,237/tons, reflecting IDR7.8m/tons in industry’s net ASP (53.8% y-y). At the same time, we expect production volumes to be lower than 4Q10 level, but still translating to positive growth over 1Q10 (exhibit 6). This is likely to result in improved market underperformance for the Indonesian CPO counters in the short term (3 months). However, this should be used as an exit mechanism as we expect worse performance over the next six to 12 months (exhibit 3).

Prefer smaller cap stocks with BWPT & GZCO as top picks
At this stage of the cycle, we prefer smaller cap BWPT and GZCO as our top picks on much more sustainable growth rates than their peers as reflected in their strong PEG (exhibit 1 & 2). The risk to our Neutral call on the Indonesian plantation sector would be if oil price were to hit highs seen back in 2008, which would in turn push CPO prices to the highs (i.e. close to USD1,400/ ton) experienced in 2008 levels as well.

Jasa Marga (JSMR IJ) – resurfacing of JORR-S legal case is weak by Sarina Lesmina - CLSA

· This is an on-going legal case mentioned in JSMR's IPO prospectus in Nov2007.

· JORR-S is a 14km TB Simatupang section, which is part of the 43km JORR 1. JORR 1 contributes 20% to JSMR's total revenue; we estimate JORR-S contributes 7-8% to total JSMR revenue.

· JORR-S' previous owners lost this toll road due to a default by the contractor (Hutama Karya). The concession was seized by the court and given to Jasa Marga, who at the time was BOTH a toll road regulator and toll road operator. (Note: Current Toll road Regulator (BPJT) was formed in 2005).

· JSMR is given an "operational right" for this toll road for 15 years starting 2006.

· In the prospectus, it is mentioned that the Toll road Regulator will replace the "operational right" with a concession right. To date, this is still in process.

· While this issue could be an overhang, we think it is unlikely at this stage that JSMR will lose JORR-S given the "operational right" is a legal right given by the Ministry of Public Works at that time. Moreover, the fact that JSMR is a state-owned company also limits the risk of losing this. But we acknowledge that a proper concession right is needed to ensure no more litigation from previous owners.

Maintain BUY on JSMR, now trading at 14.4x PE11. Our TP of Rp4,200/sh represents 27% upside from current level. Our earnings and DCF-valuation has not reflected the upside from the recent new concession bought. The company is eyeing for more concessions from the 24 stalled toll road projects currently being evaluated by the government. See file for more details.

Indonesian banking sector, currency kick - CLSA

ret Ginesky has just written a note on Indo banking sector. He looks at how a stronger rupiah should drive profits higher at the Indonesian banks. Historically, an appreciating rupiah implies stronger loan growth in the system. Confidence is key as Indonesia is likely going to have to rely more on outside capital going forward.

Loan growth is expected to be around 23% in 2010 and 25% for 11 CL. While it looks high, Indonesia still has a very small loan penetration at about 26% to GDP. In the past 5 years, average loan growth is 19-20% and it did not lead into serious inflation. The economy is re-leveraging from a very low base.

The challenge is that LDR will move to 85% by YE2011 from previously 75%. While banks are very well capitalized, it is certainly going to get tighter soon. Deposit growth in the past 5 years is around 14-15% average p.a, significantly below the loan growth. Indonesia is going to rely more on outside capital in the next few years. In this regard, confidence is essential.

Other key points from the report:
· Loan growth of 23% in 2010 and 25% for 11CL, supported by strong deposit generation is tantamount in this environment.
· The historical deleveraging story is waning, NPL improvements will have less impact on future earnings across the system.
· 2010 Rupiah based loan growth was driven by services, commodities, and utilities segments.
· 2011 looks to be supported by the same segments as elevated commodity prices and need for energy drives investment.
· BBRI, BBNI, and BMRI lend to the fastest growing segments in the Indonesian economy

Kalbe Farma: Hold; Rp3,675; TP Rp3,275; KLBF IJ Proposed 50% dividend payout ratio - DBS Vickers

It is reported that Kalbe Farma (KLBF) plans to pay final dividend of Rp643.2b or Rp68.6/share subject to AGM approval, yielding 1.87%. This full year dividend is a 50% payout from its FY10 EPS of Rp137.2. The proposed dividend for FY10 has increased significantly from the averaged dividend payouts of around 15% to 26% over the past 4 years. Aside from the strong earnings growth of 38% y-o-y in FY10, we believe the higher dividend payout was also due to its growing net cash position of Rp1.9tr. The company’s plans to utilize its cash reserve for acquisitions have yet to materialize.

For now, we maintain our Hold call and target price of Rp3,275. Currently, KLBF is trading at a rich 24.4x FY11F PE with most positives already priced in. Potential re-rating catalysts could be from better than expected 1Q11 results and M&A newsflow.

Asian Stocks Fall as U.S. Credit Outlook Cut; Oil Prices Drop - Bloomberg

Asian stocks fell, leading the benchmark index lower for a third day, after Standard & Poor’s Ratings Service cut the U.S. long-term credit outlook, fueling concern that a recovery in the global economy may slow.

Toyota Motor Corp. (7203), the world’s No. 1 carmaker, dropped 2.5 percent in Tokyo. Samsung Electronics Co., which receives 20 percent of its revenue from America, lost 1 percent in Seoul. BHP Billiton Ltd. (BHP), Australia’s biggest oil producer, dropped 1.6 percent after oil and metal prices declined. Tokyo Electric Power Co., the operator of the crippled nuclear station in Japan, fell 5.4 percent after robots detected radiation too toxic for humans in two of its buildings.

The MSCI Asia Pacific Index fell 0.9 percent to 134.47 at 10:09 a.m. in Tokyo, with about six shares dropping for each that climbed on the 1,023-member gauge. The measure fell 0.5 percent last week, reversing three straight weeks of gains.

“If we get down to a point where the U.S. has its debt downgraded, the deflationary effects will be felt globally,” said Melbourne-based Tim Schroeders, of Pengana Capital Ltd., which manages about $1 billion. “A lot of credit is priced off U.S. denominated debt and those effects will be felt around the world.”

Japan’s Nikkei 225 (NKY) Stock Average fell 1.2 percent. Australia’s S&P/ASX 200 Index slumped 1 percent and New Zealand’s NZX 50 Index lost 0.5 percent. South Korea’s Kospi index slipped 0.3 percent.

U.S. Futures

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today. In New York yesterday, the S&P 500 lost 1.1 percent, its biggest retreat since March, after S&P lowered its outlook on U.S. credit outlook to “negative.” The U.S. government risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt, the ratings agency said.

Crude oil for May delivery slid 2.3 percent to $107.38 a barrel in New York, near a three-day low after China, the world’s second biggest crude-consuming nation, increased banks’ reserve requirements to cool inflation, signaling fuel demand growth may slow. The London Metal Exchange Index of six metals slumped 1.9 percent yesterday, the lowest since March 16.

The MSCI Asia Pacific Index lost 1.5 percent this year through yesterday, compared with gains of 3.8 percent by the S&P 500 and 1 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13 times estimated earnings on average, compared with 13.4 times for the S&P 500 and 10.9 times for the Stoxx 600.

To contact the reporter on this story: Anna Kitanaka in Tokyo

S&P threatens to cut U.S. credit rating on deficit - Reuters

(Reuters) - Standard & Poor's threatened Monday to downgrade the United States' prized AAA credit rating unless the Obama administration and Congress find a way to slash the yawning federal budget deficit within two years.

S&P, which assigns ratings to guide investors on the risks involved in buying debt instruments, slapped a negative outlook on the country's top-notch credit rating and said there's at least a one-in-three chance that it could eventually cut it.

A downgrade, which would leave Germany and France with a higher rating, would erode the status of the United States as the world's most powerful economy and the dollar's role as the dominant global currency.

If investors start demanding higher returns for holding riskier U.S. debt, the rise in bond yields would crank up borrowing costs for consumers and businesses. That would threaten to hurt the economy as it recovers from the worst recession since World War II.

"This new warning highlights the need for the U.S. to take better control of its fiscal destiny if it is to avoid higher borrowing costs and maintain its central role at the core of the global economy," said Mohamed El-Erian, chief executive at PIMCO, which oversees $1.2 trillion in assets and has a short position on U.S. government debt.

Major U.S. stock indexes fell than 1 percent on the day. Longer-dated government bond prices initially fell but recovered to post solid gains as falling stocks took over as the main driver for price action in the Treasury market. Bond prices frequently trade inversely to stocks.

The dollar also rose as more immediate fiscal problems in Greece hurt the euro and supported some U.S. assets.

The cost of insuring Treasury debt against default at one point Monday neared a 2011 high, though it was well below lofty levels hit two years ago when fears of a double-dip U.S. recession raged.


The threat of a downgrade raises the stakes in the struggle between President Obama's Democratic administration and his Republican opponents in the House to get control over a nearly $1.4 trillion budget deficit and $14.27 trillion debt burden.

The White House last week announced plans to trim $4 trillion from the deficit over the next 12 years, mostly through spending cuts and tax hikes on the rich. Congressional Republicans want deeper spending cuts and no tax increases.

The deficit problem has become crushing since the financial crisis of 2008. Now for every dollar the federal government spends, it takes in less than 60 cents in revenue.

A budget deficit running at nearly 10 percent of output and expected to grow will likely further swell a public debt load that's already more than 60 percent of the country's gross domestic product.

"Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said.

Even so, Austan Goolsbee, the top economist at the White House, downplayed S&P's move, telling CNBC Monday it was a "political judgment" that "we don't agree with." More ...

U.S. Stocks Tumble After S&P Reduces Country's Long-Term Credit Outlook - Bloomberg

U.S. stocks slumped, sending benchmark indexes to their biggest declines in a month, after Standard & Poor’s Ratings Service cut the nation’s long-term credit outlook to negative.

Caterpillar Inc. (CAT) and United Technologies Corp. (UTX) sank at least 2.1 percent to help pace the declines in the Dow Jones Industrial Average. The Morgan Stanley Cyclical Index dropped 1.2 percent as 26 of its 30 stocks tumbled. Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) dropped more than 1.4 percent amid concern that China’s efforts to cool inflation will hurt the economy.

The S&P 500 declined 1.1 percent to 1,305.14 at 4 p.m. in New York, its biggest retreat since March 16. The Dow average tumbled 140.24 points, or 1.1 percent, to 12,201.59.

“There are a lot of structural issues that need to be dealt with,” said Mike Ryan, the New York-based chief investment strategist for Wealth Management Americas at UBS Financial Services Inc., which oversees $741 billion. “Anytime you see anything that suggests that the rating could be subject to downgrade, it’s perceived negatively. If this were to raise funding costs for the government, then it would weigh on economic prospects. It’s clearly not positive for companies.”

The S&P 500 had rallied 4.9 percent this year through April 15 amid higher-than-estimated corporate earnings and government stimulus measures. The Fed and U.S. agencies have lent, spent or guaranteed about $8.2 trillion to lift the economy from the worst slump since the Great Depression, according to data compiled by Bloomberg.

S&P put a “negative” outlook on the U.S. AAA credit rating, assigning a one-in-three chance of a ratings cut in the next two years, because of rising budget deficits and debt. More ...

Palm Oil Advancing 23% Hurting Unilever as Stockpiles Decline to 1974 Low - Bloomberg

At a time when consumers are focused on food costs that are within about 3 percent of a record, stockpiles of edible oils needed to make everything from noodles to fish sticks are dropping to a three-decade low.

The combined stocks of nine oils will plunge 25 percent to 9.39 million metric tons this year, or about 23 days of demand, the fewest since 1974, the U.S. Department of Agriculture estimates. Palm oil prices will climb as much as 23 percent to 4,000 ringgit ($1,324) a ton by Dec. 31, based on the median in a Bloomberg survey of 11 analysts and traders.

As the global population expanded 85 percent in the past four decades, demand for edible oils rose almost ninefold. While that’s raising costs for Unilever, the second-largest consumer goods company, it will also help Sime Darby Bhd., the biggest publicly traded palm-oil producer, report a fourfold gain in earnings this year, analysts’ estimates compiled by Bloomberg show. The forecast price rally, which may quicken should flooding return to plantations, will stoke inflation that caused central banks from Brazil to China to raise interest rates.

“The world cannot afford any crop problem this year, anywhere,” said Steve Nicholson, a commodity procurement specialist at International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri. “Without a cushion of inventories, any production hiccup in the northern hemisphere this year will be catastrophic and leave today’s prices looking cheap.” More ...

Senin, 18 April 2011

Unilever Indonesia (UNVR IJ, Rp14,950 HOLD) Getting tougher - Danareksa

Downgrade to HOLD, TP of Rp15,000
With P&G and L’Oreal both planning to build new factories in Indonesia, competition will remain stiff in the home and personal care (HPC) products sector. Moreover, Unilever’s shampoo product sold under the Sunsilk brand will find it difficult to regain the number one spot in the market. As for the 1Q11 results, well, they look as if they are going to be weak according to our channel check, with flat volume growth in the HPC division, albeit supported by double-digit volume growth in the F&B division and February’s 5-8% price increases (with the selling prices of Unilever’s toilet soap expected to be hiked another 5% this month). Against this backdrop, and in view of the demanding valuation of 29.6x P/E or about 2.2x PEG by using 3-year EPS FY09-12F CAGR, we opt to downgrade our recommendation to HOLD with a lower TP of Rp15,000.

Regaining market share will be tough

Unilever’s shampoo product sold under the Sunsilk brand has already lost pole position to its main rival - P&G. And going forward, it will not be easy for Unilever to regain the market share it has lost since P&G plans to open a new facility in Java. This will cost P&G about US$100mn over the next 3 years. Similarly, L’Oreal plans to spend around US$100mn to build a cosmetic factory with a production capacity of 300mn units per year. P&G has strong brands and with Gillette has around an 80% market share, while in the market for shampoo products, its Pantene brand has a 23% market share. Once construction of the factories is complete, P&G and L’Oreal will benefit from lower costs, a quicker response time, and better accessibility. The ramifications, however, are that a price war will become more likely to break out since these companies have deep pockets to maintain lower prices.

FY11-12F EPS estimates trimmed by 5.1-4.7%
We cut our FY11-12F EPS estimates by 5.1-4.7% to take into account lower sales volume for HPC products and higher packaging costs. We assume a slight 4% volume growth in HPC products, on the back of 8% selling price increase. Note that at 30% of total costs, Unilever’s packaging costs are among the highest of the companies in our consumer universe. As a consequence, crude oil price volatility remains our biggest concern (the average ytd price is about US$96/barrel, or about 20% higher than its price last year). This is not good for gross margins which we expect to decline to 50.8% in FY11F from 51.8% last year. And as advertising expenses are expected to remain high at some 14% of sales, the FY11F operating margin is forecast to slip to 22.4%. All in all, we foresee 3-year FY09-12F EPS CAGR of 13.4%, or lower than the industry average of 15-20%.

The F&B division is performing well, but with lower margins
The F&B division is Unilever’s long-term growth driver, we believe. However, it should be appreciated that this is a lower margins business than the HPC business (FY10 operating margins of 16.8% and 31.8%, respectively). This year, the F&B division is expected to continue recording double-digit volume growth – underpinned by strong sales of its successful Magnum ice cream product thanks to an effective marketing strategy and its new “Magnum Café” concept. Our channel check indicates that Magnum Café could be selling as many as 500-600 ice creams per day, or about 0.5% of total sales. This product is particularly appealing to young people drawn by Magnum’s strong brand image and innovative concept and sales may be given a further boost in FY12F as there are plans to launch new variants of this product. Thus, the contribution from the F&B division is set to increase further, with it accounting for around 26.4-27.2% of total revenues in FY11-12F, respectively.

Asia On The Ground: Indonesia Coal - UBS Investment Research

Please mine the gap
􀂄 We met with several Indo coal operators throughout March In light of recent production disappointments throughout the Indonesian coal sector, we met with leading industry sources throughout March. These included contractors, unlisted producers, traders, shippers and an EPC company.
􀂄 Looking for signs of continuous production pressure Our key objective was to get an industry view on 1) why several coal producers keep over-promise and under-deliver on production; 2) whether production pressure will continue; and 3) which producers are most likely to meet their target.
􀂄 Production will continue to disappoint; good for regional prices Our findings suggests that despite growing investment, it will take at least twothree years to resolve the multi-bottleneck constraints putting downward pressure on production. And that will require a major revision of Indonesian land reclamation law, not to mention construction time. And even assuming perfect weather conditions (as weather usually takes the blame for production misses), we believe several producers will struggle to meet targets. Given Indonesia’s position as the world’s largest thermal coal exporter that should render support to regional coal prices, thus offsetting earnings pressure from lower production growth.
􀂄 UBS view and action: Look for producers with strong track record Producers with attractive production growth profiles or historical strong track records include Banpu Thailand, ITMG (Neutral) and Straits Asia (Buy). Smaller producers will be more likely to meet production targets on account of their relatively smaller requirement for land and infrastructure.

Astra Agro Lestari: Buy; Rp22,800; TP Rp30,650; AALI IJ Strong 1Q11 production - DBS Vickers

Astra Agro Lestari (AALI) reported 1.01m MT of FFB production (+20.6% y-o-y) and 275.099 MT of CPO (+25.7% y-o-y). Geographically, production from the group's Kalimantan and Sumatra estates had improved by 34.3% and 18.3% y-o-y, respectively during the quarter. As of end of 1Q11, the group also reported that its mature area stood at c.220k ha.

In 1Q10, AALI produced 841,893 MT and 218,791 MT of FFB and CPO, representing 19.8% and 19.6% of full year contributions, respectively. Assuming the sustainable production rates for the rest of the year, AALI should produce 5.08m MT of FFB and 1.40 MT of CPO - higher than our FY11F estimates of 4.52m MT of FFB and 1.18m MT of CPO. While we believe 1Q10 production figures were below normal due to biological tree stress, the volumes did indicate that AALI should report better-than-expected earnings for the quarter. We are currently reviewing our forecasts; but maintain our Buy rating and TP of Rp30650.

Automotive March 2011 4W sales reached 82K, up 18% m-o-m - DBS Vickers

It was reported in the news that 4W sales in March 2011 grew 18% m-o-m to 82,056 units according to Gaikindo figures. The significant m-o-m growth was partly attributable to February being a shorter month. Nevertheless 4W sales have been good in early 2011, reflecting the economic growth in Indonesia . On quarterly basis, 4W sales in Q1 2011 amounted to 225,411 units, in line with our forecast for the year. We view this as a positive start since the early part of the year is normally a slow period for auto sales. However, the near term concern for 4W sales is on the impact on supply chain post Japan earthquake as Japanese cars dominated the 4W market in Indonesia . While auto manufacturers in Japan have resumed production, the impact on the 4W supply chain still needs to be closely monitored in the next few months. Gaikindo recently reduced its forecast for 2011 4W sales to 800,000 units from 850,000 previously while our estimate is over 850,000 units.

Banking Update - Gauging inflationary risk - Bahana

Taking tight measures
Bank Indonesia (BI) has continued to closely monitor inflationary risk through both fiscal and monetary measures.

§ It is interesting to note that foreign inflows at the end of March 2011 caused 24.1% y-y hike in government papers to IDR1,106t with foreign ownership in SBI and government bonds having grown 50.0% y-y to IDR293t, 32.4% of total. Since its introduction last August, BI’s term deposits have been holding up well remaining above IDR200t in 1Q11, although it had trended down since January. In order to prevent sudden foreign reversals in liquidity, BI has tried to manage short-term capital flows by extending the minimum holding period in SBI to 6 months, effective May 13, from one month previously. Moreover, BI has ceased and replaced 1M, 3M and 6M SBIs with non-tradable Term Deposits.

§ March’s deflation of 0.33% m-m, which brought inflation to 6.7% y-y and 0.7% ytd, has paved the way for BI to maintain its benchmark rate, unchanged at 6.75% since its last 25bps increase on 4 February 2011. However, we expect inflation to rise again mid year, leading to another 25bp hike in BI rate, particularly given that core inflation has been trending up (exhibit 6). Note that the historical spread between the benchmark rate and core inflation averaged 2.1% in the past 5 years.

§ Additionally, BI’s strategy to let the IDR appreciate would also help lower imported inflation in hope of offsetting inflationary pressure from higher administrative prices (i.e. oil, which has jumped 59.3% since its low USD68/bbl in May 2010). Note that the IDR/USD has traded below IDR9,000/1USD in the past 77 days, the longest in 6 years.

Outlook: Cautiously optimistic growth
Judging from the recent progress, we are comfortable with how BI has managed inflationary risk. However, overhang remains on continued possible government’s policy to lift oil subsidy, particularly if oil price were to head above the USD120-130/bbl level. Hence, most banks have been cautiously optimistic in expanding their loan portfolios. On the demand side, total undisbursed loans have continued to increase reaching IDR587t, 32.5% of total loans, rather high when compared to historical average of between 24-27%.

Potential re-rating on lower risk free rate
Recent market outperformances (exhibit 5) have brought most banking share prices close to our target prices, leading us to downgrade ratings on most banks under our coverage to HOLDS. Hence, our NEUTRAL rating on the sector. However, it is worth noting that the downtrend in the Government’s 10 year bonds, which is used for our risk free rate base might further trigger upside potentials in our banking valuations. For now, our top pick in the sector remains with BBNI

Kawasan Jababeka: KIJA’s toll exit 34km construction expected to complete Nov12 (KIJA, Rp121, Buy, TP: Rp150) - Mandiri

􀂄 Investor daily reported today progress of toll exit 34km construction that designed to give access to four industrial estates within the area, including Jababeka (KIJA), Lippo Karawaci (LPCK), Delta Mas and MM2100. The toll exit construction is expected to be completed in Nov12.
􀂄 In the case of KIJA, the toll exit will be its other construction aside of currently on-going 29km toll exit (completes in beginning 2013) that will give direct access to its Dry Port area. Given the constructions, these provide two catalysts for KIJA’s future growth. Despite of remaining 100ha land bank targeted for residential, the company plans to acquire another 100ha from its area license, which fund sourced from its internal cash, based on our recent conversation with the company.
􀂄 We still like KIJA, given its several catalysts to grow, not to mention the power plant and dry port service. Note that our TP of Rp150 still excludes any contribution from the dry port. We maintain Buy on KIJA. Currently trades at 66% discount to RNAV11 dan PE11F 14x (vs. average peers 52% discount to NAV and PE11 26x)

Adaro Adaro Energy: Invest US$100mn to IndoMet Coal (ADRO, 2,275, Buy, TP: Rp2,800) - Mandiri

􀂄 Adaro Energy invests US$100mn to IndoMet Coal, which 25% stake owned by PT Alam Tri Abadi and 75% stake owned by BHP Biliton. This amount is not including Adaro’s total FY11F capex of US$625mn.
􀂄 Adaro plan to start developing its central Kalimantan coal project in Maruwai this year. Total thermal and coking coal reserves is estimated around 774Mt.
􀂄 Based on our recent update to company, 1Q11 coal production is likely lower than 1Q10 since seasonally it usually produces less coal in first quarter (1Q10 was exceptionally high due to drier weather) But Adaro has confirmed that the weather is already back to normal and still maintain its FY11F target of 46-48Mt
􀂄 Currently we have Buy rating on the stock. ADRO is traded at 14.5xPER11F.

Automotive: Components shortages causes decreased on production - Mandiri

􀂄 Quoted in Kontan, PT Astra Daihatsu Motor (ADM) will stop production of 2,000 units of cars n Apr’11 due to lack of components from Japan. Such numbers are equivalent to 20% of target production on Apr’11 of 10,000 units. The lack of components also shadowing the production activity for next months, hence, the customers may face a longer waiting time. Currently, ADM has production capacity around 280,000 - 300,000 unit/year. Nevertheless, ADM still maintaining its production target of 125,000 units for FY11.
􀂄 Besides ADM, declining on production also occur on PT Toyota Motor Manufacturing Indonesia, the producer of Toyota cars. The decline in production this month reaches 20-25% from the target.
􀂄 Contrast with both on the top; production activity on PT Suzuki Indomobil Sales (SIS) runs on normal activity. This is because components imported from Japan were produced in areas far from disaster site; hence, SIS is not facing components shortages.

Rising headwinds make for rough sailing in Q2 - JP Morgan

* The JPMorgan view: rising headwinds make for rough sailing in Q2. Portfolio strategy: Threats to the bull market are rising, and will make Q2 a rough quarter. For 2011, the bullish case for risk assets is still more convincing. We keep a reduced net long in risky assets, focusing more on RV. Equities: Stay long overall but underweight Cyclical vs. Defensive sectors and DM vs. EM equities to protect against near term downside risks. My take – among Indonesia’s defensive stocks, Tower Bersama (TBIG) would be my top defensive pick. Sell Jasa Marga on event risk.

* Flows and liquidity: positions leave equities vulnerable. This is the title we used exactly a year ago, Apr 16th 2010. Just as then real money investors and hedge funds have elevated equity exposures and very low cash balances. Investors have cut their EM equity underweights, but are yet to move to an overweight. What will the end of QE2 mean for asset flows? The last month of QE1 saw strong overseas and mutual fund demand for bonds. Flows into equity mutual funds dipped around and after the end of QE1, and did not recover until QE2 was launched in 10Q4.

* Astra International (ASII) – JPMorgan analyst Yoshiharu Izumi published research on Renesas Electronics (6723), the main global producer of Micro Controller Units (MCU) that could be in short supply in the coming months negatively affecting car companies such as ASII. He thinks there is no need to be overly pessimistic about the situation:

(1) before the earthquake production volume for automotive micro-control units (MCUs) at the Naka plant was equivalent to around 21,000 8-inch wafers/month, a relatively small scale for the semiconductor industry; (2) the MCUs are produced on 8-inch wafers, a very mature process technology compared with cutting-edge logic; (3) the Naka plant is in the earthquake-stricken area, which will probably be given priority for electric power; and (4) the wafers used are 8-inch, not the 12-inch variety that has been affected by a supply bottleneck due to the damage to Shin-Etsu Handotai’s Shirakawa plant.

What has caused the confusion? One reason for the confusion is that Renesas has not been clear about when production of automotive MCUs will resume. If the company seemed to give priority to certain users or certain customers, there might be a major backlash from other users. Given that Renesas has not commented in detail, we think it is also incorrect to assume the company has not acknowledged the importance of the automotive supply-chain.

MAPI, pricey takeover for Krispy Kreme - Insider Stories

Giant retailer with hundreds of licenses PT Mitra Adiperkasa Tbk (MAPI) last week launched Denim Destination-The Ultimate Denim Heaven, a special concenp store inside Debenhams Department Store, Senayan City.
The launch of Denim Destination is aimed to tap demand for stellar premium brand Denim in the middle-up size consumers.
"Denim Destination is created for Denim lovers. They can find variety of range of Denim products," said Fetty Kwartati, Mitra Adiperkasa Corporate Secretary in a press statement submitted to Indonesia Stock Exchange last week.

At end of February, MAPI operated 870 stores in 25 cities in Indonesia. In department store segment, MAPI is holder of British-based Debenhams. In food and beverage, MAPI is holding licenses of Burger King, Cold Stone, and Starbucks. But, hey...where is Krispy Kreme doughnuts?
Krispy Kreme doughnuts is a US-based doughnut which penetrated Indonesia's market on August 30 2006. The entrance was initiated by the opening of Krispy Kreme's the first outlet was opened at Pondok Indah Mall 2.

Under a license agreement agreed on July 20 2006 between Krispy Kreme Doughnut Corporation, North Carolina, US, and PT Premier Doughnuts Indonesia, a sister company of MAPI. Nowadays, Krispy Kreme manages 9 outlets which are in Pondok Indah Mall 2, Senayan City, Plaza Senayan, Grand Indonesia,
Kelapa Gading Mall, Pejaten, Soekarno Hatta airport terminal 1A, 1B, dan 2F.
In Indonesia, Krispy Kreme offers varieties of doughnuts, including the signature Original Glazed doughnut and several others that are iced, glazed, and filled with cream.
Under the license agreement, which is guaranteed by MAPI, Premier Doughnuts shall pay royalty and other fees and should purchase the essential materials from Krispy Kreme or from suppliers approved by Krispy Kreme.

However, on October 6 2010, MAPI and PT Premier Capital Investment, a wholly owned subsidiary, acquired 80,000 shares in Premier Doughnuts Indonesia, Krispy Kreme license holder, at Rp75 billion from PT Lumbung Nusantara and PT Resource Java. Who are the sellers?
You could not find anything about Lumbung Nusantara and Resource Java via Google search. Who are they?

In a company research published by CLSA on March 29, MAPI generated Rp725 billion operating cashflow last year, but shows only Rp24 billion net increase in cash. The company used the money to invest in fixed assets, acquire Krispy Kreme, and debt repayments,

MAPI acquired Premier Doughnuts at Rp75 billion. The purchase price was set at 10x EBITDA, relatively high, remembering that MAPI only trades at 6x EBITDA. Fair value of net assets acquire is Rp33 billion, while the remaining of Rp42 billion is goodwill.
"We are less keen on Krispy Kreme's pricey acquisition. Though Krispy Kreme has a good brand name in the US, its presence was overshadowed by a local doughnut company Jco when the doughnut craze was first started in 2006," said the report.
JCo currently has near to 100 outlets while Krispy Kreme manages 10 outlets on smaller scale.
"We would expect no impact from Krispy Kreme's takeover to earnings, but will adjust up this year's capex estimates to accomodate management plan to open 10 more Krispy Kreme stories," CLSA said.
2010 Performance

MAPI posted a 22.61% increase in net income to Rp201.07 billion or Rp121 per share last year from Rp163.99 billion or Rp99 per share in the previous year.
Operating income rose 45.94% to Rp449.09 billion from Rp307.72 billion. Operating margin improved to 9.53% from 7.48%.Gross profit increased 15.53% to Rp2.37 trillion from Rp2.06 trillion. Net revenue grew 14.59% to Rp4.71 trillion from Rp4.11 trillion.

At end of 2010, PT Satya Mulia Gema Gemilang controls 58.83% shareholding in MAPI and public shareholders own 51.17% stake.
Satya Mulia Gemilang is also a 24.83% stake holder in PT Polychem Indonesia Tbk (ADMG), a polyester products maker. Polychem is also 28.91% owned by Indonesia's largest tire maker PT Gajah Tunggal Tbk (GJTL).
Satya Mulia was 99.99% controlled by PT Mitralestari Adiperkasa and F.X. Boyke Gozali owned 0.01%. Previously, Boyke Gozali was MAPI's Vice President Commissioner.
On last Friday, MAPI gained 2.65% to Rp2,900 per share, reflecting 23.96x price to earning ratio.