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

Jumat, 24 Juni 2011

How China plans to reinforce the global recovery - Financial Times

Note: With this article from China’s Premier in Financial Times today, it looks like the interest rate hike in china is over and the Shanghai stock market has bottomed. This is a good sign for global equity markets going forward.

How China plans to reinforce the global recovery

By Wen Jiabao

About three years have passed since the eruption of the financial crisis. Thanks to the joint efforts of the international community, the global economy is recovering. Yet there remain many uncertainties, and the recovery is fragile. Global growth is uneven; unemployment in developed economies remains high; government debt risks in some countries have mounted; inflationary pressure is increasing. While the shock of the crisis has yet to end, new risks have emerged. The world must co-operate closely to meet the challenges.

China has moved swiftly to fight the financial crisis, adjusting macroeconomic policy to expand domestic demand, and introducing a stimulus package to maintain growth, advance reform and improve people’s lives. By taking these steps, we have overcome extreme difficulties and laid a solid foundation for China’s development.

A notable result of our response to the crisis is that China has maintained steady and fast growth. Between 2008 and 2010, China’s gross domestic product grew at an annual rate of 9.6, 9.2 and 10.3 per cent respectively. The consumer prices index over the same period was 5.9, -0.7 and 3.3 per cent; 33.8m new urban jobs were created. China has maintained sound growth this year.

The thrust of China’s response to the crisis is to expand domestic demand and stimulate the real economy, strengthen the basis for long-term development and make growth domestically driven. We have implemented a two-year, Rmb4,000bn ($618bn) investment programme covering infrastructure development, economic structural adjustment, improving people’s well-being and protection of the environment. As a result, 10,800 km of railways and about 300,000 km of roads have been built and 210m kW of installed capacity for power generation have been added. We have boosted support for science and technology including by encouraging companies to carry out technological upgrading and innovation. More than Rmb1,000bn have been spent in rebuilding after the Wenchuan earthquake. In the affected areas, quality infrastructure and public facilities were constructed, and 4.83m rural houses and 1.75m urban apartments were rebuilt or reinforced. The quake-hit areas have taken on a new look. We are working to improve the balance between domestic and external demand, with the share of trade surplus in GDP dropping from 7.5 per cent in 2007 to 3.1 in 2010. China’s rapid growth and increase in imports are an engine driving the global recovery.

In fighting the crisis, China has made huge strides in developing social programmes, which was beyond our means just a few years ago. We have made breakthroughs in building a social security system covering urban and rural areas. We have introduced a rural old-age insurance scheme which will cover 60 per cent of counties in China this year. The basic urban medical insurance scheme and rural co-operative medical care scheme now cover more than 90 per cent of the population. All Chinese now have access to free compulsory education. Government spending on education has grown to 3.69 per cent of GDP.

It has also pursued flexible and prudent economic policies, and ensured they are targeted and sustainable. Our budget deficit and debt balance are respectively below 3 and 20 per cent of GDP. The government budget deficit has been cut in 2010 and 2011. Since mid-2009, we have used monetary policy tools to absorb excess liquidity. In the fourth quarter of 2009, to strike a balance between maintaining steady and fast growth, conducting structural adjustment and managing inflation were set as the main goal of macroeconomic regulation. Since January 2010, the required reserve ratio and benchmark deposit and lending rates have been raised 12 times and four times respectively. So growth in money and credit supply has returned to normal. In June 2010, reform of the renminbi exchange rate regime was advanced, and the renminbi has appreciated 5.3 per cent against the US dollar.

There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes. Rapid price rises pose a common challenge to many countries, especially other emerging economies and China. China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked. The overall price level is within a controllable range and is expected to drop steadily. The output of grain, of which there is now an abundant supply, has increased for seven years in a row. There is an oversupply of main industrial products. Imports are growing fast. We are confident price rises will be firmly under control this year.

China is now at a new starting point in its drive for development. We have adopted the 12th five-year plan which calls for shifting the development model. We will continue to pursue economic structural adjustment, boost research and development, and education, save energy and resources, promote ecological and environmental conservation, and narrow the regional and urban-rural gap. China’s drive for industrialisation and urbanisation is gathering pace. Its economy is increasingly market-oriented and internationalised. We are fully capable of sustaining steady and fast economic growth.

China will continue to work with other countries with common responsibilities. We should make concerted efforts to strengthen the co-ordination of macroeconomic policies, fight protectionism, improve the international monetary system and tackle climate change and other challenges. We should welcome the fast development of emerging economies, respect different models of development, increase help to least developed countries to enhance their capacity for self-development, and promote strong, sustainable and balanced growth of the global economy.

The writer is China’s premier

News Update - Indopremier

TINS menganggarkan belanja modal 2011 senilai Rp 1,4 triliun yang akan digunakan untuk menyelesaikan proyek pembangunan bucket wheel dredges (BWD) tahap pertama. Proyek ini berlokasi di Bangka Belitung dan Riau. Alokasi dana untuk proyek tersebut mencapai Rp 480 miliar. BWD tahap pertama ditargetkan akan selesai pada 2012. selain itu TINS juga akan menyelesaikan rencana memodifikasi kapal keruk (KK) menjadi BWD, dengan anggaran investasi sebesar Rp 40 miliar. Sumber pendanaan capex akan berasal dari ekuitas dan fasilitas perbankan 50:50.

KIJA menjajaki pembiayaan kembali pinjaman sindikasi sebesar US$ 40 juta tahun ini yang akan digunakan untuk membiayai pembangunan pembangkit listrik Bekasi Tower. Posisi hutang terhadap ekuitas perseroan saat ini mencapai 0,7 kali sehingga masih bisa melakukan tambahan hutang.

CMNP berencana untuk menerbitkan obligasi pada September 2011 guna mengantisipasi kebutuhan anggaran terkait ekspansi bisnis perseroan. Tahun ini perseroan akan mulai menggarap ruas tol Depok-Antasari dan mengakuisisi sejumlah proyek yang mangkrak dengan total alokasi belanja modal mencapai Rp 550 miliar.

KBRI akan menjaminkan seluruh aset perusahaan senilai total Rp 800 miliar untuk mendapatkan pinjaman perbankan sebesar US$ 58 juta yang akan digunakan untuk menyelesaikan pembangunan paper machine kedua (PM II) dan meningkatkan kapasitas PM I. Dengan selesainya PM II, kapasitas produksi kertas diproyeksikan mencapai 160 ribu ton per tahun.

TLKM telah menghabiskan belanja modal Rp 5,49 triliun hingga akhir Juni 2011 dari jumlah target total Rp 13,7 triliun. Dana tersebut digunakan untuk menyelesaikan proyek kabel optik di Ring Aceh dan Mataram-Kupang. Selain itu perseroan juga tengah membangung beberapa tower BTS dimana saat ini mencapai 42 ribu unit. Perseroan juga berencana untuk meningkatkan kepemilikan di Telkomsel dari 65% menjadi 100% dengan membeli saham Singtel.

PT MNC Securities anak usaha BHIT memangkas separuh nilai emisi obligasi II/2011 menjadi Rp150 miliar dari rencana semula Rp300 miliar karena disesuaikan dengan daya serap pasar. Hal ini dilakukan karena saat ini banyak perusahaan yang menerbitkan obligasi bertepatan dengan penawaran obligasi MNC Securities.

Pemerintah menyatakan akan menambah subsidi energi pada APBN-P 2011. Pertamina diketahui telah mengusulkan tambahan kuota BBM bersubsidi sebanyak 2 juta kiloliter dari nilai awal 38,5 juta kiloliter untuk memenuhi kebutuhan konsumsi hingga akhir tahun.

Timah: Hold; Rp2,475; TP Rp2,700; TINS IJ To pay Rp70.71/share final dividend - DBS

Timah (TINS) has received shareholders’ approval to pay final dividend of Rp473bn or Rp94.17/share, yielding 3.8%. This translates into 50% payout ratio from FY10 net profit of Rp947bn, in line with our estimates. Maintain Hold, TP Rp2,700 based on blended valuation of DCF (12% WACC. 3% terminal growth), 11.0x FY11 PE, and 3.0x P/BV (5-years average). TINS will continue to benefit from strong tin price but rising production cost will put pressure on earnings. Key risk is tin price reversal.

Tower Bersama Infrastructure: Buy; Rp2,400; TP Rp2,700; TBIG IJ Acquisition tower company - DBS

Tower Bersama has entered into a conditional sale and purchase agreement for the acquisition of 100% of the shares of PT Mitrayasa Sarana Informasi (“Infratel”), a privately owned independent telecommunications tower provider in Jakarta . Infratel’s tower portfolio consists of 263 tower sites and 332 shelter-only sites, with an aggregate of 672 tenancies. TBIG had over 3,370 sites serving 5,085 tenants by March 2011. This acquisition will add more than 10% to TBIG’s revenue. 92% of Infratel’s tenancies are from the four largest Indonesian telcos. Infratel’s portfolio has an average remaining contract life of over eight years.

Our view

(i) Typically, smaller acquisitions fall in the range of 6-8x EV/EBITDA (Tower Bersama is trading at 15x FY11F EV/EBITDA). In addition, small tower companies have lower tenancy ratios (around 1x), which can be enhanced further. As such, market may react positively to the news

(ii) We expected TBIG to add 1419 tenants in FY11F on top of 4729 at the end of FY10. This may be revised up after acquisition of 672 tenants from Infratel. Infratel has a similar customer base of “Top 4 telcos” which implies that TBIG can add significant value to Infratel’s portfolio.

(iii) Small tower companies usually have high debt and may not start contributing to the bottomline immediately as it takes some time to restructure them. However they will contribute to Revenue & EBITDA immediately.

We maintain BUY with TP of Rp2,700

Overnight economic data 24 June 2011 (Friday)

US Treasury prices rise on disappointing economic data
US initial jobless claims report is weaker than expected
New home sales in the US fall less than forecast in May
Fitch upgrades the Philippines’ rating to BB+ from BB

US Treasury notes rose across the board on Thursday following weak economic data. Initial jobless claims were weaker than expected and although new home sales fell less than expected, they still remain low. Newswires reported that the European Union and the International Monetary Fund had endorsed measures proposed by Greece as part of a EUR 78 bn austerity package. However, concerns remain about Greece’s ability to pass these measures next week (28 June) in parliament. Treasury prices were also given a boost following news that members of the International Energy Agency (IEA) would release 2 million barrels of oil a day for 30 days beginning next week to help offset a Libyan supply disruption. This is only the third time that the IEA has used its emergency reserves since the agency was founded in 1974.

US Treasury 2Y notes rose 1.75/32 to yield 0.344% (versus 0.372% on Wednesday), while 5Y notes were up 12.75/32 to yield 1.458% (1.541%). 10Y notes rose 19.50/32 to yield 2.913% (2.983%). 30Y bonds were up 25.75/32, yielding 4.169% (4.215%). The VIX volatility index closed at 19.29 compared to 18.52 on Wednesday. August crude oil futures fell USD 4.39 to USD 91.02. Spot gold fell USD 27.55 to USD 1,521.40 a troy ounce, while COMEX gold for August delivery was down USD 32.90 to USD 1,520.50 a troy ounce.

The US Labor Department reported initial jobless claims of 429,000 for the week ended 18 June, higher than the 415,000 expected according to a Bloomberg survey. The previous week’s figures were revised upwards to 420,000 from 414,000. The four-week moving average of weekly claims, a less volatile number, was unchanged from the previous week at 426,250. Continuing claims for the week ended 11 June came in at 3.70 million, higher than the 3.67 million expected and unchanged from the end of the previous week.

The US Commerce Department reported that new home sales in the US had fallen to an annual pace of 319,000 in May, down 2.1% from 326,000 in April (revised up from 323,000 reported previously). This is better than market’s expectation for a reading of 310,000. The supply of new homes fell to 6.2 months in May from 6.3 months in April, based on the current pace of sales. The report also shows that the median sales price decreased to USD 222,600 in March, down 3.4% on an annual basis.

The JP Morgan EMBI Global Diversified Index closed at 567.08 compared to 568.45 on Wednesday. The JP Morgan EMBIGD sovereign spread widened by about 10 basis points (bp) to 305 bp.

Fitch Ratings has upgraded the Philippines' rating to BB+ from BB with a stable outlook. Fitch said that the upgrade reflected progress on fiscal consolidation against a track record of macro stability, broadly favorable economic prospects and strengthening external finances. The agency said that sustained strengthening in the revenue/GDP ratio, combined with structural reforms to boost investment and growth, would boost its prospects for further upgrades. Fitch's rating action follows last week's Moody's upgrade of Philippines' rating to Ba2 from Ba3. Fitch now rates the Philippines one notch higher than S&P and Moody's ratings.

Today, The US Commerce Department will announce May durable goods orders (+1.5% month-on-month expected) and the third and final GDP report for Q1 2011 (+1.9% expected).

Oil reserves release shocks markets - Financial Times

Oil prices dropped more than 7 per cent after western nations released the biggest amount of oil from their emergency strategic stocks since 1991, in a warning shot aimed at Opec, the oil producers’ cartel.

The International Energy Agency agreed to release 60m barrels of oil in the coming month to offset the daily production loss of 1.5m barrels of high quality oil from Libya, the north African country engulfed in a civil war.

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The US led the release with its special petroleum reserve providing 50 per cent of the crude oil. Japan, Germany, France, Spain and Italy are providing most of the rest. The IEA said that it was in consultation with China, the world’s second-largest oil consumer, but declined to say whether Beijing would join the effort.

Brent crude prices tumbled 7.4 per cent to $105.72 a barrel after the news was released, before settling at $107.26 in late London trading. Investors sought the safety of US government debt, pushing yields on four-week Treasury bills into negative territory and yields on three-month bills to just above zero. The yield on 10-year Treasury notes fell 8 basis points to 2.91 per cent, the lowest close since December.

This is only the third time in the history of the IEA – set up in 1974 as a counterbalance to Opec after the Arab oil crisis – that there has been a release. The move has been triggered by western concerns about the impact of high crude prices on the economic recovery.

The Libyan supply disruption, coupled with “the normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further”, warned the IEA.

“Greater tightness in the oil market threatens to undermine the fragile global economic recovery,” the IEA warned, citing the Libyan supply disruption and “the normal [summer] seasonal increase in refiner demand”.

The US had been in close contact with oil producing and consuming countries about disruptions to the international oil market that could affect the global economy, said Steven Chu, US energy secretary.

“We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery,” Mr Chu said.

“As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.” The US special petroleum reserve is currently at a record high level of 727m barrels.

David Goldwyn, a consultant and until recently the US State Department’s top diplomat for oil affairs, said weak economic growth demonstrated that the oil disruption was inflicting “severe and long lasting damage” – a precondition for Washington to authorise the release of the oil reserve.

Robert McNally, a consultant and White House oil adviser from 2001 to 2003, said that although the IEA was pointing to Libya, “in reality the forcing action is the surge in oil prices”.

This month, Opec members failed to agree an official increase in production quotas despite a concerted effort by Saudi Arabia, the world’s biggest producer and traditionally seen as the cartel’s de facto leader, to boost output. Iran opposed the increase.

The IEA said in May that it would use all tools at its disposal to increase supply unless the cartel raised production. Opec failed to reach an agreement to increase official production targets in Vienna this month despite strong efforts by Saudi Arabia and other moderate Gulf countries such as Kuwait.

Mohammad Ali Khatabi, Iran’s Opec governor argued on Wednesday that there was no evidence of a supply shortage necessitating the “interference of oil consumers”.

“Maybe they think there is more demand, but as far as we know the market enjoys stability in supply and demand,” he told the Financial Times.

Iran opposed increase in the oil production in the Opec meeting earlier this month and was pleased that the oil cartel rejected a change of quota against the will of Saudi Arabia, the biggest producer.

But analysts said the current situation did not constitute an emergency.

“The reality is that we are well supplied,” said Randa Fahmy Hudome, an energy consultant and former Bush administration energy official. “The price of oil has risen and dropped so there is not a supply problem in the market. It’s just that the economy is not doing as well as people would like.”

JP Morgan slashes oil price forecast after IEA release - Reuters

(Reuters) - J.P. Morgan slashed its forecasts for crude oil prices in the third quarter after the International Energy Agency on Thursday announced the release of 60 million barrels of oil over the next month to shore up the economic recovery.

The bank now foresees the price of Brent crude to average $100 a barrel in the third quarter, down from $130, it said in a note to clients late on Thursday.

"If pursued rigorously, the 60 million-barrel sale over 30 days is a sufficient volume to cause a very substantial drop in the oil price," said J.P. Morgan analysts led by Lawrence Eagles.

"IEA countries have replaced OPEC as the supplier of the marginal barrel to the market, with significant pricing power conferred to the U.S. by virtue of its large contribution to the release pool."

The offer of strategic oil inventory "should be seen not only as a stop-gap due to insufficient global supply, but also as an injection of stimulus into the world economy, and result in a significant shift in world oil pricing dynamics in the third quarter," the bank said.

The new forecast is the same that J.P. Morgan had before the disruption to Libyan supplies, the note said. (Reporting by Alejandro Barbajosa;Editing by Clarence Fernandez)

Chinese Premier Declares Inflation Victory - CNBC

Chinese premier Wen Jiabao has declared victory over domestic inflation, saying that the government has successfully reined in price pressures.

“China has made capping price rises the priority of macro-economic regulation and introduced a host of targeted policies. These have worked,” Mr Wen writes in Friday’s Financial Times. “We are confident price rises will be firmly under control this year.

Consumer price inflation has been rising since the middle of last year, reaching a 34-month high of 5.5 per cent in May. Politically sensitive food prices have been the main driver of headline inflation, rising more than 10 per cent year-on-year in each of the past five months. Food inflation hit 11.7 per cent in May, feeding fears that persistent price rises could exacerbate social tensions.

Most analysts predict that the headline inflation rate will peak soon, before starting to decline. According to a HSBC purchasing manager’s index, inflationary pressures have eased in the manufacturing sector.

“The overall price level now is within a controllable range and is expected to drop steadily,” Mr Wen writes.

Beijing has been tightening credit conditions over recent months, raising interest rates on four occasions.

Mr Wen also noted that China has an abundant grain supply after seven consecutive years of increasing output.

“The ongoing slowdown is helpful to check inflationary pressures, which remain the top macro risk for China,” said Qu Hongbin at HSBC.

“[But] food inflation is likely to remain high since the recent floods in southern China could cause temporary disruption to food supply.”

China’s top leaders will gather early in July to decide the direction for economic policy in the second half of the year, and analysts say if inflation is under control then Beijing may be willing to ease credit restrictions in order to engineer a “soft landing” for the economy.

“There is concern as to whether China can rein in inflation and sustain its rapid development,” Mr Wen said. “My answer is an emphatic Yes.”

INDONESIA BANKS Report: “Will the real competition please stand up?”–Overweight - Credit Suisse

Report- Buy BMRI, BBNI then BBRI, BTPN, Hold BBCA!

Teddy reiterate Overweight Bank Sector as Indonesia Banks remain most profitable globally. At the backdrop of competition for domestic deposits and remained fluid global liquidity, we continue to favour Banks with funding franchise (preferably high low-cost CASA) and low LDR (Figure 5 page 2), followed by Banks with high earnings yield (high NIM) (Figure 22 page 11), therefore we reiterate BUY BMRI, BBNI then BBRI, BTPN, while Hold BBCA due to fair-valuation!

· Teddy Oetomo (Report attached): Where is the real competition? We believe that the real competition in the Indonesian banking system is on the funding rather than the lending market (as shown by Figure 2). That means investors should position themselves on banks that either currently have excess funding or those with an ability to compete for funding to support their future growth.

· Tight and may get tighter. Tight funding means deposit rates are stickier on the way down. We foresee potential for even higher demand for loans if Indonesia moves into a higher investment cycle. In addition, the central bank’s LDR target policy resulted in tighter liquidity rather than promoting loan growth. High loan demand, combined with tight liquidity, will add up to higher competition for deposits in the future.

· Two types of winners. The first category winners out of the high loan demand and tight liquidity conditions are banks with low LDR and high CASA, namely, BMRI, BBNI and BBCA. The second category winners are banks with high lending rates and NIMs, which allow these banks to be more competitive in securing deposits to fund their loan growth. This category includes BBRI and BTPN.

· Initiations. We initiate coverage on Bank Tabungan Pensiun Nasional (BTPN.JK) at OUTPERFORM with a target price of Rp3700/share and Bank Jabar Banten (BJBR.JK) at NEUTRAL with a target price of Rp1320/share.

Kamis, 23 Juni 2011

U.S. Economy's Woes Temporary; S&P Set to Hit 1450 - Goldman

The recent economic troubles that caused Goldman Sachs to slash its growth outlook are only temporary and unlikely to stand in the way of stock market rally, the firm's senior investment strategist said.
In keeping with a long history of bullish forecasts, Abby Joseph Cohen told CNBC that even though her firm cut its quarterly gross domestic forecast last week from 3 percent to 2 percent, that doesn't reflect broader pessimism about where the economy and markets are heading.

"We believe that 2 percent GDP number for the quarter is something that represents special factors in the quarter and we do think economic growth will be reaccelerating toward the end of the year," Cohen said in a live interview.

The "underlying growth rate" for the economy will be closer to 3 percent for the remainder of the year, she said, a level that would support Goldman's prediction that the Standard & Poor's 500 will close out 2011 in the 1450 range, which would represent a 12 percent gain from current levels.

Cohen spoke as the market awaited the latest proclamation from the Federal Reserve Open Market Committee and the central bank's chairman, Ben Bernanke.

Even as the economy has softened, with 9.1 percent unemployment and a double-dip in housing prices, the Fed said Wednesday it is not changing course from the expected end of quantitative easing at the end of June.

Pimco's Bill Gross did say on Twitter that he expects Bernanke to hint at some form of additional easing at the next Jackson Hole, Wyo., summit in August. But Cohen said she is part of the consensus that expects the Fed to stand pat.
"The confidence that most investors are showing in the Federal Reserve is well founded," Cohen said. "This is the Fed that took aggressive action when it needed to and our sense is they are coasting into a neutral zone."
One reason for her optimism, she said, is that regional banks are starting to lend again.
"Up until about six months ago they kept tightening and tightening credit standards and they were not increasing the amount of lending," Cohen said. "They are becoming a little bit easier. There is more lending going on."

Big Indo bank report - EXTREME, in a good way - CLSA

What is extreme banking? Must read our big report on Indonesian Banks which should be hitting your desks anytime.
A few charts here speaks a thousand words;

1) We have created a new metric which we believe best highlights the relative ability to capture growth and income in each Asian country.
To do this, we look at the change in GDP per capita over the past five years together with return on assets (ROA). We multiply the change in GDP per capita by ROA to arrive at what we call the CLSA Earnings Ability Index (EAI).

Unlike most countries in Asia, Indonesian banks hold fairly unique positions. given their extremely high ROA, Indonesian banks are capitalising on economic growth better than other Asian countries.

Using our new CLSA Earnings Ability Index, we find that the country’s GDP-per-capita growth and ROA combined is greater than the rest of the region. Limited credit penetration, low leverage ratios and high internally generated capital will support strong expansion. With limited overlap of banks’ specialisation, extreme ROAs can persist. We remain Overweight on Indonesian banks.

Bank Central Asia (BBCA IJ) is extremely well positioned. Bit pricey but overall the best bank hands down. We also like Mandiri (BMRI IJ) and Bank Negara (BBNI IJ) as it both banks are armed with ample capital to boost loan growth.

Corporate Flash United Tractors - Bahana

2Q11 preview: Plenty of cushion to our numbers
§ With estimated flat m-m Komatsu’s volume growth in June, we expect 2Q11 sales volumes to fall 10.1% q-q to around 1,984 units, stemming mainly from the lagging impact of supply disruption from the recent earth quake in Japan . Nevertheless, this translates to 1H11 sales volumes of 3,591 units, still up 61.4% y-y. This strong growth provides cushion since we only expect full-year heavy equipment sales of 7,100 units, up just 30% y-y on further weakness in the next couple of months. However, UNTR expects sales volumes to recover in July/ August.
§ On the mining contracting front, less rainfalls in May and June would underpin 2Q11 estimated production volumes to 20.3m tons (+5.8% q-q) and overburden removal to 197m bcm (+17.8% q-q). Nevertheless, with higher fuel costs and strong IDR to USD, we expect continued flat operating margin of around 13% in 2Q11.
§ On the coalmines business unit, new monthly record high of 416k tons in April volumes and 370k tons in May and June will mean 2Q11 sales volumes of 1.2m tons, up 15.8% q-q. This coupled with ASP of around USD100/ton will result in solid 2Q11 15% q-q revenue growth to IDR1.2t.

Outlook: Rights issue to ensure coal-related expansions
Incorporating 2Q11 operating performance outlook in each business unit, we expect UNTR to register flat q-q earnings growth. On a more positive note, continued strong performance on a y-y basis would result in stellar 1H11 earnings growth of 37% y-y to IDR2.6t. Note that UNTR has just successfully completed its IDR6.1t rights issue, of which mostly would be used for expansions in its coal-related business units. Thus, we retain our medium-term positive view on UNTR’s capability to secure organic earnings growth.

Recommendation and valuation: Catalyst from coalmine acquisitions
In line with our unchanged 2011 forecast, we maintain our DCF-based TP of IDR28,500 on UNTR. Positive catalyst in 2011 would come from the potential successful acquisitions of new coalmines, resulting in higher coal sales volumes and mining contracting activities in the coming years. BUY.

Astra International: Buy; Rp60,000; TP Rp65,000; ASII IJ Strong recovery ahead - DBS

• Flat 4W sales in May, but 2H11 sales are expected to be considerably stronger led by normalised production and seasonally stronger demand
• May 2W sales breaks new high; AHM plant visit reaffirm our positive view
• Reiterate Buy, TP unchanged at Rp65,000

Flat May 4W sales volume, but 2H11 expected to improve. ASII’s 4W sales volume was flat at 32,153 units in May, inching up 1.4% m-o-m but slipping 2.1% y-o-y. The flat result was widely anticipated because of disruption to the auto production chain after the Japan quake. On a positive note, Toyota and Daihatsu have just resumed normal production and ASII dealerships’ inventories are likely to normalise by July. Coupled with growing pent up demand and stronger season for car sales, these would fuel ASII’s 4W sales the rest of this year.

May 2W sales break new high. May 2W sales hit a record high of 377,355 units (+0.2% m-o-m, +10.3% y-o-y), and ASII’s market share improved by 0.9 ppt m-o-m and 3.8 ppt y-o-y. Sales of 2Ws remained strong because ASII’s local content is c.98%. Hence, the impact from Japan ’s quake was negligible.

Reiterate Buy, TP unchanged at Rp65,000. ASII is trading at relatively comfortable 14.6x FY11F PE, 24% below its peak valuation in 2010. But heading into 2H11, the supply chain should start to normalise, while sales are also seasonally stronger. We expect sentiment to improve towards ASII, in line with expectations of stronger auto sales in 2H11. We maintain our positive stance on ASII.

Banking Feedback from client meetings - DBS

• Investors were selectively overweight on Singapore banks amid market uncertainty; some investors were gradually looking at re-positioning into Singapore banks as regional laggards and as defensive picks.
• Malaysian banks’ M&A plays largely priced in. Discussions on HLBK-EON merger and M&A scenarios for RHBC were the main highlights.
• Concerns on the Thai politics could cap Thai banks’ upside in the near term. Investors prefer to wait till the political dust settles.
• Investors remained cautious on Indonesian banks due to relatively rich valuations; but concurred that long-term growth prospects are attractive.
• Our top picks remain OCBC, BBRI, KBANK, HLBK.

Malaysian M&A catalyst priced in along the way. Our key theme on M&A event drivers for Malaysian banks materialized as our meetings progressed. Our high conviction pick, HLBK gained 28% since May with the acquisition of EON. Investors were keen on RHBC’s M&A scenarios as central bank approved merger talks.

Thai politics put a lid to short-term upside. Thailand ’s economic growth remains strong while the banking sector’s fundamentals are intact. We believe there is value in Thai banks after the recent sell down and suggest investors to accumulate on weakness. Thai banks are well positioned as secondary beneficiaries post elections.

Keep Singapore banks as top picks, still selective on Indonesia banks. At current valuations, Singapore banks still offer the best risk-reward option with robust asset quality and strongest capital ratios. We are selective on Indonesian banks in view of their rich valuations but remain attractive long-term growth plays. Interest was on BBRI with mixed response for BBNI as investors remain uncertain on its transformation prospects.

Our top picks remain OCBC, HLBK, BBRI and KBANK. Our preferred picks are OCBC for Singapore , BBRI for Indonesia ; KBANK for Thailand . Despite the run up in HLBK, we believe there is still value to be extracted from the merger with EON. We see value in BBNI as a strong turnaround story for 2012 and continue to like BBL as a large-cap proxy to Thai banks’ corporate lending growth

It’s Time to Invest in Coal - Marin Katusa

Marin Katusa, Chief Energy Investment Strategist
June 22, 2011 4:26pm GMT

Coal prices are surging ahead even as most other commodities pull back, spurred on by expectations that metallurgical and thermal coal production will again fail to meet rising global demand this year. The result? Record profits for major coal producers like Xstrata, a surge in acquisitions from coal-hungry India, Chinese electricity shortages, and a raging carbon tax debate in Australia amid record investments in that country’s coal-heavy mining sector.

The price spikes in the second half of 2008, which were completely unsustainable and disappeared rapidly in the recession, distort the picture. So instead, imagine the above graph without those peaks. What you get is an almost sustained ascent in the spot prices of thermal and metallurgical coal over the last four years. Metallurgical coal, which is used to make steel and is also known as coking coal, has almost doubled in price, climbing from just above US$80 per ton in mid-2007 to more than US$160 per ton today. Thermal coal, which is burned to generate electricity, has risen from the US$45 per ton range to almost US$80 per ton.

There are a couple of countries that really take notice when coal prices start to rock. Australia is the world’s biggest coal exporter and relies on thermal coal for 80% of its electricity. China mines more coal than any other country in the world but still imports more to support its power and steel-making needs – the country mines and burns more than three billion tons of the black stuff annually. And India – where the economy is growing at 8% annually – is facing multimillion ton coal shortages even as it works to halve a 14% peak power deficit within two years.

Let’s start with Australia, a country embroiled in a debate over newly introduced carbon taxes. Those taxes are set to come online in mid-2012, ahead of a cap-and-trade system that could begin as early as 2015. Proponents say the tax is necessary to force a coal-reliant country to move toward cleaner energies. However, the tax has drawn widespread criticism from the nation’s huge coal industry. Australia supplies 19% of the world’s thermal coal and 59% of its coking coal; these industries are worth A$18 million and A$40 million, respectively (2009 numbers). With coal prices expected to keep rising for the next few years at least, Australian coal miners had big expansion plans. Instead, if the carbon tax goes ahead, the industry says it will have to close mines, meaning major tax and job losses for the nation. Opponents of the tax also say it will make Australia’s own energy more expensive and less reliable.

Another argument against the tax is that reducing Australia’s coal output could in fact increase global carbon emissions, because power stations in China and India would simply use dirtier coal to fill the gap. Australia’s thermal coal is perhaps the best in the world, with high energy content and few impurities. Thermal coal from Indonesia has only 70% of the energy value of Australian thermal coal, which means that much more coal would have to be mined, processed, and shipped.

In the context of this very current, heated debate – the Australian coalition government is set to meet this weekend to hammer out the details of the tax – a new report from the Australian Bureau of Agricultural and Resource Economics and Sciences shows that planned investments in the country’s mining sector have soared to a record A$173.5 billion. The figure represents development plans for 94 projects, including 35 mineral projects, 35 energy projects, 20 infrastructure projects, and four processing projects. The Bureau estimates A$55.5 billion in mining-industry expenditures in the current year alone.

A fair chunk of these investments will come from coal companies, which have money to spend because the current coal prices are providing record profits. Xstrata, the world’s largest exporter of thermal coal, is expected to report an 83% gain in net income this year, according to a Bloomberg compilation of analysts’ expectations. Another good example comes from Arch Coal (N.ACI), which recently tendered a $3.4 billion offer for International Coal Group (N.ICO) aimed at creating Australia’s second largest metallurgical coal producer.

China is another major coal producer, but there the issue is coal shortages. The country’s economy is steaming ahead at a 10% growth rate, and that kind of development requires a lot of steel. This year alone, China is facing a shortfall of 56 million tonnes of metallurgical coal – the country is expected to produce 513 million tonnes, but consumption will reach 569 million tonnes. The Asian giant imported 47 million tonnes in 2010, helped by a 278% increase in imports from Mongolia. And even though domestic coking coal production is expected to increase by 80 million tonnes per year by 2015, China’s latest estimates predict a 100-million-tonne annual shortfall in coking coal by 2015.

It is not just coking coal that China needs. Shortfalls in thermal coal supplies are the main culprit in an expected 30-million kW summer power deficit. And the problem is exacerbated by the fact that the country’s electricity pricing system has not kept up with coal price increases. Plants sell electricity to the State Grid Corp. of China (SGCC) at a set price, and SGCC then resells to consumers. But the set price has not kept pace with coal prices. As such, coal-fired generators lose money for every ton of coal they burn, which is not exactly an incentive to produce more power. Over the past three years, China’s top five state-owned power generating plants have lost some 60 billion yuan, while SGCC posted a 40-billion-yuan profit last year alone.

China is expecting to face its worst power shortage in years this summer. Widespread droughts, which have decimated the country’s hydropower capacities, are not helping. As many as 20 provinces and territories have already been put on power rationing, including the country’s industrial heartland. Some 44 major industries in Zhejiang (a manufacturing hub near Shanghai) have been told to limit consumption or face prohibitive tariffs. The story is much the same in Guangdong, south China’s manufacturing hub. And producing more coal is not an option – the government has acknowledged that China is near its peak coal production capacity.

To continue on a familiar theme, India is also facing an acute coal shortage. In April, for example, the nation imported 32 million tonnes of thermal coal against a total requirement of 36.9 million tonnes. At the end of March, 26 of India’s thermal power stations reported having only critical stocks of coal, including ten stations with fewer than four days’ worth of fuel. On Monday, the prime minister convened an emergency meeting to discuss the coal shortages, which are expected to total 112 million tonnes over the next 12 months.

India has been working to address the coal void for some time now. Indian firms have been scouring the globe for coal assets, and the effort has secured several major deals: Indian conglomerate Adani is set to buy the 25-million-tonne-per-year coal export terminal as Abbot Point in Queensland, only a year after buying the Galilee coal project in Australia for $2.7 billion; Indian trader Knowledge Infrastructure signed a joint venture deal with Indonesian miner PT OSO International to develop thermal coal mines in Kalimantan; and three Indian firms are among those shortlisted to buy Australian coal explorer Bandanna Energy, a deal expected to top $1 billion.

Coal India, which produces 80% of the country’s coal, is not going to be left out of the shopping spree. A few months ago, the company set aside $1.2 billion for overseas buys, specifically in Australia, Indonesia, and the U.S. And it has the money – net income for the first quarter totaled $931 million and full-year profits were up 13%. Shares in Coal India started trading Nov. 4 after the government raised $3.2 billion by selling a 10% stake, in the country’s largest public offering to date.

The story could go on, discussing other coal-needy countries like Japan, South Korea, Germany, and so on, but perhaps the point has been made. Global production is maxed out with respect to existing infrastructure, so increases from here can only occur as quickly as new mines, rail lines, and ports can be built. Coal prices have been climbing steadily, based on real supply constraints, and most industry watchers agree that they will hold their ground or continue to climb for the next few years.

Those countries with coal should count their blessings.

Trades of the Day... CIMB

CIMB melakukan company visit ke Bayan Resources (BYAN). BYAN adalah produsen batubara no 7 terbesar di Indonesia dengan CV 4,200-7,000 kcal/kg GAR. ASP 1Q11 sebesar $97.20/ton karena bituminous coal. Namun demikian cash cost BYAN juga paling tinggi, sekitar $66.8/ton sehingga net margin juga rendah sekitar 8.5%. Saham ini saat ini pada valuasi 32.8-27.7x CY11-12 P/E menurut Bloomberg consensus dan kami menilai premium ini tidak bisa dijustifikasi. BYAN akan mengembangkan reserves di projek Pakar serta mengembangkan infrastruktur
Sesuai prediksi, US Fed mempertahankan rate di 0-0.25% dan mengakhiri program QE2 pada akhir Juni, namun tidak menawarkan QE3. Fed lebih khawatir mengenai US economy dan menurunkan prediksi GDP. Fed mengatakan bahwa default Yunani berdampak kecil pada bank US namun pengaruhnya besar ke Jerman dan Prancis.

Media Nusantara Citra (MNCN IJ; IDR 920; Sell on strength) – Data yang menurun, kecuali SEC
Surya Citra Media (SCMA IJ; IDR 5400; Sell on strength) – Bayangan naik jenuh
Global Mediacom (BMTR IJ; IDR 820;Sell on strength) – Tiadanya topangan yang kuat

Sales Note : Kalbe Farma potential two acquisition targets - CIMB Indo

Good morning,

Sales Note
The market likely to turn positive due to positive development in Greece. Rupiah strengthens to below Rp8,600 and 10 year bond yield stays at 7.68%. Like other consumer companies, pharmaceutical companies also show strong revenue growth this year. We visited Kalbe Farma and please have on the note. We plan to visit Kimia Farma later this afternoon.

Kalbe Farma (KLBF IJ, N, Rp3,800) - potential two acquisition targets. Our observation of a shift in its treasury-stock holding (worth Rp2.6tn or 7.7%) from Kalbe to a nominee in Singapore suggests that an acquisition may happen sooner than later, likely to be in 3Q11. The company has around Rp2.3tn and is in net cash position. Short term, this would be dilutive, unless valuations (of M&A) are attractive. The company indicated strong 2Q11 sales growth, but margin was under pressure on increasing competition (higher selling expense). The price increase is scheduled in 3Q11, which would be a key to a re-rating, if happens. The stock trades on P/E of 18x for FY12, higher than the sector average of 17x.

We are to meet up with the management of Kimia Farma (KAEF IJ, market cap US$128mn) this afternoon. Kimia Farma is a state owned pharmaceutical company with the government holding a 90% stake in the company. According to Bloomberg, it trades on P/E of 7.3x and P/B of 0.98x, much lower than other consumer stocks (Kalbe at P/E 18x and P/B of 6x). The ROE was about 14% (compared to Kalbe at 26%) in 2010, which seemed to growing. The company is in net cash position, with cash as of Mar 11 was Rp104bn and total debt of around Rp45bn.

Bumi Resources (BUMI IJ, O, Rp4,000) - de-leveraging continues. During the analyst meeting yesterday, Bumi reiterated its plan to prepay the first tranche of its CIC loan in Oct 11 (amounting US$600mn, we estimate US$730mn including penalty and late charges). This indicates that de-leveraging continues which would cut interest from 19% to around 6%, despite negative perception on Vallar's latest plan to transfer a 75% stake in BRMS in exchange for US$2.07bn CB. Bumi currently trades at 12x forward P/E after the recent price correction, with upside on earnings and further de-leveraging. I would prefer other coal stocks: Harum Energy (HRUM IJ, O, Rp12,000) and Indo Tambang Raya (ITMG IJ, O, Rp60,900).

Today's market - what our sales trader says
Still on Greece, confidence in the government has spilled some optimism and boosted equity market across the globe. Regional off to strong kick. Expect JCI to go inline with other markets and trade steady around 3800 level. However, beware of profit taking as index has already jumped 1.7% yesterday.


* Sales call: buy Tower Bersama Infrastructure (TBIG) – after market close yesterday the company announced the signing of a conditional sale and purchase agreement to acquire a 100% equity interest in PT Mitrayasa Sarana Informasi (“Infratel”), a privately owned independent telecommunications tower provider, with 263 towersites and 332 shelter-only sites, with an aggregate of 672 tenancies. This acquisition will add more than 10% to TBIG’s revenue. My take – As of the end of Dec 2010, TBIG had 3,104 sites and 4,729 tenants. So Infratel acquisition may expand its number of sites by 8% and its tenants by 14%. This sounds like a significant acquisition. Given TBIG’s very attractive debt facility (all-in cost of 9% fixed in IDR), there is decent chance that the acquisition may contribute positively to EPS on day one (especially if TBIG has the option to repay all of Infratel’s debt immediately). Price of the acquisition is not yet disclosed. On consensus, the stock trades on 17.6x and 13.2x P/E for FY11-12, but with strong potential for upward EPS revision as TBIG executes its M&A plans.

* Sales call: buy Indomobil Sukses International (IMAS) – CEO Jusak Kertowidjojo announced to the market that the company will soon raise Rp2.76trn by issuing new shares at Rp8000. The company intends to aggressively expand its Indomobil Finance loanbook, by injecting Rp553bn new equity into the subsidiary (who recently raised Rp1trn in an upsized bond issue). They also intend to grow the distibution network for Hino trucks and Nissan. My take -- the stock could be an interesting complement to Astra International, as a purer play on discretionary spending as Indonesia enters the "S" curve in car ownership ratio. Its winning product "Nissan Livina" could gain market share (from low base) relative to "Toyota Avanza" and "Daihatsu Xenia" when the Indonesian consumers have the extra dollar to spend.

* Sales call: buy Energi Mega Persada (ENRG) – JPM Korea shipbuilding analyst thinks that Japan quake and Shell’s FLNG decision in May has accelerated many FLNG projects in Asia and Latin America. There are 27 projects in pipelines with FLNG concept. INPEX and Petronas projects are already open since the end of last year and yards are expecting results within 2011. Also, we expect Petrobras will open its FLNG tender soon, earlier than expectation with estimated size of $2~3bn. JPM oil analyst Brynjar E Bustnes provided us with the page below on FLNG project status update. My take – a new strategic partner in Energi’s Masela project can help unlock the true value of this big Indonesian gas reserves. There is decent chance that the project can be bigger than initial design, and implementation can be quicker, if Shell were to come into the picture.

PT Bumi Resources Tbk | First Quarter 2011 - Financial - Company Release


Attached is a Media Release on the Q1'11 financials of PT Bumi Resources Tbk. for your information.

There has been a change in reporting as 3 new PSAK's as per Indonesian GAAP and 2 new management policies have been implemented on 1 January 2011. Your attention is drawn to the enclosures which describe the changes, their impact on the books of Q1'10 and a comparison of old and new GAAP of Q1'11 vs Q1'10 numbers for benefit of stakeholders.

A gain of $ 36m was reversed in Q1'11 as we terminated the stake sale in Gallo Oil because of the instability in Yemen ; otherwise, the net income would be higher.

Operationally, the Q1'11 performance has been sound in spite of wet weather. Sales of 14 tons were achieved at a record - breaking price of $ 87.6/ton. (vs $ 62.75/ton in Q1'10) .This is 39.6% higher yoy.

We expect to exceed sales of 15m tons in Q2'11 at forecast $ 90/ton. For the present, we retain guidance of 66m tons in FY2011 but raise our full year average price guidance to $ 90/ton fob (from earlier $ 77/ton).

Bumi expects to deleverage by a further $800 m over 2011 and targets to prepay CIC's tranche I of $ 600m, in Oct'11, (2 years early).

Dileep Srivastava
Director & Corporate Secretary
PT Bumi Resources Tbk.
Bakrie Tower, 11th Floor
Kompleks Rasuna Epicentrum
Jl. H.R. Rasuna Said
Jakarta 12960

Tel : +62 21 57942080
Fx : +62 21 57942070

BUMI Revisi Laporan Keuangan Triwulan I pendapatan lebih kecil USD1 juta - Okezone

JAKARTA - PT Bumi Resources Tbk (BUMI) merevisi kembali laporan keuangan perseroan periode triwulan I-2011 sehubungan dilakukannya penyesuaian yang diperlukan terhadap kebijakan akuntansi Indonesia yang baru dan bersifat lebih ketat.

"Perseroan telah membukukan pendapatan bersih sebesar USD112 juta atau lebih kecil USD1 juta dibandingkan bila menggunakan kebijakan akuntansi yang lama," kata Direktur BUMI, Dileep Srivastava, dalam keterangan tertulisnya kepada okezone, Rabu (22/6/2011).

Menurutnya, pendapatan bersih yang dinyatakan kembali dan lebih rendah tersebut berasal dari perubahan perlakuan terhadap biaya dan pendapatan konsolidasian dari anak-anak perusahaan perseroan.

Selain itu, berdasarkan pada kebijakan akuntansi baru, BUMI wajib menunda pembukuan keuntungan sebesar USD36 juta yang dikapitalisasi perseroan pada 2010 dari penjualan/pelepasan yang telah dipastikan atas salah satu aset lepas pantai Perseroan, Gallo Oil di Yaman.

Setelah ditandatanganinya perjanjian jual beli, penjualan tersebut diakhiri mengingat krisis politik di Yaman. Diketahui, sebelumnya BUMI merilis kenaikan laba bersih sebesar USD36 juta menjadi USD113 juta dibandingkan periode yang sama tahun sebelumnya sebesar USD97 juta.

"Kami bersyukur dengan berbagai kemajuan signifikan yang kami capai dalam menyesuaikan dan menerapkan kebijakan akuntansi baru dari 1 Januari 2011, membuat
Perseroan sejalan dengan operasi pertambangan internasional," jelasnya.

Berdasarkan kebijakan akuntasi baru, perseroan menyatakan perlu menyajikan kembali beberapa angka dari tahun lalu yang diakui membingungkan para investor dalam jangka pendek.

"Namun kami percaya bahwa manfaat dari perbaikan reputasi dan penerapan praktik internasional terbaik akan jauh melebihi penyesuaian-penyesuaian buku jangka pendek," tutur Dileep.

Berdasarkan PSAK lama, pendapatan penjualan sebesar USD1,23 juta atau naik 21 persen dari USD1,02 juta pada triwulan I-2010 berkat harga jual rata-rata batu bara yang lebih tinggi sebesar 87,63/ton pada triwulan I-2011 dibandingkan USD62,75 per ton pada triwulan I-2010.

Sebagai hasilnya, pendapatan operasional naik 44 persen menjadi USD316 juta dari sebelumnya USD219 juta di periode yang sama tahun lalu. Demikian pula, pendapatan bersih sebelum pajak naik 51,5 persen sebesar USD347 juta dibandingkan sebelumnya USD229 juta pada tahun lalu.

Perbandingan keuangan triwulan I-2011 versus triwulan I-2010 berdasarkan PSAK lama dan baru dilampirkan sebagai informasi. BUMI menegaskan bahwa per 1 Januari 2011, perusahan telah menerapkan kebijakan akuntansi baru yang memasukkan tiga peraturan akuntansi baru untuk menyesuaikan dengan IFRS (Standar dan Peraturan Keuangan Perusahaan), seperti yang diterapkan di Inggris.

Fed to Maintain Record Stimulus After Ending Bond Purchases - Bloomberg

June 22, 2011, 7:38 PM EDT
By Craig Torres and Jeannine Aversa

June 22 (Bloomberg) -- Federal Reserve officials decided to keep the central bank’s balance sheet at a record to spur the slowing economy after completing $600 billion of bond purchases this month.

“The economic recovery appears to be proceeding at a moderate pace, though somewhat more slowly than the committee had expected,” Fed Chairman Ben S. Bernanke said at a press conference after a meeting of the Federal Open Market Committee. Bernanke and his colleagues on the panel cut their growth forecasts for this year and next and raised their estimates for the unemployment rate, driving stocks lower.

Bernanke said that unemployment, now at 9.1 percent, will come down “very painfully slowly” even after the pace of economic growth picks up starting in the second half of the year. Some of the reasons for the slowdown, such as higher commodity prices and supply-chain disruptions caused by the March earthquake and tsunami in Japan, will be temporary, he said. Others, including declines in home prices and financial- sector weakness, may be more long-lasting.

“Some of these headwinds may be stronger and more persistent than we thought,” Bernanke said. “We don’t have a precise read on why this slower pace of growth is persisting.”

Stocks fell, ending a four-day rally. The Standard & Poor’s 500 Index declined 0.7 percent to 1,287.14 at the 4 p.m. close of trading in New York. The yield on the 10-year Treasury note was 2.98 percent, little changed from late yesterday.

Fed’s Options

Bernanke said the Fed has options to further stimulate the economy, such as undertaking additional bond purchases or strengthening its commitment to holding rates lower for longer.

“They have their own costs,” he said. “But we’d be prepared to take additional action, obviously, if conditions warranted,” he said.

At the same time, he stressed that the economy has improved since last August, when he first indicated that the Fed might embark on a second round of large-scale asset purchases to stave off the threat of a broad-based decline in prices.

“The current outlook is significantly different than what we were facing in -- in August of last year,” he said. “We no longer have a deflation risk.”

Bernanke is keeping his options open on the Fed’s next step, said Jerry Webman, chief economist and senior investment officer at OppenheimerFunds in New York.

On the Horizon

“It’s pretty clear that they don’t see anything on the horizon that would get them to adjust policy one way or the other,” said Webman. “There has got to be a wait-and-see period to see what effects some of these temporary exogenous factors will have.”

The Fed left its benchmark interest rate in a range of zero to 0.25 percent, where it’s been since December 2008, and repeated a pledge to keep it there “for an extended period.” The decision was unanimous.

In his press conference, Bernanke said an “extended period” means the Fed would maintain rates at low levels for at least two or three meetings. The Fed meets eight times a year.

“The thrust of extended period is that we believe we’re at least two or three meetings away from taking any further action,” he said. “And I emphasize at least. But depending on how the economy evolves, and inflation and unemployment, it could be, you know, significantly longer.”

Securities Holdings

The Fed will aim to keep the domestic securities holdings in its System Open Market Account at about $2.654 trillion, according to separate a statement today from the Federal Reserve Bank of New York.

“They want to keep as accommodative as possible for as long as they can to hopefully add some juice to the economy and raise demand until the recovery is on a firmer footing,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “They acknowledged economic conditions have deteriorated since the April meeting.”

The U.S. economy grew at an annual rate of 1.8 percent in the first quarter, down from 3.1 percent in the fourth quarter of 2010, and recent data have shown manufacturing and consumer and business sentiment weakening.

Fed governors and regional-bank presidents now say the economy will expand by 2.7 percent to 2.9 percent this year, down from April’s forecasts of 3.1 percent to 3.3 percent, based on the median range of projections. Growth in 2012 will range from 3.3 percent to 3.7 percent, compared with forecasts of 3.5 percent to 4.2 percent in April, the Fed said.

Unemployment Forecasts

Central bankers raised their forecast range for the U.S. unemployment rate to average 8.6 percent to 8.9 percent in the fourth quarter of 2011, compared with projections of 8.4 percent to 8.7 percent in April. For the fourth quarter of 2012, the rate will average 7.8 percent to 8.2 percent, versus prior forecasts of 7.6 percent to 7.9 percent.

Inflation excluding food and energy prices will range from 1.5 percent to 1.8 percent this year, the projections today showed, up from 1.3 percent to 1.6 percent in the April forecasts. That’s based on the Commerce Department’s core personal consumption expenditures price index.

“Inflation has moved up recently, but the Committee anticipates that inflation will subside to levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate,” the statement said.

Bernanke said on June 7 that policy makers will “closely monitor” inflation, while predicting that price increases will ease in the medium term. The consumer price index rose 3.6 percent for the 12 months ending in May, the most since October 2008, as food and fuel prices drove the benchmark higher. So- called core CPI, the index excluding food and fuel, rose 1.5 percent during the same period, the most since January 2010.

--With assistance from Steve Matthews in Atlanta and Scott Lanman and Joshua Zumbrun in Washington. Editors: James Tyson, Christopher Wellisz

To contact the reporters on this story: Craig Torres in Washington

Japanese coal plants delayed return removes 8 million mt/year in demand - Platts

Three out of five Japanese coal-fired power plants that were damaged in the country's devastating March natural disasters are set to return to the Japanese electricity grid next month, while repairs to two other quake-hit coal plants may take until 2013, according to Japanese coal market sources Wednesday.

The delayed return of the remaining two plants effectively translates into lost demand for imported thermal coal of about 8 million mt/year. The five quake-affected power plants are Tokyo Electric Power's 600-MW Hirono and 1,000-MW Hitachinaka plants, Tohoku Electric Power's 2,000 MW Haramachi plant and two plants operated by a joint venture between Tepco and Tohoku Electric Power, 1,450 MW Nakoso and 1,000 MW Soma.

These five coal plants were consuming between 15-16 million mt/year of imported thermal coal prior to the March 11 disaster, according to Japanese coal market sources. "Five coal-fired plants were hit by the earthquake and tsunami in March and the prospects are that three of those plants will resume power generation from July," one Japanese market source said Wednesday. "Demand for electricity is increasing in Japan for the summer months and customers are looking at the spot market," said a second market source, who estimated that Tepco's 10 million mt/year consumption of thermal coal would be trimmed by 20% this year.

While these five plants have been out of action, their shipments of imported thermal coal have been delayed, or pushed back to a later date. Some of the vessels that would have delivered these coal shipments under long-term freight contracts have been reassigned to other cargoes in the freight market.

"Tepco declared force majeure on its coal shipments, and so shipping agents were left with increased tonnage on their hands. They went into the market to find alternative cargoes for these vessels," the first market source explained. "Some vessels are now returning to their original contracts to ship coal again to Japan. When the three Japanese power plants resume production they will need to secure cargoes of coal," he stated.

The three Japanese coal plants that have recovered to date are Tepco's Hitachinaka plant which came back online in May, and Tepco's Hirono plant and the Nakoso plant which are set to restart in July. Their combined demand for thermal coal is estimated at 7-8 million mt/year by Japanese market sources. Both the Hirono and Nakoso plants receive shipments of imported coal through Onahama port located 170 km northeast of Tokyo on Japan's eastern seaboard. "Even with the three plants returning to operation, Japan will still have two other plants under repair," said the first market source. The Soma coal plant is likely to return in early 2012, and Tohoku's Haramachi coal plant which was reportedly more seriously damaged in the earthquake is set to restart in 2013, said the first market source.

KLBF Acquisition imminent? - by Erwan Teguh (KLBF IJ / KLBF.JK, NEUTRAL - Maintained, Rp3,425 - Tgt. Rp3,800, Pharmaceuticals) - CIMB

While Kalbe has made known its desire to acquire, our observation of a shift in its treasury-stock holding from Kalbe to a nominee in Singapore suggests that an acquisition may happen sooner than later. Indeed, our recent discussions with management seem to indicate two targets. Any deal, potentially as early as 3Q11, could be funded by cash + stock, we believe. Short term, this would be dilutive, unless valuations are attractive. Meanwhile, 2Q11 sales growth should be better though margins may succumb to higher selling expense. 3Q11 scheduled price increases, if materialised, should hold the key to a re-rating. For now, we maintain our Neutral rating, earnings estimates and target price of Rp3,800, pegged at 20x CY12 earnings.

BUMI On the right track - by Erindra Krisnawan (BUMI IJ / BUMI.JK, OUTPERFORM - Maintained, Rp3,100 - Tgt. Rp4,000, Coal Mining) - CIMB

1Q11 reported profit of US$112m (down 19% yoy due to a low effective tax rate in 1Q10) accounted for 20% of our FY11 forecast and 23% of consensus. While 1Q11 operating profit of US$219m (+44% yoy, -15% qoq) represented 16% of our forecast and 18% of consensus estimate, volume and ASP met expectations, offering comfort that earnings expectations for the year can be met. Hence, no change to our earnings forecasts. Bumi reiterated its plan to prepay the first tranche of its CIC loan in Oct 11, implying it continues to de-leverage despite perceived uncertainties surrounding Vallar's latest plan to transfer a 75% stake in BRMS in exchange for US$2.07bn CB. Following its recent price correction, Bumi trades at 12.4x forward P/E with potential upside from earnings strength and further de-leveraging. Our price target remains NAV-based, at Rp4k.

Global outlook Solid Ground The great reset - CLSA

A structural distortion in the US Treasury market is about to unwind. The
past two decades’ flood of emerging-market (EM) central-bank capital
will end as authorities take control of domestic monetary policy. The resulting increase in EM interest and exchange rates will balance external accounts and end their accumulation of foreign reserves. Treasury yields will rise, potentially to deflationary levels. This growth shock will hit developed-world equities, while rising interest rates will depress EM equities. But this ‘great reset’ will bring opportunities worldwide as we
witness the most rapid realignment in global competitiveness since the Asian crisis, while policy flexibility will allow EM authorities to reflate their economies.

Foreign central bank support for Treasuries already waning
􀂉 India, Hong Kong, Korea and Switzerland’s external accounts are now in balance
and foreign-reserve accumulation has ended.
􀂉 China and Brazil’s reserve growth is driven mainly by short-term capital inflows.
􀂉 There is evidence of diversification, with reserves up US$421bn since September
but foreign official holdings of Treasuries down (although the data are unreliable).

Exchange rates are more flexible and interest rates rising
􀂉 EM exchange rates are rising more rapidly than they did pre-crisis.
􀂉 EM authorities are building up interest-rate premiums to US rates.
􀂉 More flexible exchange rates and interest rates mean that external accounts balance more rapidly and reserve accumulation and Treasury buying can end.

Treasury yields will rise as US economic growth slows
􀂉 In the absence of foreign central bank and Fed buying, the private sector will need to buy US$370bn of Treasuries per quarter to cover net issuance.
􀂉 A higher yield and/or lower inflation expectations will be needed to direct this
US$370bn-per-quarter flow of private capital into Treasuries.
􀂉 QE3 will be restricted as foreigners lose faith in the US dollar and Treasuries.
􀂉 Financial suppression is a more likely step to inflate away sovereign debt.
􀂉 The great reset will create major wealth destruction, but investors can profit by
waiting it out in EM currencies.
􀂉 Soon buying opportunities will appear in EM equities.

Indo Telcos: Playing defence – BUY EXCL, OPF TLKM, UPF ISAT by Dee Senaratne - CLSA

HoR Dee Senaratne revisits the telco space. He re-iterates Excelcomindo (EXCL IJ) as top pick in the sector. Makes sense as EXCL is best in class capital efficiencies, rapidly de-gearing its balance sheet and attractively trading at 10.6x 2012 earnings.

Telkom (TLKM IJ) comes in as Dee’s second choice as the company’s shares have near-term support from an 8% yield helped by Rp5tr share buy-back. Indosat (ISAT IJ) is our least preferred choice due to its inflated cost structure and unattractive premium valuations (17x 2012 earnings) to the sector. What could de-rail this view? The much talked about tower divestment could be a catalyst for share price performance.

United Tractors (UNTR IJ) earnings upgrade - CLSA

Sarina Lesmina is upgrading UNTR recs to BUY and raises TP to Rp28,000. This is on the back of a slew of positive newsflow. Confident that heavy equipment manufacturing plant will recover by August, Komatsu Japan has confirmed it will deliver more heavy equipment units to UNTR. As such UNTR has upped their sales target to 7,500 units this year. Demand remains strong as UT’s 5M11 mining sales equipment has doubled YoY. UNTR’s PAMA has also increased target for overburden removal by 3.3% to 750m bcm, on the back of improving weather in Kalimtantan. Our very own on-the-ground analyst Amie “Komodo” Liem did some channel checking, talking to some coal traders and confirmed that demand from China has increased strongly this month. The feel was that as long as coal cargo was ready to go, price was not so much of an issue. Bodes well for UNTR. BUY.

Key points:
· UT increased their target for Komatsu sales and the productivity of its mining contracting unit as components market and weather improve. UT increased their target for Komatsu sales this year by 7% to 7,500 units (+38% YoY) from 7,000 units.
· Weak May sales were not a surprise, but recovery is expected to start in August. Komatsu market share rose to 52% from 46% in 2010, driven by stronger growth in demand for mining equipments.
· UT also increased the target for overburden removal by 3.3% to 750m bcm, on the back of improving weather. We also expect GP margin to recover to 15% from 13.8% in 2010, and forecast a 10-14% growth in OB removal and coal production.
· We raised our profit forecasts for UT, but believe there is more upside to come as their expansion plans unfold. We upgrade our profit forecasts by 7-9% for FY11/12. We expect net profit to grow 36% in FY11 and 20% in FY12.
· Upgrade Rec. to BUY with TP: Rp28,000. UT now trades at 13.7x PE12 and 12.0x PE13.

Rabu, 22 Juni 2011

Astra International: Recovery in 2H as supply returns to normal (Buy; Rp59,100; TP Rp65,000; ASII IJ) - DBS

• Flat 4W sales in May, but 2H11 sales are expected to be considerably stronger due to normalised production and seasonality
• May 2W sales breaks new high
• Maintain Buy and Rp65,000 TP

Flat May 4W sales volume, but 2H11 expected to improve ASII’s 4W sales volume was flat at 32,153 units in May, inching up 1.4% m-o-m but slipping 2.1% y-o-y. Its market share improved by 0.4% ppt m-o-m to 52.7%, but contracted 1.6% ppt y-o-y. The flat result was widely anticipated because of disruption to the auto production chain after the Japan quake. Despite the flat sales in May, total 5M11 sales volume is still broadly in line at 39% of our FY11F 4W sales volume.

Resumes normal production, supply recovering. Despite the quake, both Toyota and Daihatsu did not adjust their 2011 production targets, which is 385,000 units combined. This implies both automakers are confident they can recover more than 50% of the lost April-May production in 2H11 by running overtime shifts. Given that Toyota and Daihatsu have resumed normal production since early June, dealerships’ inventories are likely to normalise by July.

Upcoming Eid-ul Fitr will support sales. Despite slower supply in April and May, demand for 4W had remained strong, creating pent-up demand. More importantly, sales growth will also be supported by stronger demand during the pre Eid-ul Fitr period.

Our channel checks reveal June sales picked up partly because buyers have started to pre-book before the Eid-ul Fitr holiday season. Speaking of Toyota, it seems sales for the first 20 days of this month is 20,000 units and press reports indicate units sales could easily reach 23,000 (+18% m-o-m) in June.

In addition, we are also entering the seasonally stronger sales quarter. Historically, sales normally spiked one to two months prior to Eid ul-Fitr. This year, Eid ul-Fitr will fall on end- August. Even after Eid ul-Fitr, we expect sales to pick up in the 4Q supported by end-of-year promotions. Thus, we expect stronger performance in 2H11 to make up more than 50% of our FY11F sales volume (485K units).

May 2W sales break record

May 2W sales in May hit a record high of 377,355 units (+0.2% m-o-m, +10.3% y-o-y), and ASII’s market share improved by 0.9 ppt m-o-m and 3.8 ppt y-o-y. 2W sales remained strong because ASII’s 2W local content is almost 98% compared to 65% for its 4W’s. Hence, the impact from Japan ’s quake was minimal. 5M11 sales is in line at 42% of our FY11F sales of 4 mil units.

Market share gain due to attractive new launches. YTD, ASII’s market share has improved by 4.6 ppt y-o-y to 51.1%. It regained market share from Yamaha, its main competitor whose market share is now 41.3%. ASII’s success was mainly due to Astra Honda Motor’s timely response to the shift in market preference towards automatic transmission 2W (AT 2W). It added three new models that are specifically designed to penetrate the AT 2W market in 1H11.

Reiterate Buy, Rp65,000/share TP. ASII is currently trading at relatively comfortable 14.4x FY11F PE, 33% cheaper than its peak valuation in 2010. But heading into 2H11, the supply chain should start to normalise, while sales are also seasonally stronger. Hence, we expect sentiment to improve towards ASII, in line with expectations of stronger auto sales in 2H11. As such, we maintain our positive stance on the counter.

Ideas ideas ideas DOID as beta trade - JP Morgan

JPMorgan strategists Mislav Matejka (Europe) and Frank Li (China) are off to a good start on their short term buy call on markets. US technical strategy of looking for a tradeable bottom above 1250 has started to pay-off also; Michael Krauss is looking for retracement rally in July targetting 1325-1340 this summer. Global chief economist Bruce Kasman is looking for midyear rebound in manufacturing output data across the globe, easing concerns of global slowdown.

What to buy in Indonesia? Yesterday I highlighted BBNI, BFIN, and IMAS as domestic plays – and I would reiterate these names today. But overnight in the US, the higher beta sectors acted well throughout the day as the “risk on” trade was in effect with Materials, Energy, Tech, and Consumer Discretionary leading to the upside. So I would add Delta Dunia (DOID) and Energi Mega (ENRG) to my pick list also.

Bumi Resources - 1Q11 results: Strong but below expectation - JP Morgan

1Q11 results strong but below expectations due to costs: BUMI
reported a 1Q11 net income of US$112MM, down 15% Y/Y from US$132MM in 1Q10. However, excluding non-recurring gains and losses, 1Q11 core net income was US$59MM, up 19% Y/Y from US$49MM, which shows a strong performance. As non-recurring items have historically distorted BUMI’s net income, an analysis of the operating profit reveals the company’s performance in 1Q11. After adjusting for the 30% non-controlling stake in KPC and Arutmin (as required by the IFRS), BUMI’s 1Q11 operating profit of US$219MM is below both the consensus’ (18%) and J.P. Morgan’s (16%) operating profit expectations of US$1.2 bn and US$1.35 bn, respectively. Much of the shortfall is because the costs rose from US$49/ton of coal in 1Q10 to US$64/ton in 1Q11.

1Q11 ASP at US$87 per ton: The recorded volume (before the adjustment of Tata’s stake) for 1Q11 was 14MM tons and the average 1Q11 ASP was US$87/ton, which is significantly higher than the US$77/ton originally guided by BUMI back in Apr-11 and US$63/ton recorded in 1Q10. BUMI has provided a new and higher ASP guidance
of US$90/ton for FY11E, while retaining the FY11E volume guidance of 66MM tons.

Deleveraging process has accelerated: BUMI continues to reiterate its deleveraging efforts, by repaying the 19% CIC loan, whose first tranche of US$600MM will be prepaid in Oct-11. Another recent action is the US$2 bn convertible bonds issued by Vallar to purchase 75% of BRMS. According to BUMI, the convertible-bond issue is another tool to raise additional funds to further deleverage its balance sheet, as BUMI can sell the bonds to investors, who wants exposure to Vallar’s shares.

We are restricted on BUMI: Currently, J.P. Morgan is restricted on BUMI and cannot give any rating recommendation or disclose its price target. We will follow up with more details.

Economy: Greece debt crisis hurts sentiment on the rupiah - Mandiri

Market review
§ Emerging market currencies and stock market weakened on uncertainty over Greece’s debt bailout extension and weak US economic figures. The rupiah weakened to Rp8,608/US$ (1.0% wow) and stock market index fell to 3,722 (1.7% wow).

Global economic update
· Series of weak US statistics released last week indicated that the economy is loosening its momentum.
· Rejection of austerity plan by Greek parliament and dispute among the creditors particularly on the need of private sector involvement have worsened uncertainty over the country’s debt bailout extension.
· Despite slowing economic growth momentum in China, inflation continued to tick higher by 5.5% yoy in May11, prompting further policy tightening by the central bank.

Domestic economic update
· Banks credit growth eased to 24% in May, while NPL was flat. No significant decline in interest rate after the implementation of base lending rate publication.
· Government debt increased Rp39.7tn in 5M11 to Rp1,716tn, yet debt to GDP continued to fall to 25.7%.

Bumi Resources: Key takeaways from analyst meeting (BUMI, Rp2,975, Buy, TP: Rp3,665) - Mandiri

Bumi Resources: Key takeaways from analyst meeting (BUMI, Rp2,975, Buy, TP: Rp3,665)
In 1Q11, excluding the EcoCoal, BUMI’s average selling price was US$96.4/ton, +44.5%yoy. Combination of KPC and Arutmin ASP was US$87.6, or up by 39.7%yoy. While for EcoCoal’s ASP increased by 24.4%yoy to US$49/ton. From here, it is obvious that higher rank coal prices gain much higher or get more premium compare to low rank coal.
BUMI has closed an attractive deal for Japanese contract at US$145/ton coal price benchmark for 1 year. BUMI has indicated that its FY11’s ASP should be more than US$90/ton.

(Therefore BUMI and HRUM that have larger portion in high quality coal compare to peers should have gain more upside in their earnings)

Cash production cost in 1Q11 was posted around US$35.6/ton or increased by 7% yoy, around 15% higher than our estimates of US$30-31/ton, mainly due to higher Strip ratio and higher fuel price
Derivative gain from equity swap and call option posted in profit and loss was unrealized gain with regard to mark to market terms of the contract agreement. So if BUMI's share price underpressure, it potentially reverses or lower in coming quarters.
BUMI also confirmed that Q211 was still a wet season, so they only expect moderate production growth at only 15-15.5Mt. The coal production will be ramped up to 18-19Mt per quarter in Q3 and Q4 2011.
There is still no clarity yet about the Bumi Plc’s debt swap transaction with CIC loan following the CB worth US$2.07bn for 75% stake acquisition in BRMS. However, our take is that If the debt swap transaction with CIC is not successfully done, BUMI will be selling the CB directly to other investors in which in our view it will expose Bumi Plc’s shareholders of 20.6% ownership (assuming total shares of Bumi Plc of 382.4mn after Step-up transaction and CB conversion of 79mn shares) to uncertain or unfriendly shareholders.
In absence of CIC debt swap issue, BUMI will pay around US$750mn (including IRR 19% and 5% penalty) in cash for early repayment option for the 1st tranch of US$600mn from CIC loan in October 2011. Source of funding will be around US$400-500mn from internal and the remaining would be from debt refinancing.
With regard to their capex, BUMI expect financial lease to hike up to US$400-500mn in the future to support its expansion capex (with regard to mobile fleets, and other instructure developments) and encourage its freecashflow. Capex for 2011 is estimated about US$150-200mn.
Currently we have buy rating and BUMI is traded at 12.3x- 10.8x PER11F-12F. We will review our earning forecasts following new accounting policies.

United Tractors: Buy; Rp22,950; TP Rp27,000; UNTR IJ Lower Komatsu sales in May was widely anticipated - DBS

• Komatsu sales in May fell by 20% mom on supply disruptions.
• Demand for heavy equipment remains solid driven by strong coal price outlook and production growth.
• Pama was inline; expect higher output to continue due to better weather conditions
• Maintain Buy, TP Rp25,700.

Lower Komatsu sales in May was widely anticipated. Komatsu sales in May came in at 617 units (+14% yoy) fell 20% mom from 767 units in April but still above our monthly forecast of 557 units. The weak result was widely anticipated due to supply disruptions arising from Japan disaster before the situation normalizes in August. Sales to mining sector contributed 65% of total sales. Despite of the short-term pressure, we believe that demand for heavy equipment is fundamentally strong on the back of strong coal price outlook and 10% p.a. coal production growth. This year, we estimate volume to grow by 25% to 6,680 units, backed by strong demand from mining sector. 5M11 sales already accounted for 54% of our FY11 forecast.

Pama grew strongly. Coal production at Pama in May was 7.0m tons in line with our monthly forecast of 7.1m tons while overburden grew to 67.4m bcm above our monthly estimates of 59.7m bcm. This is largely inline with our estimates as we expect coal output to accelerate starting from 2Q due to better weather conditions. YTD sales reached 32.4m tons and 295.1m bcm, which accounted for 38-40% of our FY11 forecasts of 86m tons and 748m bcm respectively. We maintain our forecast for now as we expect seasonally stronger output in 2H.

Coal mining unit is improving. Coal sales in May dropped by 10% mom to 373k tons due to slower sales from both DEJ (-10% mom) and TTA (-12% mom) but still above our monthly average of 333k tons. YTD sales reached 2.6m tons or 65% of our FY11F of 4m tons.

Maintain Buy, TP Rp25,700/share. We reiterate our Buy call for UT with DCF-based target price of Rp25,700/share (WACC 12%, terminal growth 3%). Our target price has been adjusted for recent rights issue. The stock is trading at attractive 15x FY11F PE against 22% CAGR in earnings over FY10-12F. Despite short-term headwinds from the delay in its Komatsu supply, UT’s long-term growth story remains intact driven by strong coal mining activities in Indonesia . UT is the prime beneficiary of rising coal mining activities in Indonesia as UT is the market leader in both construction machinery (46% market share) and mining contracting (44%) in Indonesia.

Intiland Development: Buy; Rp315; TP Rp505 prev Rp725; DILD IJ Busy years ahead - DBS

• Attractive project pipeline for the next four years
• Huge landbank earmarked for wide range of properties to ride on the sector’s growth
• Cut FY11F/12F earnings by 31%/67% after imputing more conservative revenue recognition
• Albeit lower TP of Rp505, maintain BUY, due to cheap valuation of 0.33xP/NAV, offering 62% upside

Attractive project pipeline, busy years ahead. 2011 should be another busy year for DILD with the recent launch of a commercial cluster and three residential clusters and three high rise developments launches in 2H11. Two of its Whiz Hotel should also start operations by the end of this year. This year, the company is targeting 82% y-o-y marketing sales growth to Rp2tr.

Huge landbank to ride on property sector upcycle. DILD has 1608ha of undeveloped landbank, valued at Rp4.4tr, earmarked for various projects. Indonesia ’s property industry is in an upcycle because of the low interest rate environment and a growing middle income population. And armed with its large landbank, DILD can ride on this with a diverse project mix to cater to several target segments especially the middle income and inner city residential, as well as retail and commercial spaces. Its diverse product range should reduce concentration risks and provide more stable earnings.

Reiterate BUY with lower TP of Rp505 offering 62% upside. We cut FY11F/12F earnings by 31%/67% after imputing more conservative revenue recognition assumptions. Initially, we are too aggressive on the launch schedule. Our target price is also reduced to Rp505 after we shaved RNAV to Rp919/share and applied a larger 45% valuation discount. The counter is now trading at 0.33x P/NAV while average property companies in Indonesia are trading c.50% discount, presenting a cheap valuation. Rerating catalysts are project execution and stronger than expected marketing sales.

Bumi Resources average coal sales price in the second quarter could reach $90 per tonne - Reuters

(Reuters) - Bumi Resources , Asia's biggest thermal coal exporter, said on Tuesday that its average coal sales price in the second quarter could reach $90 per tonne, or 26 percent higher than the same period a year ago.

This would be nearly 3 percent higher than first quarter prices.

Dileep Srivastava, a Bumi director, told Reuters that the company will sell around 15 to 15.5 million tonnes of coal in the second quarter despite continuing wet weather in Indonesia's Kalimantan. (Reporting by Janeman Latul; Editing by Neil Chatterjee)

PT Harum Energy Tbk - Minority calculation under IFRS may impact earnings from 2012 onwards - Credit Suisse

● Due to potential changes to IFRS-based reporting for minority interest, we note that there could be differences in earnings forecasts for HRUM starting in 2012.
● Our earnings estimates using new IFRS reporting of minority interest would have been about 17% more than our earnings estimates under the Indonesian GAAP. We have not incorporated the new IFRS calculation for minority interest, given that the
company currently is still looking into ways to incorporate this and other changes into their financial starting in January 2012.
● While the new IFRS may closer reflect the cash flow generated by the company, we believe that market is aware of this and few forecasts might have incorporated the changes. We thus believe that valuation has priced in most of the positive news.
● We maintain our NEUTRAL and target price of Rp9,600, based on 16x 2011E P/E. Given that we do not expect much upside from coal price or production in next few months, we maintain our NEUTRAL view. We may revisit our view upon reserve upgrade due in 2H11 and any update on coal price expectation.

Indonesia Banks: Upgrade to Attractive - Morgan Stanley

What's Changed
Industry View: Indonesia Banks
In-Line to Attractive
BBRI.JK From Rp7,200 to Rp7,700
BBCA.JK From Rp6,116 to Rp7,000
BDMN.JK From Rp5,000 to Rp5,700

We upgrade Indonesian Banks to Attractive: High returns, strong GDP growth and an underpenetrated market make Indonesian banks attractive in a regional context, in our view. They should maintain above regional-industry growth, yet trade in line on 2012e P/E. In our defensive regional banks portfolio, we think Indonesia is one of the best ways to buy growth.

Morgan Stanley's ASEAN economist identifies infrastructure spend as key: Our ASEAN economist, Deyi Tan, estimates future infrastructure investment could lift GDP growth to 7.2% by 2015 (8% in the bull case). We believe this could be a driver of stronger loan growth. To reflect this view, we assign a 35% probability to our bull-case valuation outcome (which assumes 25% loan CAGR), 60% to our base case (20% loan CAGR) and 5% to our bear case (15% loan CAGR). Previously, we assigned a 100% probability to our base case. The revised methodology leads us to raise our price targets.

Catalysts and risks: Although we expect inflation pressures to accelerate in 4Q11, easing near-term pressures because of better food and oil comparatives should help sentiment for now. The stocks should also benefit from the rollover of valuation metrics to 2012e as we get closer to year-end. We see the main areas of earnings risk as increased NIM pressure as the change in reference rates on government bonds affects near-term asset yields and rising NPLs in SME books.

BRI most preferred, Danamon least: Our favoured stocks are BRI (attractive valuations and high returns) and Mandiri (attractive valuation and improving business franchise). Danamon remains most vulnerable to increased funding pressures, in our view.

Bumi has Published its Prospectus

Bumi has published its prospectus ahead of a listing of the company's shares on the premium segment of London's official list, the first step in the path to a spot in the FTSE index .FTSE.

"It may not be possible for the group to detect or prevent every instance of fraud, bribery and corruption in every jurisdiction," Bumi said.

Prospectuses for companies operating in some of the world's more difficult geographies often detail fraud risk.

However, the involvement of the politically connected Bakrie family has generated increased interest in Bumi's listing documents, not least because of the perceived lack of disclosure among Bakrie-linked companies.

The potential catapulting into the FTSE of one of Indonesia's best-known political families, delays to the listing and the complexity of the deal have added to pressure on the company.

So too have concerns surrounding other miners majority-owned by emerging markets investors, particularly Kazakh miner ENRC (ENRC.L) which has been damaged by a boardroom split.

Bumi, which disclosed risks to investors over 20 pages, said Indonesia, where its activites are focussed, ranks 110 out of 178 countries in Transparency International's 2010 Corruption Perceptions Index.

It also highlighted allegations made by an Indonesian tax official at the centre of a high-profile corruption trial, Gayus Tambunan, who said subsidiaries Bumi Resources, KPC and Arutmin paid him $3 million to settle tax disputes.

Tambunan was convicted in January for bribery and abuse of power and faces a new trial over fake passports.

Bumi said Indonesia police had found insufficient evidence to file charges against Bumi Resources, and internal investigations found the allegations "groundless."

But the company has retained a third-party consultant to review procedures for cash payments and said that corruption allegations "even if untrue, could harm the group's reputation."

"They are being ultra-cautious," said one source familiar with the listing process, referring to anti-corruption policies.


Bumi Plc shares, which will begin trading on June 28, replace existing shares in Vallar (VAAR.L), Rothschild's original venture for investment in the mining sector.

The listing of Bumi is the final step in Vallar's major transformation, which began last year with the Bakrie Goup (BNBR.JK) and Rothschild joining forces for Vallar to take a 25 percent stake in coal miner Bumi Resources and a 75 percent stake in Berau Coal Energy (BRAU.JK).

Bumi Plc has since said it aims to increase its stake in miner Bumi Resources, Asia's biggest thermal coal exporter, to up to 50 percent.

It will also own a 75 percent stake in Bumi Resources Minerals after completion of a shake-up announced last week. BRM's main asset is an 18 percent economic interest in Newmont Nusa Tenggara, the company that owns the Batu Hijau mine.

Rothschild, who will be co-chairman of Bumi alongside Indra Bakrie, will own 5.6 percent of Bumi voting capital after the listing. James Campbell, former director of Anglo American (AAL.L) and co-founder of Vallar, will have 0.2 percent.

Local private equity tycoon Rosan Roeslani will own 17.4 percent and is joined on the register by Abu Dhabi Investment Council, which will own a 5.5 percent stake.

Indra Bakrie is the younger brother of tycoon Aburizal Bakrie, chairman of Golkar, part of Indonesia's ruling coalition.

Aburizal Bakrie is not involved in the day-to-day running of the family's financial ventures, which were pulled out from under heavy debts by the Rothschild deal.

The Bakrie family's voting rights will be frozen at 29.9 percent, despite a total holding of 55 percent.

Hexindo (HEXA IJ) obtains US$200m heavy equipment sales contract by Sarina - CLSA

· This is part of their target of US$650m sales revenue for the fiscal year 11 (Apr2011-Mar2012). It is a cumulative order from various coal companies.

· The company is targeting 3,000 units sold for this fiscal year (+30% YoY), or 250 units per month. Due to components shortage, Hitachi sales now averaging 150 units per month, from 200 units per month in Jan-Mar2011. Moving into July, Hexindo expects normal sales back to more than 200 units per month level. Hitachi principal said the recovery of their facility in Japan is better than expected.

· Just like Komatsu, Hexindo also said there is no evidence of Caterpillar taking away market share from them.

· Production capacity of Hitachi Indonesia is to increase from 2,500 units to 3,000 units pa this year. About 20% of Hitachi equipments are imported from Japan, with the remaining produced locally by Hitachi Indonesia.

United Tractors (UNTR IJ) reported a good operational result for May by Sarina - CLSA

· Komatsu sales in May: 617 units, (-)19% MoM as expected, given shortage of components for local production and minimum inventory for the large equipments.

· Total 5M11 sales were 3,591 units (+61% YoY), and 51% of FY11 target of 7,000 units (+29% YoY) from the company. UT expects sales to remain weak until July. We believe the target is achievable; average monthly unit sales should be at least 487 units. 68% of units were used for mining sector.

· Komatsu’s market share in 5M was 52%. This was even higher than last year’s 46%. There seems to be no evidence of Caterpillar taking away market share from Komatsu despite the shortage, but we need to confirm with Hitachi first.

· Pama’s coal production rose 14% MoM to 7m tonnes in May. 5M11 was 32.4m tonnes (+3% YoY), 40% of our FY11E of 82m tonnes. Pls see file for details.

Official 2W and 4W auto sales show good recovery by Sarina Lesmina - CLSA

May 4W sales was a flat +0.6% MoM, +1% YoY to 61,055 units. But shows that we are moving into recovery from the dip in April.

· Beginning June, the 4W sales are expected to recover further to 65,000 units per month, bringing the total FY11 to 802,170 units (up ~5% YoY). Toyota said it expects June sales to be 22,000 units, +12.8% MoM.

· 5M11 sales for both 2W and 4W rose by 16% YoY and 15% YoY respectively (coming from a lower base in 1H10). Astra's 4W market share remains stable in 5M11 at 55% just like last year.

· In 2W market, however, Honda remains the leader with 377,355 units sales in May (+2% MoM, +19% YoY). This put Honda a 9.8% ahead of Yamaha in terms of 5M market share. 2W market in May rose 10% YoY, 0.2% MoM. Negligible impact from the components shortage issues.

· We forecast a 15% YoY growth in 2W domestic sales this year to ~8.5m units. Honda's 5M11 sales of 1.74m units were 45% of our FY11E of 3.91m units (this is assuming 46% market share of Honda). But given strong ytd performance, we believe FY sales can be 5% higher than our original forecast.

· Maintain our positive outlook for Astra (ASII IJ); 2W contributes 15% to the group's earnings, but including financing, it is about 23%. We are reviewing our numbers on Astra. Pls see file for details.

Sentiment continues to be on the soft side - CLSA

Some sort of rebound is on the cards today. However, sentiment continues to be on the soft side. Without a clear catalyst and likely binary outcome of QE3 (or no QE3) on its way, most not willing to take the risk and swing the bat at the moment. Lightening exposure to resources space is the ongoing theme.

Despite weakness in the coal names, thermal coal prices have been holding up very well. Interesting to note that Itochu has announced a deal to purchase 20% of privately owned US based Drummond Coal's Columbian coal interests for US$1.52bn. The transaction highlights increasing coal demand in Japan which is likely to keep regional markets buoyant. And at the same time, we expect Chinese buyers to come back to the market in a big way in the 2H.

A few key takeaways on the deal:

· The deal includes marketing rights for coal sold into Japan.

· Drummond is one of the top 2 producers in Columbia with 27Mt produced in 2010.

· Columbia is the world's 5th largest coal exporter, with production mainly to Europe and some to the USA. 2010 saw first sizeable exports to Asia with the 2 largest producers including Drummond exporting 15% of production. Prior year was close to 0.

· A transaction in May by Australian listed New Age Exploration (NAE AU) values an open cut reserve base at US$0.5/t - US$1/t with a future royalty of US$1.5/t payable on production. The asset acquired by NAE is in the same region as the one Itochu is acquiring a stake in, although it is not yet in production.

· Columbian coal energy content is higher than typical Indonesian producers with 6,000+ kcal/kg but has similar low pollutant properties. The coal is particularly suited to Japanese power generators, however the Japanese are searching far afield as the 14,000km freight distance is approximately twice that from Australia.

Here in Indonesia, our weather condition has substantially improved last few months. Two biggest contractor both reported good May operation figures. UT's Pama coal production rose 14% MoM to 7m tonnes in May (5M11 was 32.4m tonnes (+3% YoY), 40% of our FY11E of 82m tonnes) and Dulta Dunia Coal production rose 3.7% MoM to 2.8m tonnes in May (Total 5M11 production was 13.3m tonnes) – seel below for more details. We expect acceleration in production in the 2H as we head into the dry season.

BUY Borneo (BORN IJ), Harum (HRUM IJ), and Bumi Resources (BUMI IJ).