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, 22 Juli 2011

Results Snapshot Bank Danamon: Fully Valued; Rp5,700; TP Rp5,500; BDMN IJ - DBS

Dragged down by weaker NIM
• 1H11 net profit is only 42% of our and consensus’ full year estimates due to weaker NIM; 2H11 expected to be stronger
• Focus on SME loan expansion to capture better deposit gathering ability; targets 50% CASA to total deposits by 2015
• Further details on rights issue by next week; Maintain Fully Valued and Rp5,500 TP

BP Migas: Conoco Hentikan Operasi di Sumsel - Inilah.com

BP Migas menyatakan lapangan Gas Suban dengan operator ConocoPhillips akan mengalami penghentian operasi terencana (planned shutdown) untuk dalam rangka perawatan fasilitas rutin mulai 23 hingga 29 Juli 2011.

Demikian dikutip dari keterangan resmi BP Migas kemarin. Penghentian operasi akan berlangsung dalam dua tahap. Tahap penghentian sebagian berlangsung selama 96 jam pada 23 hingga 26 Juli 2011, sedangkan penghentian total berlangsung selama 64 jam pada 27 hingga 29 Juli.

Bersamaan dengan perawatan Lapangan Suban, akan dilakukan pekerjaan hot tapping pipa gas Transportasi Gas Indonesia (TGI) untuk penyaluran produksi gas dari JOB Pertamina-Talisman Jambi Merang ke pembeli domestik di Sumatera Selatan.

“Kegiatan perawatan yang terencana ini tidak akan mengganggu target produksi tahun 2011,” kata Kepala Divisi Humas, Sekuriti, dan Formalitas, Badan Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi (BPMIGAS), Gde Pradnyana.

Dia menjelaskan, pemeliharaan fasilitas produksi Suban ini dilakukan untuk mengoptimalkan kapasitas produksi serta memastikan integritas, kehandalan sistem produksi dan pengiriman gas untuk memperkecil kemungkinan penghentian produksi tidak terencana (unplanned shutdown) di masa yang akan datang. “Diharapkan tahun depan produksi dapat bertambah,” katanya.

Gde mengatakan, produksi lapangan Suban saat normal mencapai 760 juta kaki kubik per hari. Pasokan gasnya dikirim ke Perusahaan Gas Negara (PGN) West Java dan Batam, Chevron Pacific Indonesia, serta di ekspor ke Singapura. Ketika penghentian sebagian selama 96 jam, produksi akan dipertahankan sekitar 530 juta kaki kubik per hari. “Lebih dari setengah pasokan yang dikurangi adalah gas yang dikirim ke Singapura,” katanya.

Dia menjelaskan, saat penghentian produksi total selama 64 jam, pasokan untuk PGN Batam dan Chevron akan tetap diusahakan seoptimal mungkin lewat metode line pag (sisa gas yang ada di dalam pipa). Kekurangan pasokan akan dikompensasi dari lapangan di luar blok Corridor. Selama kegiatan ini, direncanakan injeksi uap untuk lapangan Duri, Chevron akan tetap berjalan, sehingga tidak mempengaruhi produksi minyak dari lapangan tersebut.

Menurut Gde, ConocoPhillips telah berkoordinasi dan berkomunikasi dengan para pihak, khususnya konsumen gas tentang rencana kegiatan itu.

Kinerja Keuangan Bank Danamon Meningkat - Republika

REPUBLIKA.CO.ID, JAKARTA – Seluruh kinerja keuangan PT Bank Danamon Indonesia Tbk mengalami peningkatan pada semester pertama 2011. Laba bersih konsolidasi pada semester pertama tahun ini tercatat naik 3% dari periode sama 2010, menjadi Rp 1.473 miliar. Sementara Giro dan Tabungan (CASA) naik sebesar 18% dengan total dana pihak ketiga sebesar Rp 83.536 miliar. Adapun total kredit mencapai Rp 92.793 miliar, atau naik 31%.

“Kondisi perekonomian Indonesia yang menjanjikan di tahun 2011 memungkinkan kami untuk menjaga tingkat pertumbuhan di seluruh lini usaha Danamon di semester pertama tahun ini,” kata Henry Ho, Direktur Utama Danamon, dalam paparan kinerja keuangan Bank Danamon, Kamis (21/7), seperti dimuat dalam rilis Danamon.

Ia mengatakan, momen positif ini membuat pihaknya bertambah yakin atas rencana right issue. Sebelumnya Danamon telah mengumumkan rencana untuk menambah permodalan melalui penawaran umum terbatas kepada pemegang saham atau Rights Issue.

Sampai Juni 2011, rasio kecukupan modal (CAR) konsolidasian dan stand alone Danamon tercatat sebesar 14,0% dan 12,2%, jauh di atas rasio minimum sebesar 8% yang ditetapkan Bank Indonesia. Kredit nasabah di segmen UMKM mencatat pertumbuhan 23% mencapai Rp 28.046 miliar dan membentuk sekitar 30% dari total kredit Danamon. Sementara kredit korporasi dan komersial meningkat 30% menjadi Rp 20.040 miliar.

“Pada semester pertama 2011, Danamon mencatatkan kenaikan pendapatan bunga bersih (net interest income) sebesar 8%, atau mencapai Rp 5.239 miliar dari Rp 4.843 miliar setahun sebelumnya. Kinerja keuangan kami juga didukung oleh pendapatan nonbunga yang tumbuh sebesar 12%, atau mencapai Rp1.771 miliar dari Rp 1.582 miliar secara setahunan,” kata Vera Eve Lim, Chief Financial Officer dan Direktur Danamon.

Initiating Coverage Jaya Agra Wattie A different plantation - Kim Eng

We initiate coverage on Jaya Agra Wattie with a BUY recommendation and target price of Rp670, which offers 37% upside potential. JA Wattie is a small plantation company that is focused on the rubber business. Though rubber is planted in 32% of its planted areas, it would account for 72% of its gross profit this year, based on our estimate.
􀂃 Higher margin per hectare basis. Using 3M11 commodity prices of rubber and palm oil products, we estimate a hectare of rubber in JA Wattie will generate Rp73.5m in revenue. In comparison, the revenue of a typical domestic oil palm plantation is only Rp39.5m. Based on the sector’s average figures, we estimate that a hectare of JA Wattie’s rubber plantation could produce a gross margin of 80%, compared to
60% from a hectare of a oil palm plantation.
􀂃 Strong volume growth. We expect the sales volume of rubber to increase at a CAGR of 20% in FY11‐13, which would be driven by higher production from newly‐mature plants and purchase from third party. As for CPO, we estimate that its sales volume would grow at a CAGR of 38% over the next three years from 19.7k tonnes in 2010 to
52.9k tonnes in 2013.
􀂃 Aggressive expansion in rubber and oil palm. Going forward, the company plans to add 7k ha oil palm within the next three years, thus boosting to almost 26k ha by 2013 (including plasma) from 18.9k ha in 2010. As a commitment to its rubber business, management plans to increase its rubber planting area by adding 14.5k ha until 2014, thus expanding its total planted area by more than 150% to total
23.8k ha.

BUY at target price of Rp670
We employed the DCF valuation method to value JA Wattie. The WACC of 13% was derived from the cost of equity of 15% and the cost of debt of 12%, at an effective tax rate of 25%. Based on our five‐year forecast model with a long‐term growth rate of 5%, we estimate JA Wattie to have a total value of Rp2.33t, or Rp672 per share. Thus, we value the stock at 12.5x FY12 P/E. Plantation stocks under our coverage are trading between 10.1‐15.3x FY11 P/E and 9.1‐12.7x FY12 P/E. Currently, JA Wattie is trading at a discount of 15‐18% to the sector’s average of 12.3‐10.8x FY11‐12 P/E. As JA Wattie is experiencing strong volume growth in its rubber and oil palm businesses, mostly due to the young age profile of the plants, we believe such a large discount is unjustified. There are no consensus estimates available at this moment. Our target price of Rp670 offers 37% upside potential. BUY.

Indofood Sukses Makmur - Time to call it a day - Macquarie

Event
􀂃 We downgrade our recommendation to Underperform from Neutral, following INDF’s c20% share price rally in recent weeks (which has come partly in response to softening international wheat prices, but also due to resurgent consumer sector and JCI generally). We believe INDF’s share price is now stretched and offers investors limited upside potential, and also that the market may be overestimating the positive impact of lower wheat prices.

Impact
􀂃 Challenging valuation calculus: INDF is now trading at a 10.9% premium to its marked-to-market NAV – even with ICBP marked to Rp5,700 per share (ICBP comprises 56% of INDF’s M2M NAV). We highlight that the market value of INDF’s listed shareholdings now implies a Rp16.6tr valuation for Bogasari – equivalent to a 15.9x normalised FY11E PER – which we believe is too rich for a wheat miller facing rising competition.
􀂃 We also believe that ICBP’s valuation (16.4x FY11E PER, and 18.4x if noodle margins are normalised from 17.2% to 15.0%) is now very full. We reiterate that 85% of ICBP’s earnings come from the relatively mature instant noodle segment, and the division had negative 0.7% volume growth in 1Q11A. While the company has a powerful instant noodle franchise and will derive some benefit from lower wheat prices, we feel this is now more than priced in.
􀂃 Falling wheat prices good for INDF? Falling wheat prices are perceived to be a major positive for INDF. However, we highlight that there has in actual fact been a very low statistical correlation between Bogasari’s margins and spot wheat prices in the past (even allowing for an inventory lag). We believe this has been partly due to the time-shifting impact of forward purchasing contracts (which have also been utilised in recent quarters), and also the relatively rapid pass-through of input costs into end-product prices.
􀂃 Also often forgotten is the fact that CPO prices do correlate with wheat prices, and INDF’s CPO interests (19% of M2M NAV) will suffer in an environment of falling commodity prices. This also mitigates the benefit of lower wheat prices.

Earnings and target price revision
􀂃 FY11E and FY12E EPS revised by +1.8% and –8.4%, respectively. We have incorporated the dilutionary impact of the SIMP IPO and recent ICBP earnings revisions. Price target raised by 8% to Rp5,400 from Rp5,000, in line with INDF’s current M2M NAV, but valuation raised by just 2% to Rp5,100.

Price catalyst
􀂃 12-month price target: Rp5,400 based on a RNAV methodology.
􀂃 Catalyst: 2Q11E result (expected towards the end of August).

Action and recommendation
􀂃 Downgrade to Underperform (from Neutral): On FY11–12E PERs of 16.8x and 16.4x, and at a 10.9% premium to NAV (which incorporates a premium value for ICBP), we believe INDF is now too expensive, offering investors a limited margin of safety and relatively limited upside. Astra (ASII, Rp70,000, Outperform, Rp70,000 PT) remains our preferred large cap consumer pick.

Harum Energy - Notes from the pits (HRUM IJ / HRUM.JK, OUTPERFORM - Maintained, Rp10,450 - Tgt. Rp12,000, Coal Mining) - CIMB

Robust growth outlook: we reiterate OUTPERFORM. We returned from our visit to Harum's MSJ coal mine last week with positive notes. In particular, we believe the on-track production at MSJ in 2Q11 and indication of resolved issues at Santan Batubara mine bode well for our expected 35% production growth for this year. Given the comfort provided from the site visit, we maintain our estimate of a 36% 2010-13 EPS CAGR and price target of Rp12,000 (based on 16x target P/E). At its current 13.5x forward P/E, Harum remains an OUTPERFORM and our top pick in the Indonesian coal sector. Although Harum's limited reserve life is a concern, we believe reserve acquisition in the future remains a strong possibility given the group's strong balance sheet (projected cash position by end of 2011) and industry presence. We expect strong 2Q11 earnings and positive outlook on coal price in 3Q11 to be the potential catalysts for the stock.

CITI Indo BTN 2Q slightly below - Citigroup

* 2Q11 net profit -4% QoQ at Rp235bn, bringing 1H11 net profit +11% YoY at Rp480bn accoutning for 44% of consensus FY11 est'. Pick up in growth offset by deterioration in balance sheet and decline in NIMs.
* Fee income growth strong +36% YoY, 25% QoQ. Loan grew 22% YoY, but still below FY11 guidance of 27%, tho' mgmt remains confident in achieving their target. Subsidized mtge loan growth remains sluggish 4% QoQ, 12% YoY due to developers'
constraints.
* NIM declined to 5.24% (5.69% in 1Q11) due to lower loan yields and higher deposit costs. Gross NPL has gone up to 4.35% (4% in March)
* Salman maintains Sell ashigh LDR 111% and intense competition in mortgage lending likely hinder its ambitious growth plan. Trades at 12x PE & 1.9x PB for 2012.

Indonesian property - On a rerating path - Macquarie Research

Event
* The Indonesian property sector index has increased 10% this month and has outperformed the market by 7%. Nonetheless, we maintain our Overweight on the sector as we expect a rerating to occur because the sector is still trading at a lower discount compared to the last upcycle, 2Q11 pre-sales remain on track, and ASP has increased faster than expected.


Impact
* The sector is still trading at a lower discount compared to the last upcycle.During the 2008 upcycle, the sector traded at a 28% discount to NAV, while individual stocks traded at an even lower discount. Currently the sector is trading at a 41% discount to NAV.

* 2Q11 pre-sales o n track . Ex- Lippo Karawaci, which has not reported 2Q11 pre-sales yet, 2Q11 pre-sales for the stocks under our coverage rose 28% YoY and 27% QoQ due to more supply/launches this quarter. This brings 1H11 pre-sales up 28% YoY to Rp5.5tr, or 43% of our FY11 forecast.

* Faster-than-expected increase in ASP. Alam Sutera's ASP has increased 34% in the year to May (vs our FY11 expectation of 50% growth YoY) and BSD City's ASP (Bumi Serpong Damai project) has increased 30% in 1H11 (vs our FY11 expectation of 21% YoY). We believe that a higher-than-expected ASP increase is possible because the developers plan to focus more on pricing rather than volume this year. In 1H11, BSD City sales volume has dropped 14% YoY (vs our expectation of a 9% drop YoY), while Alam Sutera's land sold has declined 33% YoY (vs our expectation of a 24% decline YoY).

Outlook
* We maintain our Overweight on the sector. Our top picks in order of preference are: Summarecon Agung (trading at a 41% discount to NAV), Bumi Serpong (37% discount), Ciputra Development (38% discount), Lippo Karawaci (43% discount), and Alam Sutera (28% discount).


Stocks mentioned:
Summarecon Agung (Rp1,150, OP, TP: Rp1,450)
Bumi Serpong (Rp1,040, OP, TP: Rp1,200)
Ciputra Development (Rp520, OP, TP: 550)
Lippo Karawaci (Rp740, OP, TP: Rp840)
Alam Sutera (Rp400, OP, TP: Rp400)

Bank Tabungan Negara: 1H11 results 49% of ours and 48% of consensus estimates (BBTN, Rp1,770, Neutral, Rp1,600) - Mandiri

􀂄 BTN recorded a net profit of Rp480bn (+13.7% yoy) in 1H11, which was inline with our expectation and consensus estimates
􀂄 Despite that, the bank actually recorded higher than expected operating expenses which mostly be derived from the bank’s network expansion in 1H11. The bank targets to open 200 cash offices this year and until Jun11 it managed to open 149 cash offices. This has led to a higher Cost to Income Ratio (CIR) of 63.7% in 1H11 (from 56.1% in 1H10). So far, these cash offices (totaled 249 outlets) were able to generate around Rp1.2 tn of low cost deposits (CASA).
􀂄 During the analyst meeting yesterday, the management stated their confidence that BTN will be able to achieve its net profit target of Rp1.1 tn this year as 2H is usually stronger than the 1H (last year, 1H results represented 46% of FY10). Even though we buy this argument, we still see two risks attached to this bank (1) lower earning asset yield as the bank still had Rp7 tn variable rate bonds whose rates have declined sharply (in the last auction, the yield on 3 month SPN as the benchmark rate for VR bonds was reported at 4.18%), (2) higher cost of funds should BI increase its benchmark rates in the 2H (note that the bank still relied heavily on TD. At end Jun11, TD accounted for 64% of total deposits). We therefore prefer to maintain our current FY11 net profit forecast of Rp971bn.
􀂄 At present, BTN is traded at 2012F P/BV of 13.4x and PER of 2.1x. We are maintaining our neutral recommendation on the counter.

Gajah Tunggal: GJTL has reduced its ownership in ADMG by 2.65% (GJTL, Rp3,250, Buy, TP: Rp3,000) - Mandiri

􀂄 As quoted in Bisnis Indonesia, GJTL has reduced its ownership in Polychem Indonesia (ADMG) from 28.9% to 26.25%, through regular market mechanism. For the remaining stake, the company is still looking for potential strategic investor. ADMG is a manufacturer of nylon cords, polyester chips, polyester filaments, engineering plastic, and resins; including weaves, knits, and manufacturer’s textile. This action is the realization of the GJTL’s strategy to focus on the tire business.
􀂄 GJTL is targeting FY11F revenue will grow by around 22%-25%yoy to around Rp12.0tn-Rp12.3tn. Around 10% of revenue increase will be distribute from volume and the remaining from increasing ASP. GJTL has increased its ASP by around 10% in 1H11.
􀂄 We have a buy recommendation on GJTL; which is trading at PER11-12F of 12.0-11.6x.

Consumer goods industry: KT&G acquires local cigarette manufacturer - Mandiri

􀂄 KT&G (Korean Tobacco) agrees to pay US$133mn to acquire 60% stake in Trisakti Purwosari, a local hand rolled cigarette producer. No further details are disclosed by the company.
􀂄 In term of sales volume, Trisakti is about 1/70x of that of HMSP, according to GAPPRI data on 2006-2009; therefore we roughly estimate its FY11 net profit is around Rp100bn. This is equivalent to an acquisition valuation at PER of around 20x.
􀂄 The deal once again reflects foreign company’s optimism on Indonesia cigarette industry. We do not cover both companies.

(Big Birdie)FDI to Indonesia Has Increased Substantially, Reviving Indo’s Domestic Consumption-INDF, CPIN, BBRI, BJBR - AmCapital

U.S’s property continues to be on the weak side as reflected from existing home sales during June (act 4.77M Vs cons 4.93M) while the U.S is still facing the debate of debt ceiling. Thus, Dow (↓0.12%) and S&P (↓0.07%) closed lower last night along with weakening price of metals and soft commodities. Euro’s subdued debt overhang increase investors’ risk appetite, triggering most of Asian Market to open higher this morning, Nikkei 225 (↑0.04%), Kospi (↓0.25%), ASX (↑0.49%) and NZX (↑0.23%). Meanwhile Rupiah opens a bit strong this morning, at 8,538 and CDS remains at 138 bps with yield of 10-Yr Gvt bond points to 7.21%. Thus, capital inflows into equity (US$2.54 billion being the highest in Asia Ex Japan) seem to remain strong, in which we expect JCI to be traded in an upward direction albeit limited. Foreign Direct Investment also picks up, which will revive Indonesia ’s domestic consumption. Our selective domestic consumption remains in banking sector such as BBRI IJ, BMRI IJ, BJBR IJ, consumer goods (INDF IJ, CPIN IJ, MAIN IJ, SMSM IJ, and ASII IJ), cement (SMGR IJ), and property (SMRA IJ and ASRI IJ).

Total FDI continues to rise while Unemployment to go down to 6.8% as of February

According to Bank Indonesia data, FDI rose nearly 17% to US$2.9 billion in Q1-2011 YoY while Investment loans increased 29 percent on a year-on-year basis as of May this year while working capital loan grew at 24.8%. The increase in investment loan and working capital loan is expected to widen economic capacity so it could positively impact economic growth broadly including into manufacturing sector which has been stagnating for the last 6 years. The Investment loan growth was faster than consumer loans' and working capital loans' growth of respective 17.8 percent and 24.8 percent. Accelerating investment loan and working capital loan growth will reduce unemployment rate. This benefits companies that focus on lower income segment such as RALS IJ (PER-2011, 13.2x) and SSIA IJ (PER-2011, 11x with accelerating ROE). Surya Semesta Internusa (SSIA IJ) provides land banks especially in Cikarang and Karawang area for industrial estate. We expect that foreign based manufactures continue to expand their manufacture base into Indonesia due to China ’s rising wage and rising purchasing power in Indonesia .

Meanwhile, during June car sales (70,157 Vs prior 61,055) continue to accelerate despite short spare part supply from Japan while motorcycle sales are rising faster than car sales. With rising direct investment, this only supports increasing purchasing power as unemployment rate to go down. We believe consumption in Indonesia now adequately covers basic needs/food, meaning future increases in
disposable income will go on higher levels of consumption of non-essential goods. This is already reflected from car sales. We remain positive on ASII IJ, AUTO IJ (PER-2011,14x) and SMSM IJ (PER-2011, 11x).

Bank Tabungan Negara: Buy ; Rp1,770; TP Rp2,500; BBTN IJ Backloaded earnings and loans - DBS

• 1H11 net profit comprised 41%/44% of our/consensus earnings. NPLs for subsidized mortgage loans emerged while NIM was lower due to higher funding costs.
• Loan growth likely backloaded and asset quality expected to be resolved by year-end. No change in forecasts at this juncture.
• Maintain Buy with Rp2,500 TP.

Telekomunikasi Indonesia: Hold; Rp7,100; TP Rp7,700; TLKM IJ Telkom’s subsidiary Mitratel planning IPO in 2012 - DBS

What ' s new?
It was reported in Investor Daily today that Mitratel, a wholly owned subsidiary of PT Telkom, has sealed Rp1tr loan facility from PT Bank Rakyat (BRI). The loan will be used to partly finance the construction of 1,800 towers. The total cost for the 1,800 towers is Rp2.5tr. With this expansion, Mitratel’s towers will total to 3,000 by end of this year, versus only 270 towers as at end 2010. With 3,000 towers, Mitratel’s President Director, Edy Irianto believes that it would be a good capital base for Mitratel to go on IPO by 2012.
Mitratel is also planning to takeover 16,000 Telkomsel towers. Yet, this plan is pending approval from SingTel as it owns 35% stake in Telkomsel.
Meanwhile, Telkom is still assessing several options to buy back Telkomsel share from SingTel.

Our view
· Mitratel has disclosed its intention for IPO in the past given the attractive valuations of 10-15x EV/EBITDA enjoyed by independent tower players.
· While 3K towers should be good enough for IPO, Mitratel is looking to be the biggest tower company. This requires them to take over Telkomsel’s towers, a cause of contention between Telkom and SingTel. Telkom’s proposal to buy back Telkomsel’s 35% stake from SingTel also raises questions over the relationship between Telkom and SingTel.
· Overall, Mitratel’s IPO should be value-accretive for Telkom, although there is no certainty on the timing.

No change to our target price and recommendation

Economy Larger subsidized fuel quota, but limited impact seen on inflation and fiscal position - DBS

The House of Representatives Budget Committee has approved the increase in subsidized fuel quota from 38.6m kiloliters to 40.5m kilolitres. However, the approved amount is still short of the 42m kilolitres that downstream oil and gas regulator BPH Migas was seeking. This implies that the government will have to take steps to restrict subsidized fuel usage going forward. In our view, it is likely that a plan similar to one proposed last year (where private vehicles will be banned from using subsidized fuels and only public vehicles and motorcycles will be allowed to use subsidized fuels) may be re-introduced. However, it is still far from clear that the government will be able to stick to its revised subsidized fuel target. The issue of energy prices has always been politically difficult and notably, an initiative to restrict subsidized fuel usage in April this year was postponed. We would not be surprised if the fuel restrictions will be delayed from the targeted start period this September to next year.

When implemented, the impact on CPI would be more muted compared to when the subsidized price hike took effect in 2008. Indeed, subsidized fuel prices may be kept on hold through the rest of the year even as the government enforces the new quota and there may not be any visible impact on headline CPI. In this case, headline inflation may fall close to 5.0% by the end of the year. Even if a decision is taken to raise subsidized fuel prices, we suspect that only a small increase would be tolerated (around 10%). Under this scenario, headline inflation may breach 6% (YoY) for several months before dipping in December to around 5.7%. Under both scenarios, there are downside risks to our 6.7% inflation forecast for 2011.

Any impact on the budget is going to be limited. After factoring in the larger fuel quota and higher oil prices, the government’s budget deficit as a percentage of GDP is likely going to be 2.0% or lower, not enough to threaten the fiscal outlook. Moreover, the government also has sufficient cash reserves from funds that were not disbursed from previous years that may be tapped on.

Kamis, 21 Juli 2011

Brent crude oil could spike to $175 in 2012 : BoAML - Financial Times

LONDON: Brent crude oil futures could spike up to as high as $175 per barrel briefly next year if the global oil market stays tight, Bank of America Merrill Lynch said on Wednesday.

The bank's research team said in a note that the North Sea benchmark was likely to average $114 per barrel in 2012, compared with a projected average of $109 this year, and it saw room for U.S. light crude to trade near $102 in 2012.

It raised its forecast for Brent to an average of $102 in the fourth quarter of 2011, $8 higher than its previous forecast, saying it did not expect Libyan oil to return to world markets until the end of next year.

If Libyan oil takes much longer to return to the market, and other supply and demand fundamentals remain very bullish, there it a chance of a very sharp rise in prices, the bank said.

"If Libya does not come back on line next year, global growth holds up as expected and monetary policy remains ultra loose, we believe Brent crude oil prices could briefly spike to $175 per barrel next year," Merrill Lynch said.

The bank left its forecast for U.S. light crude oil futures, known as West Texas Intermediate or WTI, unchanged for the fourth quarter of 2011 at $88 per barrel.

"We have pushed back our assumptions on the return of Libyan supplies to 2H 2012, but we now see additional barrels from Saudi Arabia and non-OPEC providing some relief to the market in the coming months," it said in a research note.

Merrill Lynch said European and U.S. economic data had surprised on the downside this year, just as oil demand was set to slow seasonally in September, creating "near-term downward pressures on oil prices".

"We do acknowledge some downside risks to this forecast if shale oil output in the Midwest surprises to the upside."

But it was still bullish on the outlook for oil next year. "Global oil markets remain structurally under-supplied relative to the expected pace of economic growth," it said.

"As such, we see global oil demand growing at a rate of 1.5 million barrels per day (bpd) or 1.7 percent in 2012, underpinned by a global real GDP rate of 4.8 percent.

"Growth in global oil demand will once again come mostly from emerging markets, while we project outright declines for OECD demand," Merrill Lynch added.

It said several factors could derail its outlook, including a European recession, which it did not expect.

BTPN: Innovative bank - Mandiri

We have positive impression from BTPN’s analyst meeting yesterday which again highlighted the success of the bank’s innovation amid tighter competition in the banking sector. While its micro loans grew strongly at 41% yoy, its exposure to pensioners also performed very well, rising 33% yoy in Jun11, supporting a 63% yoy net profit growth. BTPN’s valuation is currently very excessive at 2012F P/BV 2.9x and PER of 13.1x. Yet, the future outlook is really worth considering, in our view.

1H11 net profit represented 48% of FY11 consensus … BTPN reported strong net profit of Rp585bn in 1H11, representing 48% of FY11 consensus forecast. Please note that net profit in 1H10 only represented 43% of FY10, hence better- than- expected FY11 results are very likely as the 2H performance is usually stronger than the 1H.

.. thanks to strong loan growth. The bank recorded strong loan growth of 36% yoy in Jun11, supported by 33% yoy growth in loans to pensioners and 41% yoy to micro businesses. It is interesting to note that the bank still managed to post strong loan growth to pensioners which reflects the bank’s attractive value proposition to its customers. BTPN currently has 470 branches dedicated to cater to pensioners, some also equipped with healthcare facilities.

NIM tended to decline, yet still at a decent level. The bank’s NIM declined from 14.0% in in FY10 to 12.8% in 1H11 as a result of changes in loan composition. The bank is moving toward higher percentage of secured micro loans which yielded 20-22% p.a vs unsecured of 40-42% p.a. The company targets to maintain unsecured loans at maximum 20% of total loans in order to maintain NPL from micro loans at around 4-4.5%.

Introducing new value proposition. During the analyst meeting yesterday, the bank introduced new CSR platform which is well integrated with the bank’s business models. The bank offers training to micro borrowers to improve their knowledge and skills in running their business. We view this as a very innovative approach in doing business and believed that it will contribute to the bank’s sustainable growth in the future. In addition, the bank is also developing new loan scheme to support productive poor people. This new plan is expected to be marketed next year. While valuation looks excessive at present, we believe in the bank’s sound long term growth hence any price correction will be a good buying opportunity.

EXCL – right timing - Indopremier

At Rp6,000, EXCL is trading at 15.2 times our estimated FY11 earnings, and 13.3 times FY12 earnings, with our estimated 16% this year’s earnings growth and 14% that of next year. EXCL is now trading about at par with the sector and the market rating. We favor EXCL strategies on Data businesses while EXCL’s current voice tariff position among the big three provides flexibilities to compete to grow the next years. Maintain BUY with target price of Rp7,250/share.

Right Timing
The year 2007 highlighted a new platform telephone operators to compete among, in our view. The year marked with EXCL’s dramatic decrease of voice tariffs and minutes increased followed in the next years. EXCL’s extreme tariff reduction was soon followed by other operators. In terms of total net revenue among operators listed in the BEI, as of 1Q11, EXCL sat on a 17% revenue market share, reflecting an increase from 6% in the year 2006.

Data the new source of growth
With Voice and SMS services growth have matured, Data business is the next growth engine. At present, pricing is the least most important thing to boost growth for Data section. To produce optimal consumers’ experiences, since 2010, EXCL adopts a method to integrate Voice, SMS, and Data in its product offering that ensures Affordability, Relevance, and Ease-of-Use.

Outlook
We estimate high-single-digit revenue growth years ahead with EXCL keeps its objective to offer optimal products and to go “Beyond Affordability” for the next phases.

Coal update – South Africa impact by Jayden Vantarakis - CLSA

Coal analyst Jayden points out news that the president of the ANC Youth League, Julius Malema is pushing South Africa to nationalize its natural resources, including its sizeable coal mining industry.

Why is this important?

The ANC Youth League has in the past been a strong platform to the highest political office in South Africa.
Other resource-rich countries that have gone down the path to nationalization have resulted in banning and/or disruption of exports.
Large coal miners with presence in South Africa include BHP, Anglo American and Sassol
South African thermal coal price moves in line with Newcastle thermal coal prices
Potential nationalization is likely to introduce uncertainty in the supply chain
Why does it impact Indonesia?

India has been South Africa’s largest customer. South African nationalization concerns could make Indian power utilities look to Indonesia for incremental supply.
Adaro (ADRO IJ) and Indika (INDY IJ) have the most leverage to Indian coal assumption because of their lower coal energy content.

Cement sector: Homefield Advantage - CLSA

Di Shui has done some channel checks and came away convinced that market concerns over rising competition is premature. We have long known that barrier to entry is significant - branding, distribution, land acquisition, and access to raw materials.

But what’s interesting is that even bulk cement is a branded commodity and it is very difficult for cement distributors to switch from one brand to another back and forth. Plus, construction lead time is 2-3 years, assuming one can clear the land (a big IF, especially in Java).

Key points from her report:

1H11 demand growth of 14.8% YoY was largely driven by property development.
Government spending is rising, especially in West and Central Java.
The private sector accounts for 60-70% of total demand with the remaining 30-40% attributed to public spending.
Semen Gresik and Semen Bosowa (the 1st and 4th respective largest domestic producers) have started to import clinker. Both are facing high utilization rates ahead of new capacity coming on stream in 2012.
There have been headlines that several large foreign cement producers plan to expand into Indonesia; we tally US$4bn for 24.5 tons of new capacity. Market concerns over rising competition may be premature. Limited to no foreign capacity likely before 2015.
Despite domestic supply constraints in 2011, market opportunity for foreign producers is limited. Even bulk cement is a branded commodity in Indonesia.
Distribution is another key barrier to entry. Distributers are unlikely to take on new producers, as old producers may retaliate by cutting off supply in the future.
Other barriers include land acquisition and access to raw materials.
We remain overweight Indonesian cement producers. BUY Holcim (SMCB IJ), O-PF Indocement (INTP IJ) and Semen Gresik (SMGR IJ).

Gozco Plantations (GZCO-BUY-IDR370-TP:IDR490) Moving on - Bahana

High 2Q11 new planting; moving ahead as expected
Despite limited new planting of around 800 ha in 1Q11, Gozco Plantations (GZCO) have planted around 2,000 ha of new planting in 2Q11, bringing ytd newly planted area to nearly 3,000 ha or accounting for approximately 50% of our FY11 new planting target of 6,500 ha. It is worth noting, as 90% of its 94k ha unplanted area (exhibit 8) are waived from the new planting permit moratorium, it would enable GZCO to continue expanding with annual additional planted area of around 6.5 ha per annum going forward. Hence, we believe that GSZO is likely to move ahead with its expansion plan to meet its 2011 new planting target.

Weak share price due mainly to share divestment
GZCO’s 23% ytd market underperformance on the back of the divestment of 10% stake in GZCO by one of the shareholders, Barito Pasific (BRPT). This was owing to by BRPT’s failure to acquire additional 10% stake in the company, making up the total of 20%. With 20% stake in GZCO, BRPT was intended to consolidate the company’s earnings in its book. However, we believe that selling pressure has gradually eased as most of shares have been executed and sold to AmFraser Securities ( Singapore ).

1H11: strong results on high production yields
We believe 2Q11 GZCO’s FFB production is likely to reach 40k tons with its third parties’ FFB of 25k tons. Combined with 2k tons of inventory in 1Q11, the 2Q11 expected 14k tons of CPO production would allow the company to book revenue of IDR151k (+105% y-y). Additionally, GZCO’s higher net ASP of IDR7.7m/ton (+17% y-y) has helped the company to bolster the 2Q11 revenues. As consequence, we expect GZCO’s 2Q11 earnings to reach IDR 55b (+230% y-y), bringing 1H10 earnings to IDR100b. This is inline with our expectation and the market consensus, which accounted for approximately 52-53% of FY2011 estimates.

Cheap valuation + Strong growth ahead = BUY!
On the back of strong growth ahead from higher production, GZCO’s 2011 top and bottom lines are on targets to reach IDR610b (+34% y-y) and IDR193b (+20% y-y) respectively. Its commitment to consistently plant on the massive unplanted area would ensure its long term growth of the matured area, growing at CAGR of 23% over the next few years (exhibit 10). This would translate into 15% EPS growth going forward. GZCO is currently trading at undemanding valuation at 2012P/E of 8.6x or 35% discount to the industry’s average. Given its promising long-term growth outlook with PEG of only 0.8x, we believe that GZCO deserves re-rating on its valuation. Despite our Neutral rating on the sector, we maintain our long-term positive view on GZCO with a target price of IDR490 (+32% upside potential), trading at 2012 implied P/E of 11.4x (22% lower than the sector’s average P/E of 14.5x) and PEG of 1.1x (17% lower than the sector’s PEG of 1.3x). BUY.

Aneka Tambang - Weak Earnings Momentum - Citigroup

 Subdued earnings outlook; maintain Sell — The tepid nickel prices outlook and lack of spare capacity in the next few years suggest limited share price upside for the stock, in our view. While the earnings contribution from gold is rising, we think the increased reliance on higher gold prices to re-rate the stock is not a robust foundation for turning positive. We raise our FY11E/FY12E earnings forecasts by 60%/52% respectively, mainly on higher nickel price assumptions. We consequently raise our target price by 53% to Rp1,780 based on 2012E P/E of 10.6x – the stock’s average since 2004. However, we think valuations at 2012E P/E of 12.2x are demanding against an outlook of declining earnings in 2012-13E. Hence, we maintain our Sell / Medium Risk (3M) rating.

 Nickel prices may have peaked — After nickel prices averaged c.US$25,600/t in 1H11, Citi’s Global Commodities team expects nickel prices to moderate to US$24,500 in the next 6-12 months. Despite the significant ongoing problems with the ramp-up of new HPAL capacity, the ongoing increase in Chinese nickel-pig-iron production is likely to cap significant gains in the price of nickel in 2H11.

 Gold production ramp-up — We expect Antam to increase its gold production by 10% in 2011E as it ramps up production at the Cibaliung gold mine. The ramp-up should mitigate the weaker earnings outlook from nickel and ferronickel. Hence, we expect gold to account for c. 30% of 2011E EBIT vs. 25% in 2010. Citi expects a weaker investment-demand environment for gold in 2012E and thus expects the metal to once more be trading below US$1,400/oz.

 Risks — Upside risks to our call stem mainly from higher-than-expected nickel and/or gold prices and production.

Delta Dunia: Consensus number may still be coming down (DOID, Rp1,040, Buy, TP: Rp1,400) - Mandiri

􀂄 We found an indication of weak 2Q11earnings mainly due to margin compression driven by a jump in depreciation cost, spare part-maintenance cost, and accounting changes in salary and bonus payment from cash basis into accrual basis. In addition there would be one-off refinancing cost of US$16-17mn. Overall it potentially reduces our FY11F operating margin by 2-3% or equivalent to Rp130-200bn earnings vs our previous FY11F net profit forecast of Rp454bn (consensus Rp554bn).
􀂄 Our forecasts and consensus numbers may have underestimated the affect of DOID’s Double Declining (DD) method that may result in a 60% yoy jump in depreciation cost this year, to US$150-160mn (vs our FY11F of US$105mn), given the capex expansion. In FY11, DOID is budgeting US$250mn capex with potential upgrade to US$280mn if certain projects are awarded, versus US$200mn capex in FY10 and US$75mn in FY09.
􀂄 Change into Straight line method (SL) is a critical factor for DOID’s bottom line in our opinion which hypothetically could save significantly up to US$30-40mn of depreciation cost in early years
􀂄 On the balance sheet side, the completion of US$138mn right issue has
strengthened its balance sheet, increasing the company’s bargaining
power to its lender.
􀂄 On the operating side, overburden removal reached 155.7mn bcm in 1H11 or 43.3% of our forecast. Company is now guiding 350mn OB removal, or 2.7% lower than previous number of 360mn bcm. To achieve this target, company needs to ramp up its OB number to 32-33mn bcm per month, versus 27-28mn bcm in May and June 2011.
􀂄 Delivery of its new fleets is on track which mostly came in June and July 2011. The new equipment is is expected to lift revenue in 3Q11. As of June 2011, DOID has spent US$90mn capex and expects fleets deliveries worth U$160mn in 2H11F.
􀂄 We are reviewing our forecasts with possible downgrade following the 2Q11 results that will be announced around the end of this month

Astra International: Buy; Rp71,500; TP Rp80,000 prev Rp65,000; ASII IJ; Burning rubber in 2H - DBS

• Expect strong recovery of 4W sales in 2H
• Ample share price catalysts
• Maintain Buy; TP raised to Rp80,000

Pending recovery of 4W market. ASII’s 1H11 4W sales grew a healthy 10% yoy to 229K units despite the supply disruption. More positively, latest channel checks confirm ASII dealers’ inventories have returned to normal, led by the rapid recovery of production at Toyota and Daihatsu. It is now poised to ride on the strongest seasonal period of the year (3Q) and pent up demand accumulated over the past few months. In view of the improving supply-side dynamics, pent-up demand, and seasonal factors, we expect the underlying developments to further improve investment sentiment towards the stock.

Ample catalysts. ASII offers several thematic plays: (1) it is the main beneficiary of Indonesia’s consumer-driven growth, (2) it has an urban orientation, and will benefit from rising electricity consumption; this will raise coal demand and benefit United Tractors, where ASII is the largest shareholder with 60% stake, and (3) continued re-rating of the broad JCI.

TP raised to Rp80,000; reiterate BUY. Given ASII’s robust earnings momentum relative to its size (+21% yoy in FY11F), well-hedged business model, transparent governance, and high dividend payout policy, its current valuations (on a blended FY11/12) at 15.8x P/E and 4.2x P/BV (29% ROE) is reasonable. Near term catalysts are strong 4W sales in 3Q11, and possibly stronger Rupiah. Our sum-of-parts TP is raised to Rp80,000 , offering 15% upside (including an c.3% dividend yield). The uptick is due to our earnings upgrade and rolling over of our valuation base to blended FY11/12 earnings.

ITMG: Moderate growth in 2Q11, still wet - Mandiri

We feel that our forecast and consensus number for ITMG are on the conservative side, based on 2Q11 preview and company visit. South Kalimantan’s weather has been favorable for mining activities, drier than that of East Kalimantan. In 2Q11, the company indicated moderate production growth of 9.6%-11.5% QoQ to 5.7-5.8Mt, 300k-400k tons below internal target. But, the management appeared upbeat on coal price outlook for FY11F, seeing potential upside to US$94/ton versus current guidance of US$92/ton. Diesel and cash costs are running higher than our assumptions, but our earnings sensitivity analysis points to potential earnings upgrade of between 10-16% for FY11F, that would place ITMG on 11.3-12.0x P/E, looking attractive to its peers.

Below company’s target. Coal production in Indominco and Trubaindo were expected to reach 3.5Mt and 1.7Mt or 300k and 100k below company’s target respectively. April and May was still wet months and there was still lot of mud caused by heavy rainfall carried over from the 1Q11 in Indominco. But strip ratio has been stable at 12x. The company has indicated higher cash cost following higher fuel price that has reached US$1.08/litre (+16.2%qoq), 20% higher than our FY11F of US$0.9/litre.

Upbeat on coal price outlook. The company is upbeat on the coal price outlook in 2H11F. Company stated that strong demand from China and India will effectively take effect on seaborne coal price in 4Q11. However, currently ITMG only has around 20% exposure to spot and index-link pricing, so there will be less opportunity capturing any coal price hike in 4Q11. But it reiterated that there is still potential upside for its FY11F ASP up to US$92-94/ton, 7%-10% higher than our conservative FY11F ASP of US$85.6/ton.

Derivative losses in 2Q11. The company indicated it record profit on coal swap transaction but booked losses on fuel swap transaction. But overall, in 2Q11 the company will book a net derivative loss of around US$5mn. So cumulatively as of June 2011, the net result is net derivative gains of around US$4-5mn vs derivative gain in 1Q11 of US$9.3mn.

Potential attractive valuation- Maintain Buy. Based on our sensitivity, the net result of higher coal price and fuel price is positive for FY11F earnings with potential earnings upgrade up to 10 -16% which lead to attractive valuation (please see exhibit 2). However, we maintain our earning forecast and prefer to wait on the actual 2Q11 results that will be announced in mid August 2011. We still maintain our Buy rating and TP at Rp55,800 implying 15.4x-11.3xPER11F-12F.

JSMR (TP Rp4,000): So far so good - Danareksa

Steady Traffic
Traffic was relatively steady in June at 90.9mn vehicles (+0.7% mom). This confirms that the restrictions on trucks did not have any significant adverse impact on inner city traffic. In fact, the inner city traffic was 1.7% mom higher at 22.1mn vehicles in June. The daily average traffic volume was 2.9mn vehicles (+1.0% mom, +12.3% yoy). Nonetheless, please bear in mind that yoy comparisons are not apple-to-apple - and therefore misleading – because of relocation of some toll gates and the resulting change in the traffic accounting system.

New toll road awarded
Jasa Marga has been awarded a new toll road project from Sarangan – Tj Benoa in Bali , which goes from the airport to the busy resort in the south. The toll road can be expected to be completed before the APEC summit in 2013. The length of the toll road is 10 km involving a Rp2.3tr investment. Fortunately, land acquisition for this project is minimal since the toll road shall run along the coast. Construction shall be more expensive, however, as the toll road is elevated. In other projects, reparation of the Semarang-Solo section has been done and approval is currently being sought from the toll road authority for commercial operation of the section. It is expected that the toll road shall be operational before the Lebaran Holidays in August 2011.

The missing piece of the puzzle
JORRW2 North is the missing link in the JORR toll road. The toll road passes through the two regional districts of South Jakarta and West Jakarta . In the South Jakarta area, land acquisition has reached 70.95% while in West Jakarta the figure stands at 89.36%. Jasa Marga aims to start construction in early 2012 with completion expected within 18 months. Jasa Marga may choose to split up the 7km toll road into two or three sections that utilize two to three different contractors, a move which would hopefully speed up its completion.

2Q11 results expected soon
The 2Q11 results are expected to be released in the last week of July 2011. We expect 2Q11 to be better than 1Q11 because of the stronger traffic (traffic reached 268.2mn vehicles in 2Q11 or up 5.7% qoq). And since Jasa Marga has not significantly increased its gearing, the operational improvement in 2Q11 should flow through to the bottom line. Given our expectation of good 2Q11 results, we maintain our BUY recommendation on the counter. Our Target Price is Rp4,000.

Banking: Concerns on possible foreign shareholding limit curb - DBS

Concerns on foreign banks’ exposure to Indonesian operations appear to be looming since news was circulated last week. It was reported in the media that Bank Indonesia plans to curb the amount of shares an individual investor can hold in commercial banks. Its Deputy Governor had stated that a study to limit bank ownership to less than 50% was underway. Regulating the single majority in a bank would be the central bank’s top priority within the next couple of years, he said, adding that Bank Indonesia aims to encourage banks to sell their shares to the public so that the ownership of majority shareholders could be reduced. Bank Indonesia ’s Governor stated that the new regulations could go into effect by 4Q11. Branches of foreign banks may not be affected by this regulation, as they are not part of an Indonesian bank. The Governor also said that the affected banks would be given ‘a long period of transition time’ after the rule is passed so that the affected investors can sell their stakes to whomever they choose. State-controlled banks would likely be exempted, although it is still unclear at this stage.

We think it is still too preliminary to take any action on our calls/recommendations. Even if the rule is passed at the end of this year, we believe the central bank would give sufficient time for the shareholders to pare down their stake. It is also not clear if the rules would be implemented retroactively.

Bank Danamon (BDMN) and Bank Tabungan Pensiun Nasional (BTPN) are both largely owned by foreign shareholders. BDMN is 67.4% owned by Asia Financial Indonesia (stakes jointly held by Temasek and Deutsche Bank). Meanwhile, TPG hold 59.7% of BTPN.

If strictly implemented, BDMN and BTPN could see it owners selling its stakes down over time. Perhaps BDMN could resolve this via its proposed rights issue, which it announced last week. BDMN stated its intention to raise rights but did not release any details of the proposed rights, except that it would likely be completed by year end. Management said that the proposed rights issue is a proactive move to strengthen its capital base for further business growth over the next three years.
Separately, the impact would be negative for Malaysian-owned Indonesian banks particularly CIMB, which owns 96% of CIMB Niaga, while the impact on Maybank which owns 96% of Bank Internasional Indonesia (BII) would be negligible.

CIMB derives 35% of its earnings from its Indonesian operations. Assuming this is halved (CIMB currently holds 96% of CIMB Niaga), earnings could decline by 10-13% over FY12-13. However, should CIMB be able to sell its stake of CIMB Niaga down, it would be able to reap capital gains which could more than offset the earnings decline. But this would be one-off and subsequent earnings excitement would have to largely depend on its Malaysian operations.

For Maybank, BII contributes less than 5% to the group. Even if Maybank has to sell down its stake, the impact to earnings would be minimal. Maybank is still trying to sell its stake down to 80% as stipulated by Bapepam ( Indonesia ’s Securities Commission equivalent) and has so far not been able to lower its stake that much – from 97.5% to 96.0% so far. If Maybank is required to lower its stake in BII to 50%, capital gains would be significant at current valuations. Impact going forward would not be significant as Maybank continues to derive more than 90% of its earnings from Malaysia , with the second largest contribution from Singapore .

Astra Agro Lestari; Hold - downgrade from Buy-; Rp22,950; TP Rp25,150 prev Rp28,100; AALI IJ: 2Q11 earnings to decelerate - DBS

• CPO output up 16% q-o-q and 27% y-o-y, boosted by larger external FFB purchases
• But 2Q11 earnings expected to edge down 1% q-o-q to Rp640-660b due to higher raw material costs
• FY11F-12F earnings cut by 5-11% on lower expected CPO prices due to stronger IDR
• TP lowered to Rp25,150, downgrade to Hold

1H11 output in line. Astra Agro Lestari (AALI) reported strong growth in 2Q11 CPO output to 319,064 MT (+16% q-o-q, +27% y-o-y). As a result, 1H11 CPO output jumped 26% y-o-y to 594,163 MT, or 50% of our FY11F output.

Third-party FFB purchases remained high. The strong CPO output was driven by a surge in 3rd party FFB purchases in the quarter to 268,826 MT (+31% q-o-q, +83% y-o-y), translating into 1H11 volume of 474,703 MT (+111% y-o-y). As was the case in 1Q11, recovering FFB yields were likely the main driver. We expect this to continue into 2H11led by seasonal uptick and increased maturity profile.
Earnings growth to decelerate. In 2Q11, spot CPO prices received by Indonesian planters averaged Rp7,721/kg (-7% q-o-q). A combination lower q-o-q net CPO ASP and larger external FFB purchases should offset the impact of larger own FFB volumes. Hence, we expect 2Q11 bottom line to be flat at Rp640-660b, but still c.80% stronger y-o-y.

TP cut to Rp25,150. DBS Bank recently revised its forecast FX rates, calling for slightly weaker MYR in the near term, but stronger IDR and MYR over the long term. Hence, we nudged up near-term CPO prices, and nudged down long-term CPO prices. And accordingly, we cut FY11-13F earnings by 5-11% due to a stronger IDR. Given limited 10% upside potential, we downgrade AALI to HOLD from Buy.

Corporate Result Flash Adhi Karya - Bahana

2Q11 performance
§ Despite robust growth of 675% q-q, ADHI booked unexciting 2Q11 net profit of IDR19b, bringing 1H11 net profit to just IDR22b (-6.3% y-y). Although 1H11 earnings accounted for only 11.3% of our and consensus FY11 estimates, it was in line with expectation due to the cyclicality of the industry. Likewise, ADHI’s 1H10 earnings accounted for 12% of FY10 earnings. We believe that ADHI is likely to post better results in the subsequent quarters.
§ On a positive note, 2Q11 operating profit jumped 113.8% q-q to IDR70b, translating 1H11 earnings of IDR103b (+36.4% y-y), in line with our and consensus estimates. Higher operating profit in 2Q11 stemmed from accelerated project delivery and higher operating efficiency, leading to improvement in margins to 5.8% from 5.2% in 1Q11.
§ On the top line, 2Q11 revenue of 1.2t (+92% y-y) remained insufficient to propel 1H11 revenue, booking IDR1.8t (-1.9% y-y).

Outlook
While 2Q11 earnings were far from stellar, we expect acceleration on the realization book orders to support improvement in the following quarters. Nevertheless, we plan to revisit our numbers to account for possible slower than expected projects completion. It is worth highlighting that while downward revision on ADHI’s 2011 revenue may unfold.

Valuation and recommendation
While we roll over our valuation to 2012, we maintain our TP of ADHI at IDR970, translating to an implied P/E of 7.8x, 51% discount to the regional PE of 15.9x. Despite unexciting earnings performance, ADHI’s undemanding valuation has encouraged us to retain our BUY rating on the counter.

ASII (TP Rp78,000) 1H11 auto sales came in line with our full year estimates - Credit Suisse

● Domestic car and motorcycle sales during 1H11 came in in-line with our full-year estimates. Domestic car sales in June were up 15% MoM (flat YoY) to 70,157 units. The 2Q11 car sales were up 8% QoQ (-2% YoY), bringing the YTD figure up to 13% YoY,
which came in line with our forecast (47% of FY11E).
● Astra’s car sales in June were up 24% MoM (flat YoY) to 39,852 units. The 2Q11 sales up 9% QoQ (-5%YoY). YTD, Astra’s car sales up 10% YoY to 229,151 units (47% of FY11E). Astra continues to lead the segment at 57% market share in June.
● Domestic motorcycle in June down 7% MoM (1% YoY) due to fewer working days in June. The 2Q11 sales were up 17% QoQ (21% YoY). YTD figure was in line with our forecast, up 13%YoY.
● Astra’s motorcycle sales in June increased 23% YoY (-4% MoM)to 361,665 units, which brings 2Q11 sales up 17% QoQ (+21% YoY). YTD, Astra’s sales up 26% YoY (48% of FY11E). Astra maintained its dominant market share at 55% in June. We maintain our NEUTRAL rating and target price of Rp78,000.

Senin, 18 Juli 2011

Bumi Resources: Step-up acquisition and share matching awards (BUMI, Rp2,950, Buy, TP: Rp3,700) - Mandiri

􀂄 Last week Bumi Plc announced its application for 1.299mn new Bumi Plc’s voting ordinary shares to be admitted to the premium listing segment and London stock exchange, of which 1.179mn shares new Bumi Plc’s voting shares as consideration part of the BUMI’s Step-up acquisitions program announced on 30 June 2011 to increase ownership in BUMI up to 32.1%. While 120k shares has been allotted to the Share Matching Award Directors.
􀂄 Upon admission the total number of ordinary shares in Bumi Plc will be 224.9mn shares, in which voting right will be 157.0 mn shares and 67.8mn shares will be suspended voting ordinary shares.
􀂄 The transaction is a bit slower than our expectation but remain on track with company’s plan. Despite we find it challenging for Bumi Plc to increase its ownership in BUMI up to 51% (40% is more likely), Bumi Plc has been incorporated in UK to become the parent company of the Group so it could have less than 50% free float once the scheme become effective. Premium listing to FTSE100 is a critical moment for the Group since it will increase global capital inflow and support fund raising forward.
􀂄 Currently we have Buy rating on the stock, BUMI is traded at 14.3x-12.1x PER11F-12F.

Adhi Karya: New project obtained in 1H11 reached Rp4.1tn translating to 33% of FY target (ADHI, Rp740, Neutral, TP; Rp950) - Mandiri

􀂄 New contract obtained in 1H11 has reached Rp4.1tn (+103.0%yoy) or translating to 32.8% of FY target. ADHI is targeting of FY11F new contract of Rp12.5tn (+54.3%yoy), while carry over contract of Rp6.9tn (+27.8%yoy). Hence, FY order book to reach Rp19.4tn (+43.7%yoy). The increase of the new contract obtained in 1H11 due to the project delayed on 2010. Around 80% of ADHI’s projects are governments.
􀂄 ADHI is targeting revenue FY11F to reach Rp9.1tn (+59.6%yoy), and net income Rp208bn (+10.0%yoy). Meanwhile, we are forecasting new contracts of Rp11.8tn (+45.6%yoy) generating revenue of Rp8.3tn (+45.6%yoy). Furthermore, we expect net profit FY11F to reach Rp200bn (+5.8%yoy) given net margin at 2.4%.
􀂄 We have Neutral recommendation on ADHI, is traded at PER11F of 6.5x.

Telkom Indonesia: Highlights from site visit (TLKM, Rp7,150, Neutral, TP: Rp7,600) - Mandiri

􀂄 We made a site visit to Telkom Indonesia’s (TLKM) market in Manado, North Sulawesi and found several points to highlight.
􀂄 North Sulawesi, especially Manado, is an important part for TLKM, in terms of market and network backbone for Eastern part of Indonesia. TLKM through Telkomsel predominate cellular market with 87% market share (2.1mn subscribers, 93% penetration rate). However, in terms of revenue contribution, Mid-East Indonesia only comprises 25% of total.
􀂄 Clearly, Eastern part of Indonesia is very dependent to TLKM’s current earth station satellite and future Palapa Ring, which we see may be the catalyst for growth in Eastern Indonesia’s lack of network infrastructure (currently 50% completions).
􀂄 Meanwhile on data & internet segment, TLKM’s Speedy holds 61.5% market share, ahead of Indosat’s IM2. We view that Manado is very potential market, where it has the 2nd fastest internet growth after Jakarta. It also has the 2nd largest subscription-based tablet PC (e.g. iPad and Samsung Galaxy Tab) users. This is due to the fact that Manado people are in high standard living style (GDP per cap grow 67% in the last 5 years) and highly consumptive.
􀂄 On tower business, TLKM’s towers in Eastern Indonesia, specifically North Sulawesi, have high tenancy ratio of 5-6 tenants in one tower, which impose to high margin as in Java area (60-70% operating margin)
􀂄 Overall, we view that Eastern Indonesia has future potential for data and internet growth; however network infrastructure (e.g. Palapa Ring) is essential to support the growth. We still maintain our Neutral view on TLKM, currently traded at PER11F 11.4x

Adaro Energy (ADRO IJ) Turning on the Power - CLSA

Our mining analyst Jayden has just written an update on the company’s plan to move further downstream into the domestic power sector. ADRO-JPower-Itochu consortium has signed an LOI with the Indo govt for the 2x1,000MW IPP in Central Java. Outperform with TP of Rp2,800.

We see the move into power as positive over the medium to long term for the following reasons:

Creating base demand for ADRO’s lower energy Wara coal (4,000kcal/kg), which will represent the majority of incremental future production.
Thus, the power plant project will give ADRO some leverage in dealing with future coal buyers.
State owned power company PLN, under new management, bears several key risks of coal price and exchange rate. This provides more stable returns to investors over the 25 year contract life.

Other key points from the meeting:

ADRO-JPower-Itochu consortium has signed an LOI with the Indonesian Government for the 2x1,000MW Pemalang IPP in Central Java.
ADRO owns 34% of the 2x1,000MW Pemalang IPP in Central Java and plans to supply 7mt of the 9mt annual coal requirement. PLN bearing several key risks.
ADRO is also submitting bids in for two more power projects, although with less scale than the first. Partnering with KEPCO for a US$350m 2x100MW project in South Kalimantan, and with Mitsubishi in 1x660MW power plant in West Java.
While we estimate returns to shareholders will be above ADRO’s WACC, the forecast start date of 2017 will have no bearing on near term valuations for the stock.
Any additional power tenders won will have similar construction lead times. Neutral near term impact on valuation.
Along with the rest of the Indonesian thermal coal players, Adaro has underperformed the JCI during 1H11. We keep our operating assumptions and TP unchanged.
Our earnings estimates are based on coal price forecasts of US$115/t and US$105/t respectively in 12CL and 13CL. Our 1 year fair value of Rp2,800 is based on a blended DCF and 12.5x 12CL PE, offering investors 13% upside.

Adaro Energy: Hold; Rp2,550; TP Rp2,450; ADRO IJ Key takeaways from site visit - DBS

• Vertical integration into power plant to secure coal demand.
• Good weather supports coal production in 2Q. Expect 1H production to be within our estimates.
• Maintain Hold, Rp2,450 TP.

We joined the analyst meeting and site visits at Tutupan and Wara mines in South Kalimantan . Some takeaways are as follows:
2x1GW Power Plant Deal is a long-term project; not much expected in near term. Adaro (34% stake) recently announced a project with J Power (34%) and Itochu (32%) for a coal-fired plant with 2x1GW capacity in Central Java . The purchase agreement with PLN will be for 25 years after the completion of the project. Although this IPP project represents a strategic move by Adaro to move downstream and to secure demand for its coal (up to 7m tons per year), we believe the project should not have any material impact in the near term. While the project could offer interesting prospects given its size and coal consumption potential, we think it is still too early to judge as the project will not start its operation until 2017. Assuming US$1m per MW and 80:20 debt/equity ratio, its 34% stake or US$136m will be financed internally and net gearing will increase to 0.7x but the debt at project level will not be consolidated into the book. We expect IRR of mid-teen for the power plant project.

Better weather supports coal production in 2Q. Our discussion with the operation personnel revealed that the weather was favourable in April and June with exception in May. But overall it was drier than last year. Combined coal production at Tutupan and Wara could reach 120-130k tons/day in 2Q. This should translate into up to 12m tons of output in 2Q or 22.4m tons in 1H or inline with our estimates as we expect 47m tons of production in FY11F. Given current weather conditions, we believe 48m tons of output for 2011 is possible.

Kelanis terminal expansion and power plant. A new set of barge loaders with capacity of 30m tons will be build at south Kelanis near the existing facility in order to expand capacity to 80mtpa (from 55mtpa) with estimated completion in 2Q12. ADRO also plans to build 2x30MW power plants to supply power for its overburdened crushing and conveying and other parts of the mining operations as well as to reduce dependency on fuel oil.

Bio diesel fuel project. Jetrova-based Bio diesel fuel (BDF) refinery plant with capacity of 1.2 tons per day has been built in March. ADRO estimates around 8k tons of BDF will be used annually and reduces 20k tons of CO2 emission. ADRO currently use its BDF production as a fuel for its Komatsu HD785 dump truck.

Maintain Hold, Rp2,450 TP. We like ADRO for long-term growth prospects with the power plants generating stable cash flow and creating demand for its coal. However, we foresee short-term earnings risk due to its slower growth in ASP compared to peers. Maintain Hold, Rp2,450 TP.

(Early Bird) Euro Continues to Struggle, JCI’s Almost Reaching its Full Valuation - AmCapital

The U.S’s consumers continue to struggle as Michigan Sentiment reflected (Act 63.8 Vs cons 71.4); however, better than expected corporate profits from Google, which brought Dow (↑0.34%) and S&P (↑0.56%) into a positive territory. Continued worry on Euro’s debt is still persisting, where ECB (Euro Bank Central) refuses to take a collateral from default country. This causes Euro to open much weaker, at 1.401 while Spain’s (6%) and Italy’s yield (5.7%) keeps going new high. This triggers most of Asian Market to open lower this morning, Kospi (↓0.83%), ASX (↓0.23%) and NZX (↓0.55%). Rupiah seems to be weakening at this point, at 8,543 while Indo’s CDS is still stable at 138 bps. This means that JCI might be traded a bit lower albeit limited since it almost reaches its full valuation, PER-2011 of 14.3x (Estimate of 280 rupiah/share). We prefer buy on weaknesses on banks (BBRI IJ, BMRI IJ and BJBR IJ), consumer goods (INDF IJ and CPIN IJ), telcos (TLKM IJ and EXCL IJ), and property such as ASRI IJ and BSDE IJ) on the back of relatively lower inflation compared to that of last year.

Corporate Headlines:
PT Adaro Energy Tbk (ADRO IJ): will increase its port capacity in Central Kalimantan from 55 million tons to 80 million tons/year. This project will need fund of US$100 million and will be finished by the end of 2H-2012. The port expansion is actually meeting with the production target up 80 million tons by 2012.

PT Alam Sutera Realty Tbk (ASRI IJ): is planning to expand its land bank in Pasar Kemis, Tangerang. The company needs fund of 300-500 billion rupiah to expand its land bank. ASRI IJ already has 700 Ha of land bank in Pasar Kemis, and will plan to expand as far as 1,000 Ha. The fund source is from internal cash marketing sales. As of now, the company’s cash balance is 900 billion rupiah.

Minggu, 17 Juli 2011

Nirwan Bakrie: Indonesia Should Control Newmont Management Indonesia - The Indonesia Today

Nirwan Bakrie, leader of the Bakrie Group, said the group is not interested anymore in getting the 7% shares divested by PT Newmont Nusa Tenggara (NNT), which has been purchased by central government.

But Nirwan, according to Media Indonesia, said Indonesian parties should control the management of NNT pursuant to the spirit of divestment laid out in the contract of work.

"Legal ground for the control over Newmont is Article 33 of 1945 Constitution. That's the spirit of divestment," Nirwan said.

Citing the same article, Nirwan said that divestment of shares should be with an outright control over the management of NNT.

"We don't want to see the shares divested, but control over the management is retained by foreign parties," Nirwan said.

After the completion of divestment, national interests control 51% shares in NNT. They are PT Multi Daerah Bersaing, a consortium of Bakrie and local administrations, with 24%, Pukuafu with 17.8%, PT Masbaga 2.2%, and central government with 7%. Newmont and Sumitomo, meanwhile, co-own 49%.

At the hear of the criticism is the voting rights of Masbaga, which reportedly controlled by Newmont, giving the company and Sumitomo a majority voting rights in NNT. Newmont had earlier denied of controlling the shares held by Masbaga, but Newmont's financial statement to the New York Stock Exchange clearly mentioned about the control over Masbaga's voting rights.

Delta Dunia Completes US$142 Million Rights Issue Indonesia - The Indonesia Today

PT Delta Dunia Makmur (DOID) Tbk, parent company of giant mining contractor Bukit Makmur Mandiri Utama (BUMA), has completed a rights issue, which raised gross proceeds of US$142 million.

DOID issued 1.358 billion new shares priced at Rp900 per share or about 16.7% of the company's total issued and paid-up capital after the rights issue. The stock closed lower at Rp1,020 on Friday (July 15). At that price, DOID currently has market capitalization of Rp8.31 trillion.

"The rights issue was fully taken up by existing shareholders and when calculating requests for additional shares from existing shareholders (over allotment), the rights issue was 1.2x oversubscribed," DOID said this week.

DOID said there were no remaining right shares purchased by Northstar Tambang Persada Ltd as the stand-by buyer.

Credit Suisse (Singapore) Limited and Mandiri Sekuritas acted as financial advisors for the rights issue, while Milbank, Tweed, Hadley & McCloy LLP and Melli Darsa & Co were legal advisors.

Barclays: Nickel continues to outperform the base metals complex - Commodity Online

Price movements were mixed across the complex yesterday. Broad market sentiment received some support from a stronger-than-expected Q2 China GDP growth figure as well as indications from Fed Chairman Bernanke of the potential for additional policy support (if needed), although this was tempered by the on-going challenges presented by the peripheral Europe debt crisis.

The strongest performer on the day was nickel, which rose by 1.4%, while Lead was the weakest, falling by 1%. Indeed, the past month has seen Nickel being strong, rising by close to 12% from its low in mid-June. This performance is in-line with our expectations given that the refined nickel market has been the only base metal in a market deficit, clearly supported by a sustained downward trend in LME stock levels (down by 32Kt, -21% YTD).

In turn, in our view, we certainly lacked a clear justification for nickel prices to be trading into the cost curve, which was the case in mid-June when the profit margins of high-to-medium grade nickel pig iron (NPI) producers in China were being pressured when the LME front-month contract was trading close to $21,000/t. Moreover, the latest flow of data from China suggests that despite concerns over rising NPI output, which have been invigorated by the 62% rise in ore imports year-to-date, refined nickel demand is also in robust health.

For January to May, apparent consumption of refined nickel rose by an impressive 21%, second only to lead across the complex in strength with no indications this had been distorted by any restocking effects. The release of the NBS June refined production figure yesterday, which offered a robust 48% y/y growth in output, indicates that this positive demand trend is continuing into the middle of the year.
Moreover, Chinese refined nickel prices continue to trade at a robust premium to LME, averaging $3,700/t since the beginning of June, only mildly lower than the April-May average of $3,870/t, offering few signs of oversupply. Moreover, while Q3 stainless output in China is anticipated to be close to flat y/y as well as q/q, Q4 is expected to be a record period for production levels and with indications of significant substitution from 200 (low nickel) to 300 (high nickel) series stainless in 2011, refined Nickel demand appears set to improve towards year-end.

eyond China, softer stainless demand conditions are anticipated in both the US and Europe in Q3 and to some degree this is evidenced by the recent performance of physical premia. In Europe at least, nickel premiums have fallen firmly over the past week, with Metal Bulletin reporting premiums for uncut cathodes have fallen to $100-150/t from $150-200/t, as 4x4 cathodes and nickel briquettes have also softened to $300-350/t from $350-400/t. The supply-side of the nickel market has also captured significant attention for the level of disruptions experienced in 2011 and yesterday saw an announcement from Minara Resources that the recent suspension of production at its Murrin Murrin high-pressure acid leach (HPAL) facility owing to a technical problem has resulted in the company reducing its production guidance from 33-37Kt down to 29-32Kt for 2011.

By implication, the loss of production could be as great as 8Kt versus initial expectations, and demonstrates that even for an apparent success story for HPAL facilities, the susceptibility to disruption and lost output remains high. Finally, the quarterly results of the major miners have begun to be published for Q2 giving some indication of production performance during the period. Rio Tinto Q2 11 mined Copper production fell by a massive 24% y/y, owing largely to lower ore head grades at 630Ktpy Escondida and 211Ktpy Kennecott Utah Copper.

Mined production at Escondida fell 23% y/y during H1 11 and 31% y/y in Q2 11, while refined output rose by 8% and fell by 4%, respectively, as ore grades fell from 1.4% to 1.06%. Kennecott Utah mined copper output fell by 17% y/y in Q2 11 and output for the year will be lower as production moved through lower grade areas of the pit. Due to changes in metal sharing and lower ore grades, Rio’s share of production from Grasberg fell dramatically (by 64%). The full picture of mine output for this mine will be published in Freeport-McMoRan’s results on 21 July.

US building slump squeezes scrap copper market - Reuters

Supplies in the U.S. copper scrap market remained tight at the start of the third quarter, as a lingering slump in industrial demolition rates made material, especially higher-grade material, harder to come by.

The prolonged downturn in the housing sector has squeezed supplies, along with a general reluctance from producers and owners to release more metal into the marketplace as smaller quantities of the secondary scrap metal have limited their ability to quickly fill shipment containers.

"The generation is a little bit less because housing demolition continues to not be there, so your insulated wire units and clean, high-grade copper are just not as prevalent as they had been in the past during the summer months," said Matthew Heitmeier, director of non-ferrous metal marketing with Louis Padnos Iron & Metal Co.

"People don't want to sell until they know that they have a full load to ship."
It was not clear whether this slower business trend will extend into the autumn.
"I don't see anything that would portend a significant increase in the flow of copper scrap, unless there is a very dramatic price rise and some quantities that may still be withheld hit the street and start to move," said Robert Stein, vice president of nonferrous marketing and trading with Alter Trading Corporation.
While higher grades of scrap have become harder for buyers to get their hands on, lesser grades have flourished, with the lion's share of this material heading over to Asia.

"There has been tremendous buying of electric motors and insulated copper wires ... the lower-grade items, whereas the higher grade material has not picked up," said Marc Kaplan, president of Mews Metals Trading in New Jersey.
As a result, the spreads or discounts that the secondary metal tends to own against the benchmark COMEX futures price HGU1 have barely budged over the last 30 days, dealers said.

Spreads for Bare Bright copper, often regarded as the highest grade of copper scrap, stood at 5 to 12 cents below the COMEX futures price, unchanged from the beginning of June.

No. 2 copper scrap, which typically consists of a mixture of wire and tubing with a 96 percent copper content, was quoted at 40 to 45 cents under, in a bit from an early-June range of 42 to 48 cents under.

"Spreads are staying the same because buyers are having trouble finding material, so they can't widen them," one East Coast dealer said.
This doesn't seem to be the case in China. June import data showed shipments of copper scrap into China climbed to 420,000 tonnes, their highest level so far this year. (Graphic: r.reuters.com/xyr32s )

While China will remain a net importer of copper in both its primary and secondary forms, buying patterns could become erratic as unfavorable arbitrage opportunities between the Shanghai and COMEX markets and Beijing's clamp down on credit and lending standards limit the metal-consuming giant's market presence.

"It will become a tug-of-war between the higher market price and the need for the resource," said David Chiao, vice president at Atlanta-based recycler Uni-All Group Ltd.

Bank Danamon to hold rights issue - Insider Stories

PT Bank Danamon Indonesia Tbk last night announced a rights issue in a bid to raise equity capital.
The bank, in an official statement, has informed the plan to Bapepam-LK and IDX yesterday.

The bank will provide additional details of the rights issue to its shareholders once the registration statement related to the offering has been filed with Bapepam-LK, which is expected to be in the next several weeks.
In the first quarter of 2011, Bank Danamon has a strong capital position with consolidated and stand alone CARof 14.7% and 12.1%, respectively, which are well above the minimum requirements of 8% set by Bank Indonesia.
The rights issue will further strengthen the Bank’s capital position and enable it to strengthen existing customer relationships and grow its loan book to increase market share.

"In view of our confidence in the Indonesian economy and banking sector, we are undertaking the rights issue to further strengthen the Bank’s capital and accelerate the Bank’s expansion in this favorable operating environment. The capital raised will enable us to continue to improve our market position in Indonesia and to take advantage of opportunities arising in the near term,” said President Director Henry Ho.

Bank Danamon has appointed Citi and Deutsche Bank as standby purchasers and PT Danareksa Sekuritas as arranger.

A laggard property play (Current price is below IPO price and below the price when this report was published on 28 April 2011) - JP Morgan

Agung Podomoro Land Alleviating the worries - firm 1Q11 earnings Improvement

• Positive 1Q11 should raise confidence in the stock. The company reported 1Q11 earnings of Rp148bn, up by 377% y/y. 1Q11 earnings are above our estimates and consensus (26% of ours and 28% of consensus). The firm 1Q11 earnings is a reversal from the 2H10 result. We saw improvements in all sections in gross margins (apartment, office, and rental) of 37% in 1Q11 compared to FY10’s 33%. Margin on
office sold was particularly strong, with 1Q11 gross margin of 42% higher than our expectation of 33%. We view that the company’s firm 1Q11 numbers should raise confidence in the company’s execution and recommend investors to buy post the result.

• Safe cushion: unrecognized sales + firm momentum on marketing sales. With the company’s firm 1Q11 marketing sales number of Rp1.1tr, we view the FY11 marketing sales target of Rp3tr as achievable. We estimate the company to have around Rp2.5tr of unrecognized sales as of 1Q11. In our estimate, Rp1.7tr of the unrecognized sales mainly comes from the company’s new projects; Greenbay Pluit, Green Permata, and Greenlake.

• Maintain OW, Dec-11 PT of Rp455. We are adjusting our FY11/12 earnings estimates for APLN by +1/-3% respectively after accounting for higher top-line and higher operating expenses. We maintain our OW, and slightly tweak our Dec-11 PT to Rp455 versus Rp470 previously on earnings adjustment and higher capex estimates. We think firm project deliveries and execution should raise confidence in the stock. Our Dec-
11 PT is based on a 15% discount to NAV (Rp8.1tr for existing projects and Rp2.2tr for potential new projects).

• Key risks: (1) Delay in execution or construction of projects, (2) Lack or slowdown of new projects.

Adaro Energy: Key takeaways from site visit (ADRO, Rp2,500, Buy, TP: Rp2,800)

After analyst and lunch meeting session with Adaro’s top management on Wednesday, we directly joined the Site tour to Tutupan and Wara mine operations. Our site tour was led by Alastair Grant, Marketing Director of Adaro Energy. Some key takeaways are as follows:
According to senior operation mine key persons, Tutupan and Wara coal production on average have reached 120k tons and 45k tons per day respectively in 2Q11. This will translate into 11.5-12.0Mt coal production in 2Q11 (about 8.5%-13% qoq growth), higher than our previous expectation. Official operation figures will be announced end of this month.
Weather has been normal and dry. In June and July, Tutupan and Wara coal production were expected to reach 4.0-4.2Mt and 0.5-0.6Mt per month respectively. So it looks that 47-48Mt coal production target this year should be achieavable if weather remains good until end of year.
Despite of some delayed on new fleets deliveries from Komatsu and Hitachi (around 20-30 fleets) for 6 months, Adaro ensures that it will not affect its production target this year.
As of May – June 2011, fuel price has jumped more than US$90cent/litre. We expect it could reach US$1/litre. Following higher strip ratio, Adaro indicated that blended cash cost (excluding royalty) in 2Q11 will be around US$38-40/ton (Tutupan was about US$50/ton and Wara about US$20/ton), relatively in line with our FY11F of US$39.7/ton.
Kelanis port’s capacity is being upgraded from 55Mtpa to 80Mtpa and it is expected to complete by 2H12 with estimated capex of US$100mn.
Barito river capacity currently is about 70Mtpa where 46-48Mtpa alone come from Adaro. Alastair mentioned that Barito’s maximum capacity could reach 200Mtpa, so there would be no constraint for Adaro to reach its 80Mtpa target in the future.
Tutupan mine currently has reached around 200m depth elevation from surface while Wara mine is about 50m depth. Dumping distance in Tutupan is getting more challenging from currently about 4-5km will increase up to 6-7km (vs Wara currently about 2km) following the operation expansion to northern part. OPCC project is estimated could save US$0.5-US$1/ton.
Adaro’s Bio Diesel Fuel (BDF) pilot project with Komatsu and Uniter Tractor will take 2 years before it commences commercially. This project produces 1.2tons of Jatropha BDF per day (B-20: combination of 20% jatropha crude oil and 80% solar) which is used for 3 units of Komatsu dump truck. Currently most of the jatropha crude oil is bought from third party in Sumbawa, Sumatra. Its production cost is US$1.5/litre relatively more expensive than solar due to economic of scale. In the future, the project will expand up to about 30-40tons of BDF production per day and use it for 100 units of Komatsu dump truck.
Flying over to Taboneo, around 20vessels (Panamax-Capesize) were seen queuing for coal loading indicating export demand remains robust. Adaro ensure there is no more demurrage since March 2011. China and India demand will remain robust in 2H11F.
We maintain our Buy rating on ADRO. Currently ADRO is traded at 16.0x-12.1x PER11F-12F

PT Bank Danamon Tbk Rights Issue On The Way - AAA

Bank Danamon’s fifth rights issue should have minor change in its ROE assuming the bank’s floating increase to 40%, eligible to get tax benefit. Rights should increase potential loan growth but at the same time dilutive.

± Cutting Margin
Bank Danamon reported that they will conduct rights issue in this year to strengthen their capitalization ratio that in 1Q11, CAR ratio already at 14.9%. The bank already appointed Deutsche Bank and Citigroup as standby buyer and Danareksa as underwriter. Assuming BDMN will increase the floating to 40% in order to enjoy tax benefit, the bank’s new share would be 1.8 bn, diluting EPS by 13% but BVPS should increase by 3% as the banks’ book value will increase higher than the increase in number of shares. Proceed will be Rp5.2 trillion, higher than previous rights on which the bank raised Rp4 trillion.

± Valuation, HOLD, TP Downgrade to Rp6,500.
As rights would certainly diluting ROE and but at the same time increasing the bank’s ability to grow, we downgrade our TP from Rp6,700 to Rp6,500. HOLD

BDMN:Rights issue in the offing - Mandiri

During the conference call yesterday, Bank Danamon announced its intention to hold a rights issue in the near term. There are no details on this plan yet as the bank is in the process of getting approval from the capital market regulatory body (Bapepam). In our view, this rights issue can serve 3 purposes (1) maintaining sound CAR (2) strengthening liquidity as the bank’s straight LDR is already at its peak and (3) reducing Temasek’s portion in the bank. Even though the first two purposes will support the bank’s future growth, the uncertainties remains on how large the dilution will be. Maintain hold.

A rights issue is in the offing… It’s just two years ago BDMN held a rights issue raising Rp4 tn of fresh funds. Post rights issue, CAR recorded at 21.3% (at end Jun09). However, the bank’s aggressive loan expansion after rights issue, the bank’s additional stakes at ADMF and the inclusion of operational risk in the calculation of CAR brought down the bank’s CAR to 12.05% at end Mar11. This triggered the need for new capital raising for the bank. During the conference call yesterday, the management only highlighted its intention to maintain minimum 12.0% CAR in the future.

.. which will also serve as a way to enhance liquidity. In our previous notes, we mentioned our concern on the bank’s liquidity. At end Mar11, straight LDR was recorded at 106% (or 98% if we take bonds into LDR calculation). The bank needs to boost its deposits higher than the loan growth to bring down its LDR and maintain a healthy liquidity position (at end Mar11, secondary reserves was estimated at around Rp13 tn – net of repo securities). That said, the bank might need to offer higher TD rates as its CASA proportion was relatively steady around 35% of total deposits. Projecting higher interest rates next year, BDMN might be further hurt in terms of funding costs. Therefore, new fresh funds from the rights issue might well serve this needs. Not only it will strengthen the bank’s liquidity position, but it will also support better NIM.

Will it be sizable? Should the rights issue be only intended to maintain CAR of 12% and assuming loan growth of 25% yoy going forward, we estimate that the size might not be different from that of the previous rights issue (= Rp4tn). However, looking at the recent new booking growth in ADMF (+78% yoy in FY10 and 47.9% yoy in 1Q11), a higher than Rp4 tn rights issue size is still very likely. Yet, there remains uncertainties until further detail is announced. Maintain hold.

Kalbe Farma (KLBF IJ), maintain UPF, slower growth yet not cheap - CLSA

CLSA Jakarta industrious consumer bee Merlissa maintains UPF call on Kalbe Farma (KLBF IJ) with TP Rp3,300.

KLBF is undergoing a transformation. The company recently hires Ongki Tedjasurya, an excellent marketer (ex Mayora and Indofood). Ongki is now KLBF’s nutritional and group marketing head division. He already initiates brand equity building and plans to launch e-store for nutritional products.

Despite the positives, we put an UPF call on the name due to the following reasons:

Valuation is rich, with the stock trading at 20x P/E12CL, matching its Indian peers and close to the highest end of its historical forward P/E trading band.
Compared to Indonesian consumer, the stock is now trading at 18% premium to the sector and its 1.2 x PEG put the stock at second highest after Unilever.
Slower earnings growth in 2011-12CL (from 30-50% in 09-10 to 12.5% this year), given limited Rupiah appreciation and higher selling expenses. Rupiah has strengthened by ~12.4% in 2010, while only ~6.4% this year, according to our estimates. We also assumed higher selling expenses at 27.5% in 2011CL, as its 1Q11 selling expenses has soared to the highest level since the last 5 years.
Its potential M&A is unlikely to provide significant contribution in the near-term, with a mere 1-2% top-line contribution according to the management.
Finally, KLBF has a huge amount of cash and the fact that cash usage is limited, there are risks that the company may spend on low yielding operational activities, such as spending ads on maturing products or expanding the lower margin business. Big cash balance could be a negative carry for the company for now.

Another issue is what will happen to KLBF treasury stocks (acquired in 2008-2010, currently 7.7% from outstanding)? In the past, management has indicated cancellation to boost ROE – already discussed for a while now. Deadline to make up the decision (divest/cancel) is 2013.

Corporate Flash Bumi Serpong Damai - Bahana

BSDE: 2Q11 top line grew 17% q-q, bringing ytd sales of IDR1.6t
§ Following strong marketing sales in 4Q09-1Q10, the management indicated 2Q11 top line of IDR730b (+17% q-q), bringing 1H11 revenue of IDR1.35t, inline to reach our FY11 revenue estimate of IDR2.7t. This 1H11 solid revenue would lead to the net profit of IDR350b, implying 2Q11 net margin of 26% (vis-à-vis our FY11 estimated net margin of 25%).
§ BSDE reported 1H11 marketing sales of IDR1.6t (+83% y-y), coming from residential units in BSD City and other projects under its subsidiary company, Duta Pertiwi (DUTI). These 1H11 marketing sales accounted for 47% of our FY11 target. Following the successful of sales on 5 sub-clusters in 1H, BSDE plans to launch another 3 sub-clusters and 1 new cluster (60ha) in BSD city. Concurrently, DUTI has continued to market its existing residential projects, followed by the new property projects in Benowo, Surabaya or Balikpapan at end 2011 or early 2012.
§ This strong demand of residential site has led to higher land ASP, reaching IDR3.5m/sqm (+29.6% ytd). In contrast, low land cost of IDR1.1-1.2m/sqm has enabled the company to reap 2011-12 operating and net margin of 35% and 26% respectively (vis-à-vis 27% and 19% the industry’s average).

Outlook
With the prolonging low interest rate, we believe that demand for property would remain buoyant in the next few years. The company’s plan to relocate its headquarters to BSD green office Park would bring more traffic flows into the premise and attract the potential development of office building in surrounding area. This would eventually support the company’s recurring income, coming from office leasing. With the continued development of infrastructure, BSDE is likely to benefit from its huge land bank reserve.

Recommendation and valuation
We maintain our BUY recommendation for BSDE due to its solid balance sheet, massive land bank and margin improvements, following the consolidation with DUTI/SMW/SMT that provides 24-25% recurring portion in 2011-12 revenue. The development of new residential projects in Surabaya and Balikpapan as well as new commercial projects in Jakarta should support the growth story. Importantly, BSDE’s current strong marketing sales should well support its 2013-14 top line growth. Thus, we maintain our Buy rating on BSDE with TP of IDR1,160, trading at 20% discount-to-NAV of IDR1,451.

Bank Danamon: Fully Valued; Rp5,800; TP Rp5,500; BDMN IJ Plans to raise capital via rights issue - DBS

Bank Danamon (BDMN) announced its intention to raise equity capital via a renounceable rights issue. The bank has submitted its plan to Bapepam and IDX. However, it will only announce further details in the next few weeks. Citibank and Deutsche Bank have been appointed as standby purchasers, while Danareksa Sekuritas is the arranger for the transaction.

The bank held a brief conference call but did not release any details of the proposed rights, except that it would likely be completed by year end. Management said that the proposed rights issue is a proactive move to further strengthen its capital base for further business growth over the next three years. There is no change in its guidance for now. BDMN’s business focus is still to grow mass market loans, while building up its liability franchise.

BDMN’s Total CAR as at 1Q11 stood at 12.1% (bank level) and 14.7% (consolidated). Management said that it was comfortable with Total CAR at above 12%. We were surprised by BDMN’s planned rights issue and will reassess when details are available. BDMN raised Rp4tn from a rights issue back in April 2009 that lifted Total CAR by 1.5 ppts to 22.7% then.

We are retaining our Fully Valued call and Rp5,500 target price, which is equivalent to 2.2x FY11 BV. It is based on the Gordon Growth Model with the following assumptions: 21% ROE, 11% long-term growth and 15.3% cost of equity. While BDMN excels in asset growth, especially in the mass market segment, it still lags its peers in deposits. Asset yields are declining, while CASA is not rising fast enough to offset margin compression. There is persistent near-term pressure. BDMN is expected to release its 2Q11 result next week.

Bank Danamon Indonesia - Alert: Rights Issue Planned - Citigroup

Bank Danamon has applied to the regulators for the approval of a renounceable rights issue. Details on the size and pricing will be disclosed later. Management is aiming to complete the transaction by the end of this year. The objective is to maintain CAR at or above 12%. We are of the opinion that the rights Issue is a positive development, as low CAR is one of our concerns (other being high LDR). We maintain our Sell recommendation till full details are available.

The Rights issue is not surprising as the Capital Adequacy Ratio (CAR) was depleting very fast, due to business model (standalone CAR requires deduction of investment in Adira Finance). Management had hinted that based on current growth trends, bank will need capital injection every three years (last right of Rp4.1trn was announced in Feb 2009 and completed in April 2009).

Citi calculations show that CAR would have fallen below 12% by Dec 2011. Based on our 2010/13 loan growth of 19% CAGR, the rights issue size of Rp3.8trn will give sufficient cushion till 2014. For loan growth of 25% CAGR, the estimated rights issue size has to be Rp6.5trn.

PT Telkom - More talk, action unlikely - Macquarie

Event
§ A Singtel spokesperson was quoted in this morning's Kontan, a local newspaper, as saying "Singtel is looking to be a long term strategic investor in Indonesia" in response to ongoing talk from TLKM management in relation to purchasing Singtel’s 35% stake in Telkomsel. We maintain our view a deal is unlikely to arise and ongoing talk remains a distraction for management from more crucial operational matters. We maintain our Neutral recommendation.

Impact
§ TLKM distracted by Singtel's stake. We view TLKM's ongoing attention to purchasing Singtel's stake as a source of distraction and potential friction with Singtel's management team. Singtel remains intent on being a "strategic" investor in Telkomsel, and is therefore averse to short term fluctuations in operational performance as witnessed recently. We therefore place a low probability on a deal materialising between TLKM and Singtel and believe attention on Singtel's stake as a misallocation of resources.
§ More corporate activity in pipeline? TLKM was quoted in Kontan (12th July), as assessing ISAT's CDMA business Starone as a potential partner for its own CDMA division - Flexi. We believe a merger of these businesses offers limited upside to TLKM given both are underperforming assets within a highly competitive segment with a challenging growth profile. Flexi represents ~5% of TLKM's revenue, whose revenue also declined by 15% YoY in 2010.
§ Operational performance the key driver of value. TLKM’s operational performance within Telkomsel is the key to driving its share price, in our view, with greater clarity needed on its portfolio of brands and their respective pricing points. Telkomsel’s aggressive approach to pricing more recently is unsustainable, in our view, attracting the less profitable high churn segment which is likely to impact performance once its price-led promotions ease.

Earnings and target price revision
§ No change.

Price catalyst
§ 12-month price target: Rp7,350 based on a DCF methodology.
§ Catalyst: 2Q results by the end of July 2011.

Action and recommendation
§ Neutral recommendation maintained. The catalyst for a re-rating remains improved operating momentum in relation to both revenue growth and profitability which have missed investor expectations recently. We expect TLKM to remain range-bound given its flat earnings profile despite trading on a relatively undemanding valuation of 11.4x FY11e PER. EXCL (Outperform, Rp6,700 PT) remains our preferred sector exposure, trading on 6.2x FY11e EV/EBITDA. EXCL is the prime beneficiary of strong growth in mobile internet, with ~50% penetration in this segment and no fixed line exposure.

SGRO:Strong organic growth - Mandiri

We did a site visit to SGRO’s Kalimantan estates and mill. We were impressed with the excellent operational practices in its estates and mill, re-affirming our positive view on SGRO. We like SGRO because: 1) we expect robust growth in its nucleus FFB production in the future due to aggressive new planting in the last few years. SGRO is one of few Indonesian listed companies doing aggressive new planting (exhibit 14). 2) We expect its margins to keep expanding due to higher proportion of FFB from nucleus to total processed FFB because the growth of its nucleus FFB production is higher than the growth of its plasma FFB production due to its plantation profile (exhibit 16). Maintain Buy on SGRO with a DCF-derived TP of Rp4,150/share, implying PER FY11F and FY12F of 13.8x and 12.2x, respectively.

Nucleus estates grew by 07-10CAGR of 19.6%, robust FFB production ahead. SGRO’s Kalimantan nucleus estates grew by 2007-2010 CAGR of 19.6%. Meanwhile, its consolidated nucleus planted area grew by 2007-2010 CAGR of 17.2%, which is one of the fastest (exhibit 14). As oil palm trees start to generate fruit after it enter the age of 4 years, SGRO’s aggressive new planting on nucleus estates in the last few years should generate strong growth in its nucleus FFB production. We estimate its nucleus FFB production should grow at 2010-2012F CAGR of 12.7%.

Various cost-effective activities. SGRO does various cost effective activities such as mechanism in fertilizer application and using Palm Oil Mill Effluent (POME) as fertilizer. This matter has made SGRO’s cost per ha is lower than AALI and BWPT (exhibit 15). Cost for doing fertilizer application (excluding fertilizer cost) by mechanism is 56.0% cheaper than by manual (mechanism=Rp49,500/ha/year vs manual=Rp112,500/ha/year). Out of its Kalimantan nucleus matured plantation of 13,974ha, SGRO’s Kalimantan estates currently applies mechanism in fertilizer application in 9,000ha and additional 1,000ha next year. Meanwhile, POME application increases its FFB yield/ha around 2 - 7% by increasing its average weight of FFB.

Decrease in loading time may slightly increase its CPO price ahead. It takes about 6 days for loading CPO to customers’ vessels. The bottleneck is the number of trucks (contractor-owned) for transporting CPO from mill to port. SGRO plans to double up the number of trucks in 2012 to decrease the loading time, which should favorable for SGRO’s CPO sales price. We learning from BWPT that quicker loading time allow the company to sell its CPO 0.5% higher than its neighbors.