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Jumat, 30 Maret 2012

WIKA & AKRA Research

<b>Kim Eng - AKRA: Beneficiary of oil price hike</b>
Stronger FY11 result has been anticipated. AKR reported strong core net profit growth of 97% YoY to Rp611b, and revenue growth of 82% YoY to Rp18,806b. Both numbers were in line with our expectations. Higher revenue was supported by all division units, particularly petroleum distribution, which recorded 99.6% YoY revenue growth to Rp14.9t, and chemical distribution, where revenues were up 36.9% YoY to Rp2.65t. Sales volumes of both divisions grew by 50% YoY and 9% YoY to 2m KL and 1.24m MT respectively.

<b>Eyeing better petroleum distribution sales amid higher oil prices.</b>
We foresee that revenues at the petroleum distribution unit will be better this year amid higher oil prices. Up to end-March 2012, the average price of crude oil was US$103 per barrel or 10% above the average price in FY11 of US$95 per barrel. High crude oil prices (to the end of this year) would support AKR’s petroleum distribution sales. Based on our calculation, if crude oil prices (NYMEX) increase by 10%, sales and net profit will each increase by 7%.

<b>Revising ASP of petroleum distribution in anticipation of higher oil prices this year.</b>
We upgrade our revenue assumptions by 6% to Rp24.1t in FY12 and by 12% to Rp28.1t in FY13 as we raise the ASPs of the petroleum distribution to Rp7,500 per litre in FY12 and FY13 (from Rp7,000 per litre in FY12, and from Rp6,500 per litre in FY13), amid anticipated higher oil prices. Our assumptions for the petroleum distribution prices are based on a crude oil price of US$98 per barrel, below the 3M12 average of US$103 per barrel. Meanwhile, we maintain our sales volume growth assumptions of 26% for petroleum distribution to 2.5m KL this year, and 15% to 2.95m KL in FY13.

<b>Raising TP to Rp3,825, maintain HOLD.</b>
We raise our TP to Rp3,825 (from Rp3,600) in anticipation of higher oil prices. With the share price up 42% ytd, we believe the market has been too optimistic about AKR’s prospects. We are waiting for new catalysts to boost AKR’s earnings growth. Maintain HOLD.

<b>Kim Eng - WIKA: Applause for results breakthrough</b>

<b>Robust showing</b>. Wijaya Karya (WIKA) reported a 24% YoY increase in FY11 net profit to Rp354b on the back of a 29% YoY growth in revenue and robust 4Q11 results. While the top line was in line with our forecast, the bottom line beat our estimate by 7% and the consensus by 8%. Operating profit grew by 37% YoY to Rp654b, 15% above our estimate, due to higher-than-expected income from joint operation (JO).

<b>Bottom line surged 88%QoQ</b>. On a quarterly basis, net profit jumped 88% QoQ to Rp139b from Rp74b in 3Q11. Margins were up by 3-4ppts QoQ, thanks to 8% growth in revenue and just a 1ppt increase in COGS. The recovery of other income, from negative Rp44b to almost positive value, also supported the bottom line.

<b>Higher contribution from ME projects.</b> WIKA booked a new mechanical electrical (ME) project valued at Rp1.5t in FY11, surged by 381% YoY from previous year’s value of Rp312b. The distribution of ME projects to total order book also rose by 12ppts YoY in FY11. We expect a slower distribution growth of ME projects in the next two years, as the company turns its focus to vie for property projects that have seen a rise in number, thereby boosting its realty distribution to total order book.

<b>Margins maintained.</b> WIKA successfully kept its FY11 operating and net margins at the same level as last year’s – 8% and 5%, respectively. Nevertheless, we expect net margin to slip by 1ppt to 4% this year on account of higher-than-expected costs. In the past decade or so, Indonesian construction companies have found it difficult to raise their margins, typically booking a single-digit figure.

<b>Limited upside, downgrade to HOLD.</b> We adjust our assumptions and raise our FY12F-13F earnings by 5-9% to factor in the better-thanexpected FY11 results. Our TP thus goes up to Rp980 (from Rp820 previously), pegged at FY12F PER of 14.1x and EV/EBITDA of 5.6x. The new TP suggests an only 7.7% upside from the current level, thus we downgrade our call to HOLD on the counter.

Global Market Statistic 30 Mar 2012

There is a love affair happening with Thailand, Indonesia, and the Philippines.

That’s what Philip Utsch, senior Asia salesperson in our NY office, wrote in his latest sales note. In his view, people now dislike China and India. China is just going through worries of a hard landing/profit decline, and India now has a big cloud hanging over it.

This love-in is so ferocious, that Philip thinks he can’t recommend a stock in Thailand, Indonesia, and the Philippines before it goes up immediately on thin volume. Uncanny right now.

The problem of course if you have a tonne of money in China and India, about 28% of the MSCI Asia Ex-Japan is in India and China, and for TIPs it is 4.7%.

So 28% chasing 4.7% and you have a problem. This is dynamic is even more pronounced for Emerging Market Funds.

So because of this you have……

Thailand:         The SET is about to break to a new 10 year high.
Indonesia:        2.5% away from all time high.
Phillipines:       2% off an all time high.

Amar Gill’s recent report Asean Arising highlights why Asean really stands out in terms of demographics, its growing labour pool, and surging FDI numbers while China’s labour pool is getting increasingly tight. Meanwhile FDI into China and India are leveling off or falling.  Link to his full note here:

In the case of Indonesia, this love affair led to foreign ownership of government bonds reaching 36% as of August 2011. While foreign ownership of corporate bonds is only 5.1% as of September 2011, this will rise as well due to Indonesia’s return to investment grade rating.  Indo corporates are churning out good cash-flows, making their bonds more attractive.

Another sign of the love affair with Indonesia is an article in the March-April edition of CFA magazine highlighted that whether you were a debt or equity investor, you would have come out comfortably in front. Not easy in a year in which emerging market equity benchmarks dropped 20% through the year.

One of the reasons for this love affair with Indonesia is the rising middle class. In the Asean Arising report, Amar Gill also noted that Indonesia’s middle class is set to grow at 13% CAGR in 2010-15, the fastest in the region. At the same time, discretionary spending in Indonesia will grow fastest at 19% CAGR from 2010-15.

Property developers are also getting a part of this love-in. The love affair with Indonesia means competition for space. Rental rates for offices and malls are on the way up. Big time (more on this to come). Even retail powerhouse Mitra Adiperkasa (MAPI IJ) faces this challenge.

In the past, mall owners will be very happy to have MAPI group as their major tenants (big anchor tenants + top brands) and plenty were more than willing to give big concessions in term of rental rates and other terms. Are we seeing the shift in pricing power, especially for the well run malls? It appears that the malls have the upper hand since 2010.

Jasa Marga (JSMR IJ) makes progress in 1000km Trans-Sumatera toll road.  JSMR is targeting Oct2012 for the concession right for the initial toll road project of Trans Sumatra, namely Padang-Sicincin of 27km in West Sumatra.  The company will partner up with the local government and also Semen Padang (who will provide the materials such as cement); the consortium will be named PT Jasa Marga Tol Sumbar.  The plan is to build a high grade highway.  Investment value for this project is yet to be determined.  The company mentioned that the toll road wil be one lane each way with estimated 10,000 daily traffic.  Comment:  A few weeks ago JSMR signed an MoU with several governors of Sumatra to be the sole developer and operator for the trans Sumatra network.  This will give the company flexibility to stage the developments, ensuring completeness, connectivity and good return on investment. According to the company, West Sumatra province seems to be the most ready to support the development, by allocating Rp23bn to help in land clearing.

Alam Sutera (ASRI IJ) to issue US$150m bond with 10.75% interest.  ASRI plans to issue five-year senior debt of US$150m with 10.75% interest.  The maturity will be on 27Mar2017 with first interest payment on 27Sep2012.  This debt will be listed in Singapore.  80% of the proceeds will be for land acquisition in Serpong and Pasar Kemis, and 20% for construction (working capital). Comment:  ASRI revenue and cost are mostly in Rp, hence we think it is unnecessary for the company to issue US$ debt, especially with such high yield.  The company commented that the main reason is they do not need to put in collateral for the US$ debt, whereas for Rp debt, they need to put in land bank as collateral.  The company also mentioned that they want to tap into ‘regional’ market for funding.  The plan this year is to buy 300-500ha of land bank; about 90ha from Serpong.  The company said there is about 300ha permit in Serpong which they can acquire from.

Surya Semesta (SSIA IJ) groundbroke commercial estate Suryacipta Square project. Suryacipta Square will be built on 10ha land on its industrial estate Suryacipta City in East Karawang, West Java. The 1st phase, consisting of 3-star hotel (Batiqa), office tower and retail arcade, is estimated to cost Rp150bn (US$16.3m) and will be financed from internal cash. SSIA projects 1st phase to be completed in June 2013. The whole development is estimated to cost Rp900bn (US$97.8m). Comment: SSIA has Rp597bn (US$65m) cash position as of 9M11. The project is in-line with SSIA’s plan to ramp-up its hospitality and commercial business as they currently contributes 15% to SSIA profit. SSIA plans to open as many as 30 3-star hotels for the next 5 years.

Bank Indonesia (Central Bank of Indonesia or BI) makes new branchless bank regulations. BI has prepared 5 strategies to enable the low-middle class to access the banking system. The strategies are Tabunganku (Central Bank’s Saving Program), mobile banking, banking agent in remote areas (under branchless banking concept), credit to start up small business and survey financial identity number (to estimate the potential loan disbursement). Bank can raise Rp100tr of deposits through these strategies. These strategies can also grow third-party fund by 0.5% and bank loans by 26%. The banks are waiting for BI’s regulation to develop the branchless banking system. Comment: By doing this, the banking penetration will increase in Indonesia, which will support the economic growth. We estimate around 40-50mn saving accounts currently in the system, representing c 20% of Indonesian population.

Indonesia's Nickel export ban may spur local investment. A local newspaper reported that the ban starting in May 2012 would lead to a decline of 75% in nickel ore sales to China and it will probably encourage exporters to invest in Indonesia. Indonesian nickel ore accounts for 60%to 70% of the feed for China’s nickel pig iron production. China’s production of nickel pig iron, an alternative to refined nickel, may fall in 2013 and 2014. Comment: Before the May 2012 deadline, exporters of unrefined ore are being asked to submit plans for compliance with the ruling before the law is enforced in May 2014. It is likely that all companies therefore will be able to satisfy the Government/Ministry of Energy and Mineral Resources for future compliance and continue the practice of exporting unrefined minerals beyond the May 2012 deadline. Royalties from mineral exports represent a significant source of income for regional governments particularly in Sulawesi.

Indonesia’s first MRT will be operational by 2016? The MRT Jakarta system which is expected to cost Rp1tn (US$1.6tn) will be 111 km long, with North-South corridor of 24km and East-West corridor of 87km.  The first phase of the North-South route will run from Lebak Bulus in South Jakarta to the Hotel Indonesia circle in Central Jakarta.  It will have 13 stations and construction will begin this year.  The second phase will be an 8km stretch from the traffic circle to Kampung Bandan in North Jakarta (2018). East-West corridor will be up in 2024.  Ten consortiums have been approved by JICA to participate in the bidding process in June/July this year.  Among the companies are Kajima-Waskita JO, Obayashi-Shimizu-Jaya Konstruksi-Wika JO, Tokyo-Adhi JO, etc.

Agung Podomoro Land (APLN IJ) to issue Rp1tn (US$108m) bond in June 2012, as it plans to acquire up to 15 projects for year 2012 and 2013. APLN allocated Rp3.5tn (US$380m) capex this year. APLN’s FY12 marketing sales target is Rp4.3tn (US$467m).

Higher public transpostation cost to come. The Organization of Land Transportation Owners (Organda) plans to raise the price of public transportation tickets by 35% starting from April or 15% higher than what the government’s suggests.

Mitra Adiperkasa(MAPI IJ) 2012 expansion. Corporate Secretary said that MAPI will add 10 new brands for specialty stores, including DKNY and Spanx. It will also add 2 department stores in Jakarta Sogo and Debenhams and around 75 F&B outlets. On fuel price hike, she stated that MAPI will be effected for the distribution cost, but MAPI can pass it to the customers for its target market is the middle upper class that will less impacted by the inflation. Comment: The new brands are relatively small this year. They are focusing on store expansion of about 60k sqm (including 30k sqm for the department stores). Up to 2M12, they managed to open 2,363 sqm (4% of their target), but aiming to accelerate in 2H12.

Tango targets 60% of wafer market share. To achieve the goal, subsidiary of Orang Tua (OT) group will launch a new premium wafer product that will increase Tango revenue contribution to the group to 30% from 20%. The company plans to add a production facility outside Jakarta and Karawang on top of its 2 existing facilities due to increasing production capacity from the new product of 30%. Note that Tango sales grew 15% YoY. Comment: It concurs our view on stronger demand in middle/up class segment. Tango product will not compete directly with Mayora (MYOR IJ) as Mayora has only wafer roll under Astor brand.