Daily Focus 24 Feb 2011 - DBS Vickers

Jasa Marga: Not Rated; Rp3,100; JSMR IJ

Indonesia infrastructure play with solid track record
We recently met with Jasa Marga, the largest and oldest toll operator in Indonesia . While the progress on Indonesia ’s infrastructure development so far has been disappointing, we believe Jasa Marga is one of the safest bet to get exposure to Indonesia ’s infrastructure sector. There are several catalysts for Jasa Marga in our opinion. The scheduled tariff hike later this year for over 10 toll concessions, is adjusted based on CPI inflation every two years and hence provide Jasa Marga with some protection against inflation. Jasa Marga expects the two toll roads sections to commence in 2H11, contributing to revenue growth later this year and next year. More importantly, the company has a promising pipeline with seven concessions under development and potential concessions for acquisitions that are strategically linked to existing concessions. Jasa Marga currently trades at 15x forward PE, down from recent peak of 20x PE in October 2010.

Indo Tambangraya: Buy; Rp48,600; TP Rp62,350; ITMG IJ

FY10 net profit of US$204m below estimates
ITMG reported US$204m net profit in FY10, 26% below our estimates of US$276m and 33% below consensus. We have yet to receive the details but the weak result is likely due to unrealized derivative losses from coal price hedging. We believe the weak result has been priced-in given the recent weakness in share price. We expect strong 1Q11 earnings to be the short-term catalyst for the stock. Maintain Buy, TP of Rp62,350, implying 28% upside potential and 4% yield. ITMG is trading at attractive 11x FY11F PE below 13x 4-years average and 20x of peak.