BBRI upgrade to U/W, Telcos - JP Morgan

* Research call – Bank Rakyat Indonesia (BBRI) upgrade to O/W from U/W: The key call by Aditya Srinath is that BBRI’s NPLs may have declined in 4Q10 (a trend reversal from steady worsening trend since 2009), to stabilize at around 4%. 79% of the 9M10 disburals were to low NPL and high-margin micro/consumer loans, a trend he expects to continue. BBRI management has gone into capital conservation mode by focusing on its lower RWA businesses and micro lending (85% risk weight), targeting 20-25% credit growth as opposed to “over 25%”. He upgrades BBRI to O/W with PxT of Rp6000.

* Research call – Tower Plays and Consolidation Plays within the AsiaPac telco sector. Head of AsiaPac telco research James Sullivan commented on the the dynamics behind AT&T’s agreement to buy T-Mobile USA from Deutsche Telekom AG for US$39bn, and its relevance for AsiaPac. The bottom-line: new wireless technologies (Apple / tablets) needs significantly more base stations to cover an area (3G cell sites radius get smaller as data loads increase)…and the #1 determinant of OpEx structure is the number of base stations. So the significant cost pressure has been the catalyst for industry consolidation. He views that India is the market in Asia most in need of consolidation, and he also sees consolidation potential among the second tier operators in Indonesia. My take – TBIG and BTEL are the two names to watch on this theme.