Daily Focus 29 March 2011 - DBS Vickers

Indo Tambangraya: Buy; Rp46,550; TP Rp59,000; ITMG IJ

To distribute Rp407/share final dividend

Indo Tambangraya Megah (ITM) has agreed to pay Rp407/share final dividend, yielding 0.9% to be paid on 6 May 2011. This translates into 75% payout ratio with total dividend of Rp1,202/share, or net yield of 2.6%. Interim dividend of Rp795/share has been paid in June last year. Net yield is below our estimate due to lower than expected FY10 earnings.

Meanwhile, the company indicates that it is looking to acquire up to three coal mines in Kalimantan with 20-50m tons of coal reserves. We believe that coal assets acquisition is necessary to support production growth and maintain its reserve balance at 14-15 years (vs peers of 20-115 years). The company also indicates US$2.3b of revenue this year, inline with our estimates.

Maintain Buy with TP of Rp59,000/share based on blended valuation of 17x FY11F PE and 6x P/BV. The stock is attractive at 11x FY11F PE versus 12-13x for Indonesian peers given its strong earnings leverage to spot price.


Kalbe Farma: Hold; Rp3,075; TP Rp3,275; KLBF IJ

Stronger than expected FY10 result

Kalbe has booked FY10 earnings of Rp1,286.3bn a 38% y-o-y increase on the back of 13% y-o-y increase in sales to Rp10,2268bn. The earnings beat our estimates by 9% and consensus by 3%. Besides stronger sales, Kalbe’s net earnings were also boosted by 61% y-o-y decrease in interest expense to Rp20.7bn and 52% drop in minority interests to only Rp57.5bn.

Kalbe balance sheet remains healthy. As of 31 Dec 2010, net cash position stands at Rp1,877.6bn versus Rp1,223.0bn in 2009.

For now, we maintain our Hold call and target price of Rp3,275. Currently, KLBF is trading at 19.2x FY11F PE with most positives already been priced in. We will be visiting the company once the full financial statements are released later today.