Harum Energy result, Astra Int update, budget, DOID - Nomura Indonesia

Harum Energy (HRUM IJ - BUY) just released a financial result for FY10 which is inline with our expectation.

Key summaries and our comments are as follows:
· Earnings grew 7% y-y to Rp824bn which was in line with our estimate of Rp832bn
· Revenue growth was flat due to a combination of higher sales volume at MSJ (+49% y-y to 6.0mn tons in our estimate) and lower ASP (-16% y-y to US$76.5/ton in our estimate)
· EBITDA was down 11% y-y on higher oil price
· HRUM was in a net cash position with a cash balance of Rp1,030bn (~US$114mn) and a low debt of Rp45bn (~US$5mn)
· No operational numbers are issued by HRUM as of now but we believe that they wouldn’t be much different from our estimates as follows:
o Production volume (100% basis) : 7.4mn tons
o Sales volume (100%) : 8.6mn tons
o ASP (MSJ) : US$76.5/ton
o ASP (SB) : US$71.3/ton

· We continue to like HRUM on its strong exposure to seaborne market, highly exposed to spot market, and healthy balance sheet.
· We maintain our Buy rating with a target price Rp11,400/share

Astra Intl (ASII IJ – BUY) – Toyota and Komatsu latest update + risk of disruption in MCU. Maintain BUY.

The report of damage in production facilities at microcontroller unit production lines in the Tohoku region, including the key Naka (Ibaraki Prefecture) plant of Renesas Electronics [6723] (No rating; ¥658, 18 March close) might have some impact to automotive production globally (see attached report from our equity research team in Tokyo). Renesas Electronics is the #1 microcontroller manufacturer globally with 45% market share of automotive MCU. MCU is used in automobile components including power train, steering, airbag, lights, locks, etc. A typical mid-range automobile contains between 30-100 microcontrollers.

However, the risk to Indonesia automotive production is likely to be less severe vs. develop market given the popular car models in Indonesia are of simpler technology with minimum usage of sophisticated MCU.

In the meantime, Toyota Motor Corporation has resumed production of parts for overseas production (Toyota update as per March 24, 2011).

“In addition to the resumed production of replacement parts (started on March 17) and parts for overseas production (including knockdown) assembly (started on March 21), from March 28 TMC will resume production of hybrid vehicles (the Prius, HS 250h and CT 200h) for which worldwide demand is strong. The production will be limited to TMC's Tsutsumi Plant and Toyota Motor Kyushu. For the time being, we are keeping an eye on progress in production while carefully assessing parts supply.” http://www2.toyota.co.jp/en/announcement/110324_1.html


Komatsu on the other hand has yet to resume its operation in its Ibaraki (dump trucks, articulated dump trucks, large wheel dozers, large wheel loaders) and Koriyama (hydraulic equipments) plants. Astra’s subsidiary, United Tractors (UNTR IJ), is the sole distributor of Komatsu in Indonesia. United Tractors contributes about 20% of Astra profit. Selling Komatsu equipments only accounts for 25%-30% of United Tractors profit with the remaining profit comes from contract mining, parts/after sales services, and its own coal mine. About 20% of Komatsu equipments sold in Indonesia are imported from Japan.

Government budget recorded a surplus of Rp18.5tn for the first 2 months of 2011, due to higher income realization and low expenditure/spending. Income for the first two months of the year recorded Rp130t or 11.8% of full year budget target or 20% higher than last year realization. Realized spending for the period was Rp111.5t or 9.1% of current year budget. Although government spending realization is lower than income realization, current year-to-date spending amount was 14% higher than last year. Healthy government budget would be positive for economy, and would potentially support further upgrade in Indonesia's credit rating. More specifically as healthy budget would help ensure sufficient government spending for infrastructure development.


Buma, mining contractor subsidiary of Delta Dunia (DOID IJ – not rated) obtained new US$750m debt funding from CIC and GIC. The new funding will mostly be used to refinance the US$600m debt raised by the company end of last year. The new funding from GIC and CIC will have longer tenor of 7 years compared to current existing loans. While longer tenor debt would benefit Buma, entry of CIC and further investment by CIC in the company would further strengthen shareholder base of Buma, and ensure sufficient funding for any future expansion. CIC would be a majority financial shareholder of Buma in addition to GIC and TPG.