ANTM has booked Rp2.9tn FY12 net income (+55.3% yoy, +1458.2% qoq), above consensus’ estimates (278.2%). Albeit the in-line revenue to operating income compared to consensus, gain from value adjustment under other income boosted the company’s bottom line by Rp2.5tn.

*  Gross and operating profits both declined due to rising mining operation costs as a result of continuing R&D for production while ASP decreased.

*  Ferronickel production declined by 6.69% in FY12 to 18,372 tni while its sales remained relatively flat at 19,527 tni from 19,530 tni in 2011. With an ASP of USD7.73/lb, ferronickel sales came up to be Rp3.14tn last year.

*  Nickel ore sales was recorded at Rp3.07tn which grew by 24.8% yoy due to increase in production volume. Total production rose to 6.47mn wmt while sales increased to 8mn wmt.

*  Gold sales, recorded at 7,024 kg, went above ANTM’s target of 7,009 kg although production was only at 2,849 kg vs the target of 3,000 kg. Gold sales thus was recorded at Rp3.63tn in FY12. This year, ANTM targets gold production volume of 3,316 kg and sales of 7,601 kg boosted by the production hike in Pongkor.

*  We are currently reviewing our model to reflect the most updated numbers. ANTM is currently trading at 10.57-11.71x PE13-14F.
me @ LOTS Trading Club (LTC)

RALS - Cheapest play in the department store space

Unaudited FY12 NPAT was weak but expected. It would have been 12-15% higher if the supermarket delivered. Margin enhancement and strong wage hike would be the catalysts. We reiterate BUY. Valuation re-rating in the department stores space could catalyze RALS as the cheapest play.

Weak FY12 NPAT is expected. RALS will report audited FY12 results in end-March. Unaudited NPAT was revealed at Rp424bn (+12.3%yoy), 11% lower than our previous estimates and 5% lower than consensus.

We have fine-tuned our numbers to factor these. Weak NPAT came as supermarket booked some Rp15bn net loss versus Rp40-50bn profit targeted. Consolidated NPAT would have been 12-15% higher if supermarket division met the management's budget.

Record high productivity indeed. 2012 sales/sqm reached Rp8.0mn (+4.4%yoy), a historic high. The decision to replace some supermarket space with the fashion consignment products enhanced productivity. SSSG recovered to 8.8% from 5.0% in 2011, albeit slightly lower than our expectation.

Margin enhancement to continue. Core department stores business performed very well last year. Its EBIT margin could reach c.11% in FY12, higher than MAPI. As consignment proportion rises, the gradual operating margin improvement should continue going forward. Fashion consignment can generate 3-6ppt higher operating margin than outright.

RALS expects fashion consignment proportion to reach up to 35% this year, versus 30.6% in FY12. For department stores alone, consignment proportion is 50%, far below MAPIs department stores (~80%) and LPPFs (~70%), suggesting ample room for operating margin improvement.

Recent hire of an operational manager for the supermarket division, rather than a top-level guy, should also be more effective in addressing the core issues of the business.

Take a more conservative approach. 2013 strong minimum wage hike would benefit RALS. If adjustments are smooth, RALS indicated that achieving Rp550bn FY13F NPAT (8.8% above consensus) is possible. But we decided to be conservative as some deferment in wage adjustments is possible as hundreds of companies are applying for excemption from the wage hike.

We slashed FY13F EPS by 5.9%, factoring higher wages and electricity costs, now aligned with the street.
Reiterate BUY with unchanged TP at Rp1,400 still pegged to 1.0x PEG. Current 16.2x FY13F PE makes RALS an underdog against regional average of 26.2x or even local peers at 30.4x.

Valuation re-rating in the department stores space could catalyze RALS as the cheapest play. On a 12-month forward, RALS 16x PE is also on par with its mean. A discount to execution risk is understandable, but not this high.
me @ LOTS Trading Club (LTC)