Bank Mandiri ended FY10 with everything inline with the expectation. However, there are recently some positive news to BMRI which will could be the earnings surprises of its 2011F performance. After rights, BMRI is traded only at 2.8x PBV with ROE remain solid at 25%. BUY
± Solid ROE and Lower NPL
Bank Mandiri recorded FY10 net profit growth at 29% yoy to Rp9.2 trillion, only slightly deviated by 2% with our estimates and 5% vs. consensus. Higher growth in net profit than the equity (+18% yoy) has sent ROE to 24%, the highest level ever recorded in BMRI’s history. Meanwhile NPL pushed down to 2.4% with 192% coverage ratio, indicating that under the new captain on the ship, the bank is not losing its grip to alleviate NPL.
± No Surprise in 2010, But What About 2011?
Overall, nothing is surprising with the bank’s good FY10 performance, as most number came within our and market expectation, which explained why its price has only climbed by 5.4% ytd vs. BBRI 18.1% ytd and peers 9.8% ytd. However, rolling into 2Q11-4Q11, we see positive things on BMRI that could be the factors of the earnings surprises. 1) Rajawali and Djarum Group are reported to acquire Garuda Indonesia via private placement, reducing the loss in BMRI’s securities subsidiary. 2) Government is speeding up haircut lending bill which is targeted to be ratified this year. 3) Low cost funding that derived from low LDR could create pricing competitiveness.
± Valuation, BUY – New TP Rp8,500
We have factored in the rights issue effect on BMRI’s FY11F financials, which will lift CAR ratio (including operational risk) to 15% from 13%. However, to maintain CAR, we cut our dividend payout assumption from 35% to 30%. And upon to rights issue adjustment, we also increase our net income FY11F from our previous estimate by 11%, thus we augmenting our TP from Rp8,200 to Rp8,500 (Gordon Growth Methodology). Our TP reflects 3.5x PBV FY11F which is at par with its historical valuation. Currently the bank is traded at a very attractive valuation at only 2.8x PBV. BUY recommendation remains intact.
Sabtu, 16 April 2011
BBTN:Challenges remain - Mandiri
Even though FY10 results look encouraging, we remain concerned with the bank’s funding and possible decline in NIM in the future. However, our concerns seem to have been reflected on the current share price. We therefore upgraded our recommendation from sell to neutral.
Slower loan growth... BBTN reported slower loan growth of 26.6% yoy in 2010 compared with 32.4% yoy in 2009 and 41.2% yoy in 2008. This was particularly due to lower growth in subsidized mortgage of 13.2% yoy vs non-subsidized mortgage of 26.9% yoy. The delay in the implementation of new subsidized loan scheme was claimed to be the reason behind such slower growth in the subsidized mortgage. The new scheme was just implemented in Oct10, whereby of the total Rp2.7tn of funds provided by the government, BBTN was only able to utilize Rp600bn, or translating into Rp1tn of new subsidized mortgage in 2010. This year, the bank targets to disburse around Rp6tn of subsidized mortgage (+27.1% yoy).
Concerns on funding remains… Although total deposits grew by 18.2% yoy in 2010, the bank’s CASA growth remained flat. This affirmed our previous argument that finding low cost funding would remain a challenge for the bank. However, thanks to the low interest rate environment presently, the bank managed to improve its NIM to 5.9% in FY10 from 4.7% in FY09. Nonetheless, with the possibility of higher interest rate this year, the challenge for BBTN will be bigger. Despite projected improvement in liquidity as the government is expected to place around Rp3.6tn of funds to support subsidized mortgage, the bank’s margin will likely narrow as this new subsidized mortgage will only give around 4.25% margin. We therefore expect, the bank’s NIM to fall to 5.4% this year.
No more reversal expected. The bank recorded income from recovery of loans written-off amounting to Rp78.6bn in FY10. Despite that, net impairment expenses was still high at Rp331.8bn in FY10 compared with Rp64.2bn in FY09 as the bank had to write off around Rp100bn of bad assets in 2010. We do not expect any significant write-off to occur this year, hence lower impairment expenses of Rp211.8 bn in FY11F is expected.
Upgraded to neutral. We maintain our net profit forecast for FY11F thus our TP of Rp1,600/share. Risks to our forecast are: (1) the bank (again) recorded recovery on loans written-off and (2) higher gain on marketable securities. Both factors were the reasons behind the better-than- expected FY10 results. Meanwhile, we believe that our concerns have been fully reflected on the current share price. Therefore, we upgraded our recommendation from buy to neutral.
Slower loan growth... BBTN reported slower loan growth of 26.6% yoy in 2010 compared with 32.4% yoy in 2009 and 41.2% yoy in 2008. This was particularly due to lower growth in subsidized mortgage of 13.2% yoy vs non-subsidized mortgage of 26.9% yoy. The delay in the implementation of new subsidized loan scheme was claimed to be the reason behind such slower growth in the subsidized mortgage. The new scheme was just implemented in Oct10, whereby of the total Rp2.7tn of funds provided by the government, BBTN was only able to utilize Rp600bn, or translating into Rp1tn of new subsidized mortgage in 2010. This year, the bank targets to disburse around Rp6tn of subsidized mortgage (+27.1% yoy).
Concerns on funding remains… Although total deposits grew by 18.2% yoy in 2010, the bank’s CASA growth remained flat. This affirmed our previous argument that finding low cost funding would remain a challenge for the bank. However, thanks to the low interest rate environment presently, the bank managed to improve its NIM to 5.9% in FY10 from 4.7% in FY09. Nonetheless, with the possibility of higher interest rate this year, the challenge for BBTN will be bigger. Despite projected improvement in liquidity as the government is expected to place around Rp3.6tn of funds to support subsidized mortgage, the bank’s margin will likely narrow as this new subsidized mortgage will only give around 4.25% margin. We therefore expect, the bank’s NIM to fall to 5.4% this year.
No more reversal expected. The bank recorded income from recovery of loans written-off amounting to Rp78.6bn in FY10. Despite that, net impairment expenses was still high at Rp331.8bn in FY10 compared with Rp64.2bn in FY09 as the bank had to write off around Rp100bn of bad assets in 2010. We do not expect any significant write-off to occur this year, hence lower impairment expenses of Rp211.8 bn in FY11F is expected.
Upgraded to neutral. We maintain our net profit forecast for FY11F thus our TP of Rp1,600/share. Risks to our forecast are: (1) the bank (again) recorded recovery on loans written-off and (2) higher gain on marketable securities. Both factors were the reasons behind the better-than- expected FY10 results. Meanwhile, we believe that our concerns have been fully reflected on the current share price. Therefore, we upgraded our recommendation from buy to neutral.
Reports gauge damaging La Nina summer rain's cost
THE effects of the summer's La Nina rains on the nation's coal, iron ore and uranium exports will be revealed this week in the first-quarter reports of Rio Tinto and its subsidiary Energy Resources of Australia.
Both are expected to warn that the weather's impact will stretch into the June quarter.
While the headlines about devastating floods have gone, heavy rain continued in Queensland, the Northern Territory and Western Australia throughout February and March, meaning first-quarter production will be hit much harder than even the December quarter.
Rio energy chief Doug Ritchie, who runs the miner's coal and uranium businesses, said rains were continuing in Queensland, with coal production still affected.
UBS analysts are forecasting that even though port and rail infrastructure is mostly up and running after the floods, Queensland's March quarter coal production will be down 15 per cent from the December quarter.
Sales are expected to fall even further -- 30 per cent -- because port and mine stockpiles were run down during the heaviest of the rains and have not been rebuilt.
"We would expect Rio Tinto's Queensland coal and West Australian iron ore operations to show reduced production (from the previous quarter)," UBS analyst Glyn Lawcock said.
February export data released last week by the Bureau of Statistics shows hard coking coal exports, mainly from Queensland, slipped by 9 per cent from January and were down 30 per cent from a year ago at 4.9 million tonnes.
UBS said the exports were the lowest in the past decade.
While Rio's Queensland coking coal output is expected to show similar drops, its Hunter Valley thermal coal operations in NSW, run by its Coal & Allied subsidiary, are expected to show only a 10 per cent drop from the previous quarter.
Coal & Allied, which reports on Wednesday, is forecast by UBS to have produced 6.8 million tonnes in the quarter, down 10 per cent from the December quarter but up 20 per cent from a year ago, when the weather in the Hunter Valley played more havoc.
ERA, which reports tomorrow, has the biggest potential to give the market a negative shock, as far as Rio's results go. UBS is expecting a 55 per cent drop in uranium production from the previous quarter to 525 tonnes.
Both are expected to warn that the weather's impact will stretch into the June quarter.
While the headlines about devastating floods have gone, heavy rain continued in Queensland, the Northern Territory and Western Australia throughout February and March, meaning first-quarter production will be hit much harder than even the December quarter.
Rio energy chief Doug Ritchie, who runs the miner's coal and uranium businesses, said rains were continuing in Queensland, with coal production still affected.
UBS analysts are forecasting that even though port and rail infrastructure is mostly up and running after the floods, Queensland's March quarter coal production will be down 15 per cent from the December quarter.
Sales are expected to fall even further -- 30 per cent -- because port and mine stockpiles were run down during the heaviest of the rains and have not been rebuilt.
"We would expect Rio Tinto's Queensland coal and West Australian iron ore operations to show reduced production (from the previous quarter)," UBS analyst Glyn Lawcock said.
February export data released last week by the Bureau of Statistics shows hard coking coal exports, mainly from Queensland, slipped by 9 per cent from January and were down 30 per cent from a year ago at 4.9 million tonnes.
UBS said the exports were the lowest in the past decade.
While Rio's Queensland coking coal output is expected to show similar drops, its Hunter Valley thermal coal operations in NSW, run by its Coal & Allied subsidiary, are expected to show only a 10 per cent drop from the previous quarter.
Coal & Allied, which reports on Wednesday, is forecast by UBS to have produced 6.8 million tonnes in the quarter, down 10 per cent from the December quarter but up 20 per cent from a year ago, when the weather in the Hunter Valley played more havoc.
ERA, which reports tomorrow, has the biggest potential to give the market a negative shock, as far as Rio's results go. UBS is expecting a 55 per cent drop in uranium production from the previous quarter to 525 tonnes.
Peringkat Energi Mega diturunkan - Bisnis Indonesia
Lembaga pemeringkat Standard & Poor's Ratings Services menurunkan peringkat jangka panjang PT Energi Mega Persada Tbk (EMP) menjadi CCC+ dari semula B-.
Pada saat yang sama, S&P juga menurunkan peringkat rencana penerbitan obligasi oleh Energi Mega Persada International Holdings Pte. Ltd menjadi CCC+ dari semula B-. Dalam rencana penerbitan obligasi ini, EMP dan anak usahanya
Melalui EMP International Holdings Pte Ltd, EMP akan menerbitkan obligasi senilai US$275 juta bertenor lima tahun.
Analis S&P Andrew Wong menjelaskan penurunan peringkat ini disebabkan terjadinya tekanan terhadap likuiditas EMP karena terjadinya pelanggaran terhadap covenan (perjanjian pembatasan) kredit dengan bank.
"Kami mengharapkan perseroan memiliki dana tambahan yang memadai untuk menjamin kelanjutan operasional," paparnya kemarin.
EMP berencana membiayai kembali utang bank yang jatuh tempo untuk menyelesaikan masalah kepatuhan terhadap covenan. Wong menyatakan S&P memahami posisi EMP yang sedang menggelar negosiasi pembiayai kembali.
"Kami yakin profil risiko keuangan perseroan pada satu hingga dua tahun ke depan didominasi dengan rasio utang yang tinggi. Namun, kami harapkan produksi gas dari Blok Bentu bisa membantu menaikkan rasio coverage terhadap utang."
Wong memaparkan peringkat EMP mencerminkan tingginya rasio utang perseroan, pergerakan industri, integrasi yang terbatas, dampak perubahan harga minyak, dan risiko pelaksanaan proyek-proyek besar.
Pada saat yang sama, S&P juga menurunkan peringkat rencana penerbitan obligasi oleh Energi Mega Persada International Holdings Pte. Ltd menjadi CCC+ dari semula B-. Dalam rencana penerbitan obligasi ini, EMP dan anak usahanya
Melalui EMP International Holdings Pte Ltd, EMP akan menerbitkan obligasi senilai US$275 juta bertenor lima tahun.
Analis S&P Andrew Wong menjelaskan penurunan peringkat ini disebabkan terjadinya tekanan terhadap likuiditas EMP karena terjadinya pelanggaran terhadap covenan (perjanjian pembatasan) kredit dengan bank.
"Kami mengharapkan perseroan memiliki dana tambahan yang memadai untuk menjamin kelanjutan operasional," paparnya kemarin.
EMP berencana membiayai kembali utang bank yang jatuh tempo untuk menyelesaikan masalah kepatuhan terhadap covenan. Wong menyatakan S&P memahami posisi EMP yang sedang menggelar negosiasi pembiayai kembali.
"Kami yakin profil risiko keuangan perseroan pada satu hingga dua tahun ke depan didominasi dengan rasio utang yang tinggi. Namun, kami harapkan produksi gas dari Blok Bentu bisa membantu menaikkan rasio coverage terhadap utang."
Wong memaparkan peringkat EMP mencerminkan tingginya rasio utang perseroan, pergerakan industri, integrasi yang terbatas, dampak perubahan harga minyak, dan risiko pelaksanaan proyek-proyek besar.
Mandiri Sekuritas & DOID rights issue - Mandiri
PT Delta Dunia Makmur Tbk (DOID), parent of Indonesia's second largest coal mining contractor PT Bukit Makmur Mandiri Utama (BUMA), today jumped 8.55% to Rp1,270 per share on a market rumor saying DOID drops a rights issue.
A source close to the deal the rights issue for Delta Dunia is inevitable in a bid to boost its equity, which is in line with its plan to expand business.
"Delta Dunia has mandated PT Mandiri Sekuritas to arrange the rights issue, which is more likely to be held in the second half of this year, a bit delay from the initial plan in April-May," the source said. Delta Dunia is also considering to secure US$750 million new loan facility before the rights issue will be held.
Andre Soelistiyo was unreachable when Insider Stories tried to confirm about the appointment of Mandiri Sekuritas. Despite the proposed rights issue, how about the operational target this year?
A source close to the deal the rights issue for Delta Dunia is inevitable in a bid to boost its equity, which is in line with its plan to expand business.
"Delta Dunia has mandated PT Mandiri Sekuritas to arrange the rights issue, which is more likely to be held in the second half of this year, a bit delay from the initial plan in April-May," the source said. Delta Dunia is also considering to secure US$750 million new loan facility before the rights issue will be held.
Andre Soelistiyo was unreachable when Insider Stories tried to confirm about the appointment of Mandiri Sekuritas. Despite the proposed rights issue, how about the operational target this year?
INTA Akan Stock Split 1:5 - TokoSaham
Manajemen PT Intraco Penta Tbk (INTA) mengusulkan rasio pemecahan saham 1:5 (1 saham menjadi 5 saham).
Untuk memuluskan aksi korporasi ini, manajemen INTA akan menggelar rapat umum pemegang saham luar biasa pada 15 April 2011 di Intercontinental Hotel Jakarta.
Untuk memuluskan aksi korporasi ini, manajemen INTA akan menggelar rapat umum pemegang saham luar biasa pada 15 April 2011 di Intercontinental Hotel Jakarta.
Harga saham MNC diprediksi terus melemah - Bisnis Indonesia
Harga saham PT Media Nusantara Citra Tbk diprediksi kian melemah hingga penutupan perdagangan sore nanti.
Terpantau hingga penutupan perdagangan sesi pertama siang tadi, harga saham dengan kode MNCN terkoreksi 4,71% atau setara Rp40 ke level Rp810 per lembar sahamnya.
Head of riset PT Citi Pacific Securities Hendri Effendi mengatakan penurunan lebih dari 4% saham milik konglomerasi media, Hary Tanoesoedibjo, akibat sentimen negatif setelah pengadilan kemarin memerintahkan PT Cipta Televisi Pendidikan Indonesia (TPI) dikembalikan ke pihak Siti Hardiyanti (Tutut).
"Saham MNC kian tergerus hingga penutupan nanti, mungkin tekanan jual dimulai sejak perdagangan kemarin," ujarnya, kepada Bisnis, hari ini.
Hendri memprediksi, harga saham MNCN ini bisa menembus level Rp800 per lembarnya sore ini. Pada perdagangan kemarin, harga saham MNCN terkoreksi turun 50 poin atau setara 5,55% ke level Rp850 per lembar, setelah keluar putusan pengadilan yang memenangkan tuntutan Siti Hardiyanti Rukmana untuk menguasai TPI kembali.
Terpantau hingga penutupan perdagangan sesi pertama siang tadi, harga saham dengan kode MNCN terkoreksi 4,71% atau setara Rp40 ke level Rp810 per lembar sahamnya.
Head of riset PT Citi Pacific Securities Hendri Effendi mengatakan penurunan lebih dari 4% saham milik konglomerasi media, Hary Tanoesoedibjo, akibat sentimen negatif setelah pengadilan kemarin memerintahkan PT Cipta Televisi Pendidikan Indonesia (TPI) dikembalikan ke pihak Siti Hardiyanti (Tutut).
"Saham MNC kian tergerus hingga penutupan nanti, mungkin tekanan jual dimulai sejak perdagangan kemarin," ujarnya, kepada Bisnis, hari ini.
Hendri memprediksi, harga saham MNCN ini bisa menembus level Rp800 per lembarnya sore ini. Pada perdagangan kemarin, harga saham MNCN terkoreksi turun 50 poin atau setara 5,55% ke level Rp850 per lembar, setelah keluar putusan pengadilan yang memenangkan tuntutan Siti Hardiyanti Rukmana untuk menguasai TPI kembali.
Garuda Terima Pesawat Baru Airbus 330-200 - Vivanews
PT Garuda Indonesia Tbk hari ini, Sabtu 16 April 2011, menerima pesawat Airbus 330-200 ke-12 yang tiba dari pabrik Airbus di Toulouse, Prancis. Tahun ini, Garuda Indonesia mendatangkan sebanyak 11 pesawat baru yang terdiri atas sembilan Boeing 737-800 NG dan dua Airbus 330-200.
Kedatangan pesawat di Hanggar Garuda Maintenace Facility, Aero Asia disambut oleh Menteri Badan Usaha Milik Negara (BUMN), Mustafa Abubakar, Direktur Jenderal Perhubungan Udara Herry Bhakti, sejumlah Duta Besar negara asing dan Direktur Utama Garuda Indonesia, Emirsyah Satar.
"Satu pesawat Boeing B737-800 NG telah tiba pada Januari lalu, sedangkan satu pesawat Airbus A330-200 yang tiba hari ini merupakan pesawat ke-12 dari tipe yang sama yang dimiliki Garuda Indonesia," kata Emirsyah saat acara penyambutan kedatangan pesawat Airbus A330-200 di Hanggar II, GMF AeroAsia, Cengkareng, Sabtu, 16 April 2011.
Emirsyah mengatakan, Garuda Indonesia pada Minggu, 17 April 2011, juga akan menerima pesawat baru Boeing B 737-800 NG langsung dari pabrik Boeing di Seatle, Amerika Serikat.
Dia menjelaskan, pesawat Airbus A330-200 dan B737-800 NG tersebut diklaim dapat memberikan lebih banyak kenyamanan kepada para pengguna jasa. Sejumlah fasilitas yang dimiliki pesawat tersebut di antaranya "in-flight entertainment system" baik di kelas bisnis maupun ekonomi dengan audio video on demand (AVOD).
Tersedia 25 pilihan film, 10 program TV, 35 pilihan album musik, dan 25 interaktif video games. Para penumpang Airbus A330-200 di kelas bisnis akan lebih menikmati penerbangan mengingat tempat duduk dapat direbahkan hingga 180° atau menjadi "flat-bed-seats".
Melalui program pengembangan ke depan atau "Quantum Leap" hingga 2015, Garuda Indonesia direncanakan memiliki sebanyak 153 pesawat yang terdiri atas B737-800 NG, A330-200, dan B777-300 ER.
Kedatangan pesawat di Hanggar Garuda Maintenace Facility, Aero Asia disambut oleh Menteri Badan Usaha Milik Negara (BUMN), Mustafa Abubakar, Direktur Jenderal Perhubungan Udara Herry Bhakti, sejumlah Duta Besar negara asing dan Direktur Utama Garuda Indonesia, Emirsyah Satar.
"Satu pesawat Boeing B737-800 NG telah tiba pada Januari lalu, sedangkan satu pesawat Airbus A330-200 yang tiba hari ini merupakan pesawat ke-12 dari tipe yang sama yang dimiliki Garuda Indonesia," kata Emirsyah saat acara penyambutan kedatangan pesawat Airbus A330-200 di Hanggar II, GMF AeroAsia, Cengkareng, Sabtu, 16 April 2011.
Emirsyah mengatakan, Garuda Indonesia pada Minggu, 17 April 2011, juga akan menerima pesawat baru Boeing B 737-800 NG langsung dari pabrik Boeing di Seatle, Amerika Serikat.
Dia menjelaskan, pesawat Airbus A330-200 dan B737-800 NG tersebut diklaim dapat memberikan lebih banyak kenyamanan kepada para pengguna jasa. Sejumlah fasilitas yang dimiliki pesawat tersebut di antaranya "in-flight entertainment system" baik di kelas bisnis maupun ekonomi dengan audio video on demand (AVOD).
Tersedia 25 pilihan film, 10 program TV, 35 pilihan album musik, dan 25 interaktif video games. Para penumpang Airbus A330-200 di kelas bisnis akan lebih menikmati penerbangan mengingat tempat duduk dapat direbahkan hingga 180° atau menjadi "flat-bed-seats".
Melalui program pengembangan ke depan atau "Quantum Leap" hingga 2015, Garuda Indonesia direncanakan memiliki sebanyak 153 pesawat yang terdiri atas B737-800 NG, A330-200, dan B777-300 ER.
Waduh, Pemerintah Punya Opsi Naikkan Premium ke Rp 6.500 per Liter -Detikfinance
Pemerintah siapkan empat opsi pengendalian BBM bersubsidi, mulai dari kenaikan harga Premium sampai menahan harga Pertamax di Rp 7.500 per liter.
Hal ini disampaikan Deputi Menko Perekonomian Bidang Industri dan Perdagangan Eddy Putra Irawadi dalam diskusi dengan wartawan di Hotel Jayakarta, Bandung, Sabtu (16/4/2011).
Opsi pertama adalah melakukan pengaturan pengguna sekaligus penjatahan volume BBM bersubsidi menggunakan alat deteksi radio frequency identification (RFID).
"Artinya, subsidi BBM hanya diberikan bagi pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum, sedangkan kendaraan pribadi diwajibkan menggunakan pertamax," katanya.
Opsi kedua adalah pengaturan pengguna diimbangi dengan penyesuaian harga BBM bersubsidi. Maksudnya, subsidi BBM hanya diberikan bagi pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum dengan harga premium Rp 4.500 per liter.
Sementara untuk taksi dan kendaraan pribadi bisa mengonsumsi premium dengan harga yang lebih tinggi, yakni Rp 6.500 per liter.
Opsi ketiga adalah penyesuaian harga BBM diimbangi dengan pemberian subsidi langsung menggunakan alat kendali kartu prabayar. Teknisnya, harga premium dinaikan menjadi Rp 6.500 per liter untuk dikonsumsi semua golongan pengguna kendaraan.
Tetapi khusus pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum akan diberikan subsidi langsung via perbankan.
Opsi keempat atau terakhir adalah pengaturan pengguna sekaligus menyubsidi pertamax dengan mematok harganya sebesar Rp 7.500 per liter. Skema pengaturan pengguna BBM subsidi masih sama, yakni pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum bisa mengonsumsi premium seharga Rp 4.500, sedangkan pengguna kendaraan pribadi hanya boleh pakai pertamax.
Dalam APBN, pemerintah diberikan kesempatan untuk menyesuaikan harga BBM bersubsidi sesuai pasal 7 ayat (4) Undang-Undang No.10/2010 tentang APBN 2011.
Eddy menyatakan, sampai saat ini pemerintah belum memutuskan opsi mana yang diambil untuk menahan volume dan anggaran BBM bersubsidi tetap sesuai target dalam APBN 2011. Pasalnya perlu melihat perkembangan harga minyak.
"Skenario dalam menghadapi harga minyak yang tinggi, tapi belum dipilih karena pemerintah melihat dinamika harga minyak karena ada pasti ada implikasi pada APBN, jadi kita buat skenario jaga-jaga," tandasnya.
Dalam APBN 2011, volume BBM bersubsidi ditahan pada 38,6 juta kilo liter dengan anggaran yang disediakan sebesar Rp 95,9 triliun.
Hal ini disampaikan Deputi Menko Perekonomian Bidang Industri dan Perdagangan Eddy Putra Irawadi dalam diskusi dengan wartawan di Hotel Jayakarta, Bandung, Sabtu (16/4/2011).
Opsi pertama adalah melakukan pengaturan pengguna sekaligus penjatahan volume BBM bersubsidi menggunakan alat deteksi radio frequency identification (RFID).
"Artinya, subsidi BBM hanya diberikan bagi pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum, sedangkan kendaraan pribadi diwajibkan menggunakan pertamax," katanya.
Opsi kedua adalah pengaturan pengguna diimbangi dengan penyesuaian harga BBM bersubsidi. Maksudnya, subsidi BBM hanya diberikan bagi pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum dengan harga premium Rp 4.500 per liter.
Sementara untuk taksi dan kendaraan pribadi bisa mengonsumsi premium dengan harga yang lebih tinggi, yakni Rp 6.500 per liter.
Opsi ketiga adalah penyesuaian harga BBM diimbangi dengan pemberian subsidi langsung menggunakan alat kendali kartu prabayar. Teknisnya, harga premium dinaikan menjadi Rp 6.500 per liter untuk dikonsumsi semua golongan pengguna kendaraan.
Tetapi khusus pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum akan diberikan subsidi langsung via perbankan.
Opsi keempat atau terakhir adalah pengaturan pengguna sekaligus menyubsidi pertamax dengan mematok harganya sebesar Rp 7.500 per liter. Skema pengaturan pengguna BBM subsidi masih sama, yakni pengguna kendaraan plat kuning, roda dua/tiga, dan kendaraan layanan umum bisa mengonsumsi premium seharga Rp 4.500, sedangkan pengguna kendaraan pribadi hanya boleh pakai pertamax.
Dalam APBN, pemerintah diberikan kesempatan untuk menyesuaikan harga BBM bersubsidi sesuai pasal 7 ayat (4) Undang-Undang No.10/2010 tentang APBN 2011.
Eddy menyatakan, sampai saat ini pemerintah belum memutuskan opsi mana yang diambil untuk menahan volume dan anggaran BBM bersubsidi tetap sesuai target dalam APBN 2011. Pasalnya perlu melihat perkembangan harga minyak.
"Skenario dalam menghadapi harga minyak yang tinggi, tapi belum dipilih karena pemerintah melihat dinamika harga minyak karena ada pasti ada implikasi pada APBN, jadi kita buat skenario jaga-jaga," tandasnya.
Dalam APBN 2011, volume BBM bersubsidi ditahan pada 38,6 juta kilo liter dengan anggaran yang disediakan sebesar Rp 95,9 triliun.
ANTM:Pirates of Somalia - Mandiri
Antam’s ferronickel cargo, carried by “MV Sinar Kudus” – owned by PT Samudra Indonesia (Samin), has been hijacked in the Gulf of Aden, off the coast of Somalia. Fortunately Antam has confirmed that the cargo has been fully insured with extended premium with PT Wahana Tata. Based on our channel check the sum insured reaches US$64mn (vs rumor in the market of US$100mn) or translating around 2,500 tons ferronickel or 13.9% of FY11F production. However, the company has not confirmed the cargo’s value yet. The ransom is around US$3.5mn and might be increased up to US$9mn. Currently it is still on a negotiation process, and we expect Antam is likely to bear most of the ransom. We have no changes in our forecasts until we get more clarity on this.
Somali Piracy background. According to Aegis intelligence report, Somali pirate gangs continue to grow and the hijack remain at a broadly constant level despite of international counter piracy efforts. Some general patterns have emerged, where the most vulnerable vessels appear to be those transiting the Gulf of Aden at less than 15 knots in daylight and those with a low freeboard. In 2010, 56 incidents were reported – including 17 hijacks and 29 cases of vessels being fired upon. Somalia is already in a Joint War Committee (JWC) watch list.
How is Wahana Tata’s balance sheet? Based on Financial Institution Supervisory Agency, Wahana Tata’s total asset as of end 2009 reached Rp802.9bn. Considering the total sum insured of around Rp600bn, it would be a significant burden if it is borne alone by Wahana Tata. Based on our channel checking, Wahana Tata has diversified the risks and reinsured most of that amount to several reinsurance companies including PT Tata Reasuransi Indonesia.
Worst case scenario. Due to the 3-month shutdown plan of its FeNi II in 4Q11 Antam has limited production capacity to meet orders from European buyers this year, so that it will carry over the demand to 2012. Therefore, If Antam and PT Samudra Indonesia could not meet the pirate’s demand or complete the negotiation, we would see potential loss of around Rp570bn toward its FY11F revenue or 6-7% from our FY11F estimates. Antam might reimburse it but it will take times considering the quite significant amount of the claim vs the insurance company’s total assets.
Maintain Neutral. We have not changed our forecasts as we are waiting for the confirmation from the company. We maintain our TP of Rp2,400/share and maintain our Neutral rating. ANTM now is traded at 10.1xPER11F.
Somali Piracy background. According to Aegis intelligence report, Somali pirate gangs continue to grow and the hijack remain at a broadly constant level despite of international counter piracy efforts. Some general patterns have emerged, where the most vulnerable vessels appear to be those transiting the Gulf of Aden at less than 15 knots in daylight and those with a low freeboard. In 2010, 56 incidents were reported – including 17 hijacks and 29 cases of vessels being fired upon. Somalia is already in a Joint War Committee (JWC) watch list.
How is Wahana Tata’s balance sheet? Based on Financial Institution Supervisory Agency, Wahana Tata’s total asset as of end 2009 reached Rp802.9bn. Considering the total sum insured of around Rp600bn, it would be a significant burden if it is borne alone by Wahana Tata. Based on our channel checking, Wahana Tata has diversified the risks and reinsured most of that amount to several reinsurance companies including PT Tata Reasuransi Indonesia.
Worst case scenario. Due to the 3-month shutdown plan of its FeNi II in 4Q11 Antam has limited production capacity to meet orders from European buyers this year, so that it will carry over the demand to 2012. Therefore, If Antam and PT Samudra Indonesia could not meet the pirate’s demand or complete the negotiation, we would see potential loss of around Rp570bn toward its FY11F revenue or 6-7% from our FY11F estimates. Antam might reimburse it but it will take times considering the quite significant amount of the claim vs the insurance company’s total assets.
Maintain Neutral. We have not changed our forecasts as we are waiting for the confirmation from the company. We maintain our TP of Rp2,400/share and maintain our Neutral rating. ANTM now is traded at 10.1xPER11F.
APLN: A sales booster - Mandiri
Although APLN's FY10 net profit met our forecast, its margin was a little bit of a letdown to us. We learned that a major discount on the products was the main cause for the below-than-expected margin, which reminds us that APLN is a volume player. Going forward, our conviction to the company depends on its ability to continuously boost its sales volume. Given its historical track record and reiterated by last year’s strong sales growth, the company could surpass our FY11F marketing sales of Rp3.5tn. We maintain our Buy recommendation on the stock. We think recent Kuningan acquisition issue has pushed the stock to its bottom, hence a good opportunity to buy upon probable upcoming good news i.e. its sales booking and favorable new acquisitions.
Fast sales churn amid lower ASP. Some product discount examples were seen on its Central Park apartment project, one of company’s 2010 main revenue contributors. With today’s total area record of 53,846m2, ASP was offered at Rp13.8mn/sqm, versus to our estimate of Rp15.5/sqm. However, this has reached 68% of total saleable area, suggesting to faster sales churn, while still maintained at an attainable >20% desired project IRR. We are still confident with the growth of the company going forward, especially given continued project insertion to its business, notably the recent Green Permata, Pos Pengumben and Grand Taruma Karawang projects thus sales can continue to be boosted.
Kuningan acquisition's hanging in balance. On the recent company’s analyst briefing, APLN commented on the recent issue towards its new land acquisition of ELTY’s CBD Kuningan Epicentrum that is said still on the progress of discussion. However, they expect a lengthy negotiation, with a possibility that the deal will even collapse given a legal issue that restrains ELTY from selling the asset. Based on our channel check we learned that it was due to existing agreement with ELTY’s partner. Nonetheless, if the deal finally occurs, we think the key point is on the price deal thus we can estimate the project feasibility, especially on the ASP offered, and if otherwise, we believe on the company’s credibility that will assure continuous project offers for its future business growth
Attractive valuation, Buy. Despite of downward revision on FY11F EPS by 12.5%, we still maintain recommendation on the stock because at our TP of Rp430/share, the implied PE11F is 19x, still lower than the industry average of 21.3x. APLN’s PEG11F of 0.2x is also one of the lowest, where industry average stood at 0.6x.
Fast sales churn amid lower ASP. Some product discount examples were seen on its Central Park apartment project, one of company’s 2010 main revenue contributors. With today’s total area record of 53,846m2, ASP was offered at Rp13.8mn/sqm, versus to our estimate of Rp15.5/sqm. However, this has reached 68% of total saleable area, suggesting to faster sales churn, while still maintained at an attainable >20% desired project IRR. We are still confident with the growth of the company going forward, especially given continued project insertion to its business, notably the recent Green Permata, Pos Pengumben and Grand Taruma Karawang projects thus sales can continue to be boosted.
Kuningan acquisition's hanging in balance. On the recent company’s analyst briefing, APLN commented on the recent issue towards its new land acquisition of ELTY’s CBD Kuningan Epicentrum that is said still on the progress of discussion. However, they expect a lengthy negotiation, with a possibility that the deal will even collapse given a legal issue that restrains ELTY from selling the asset. Based on our channel check we learned that it was due to existing agreement with ELTY’s partner. Nonetheless, if the deal finally occurs, we think the key point is on the price deal thus we can estimate the project feasibility, especially on the ASP offered, and if otherwise, we believe on the company’s credibility that will assure continuous project offers for its future business growth
Attractive valuation, Buy. Despite of downward revision on FY11F EPS by 12.5%, we still maintain recommendation on the stock because at our TP of Rp430/share, the implied PE11F is 19x, still lower than the industry average of 21.3x. APLN’s PEG11F of 0.2x is also one of the lowest, where industry average stood at 0.6x.
CMNP:Inorganic growth is the only way - Mandiri
CMNP booked FY10 net income of Rp298bn (+331.7%yoy, -325.2%qoq), representing only 48.3%, and 52% of our and consensus estimates, respectively. QoQ net income dropped significantly due to auditing adjustment. In 9M10, CMNP booked unrealized gains and extraordinary income totaling Rp296bn, which were not allowed to be booked in the FY10 results by its auditor. We have Neutral recommendation on CMNP with new TP of Rp1,100/share. Currently, CMNP trades at PER11-12F of 6.9x and 6.1x
Robust growth from the Waru-Juanda toll road. CMNP booked FY10 revenue of Rp750bn (+18.8%yoy, +6.2%qoq), supported by higher revenue from the Waru-Juanda toll road. Revenue from the toll road reached Rp46bn (+47.6%yoy), due to 5%yoy tariff increase and traffic growth of 40.6%yoy, or translated into 6.1% of CMNP’s revenue. Average daily traffic in the Waru-Juanda section gradually increased from 18,000 vehicles/day in Jan’10 to 25,000 in Dec’10, or averaging 22.500 vehicles/day in FY10.
QoQ decline in net income due to auditing adjustment. In 9M10 F/S, CMNP booked unrealized gains of Rp236.1bn from debt revaluation and extraordinary gains of Rp59.6bn which boosted its bottom line. The unrealized gains were generated from debt fair value revaluation, while extraordinary income was obtained from debt restructuring in the end 2009. However, as the company’s auditor did not allow such gains to be recognized in its audited F/S, the company’s net income dropped significantly qoq.
Healthy balance sheet. We see that that the most probable way for CMNP to expand is by acquiring other toll road project. Based on our analysis on the company’s solvability ratio, we think the company still has good borrowing capacity with debt- to-equity ratio of 0.5x, lower than Jasa Marga’s of 1.0x.
Rp500bn capex is allocated for the Depok-Antasari. According to our recent meeting with the company’s managements, they plan to acquire stalled toll road projects, but they didn't give any details. Additionally, they were quoted in a local newspaper yesterday that the company plans to spend an additional Rp450bn capex on top of the initially planned Rp550bn for the Depok-Antasari project. The company intends to finance the Rp1.0tn capex with bank loan in addition to issuing bonds this year.
Valuation. Our DCF valuation (WACC of 12.2% and TG of 0.0%) results in new TP of Rp1,100/share. Hence, we maintain Neutral recommendation on CMNP.
Robust growth from the Waru-Juanda toll road. CMNP booked FY10 revenue of Rp750bn (+18.8%yoy, +6.2%qoq), supported by higher revenue from the Waru-Juanda toll road. Revenue from the toll road reached Rp46bn (+47.6%yoy), due to 5%yoy tariff increase and traffic growth of 40.6%yoy, or translated into 6.1% of CMNP’s revenue. Average daily traffic in the Waru-Juanda section gradually increased from 18,000 vehicles/day in Jan’10 to 25,000 in Dec’10, or averaging 22.500 vehicles/day in FY10.
QoQ decline in net income due to auditing adjustment. In 9M10 F/S, CMNP booked unrealized gains of Rp236.1bn from debt revaluation and extraordinary gains of Rp59.6bn which boosted its bottom line. The unrealized gains were generated from debt fair value revaluation, while extraordinary income was obtained from debt restructuring in the end 2009. However, as the company’s auditor did not allow such gains to be recognized in its audited F/S, the company’s net income dropped significantly qoq.
Healthy balance sheet. We see that that the most probable way for CMNP to expand is by acquiring other toll road project. Based on our analysis on the company’s solvability ratio, we think the company still has good borrowing capacity with debt- to-equity ratio of 0.5x, lower than Jasa Marga’s of 1.0x.
Rp500bn capex is allocated for the Depok-Antasari. According to our recent meeting with the company’s managements, they plan to acquire stalled toll road projects, but they didn't give any details. Additionally, they were quoted in a local newspaper yesterday that the company plans to spend an additional Rp450bn capex on top of the initially planned Rp550bn for the Depok-Antasari project. The company intends to finance the Rp1.0tn capex with bank loan in addition to issuing bonds this year.
Valuation. Our DCF valuation (WACC of 12.2% and TG of 0.0%) results in new TP of Rp1,100/share. Hence, we maintain Neutral recommendation on CMNP.
XL Axiata: Buy; Rp5,600; TP Rp7,200; EXCL IJ Declares Rp107 dividend per share - DBS Vickers
XL Axiata Tbk (EXCL) has announced dividend of Rp107 per share, which translates to ~30% payout ratio and ~2% dividend yield in line with our expectations. XL has adopted minimum earnings payout ratio of 30% for 2011 and targets to raise dividend payout ratio in the future. We project ~50% payout ratio resulting in ~ 4.5% yield, amid free cash flow yield of ~7%.
EXCL is the only pure wireless player in Indonesia with no exposure to declining fixed line. The company is set to gain revenue share from Telkomsel whose ~55% revenue share is too high to sustain in a 3-player market. Currently, EXCL is trading at only 11.7x FY11F PE on par with PT Telkom while offering FY10-12F EPS CAGR of ~25% versus ~5% for Telkom. EXCL remains our top pick in Indonesian and Asian telecom sector for its proven execution.
EXCL is the only pure wireless player in Indonesia with no exposure to declining fixed line. The company is set to gain revenue share from Telkomsel whose ~55% revenue share is too high to sustain in a 3-player market. Currently, EXCL is trading at only 11.7x FY11F PE on par with PT Telkom while offering FY10-12F EPS CAGR of ~25% versus ~5% for Telkom. EXCL remains our top pick in Indonesian and Asian telecom sector for its proven execution.
Bumi (BUMI IJ) – Balancing Act, by Nick Cashmore - CLSA
Bumi said that it was in talk with CIC on the possible swap of US$600mn debt into equity. “It could be with Vallar’s shares, Bumi’s shares, or BRMS’ shares”
Nick Cashmore is re-iterating his BUY call on BUMI. The company offers an enticing balance sheet restructuring story. One of the country’s most leveraged companies (US$4.2bn gross debt as of Dec 2010), debt restructuring and strong cashflow could see this drop markedly over the next few years.
BUMI has an option to repay US$600mn debt in Oct 2011, but this will cost a penalty fee of US$30mn. Assuming all of CIC debt was redeemed early, this would mean US$95mn in fees, but also US$361mn in annual interest savings.
Nick also thinks that debt for equity swaps are more likely (and have been used before). The stock remains a conviction balance sheet restructuring story. BUY with TP of Rp4,000.
Nick Cashmore is re-iterating his BUY call on BUMI. The company offers an enticing balance sheet restructuring story. One of the country’s most leveraged companies (US$4.2bn gross debt as of Dec 2010), debt restructuring and strong cashflow could see this drop markedly over the next few years.
BUMI has an option to repay US$600mn debt in Oct 2011, but this will cost a penalty fee of US$30mn. Assuming all of CIC debt was redeemed early, this would mean US$95mn in fees, but also US$361mn in annual interest savings.
Nick also thinks that debt for equity swaps are more likely (and have been used before). The stock remains a conviction balance sheet restructuring story. BUY with TP of Rp4,000.
MNC (MNCN IJ) – Channel Dispute, by Dee Senaratne and Jessica Irene - CLSA
Yesterdays story still today's headlines. MNCN losing round 1 in the battle for ownership of subsidiary TPI TV, now renamed MNC TV. Ex-owner (daughter of ex-president Soeharto already owns 25%) claims the 75% in hands of MNCN and won the case in lower court. Obviously goes into appeal and could be a long drawn-out process.
The bigger issue is for us is whether or not the content is potentially transferred across along with the potential change of ownership of MNC TV.
Key points from the report:
· MNCN has decided to appeal the ruling to High Court. There could be another two to three levels of court before it reaches the Supreme Court level.
· The dispute has been going on since 2005 when Tutut was unhappy with the result of the shareholder meeting that ratified MNC’s CEO Hary Tanoe as the owner of MNC TV.
· Any assessment at this stage is premature due to the uncertainties surrounding the case. However if the worst case happens, losing MNC TV affects revenues by 15% and EBITDA by 12%.
The bigger issue is for us is whether or not the content is potentially transferred across along with the potential change of ownership of MNC TV.
Key points from the report:
· MNCN has decided to appeal the ruling to High Court. There could be another two to three levels of court before it reaches the Supreme Court level.
· The dispute has been going on since 2005 when Tutut was unhappy with the result of the shareholder meeting that ratified MNC’s CEO Hary Tanoe as the owner of MNC TV.
· Any assessment at this stage is premature due to the uncertainties surrounding the case. However if the worst case happens, losing MNC TV affects revenues by 15% and EBITDA by 12%.
volatility in the agriculture sector - CLSA
Recently, we have seen how accelerated climate change (El Nino to La Nina) has created high volatility in the agriculture sector. Rising food prices caused by flooding and draught have pushed inflation up from China to Indonesia. It even ignited social unrest in parts of the Middle East.
Closer to home, unpredictable weather coupled with a decline in natural predators is responsible for a recent plague of caterpillars (the insects here, not the heavy equipments) in parts of Indonesia. Though the phenomenon is centered largely in East Java, smaller reported outbreaks in Central Java, West Java, Bali and, most recently, Jakarta have prompted fears of a widespread infestation.
In Jakarta, caterpillars were found on pine trees and have lead into a debate on what is the best way to deal with these insects. The head of the affected neighbourhood suggested the best way to get rid of the pests would be to chop down the trees affected. The problem is that it’d cost US$35/tree to chop the trees down. Not cheap.
In East Java, the caterpillars have destroyed thousands and thousands of mango trees in the best mango producing areas in East Java. Luckily mango does not feature prominently in Indo CPI basket (probably less than chilli). And unlike chilli, it is certainly unrealistic to encourage people to plant mango tress in the backyard.
The point is that climate changes will translate into higher food and soft commodity prices in ways difficult to predict. Luckily, Indonesia is still very much an agriculture based economy where we are not too dependent on imports.
It is interesting to note that CLSA U rubber expert Dr Hiddie Smit is of the view that natural rubber probably has not yet seen its highs. He does see 2013 pricing moderating due to new supply from some of the large tree planting done in 2006, but 2012 could still see new highs (let me know if you would like to see the report).
Rubber is an important commodity for Indonesia. Indonesia is the world's second largest rubber exporter after Thailand. As pointed out by our plantation analyst Di Shui, the country has 3.5m ha plantings, 85% smallholders, average 1-2ha/farmer, implies at least 1.5m smallholder rubber farmers here. Higher rubber price is bullish for Indo consumption story.
For direct rubber exposure, London Sumatra (LSIP IJ) has 17.6k ha rubber plantings. Rubber contributed to 15% of revenue and 14% of EBIT in FY10. A US$1/kg increase to our rubber price assumption would drive a 7% increase in earnings for FY11.
Bakrie Sumatra (UNSP IJ) has 19k ha of rubber plantings. Rubber makes up 33% of consolidated sales, 33% of consolidated gross profits in 2010.
Closer to home, unpredictable weather coupled with a decline in natural predators is responsible for a recent plague of caterpillars (the insects here, not the heavy equipments) in parts of Indonesia. Though the phenomenon is centered largely in East Java, smaller reported outbreaks in Central Java, West Java, Bali and, most recently, Jakarta have prompted fears of a widespread infestation.
In Jakarta, caterpillars were found on pine trees and have lead into a debate on what is the best way to deal with these insects. The head of the affected neighbourhood suggested the best way to get rid of the pests would be to chop down the trees affected. The problem is that it’d cost US$35/tree to chop the trees down. Not cheap.
In East Java, the caterpillars have destroyed thousands and thousands of mango trees in the best mango producing areas in East Java. Luckily mango does not feature prominently in Indo CPI basket (probably less than chilli). And unlike chilli, it is certainly unrealistic to encourage people to plant mango tress in the backyard.
The point is that climate changes will translate into higher food and soft commodity prices in ways difficult to predict. Luckily, Indonesia is still very much an agriculture based economy where we are not too dependent on imports.
It is interesting to note that CLSA U rubber expert Dr Hiddie Smit is of the view that natural rubber probably has not yet seen its highs. He does see 2013 pricing moderating due to new supply from some of the large tree planting done in 2006, but 2012 could still see new highs (let me know if you would like to see the report).
Rubber is an important commodity for Indonesia. Indonesia is the world's second largest rubber exporter after Thailand. As pointed out by our plantation analyst Di Shui, the country has 3.5m ha plantings, 85% smallholders, average 1-2ha/farmer, implies at least 1.5m smallholder rubber farmers here. Higher rubber price is bullish for Indo consumption story.
For direct rubber exposure, London Sumatra (LSIP IJ) has 17.6k ha rubber plantings. Rubber contributed to 15% of revenue and 14% of EBIT in FY10. A US$1/kg increase to our rubber price assumption would drive a 7% increase in earnings for FY11.
Bakrie Sumatra (UNSP IJ) has 19k ha of rubber plantings. Rubber makes up 33% of consolidated sales, 33% of consolidated gross profits in 2010.
Astra & Renesas - JP Morgan
• No need to be overly pessimistic about the restart of production: An April 13 report in the Nihon Keizai Shimbun indicated that production at Renesas’s Naka plant will resume in June. However, Renesas later indicated that it was targeting a July restart but has not said anything else about the future outlook. For this reason the stock market has been rife with conjecture. However, if one calmly assesses the situation, we see no need to be so pessimistic about when production will restart, considering that (1) before the earthquake production volume for automotive micro-control units (MCUs) at the Naka plant was equivalent to around 21,000 8-inch wafers/month, a relatively small scale for the semiconductor industry; (2) the MCUs are produced on 8-inch wafers, a very mature process technology compared with cutting-edge logic; (3) the Naka plant is in the earthquake-stricken area, which will probably be given priority for electric power; and (4) the wafers used are 8-inch, not the 12-inch variety that has been affected by a supply bottleneck due to the damage to Shin-Etsu Handotai’s Shirakawa plant. We think it is difficult for the company to make specific comments publicly because if it were to say it will give priority to the auto industry, it would face a backlash from users in other industries.
• What has caused the confusion? One reason for the confusion is that Renesas has not been clear about when production of automotive MCUs will resume. That said, we think it is wrong to expect Renesas to make clear comments on the topic. If the company seemed to give priority to certain users or certain customers, there might be a major backlash from other users. Given that Renesas has not commented in detail, we think it is also incorrect to assume the company has not acknowledged the importance of the automotive supply-chain. One should also recognize the tendencies of top management (President Yasushi Akao tends to discuss only what is feasible).
• Not the same as the damage Sanyo Electric suffered in the 2004 Niigata Chuetsu Earthquake: The 2004 quake was just 10km from Sanyo’s semiconductor plant, shaking the ground from directly below. The recent quake was offshore in the Pacific, mostly shaking the ground side to side. For this reason lithographic process equipment—used in the most critical phase of semiconductor processing—on the first floor was only slightly damaged. As of April 12 electricity had been restored to the cleanroom. Because production often starts within a few months of cleanroom completion even for new lines, we think the probability of production resuming in June is relatively high.
• Maintaining our Overweight rating: We reiterate our ¥1,000 price target with a time horizon of December 2011. Our price target is based on our FY2012 EPS forecast and a P/E of 8x. Given that this valuation is based on earnings two years forward, we apply a 3-point discount to the industrial electronics sector’s average P/E of 11x since the financial crisis. Risk factors that could prevent the share price from reaching our target include the production recovery being delayed by unforeseen disruptions in the sourcing of semiconductor materials (e.g., wafers and CMP slurry), delays in executing integration plans, yen appreciation, and an economic slowdown causing sales to miss our forecast. We will review our forecasts after obtaining more detailed information.
• What has caused the confusion? One reason for the confusion is that Renesas has not been clear about when production of automotive MCUs will resume. That said, we think it is wrong to expect Renesas to make clear comments on the topic. If the company seemed to give priority to certain users or certain customers, there might be a major backlash from other users. Given that Renesas has not commented in detail, we think it is also incorrect to assume the company has not acknowledged the importance of the automotive supply-chain. One should also recognize the tendencies of top management (President Yasushi Akao tends to discuss only what is feasible).
• Not the same as the damage Sanyo Electric suffered in the 2004 Niigata Chuetsu Earthquake: The 2004 quake was just 10km from Sanyo’s semiconductor plant, shaking the ground from directly below. The recent quake was offshore in the Pacific, mostly shaking the ground side to side. For this reason lithographic process equipment—used in the most critical phase of semiconductor processing—on the first floor was only slightly damaged. As of April 12 electricity had been restored to the cleanroom. Because production often starts within a few months of cleanroom completion even for new lines, we think the probability of production resuming in June is relatively high.
• Maintaining our Overweight rating: We reiterate our ¥1,000 price target with a time horizon of December 2011. Our price target is based on our FY2012 EPS forecast and a P/E of 8x. Given that this valuation is based on earnings two years forward, we apply a 3-point discount to the industrial electronics sector’s average P/E of 11x since the financial crisis. Risk factors that could prevent the share price from reaching our target include the production recovery being delayed by unforeseen disruptions in the sourcing of semiconductor materials (e.g., wafers and CMP slurry), delays in executing integration plans, yen appreciation, and an economic slowdown causing sales to miss our forecast. We will review our forecasts after obtaining more detailed information.
GEM Equity Strategy - Cyclicals: Better value in Latam and EMEA - Credit Suisse
■ Cyclicals outperformed defensives by 82% in Asia versus 37% for EMEA and just 14% for Latam. In our 12 April report, we had highlighted that in Asia ex-Japan, cyclicals (defined as Energy, Materials, Tech, Industrials and Consumer Cyclicals) had outperformed defensives (Staples, Utilities, Telcos) by a massive 82% since the lows in November 2008. The 82% outperformance in Asia compares with 37% for EMEA and just 14% for Latam.
■ Better value in Latam and EMEA? We believe a key reason for the huge difference in performance was the starting point on valuations. Asian cyclicals started the rally with much higher discounts. But now we are finding a 43% discount for Russian Energy versus a 50% premium for Indonesian coal. In Brazil, Materials are now trading at a 16% discount compared with a 73% premium a year ago. Even in South Africa (our biggest Underweight GEM market), the premium on Materials has dropped from 94% a year ago to 27%.
■ We continue to Overweight cheap cyclicals. While we continue to suggest taking profit in overvalued cyclicals (Indonesian Coal, Singapore/ Malaysia Palm Oil, Chinese Metals), we continue to Overweight cheap cyclicals. Undervalued cyclicals include Russian Energy; Brazil Materials; Korean Autos, Tech and Industrials; Chinese Oils; and Australian Resources.
■ Better value in Latam and EMEA? We believe a key reason for the huge difference in performance was the starting point on valuations. Asian cyclicals started the rally with much higher discounts. But now we are finding a 43% discount for Russian Energy versus a 50% premium for Indonesian coal. In Brazil, Materials are now trading at a 16% discount compared with a 73% premium a year ago. Even in South Africa (our biggest Underweight GEM market), the premium on Materials has dropped from 94% a year ago to 27%.
■ We continue to Overweight cheap cyclicals. While we continue to suggest taking profit in overvalued cyclicals (Indonesian Coal, Singapore/ Malaysia Palm Oil, Chinese Metals), we continue to Overweight cheap cyclicals. Undervalued cyclicals include Russian Energy; Brazil Materials; Korean Autos, Tech and Industrials; Chinese Oils; and Australian Resources.
Indonesia Cement Sector - Strong March cement sales - Deutsche Bank
Strong demand outlook; we reiterate Semen Gresik as our top pick
Despite some margin weakness due to limited pricing flexibility and rising cost pressures, we still see marginal earnings improvement in 1Q11, supported by strong cement demand. We remain upbeat on the cement sector as we hope to see higher cement prices starting 2Q11 on the back of much stronger demand as Indonesia enters the dry season of May/June. Our top pick is Semen Gresik given its new capacity due by the end of 2011, superior brand equity, and access to the fastest-growing region, the Outer Islands.
Strong March cement sales: 3.8m tons (+11% YoY; +15% MoM)
The strong cement sales in March mainly came from Java, which grew by 15% YoY compared to 7% YoY growth in the Outer Islands. Java’s strong growth mainly came from Jakarta, West Java and Central Java, while Kalimantan, Eastern Indonesia and Sulawesi recorded negative growth, offsetting Sumatra’s strong sales of +24% YoY (see Figure 2 on page 2). Overall, cement sales in 1Q11 reached 10.5m tons (+9% YoY) and were in line with our 2011 forecast of 44m tons, translating into monthly sales of 3.8m tons (+7% YoY).
Holcim Indonesia continued to record the strongest growth
Holcim Indonesia (SMCB) registered a 31% YoY (+17% MoM) increase in its cement sales, compared to Indocement (INTP) at +12% YoY (+17% MoM) and Semen Gresik (SMGR) at +1% YoY (+12% MoM). Both SMCB and INTP recorded double-digit sales growth amid strong cement demand in their main markets – Jakarta, West Java and Center Java. Overall, the top three cement players’ results are in line with our 2011 forecasts, with SMCB’s 1Q11 cement sales at 1.6m tons (+24% YoY) and INTP and SMGR at 3.2m tons (+8% YoY) and 4.3m tons (+1% YoY), respectively. (See pages 2-3 for more details.)
DCF valuation and risks
We use DCF analysis to value the cement sector stocks. Risks for the sector include (1) banks’ unwillingness to cut interest rates and extend loans for mortgages, (2) delays in infrastructure development, and (3) rising energy prices.
Despite some margin weakness due to limited pricing flexibility and rising cost pressures, we still see marginal earnings improvement in 1Q11, supported by strong cement demand. We remain upbeat on the cement sector as we hope to see higher cement prices starting 2Q11 on the back of much stronger demand as Indonesia enters the dry season of May/June. Our top pick is Semen Gresik given its new capacity due by the end of 2011, superior brand equity, and access to the fastest-growing region, the Outer Islands.
Strong March cement sales: 3.8m tons (+11% YoY; +15% MoM)
The strong cement sales in March mainly came from Java, which grew by 15% YoY compared to 7% YoY growth in the Outer Islands. Java’s strong growth mainly came from Jakarta, West Java and Central Java, while Kalimantan, Eastern Indonesia and Sulawesi recorded negative growth, offsetting Sumatra’s strong sales of +24% YoY (see Figure 2 on page 2). Overall, cement sales in 1Q11 reached 10.5m tons (+9% YoY) and were in line with our 2011 forecast of 44m tons, translating into monthly sales of 3.8m tons (+7% YoY).
Holcim Indonesia continued to record the strongest growth
Holcim Indonesia (SMCB) registered a 31% YoY (+17% MoM) increase in its cement sales, compared to Indocement (INTP) at +12% YoY (+17% MoM) and Semen Gresik (SMGR) at +1% YoY (+12% MoM). Both SMCB and INTP recorded double-digit sales growth amid strong cement demand in their main markets – Jakarta, West Java and Center Java. Overall, the top three cement players’ results are in line with our 2011 forecasts, with SMCB’s 1Q11 cement sales at 1.6m tons (+24% YoY) and INTP and SMGR at 3.2m tons (+8% YoY) and 4.3m tons (+1% YoY), respectively. (See pages 2-3 for more details.)
DCF valuation and risks
We use DCF analysis to value the cement sector stocks. Risks for the sector include (1) banks’ unwillingness to cut interest rates and extend loans for mortgages, (2) delays in infrastructure development, and (3) rising energy prices.
BUMI, Plantations, Axiata XL - Nomura
Bumi Resources (BUMI IJ) management, Ken Farrell, said that in order to repay the US$600mn debt to CIC, the Company is assessing a couple of options, namely 1) cash settlement, 2) debt/equity swap, and 3) a combination of no 1 and 2. For the cash settlement, BUMI can sell its stake at Bumi Resources Minerals (BRMS IJ) to Vallar (VAA LN) and use the proceeds to pay the CIC debt. For the debt/equity swap option, BUMI can swap CIC debt with Vallar of BUMI shares. This explanation is in line with our view outlining three potential scenarios (swap the CIC debt with Vallar, BUMI, or BRMS shares) or a combination of three. We retain our Buy call on BUMI, price target Rp4,750.
Our plantation analyst, Ken Arieff, assess the availability of land for future palm oil expansion in both Indonesia and Malaysia. On our conservative assumptions, we find that Indonesia could run out of land for Palm Oil in 11 years time. Palm Oil is the only vegetable oil that grows quick enough to satiate world demand, and if land eventually runs out for the crop – this could lead to higher prices for vegetable oils in the longer term. Companies have been taking different approach to counteract this problem, some seek to increase their land banks in Africa, and the others focus on increasing yield via biotechnology. Ken maintains his bullish view on Palm Oil sector and Lonsum (LSIP IJ – Buy) remain as Ken’s top pick for Indonesian name.
We attended public expose for Axiata XL (EXCL IJ – Buy) and here are a few key takeaways from the presentation:
Shift from pricing strategy to churn management. With the growth of phone user volume and number of operators, the price elasticity for telco service has declined; subsequently the company will weight more on building customers loyalty with churn prevention rather than their usual price-oriented strategy. Everyday around 30K of XL SIM cards are sold (making up to around 1mn SIM cards sales per month), but long-term users are scarce.
A few steps are taken to keep the customers such as
(1) Launching of integrated operator portal “XLGo!” which aim to provide smartphone experience for non-smartphone users as only 1m (2.5%) of XL customers are smart phone/Blackberry users.
(2) Improving call and data transmission quality. Presently XL is in the midst of modernization; the existing BTS (base transceiver stations) will be replaced by ones supporting 3G and LTE (long term evolution) service. XL will allocate 45% of its total Rp5tn capex for data service (vs. 25% last year). Additionally, around 2,500 to 3,000 units of new BTS will be built this year.
(3) Increase product availability though better distribution channel.
Deleveraging continues: XL cut off 24% of their debt last year. From Rp7.2tn debt paid by company, 93% were early repayment and they are expecting free cash flow to be fluid going forward, allowing further debt reduction.
XL announce dividend of Rp911bn (DPS @ Rp107), giving 2% dividend yield and only marginally (8%) lower than our expectation. The dividend policy is for a minimum dividend payout ratio of 30% of normalized earning and XL plans to increase the pay out progressively as cash flows impove.
Our plantation analyst, Ken Arieff, assess the availability of land for future palm oil expansion in both Indonesia and Malaysia. On our conservative assumptions, we find that Indonesia could run out of land for Palm Oil in 11 years time. Palm Oil is the only vegetable oil that grows quick enough to satiate world demand, and if land eventually runs out for the crop – this could lead to higher prices for vegetable oils in the longer term. Companies have been taking different approach to counteract this problem, some seek to increase their land banks in Africa, and the others focus on increasing yield via biotechnology. Ken maintains his bullish view on Palm Oil sector and Lonsum (LSIP IJ – Buy) remain as Ken’s top pick for Indonesian name.
We attended public expose for Axiata XL (EXCL IJ – Buy) and here are a few key takeaways from the presentation:
Shift from pricing strategy to churn management. With the growth of phone user volume and number of operators, the price elasticity for telco service has declined; subsequently the company will weight more on building customers loyalty with churn prevention rather than their usual price-oriented strategy. Everyday around 30K of XL SIM cards are sold (making up to around 1mn SIM cards sales per month), but long-term users are scarce.
A few steps are taken to keep the customers such as
(1) Launching of integrated operator portal “XLGo!” which aim to provide smartphone experience for non-smartphone users as only 1m (2.5%) of XL customers are smart phone/Blackberry users.
(2) Improving call and data transmission quality. Presently XL is in the midst of modernization; the existing BTS (base transceiver stations) will be replaced by ones supporting 3G and LTE (long term evolution) service. XL will allocate 45% of its total Rp5tn capex for data service (vs. 25% last year). Additionally, around 2,500 to 3,000 units of new BTS will be built this year.
(3) Increase product availability though better distribution channel.
Deleveraging continues: XL cut off 24% of their debt last year. From Rp7.2tn debt paid by company, 93% were early repayment and they are expecting free cash flow to be fluid going forward, allowing further debt reduction.
XL announce dividend of Rp911bn (DPS @ Rp107), giving 2% dividend yield and only marginally (8%) lower than our expectation. The dividend policy is for a minimum dividend payout ratio of 30% of normalized earning and XL plans to increase the pay out progressively as cash flows impove.
Adaro Energy {Ticker: ADRO.JK, Closing Price: 2,275 IDR, Target Price: 4,000 IDR, Recommendation: Buy} - Deutsche Bank AG
Revising 2011 and 2012 earnings forecasts on higher coal & oil prices
We have increased our earnings forecasts for 2011 and 2012 by 6% and 5%, respectively. This factors in adjustments to FY10 results, as well as higher DB coal price (up 13% and 4% to USD130/t and USD140/t for JFY11 and JFY12) and higher oil price (up c. 16% to USD117/bbl for both years) assumptions. We have also adjusted our currency assumption to Rp8990 from Rp9200 previously. So far, Adaro has priced around 40% of its 2011 volumes, implying a spot exposure of 60% (including 40% on index). (See table.)
Maintain Buy rating, with TP of Rp4,000 (down from Rp4,200)
Our revised target price reflects the above-mentioned earnings estimate revisions, slightly offset by currency adjustments. We establish our target price by conducting a sum-of-the-parts DCF analysis; we then apply a 50% premium (unchanged), in line with our approach for the sector as a whole, to reflect the coal upcycle. Our DCF analysis assumes a WACC of 11% and a US$80/t long-term coal price benchmark. For valuation purposes, we have assigned a 50% probability to the new railway project and a 20% probability to the two IPP projects.
We maintain our Buy recommendation on Adaro, due to its medum- to long-term growth prospects, supported by encouraging demand for its lower CV coal (Wara) and plan to install out pit conveyor for overburden removal to contain cost increases in the future.
We have increased our earnings forecasts for 2011 and 2012 by 6% and 5%, respectively. This factors in adjustments to FY10 results, as well as higher DB coal price (up 13% and 4% to USD130/t and USD140/t for JFY11 and JFY12) and higher oil price (up c. 16% to USD117/bbl for both years) assumptions. We have also adjusted our currency assumption to Rp8990 from Rp9200 previously. So far, Adaro has priced around 40% of its 2011 volumes, implying a spot exposure of 60% (including 40% on index). (See table.)
Maintain Buy rating, with TP of Rp4,000 (down from Rp4,200)
Our revised target price reflects the above-mentioned earnings estimate revisions, slightly offset by currency adjustments. We establish our target price by conducting a sum-of-the-parts DCF analysis; we then apply a 50% premium (unchanged), in line with our approach for the sector as a whole, to reflect the coal upcycle. Our DCF analysis assumes a WACC of 11% and a US$80/t long-term coal price benchmark. For valuation purposes, we have assigned a 50% probability to the new railway project and a 20% probability to the two IPP projects.
We maintain our Buy recommendation on Adaro, due to its medum- to long-term growth prospects, supported by encouraging demand for its lower CV coal (Wara) and plan to install out pit conveyor for overburden removal to contain cost increases in the future.
Adaro Energy - Jump! - (ADRO-BUY-IDR2,250-TP:IDR2,950) - Bahana
2011: Earnings to jump 77% y-y
In 2011, Adaro Energy (ADRO) will see net profit up 77% y-y on 24% higher ASP and 10% increased production. We expect 46.5m tons of production (+10.2% y-y), in line with the company’s guidance of 46-48m tons. On pricing, we expect ASP to increase 23.8% y-y to USD70.8/ton, also in line with management’s estimate of USD68.6-71.4/ton. Note that ADRO was rather accurate in providing its 2010 ASP guidance for 2010 of close to USD58.7/ton, some 3% higher than actual ASP achieved of USD57.18/ton. ASP achieved was lower than guided because: 1) as ADRO could not meet the delivery schedule of its customers due to rain, customers pushed higher priced coal for delivery in 2011 (2) rain resulted in higher moisture content of the coal and therefore ADRO got higher discount on the coal to the benchmark price. With blended stripping ratio of 5.9x, we expect EBITDA of USD1.2b, up 38.2% y-y, also in line with ADRO’s guidance of USD1.1-1.3b.
Cost reduction initiatives to lower cash costs by 13-14%
ADRO is taking steps to reduce its cash costs. First, it is installing USD150m Out Pit Overburden Crushing and Conveyor (OPCC), to be operational in 2013 allowing savings of USD1-2 per bcm. At 80m tons production, ADRO will produce about 380mbcm, and assuming USD1.5 savings per bcm translates to total savings of USD570m, some 13% of total production cash costs. Second, Shell has set up a fuel terminal at the Indonesian Bulk Terminal (IBT), ADRO’s terminal for coal stock piling, expected to reduce ADRO’s fuel procurement cost. This should provide savings of USD2-3 cents/liter, implying 3% savings on fuel cost, some 0.42% of total production cash costs. Additionally, other cost reduction initiatives, including bio diesel facilities, will cut oil dependency. To further encourage efficiencies, ADRO has set up agreements with 3 barge-related contractors, allowing for additional tonnages at 15% lower freight cost per ton for ADRO. Thus, we expect cash cost to rise 13.4% y-y to USD46.3/ton, in line with ADRO’s guidance of USD47/ton.
Retain BUY with 3% lower TP of IDR2,950 on slightly lower earnings
Adjusting for 2010 earnings, we cut ADRO’s net profit by 4% in 2011, translating to slightly lower TP of IDR2,950. ADRO plans to report in USD, and we forecast USD440m for its 2011 net income or IDR3.9t, 22% below consensus due to the following: (1) Current consensus earnings assume higher ASP than ours; (2) ADRO may also plan to raise debt by some USD600m, raising interest costs, as it is seriously considering acquiring 3-4 low grade deposits in Indonesia. Additionally, with new deposits acquired, amortization of mining rights will increase going forward, which we have not considered in our forecasts. Over the longer run, ADRO maintains its plan of achieving 80m tons in 2014, and it also plans to invest in 2GW of coal fired power plant projects, which will be heavily debt-financed. While this will add to ADRO’s future revenues, we have not included their impact in our forecasts. With strong earnings growth in 2011, we retain our BUY.
In 2011, Adaro Energy (ADRO) will see net profit up 77% y-y on 24% higher ASP and 10% increased production. We expect 46.5m tons of production (+10.2% y-y), in line with the company’s guidance of 46-48m tons. On pricing, we expect ASP to increase 23.8% y-y to USD70.8/ton, also in line with management’s estimate of USD68.6-71.4/ton. Note that ADRO was rather accurate in providing its 2010 ASP guidance for 2010 of close to USD58.7/ton, some 3% higher than actual ASP achieved of USD57.18/ton. ASP achieved was lower than guided because: 1) as ADRO could not meet the delivery schedule of its customers due to rain, customers pushed higher priced coal for delivery in 2011 (2) rain resulted in higher moisture content of the coal and therefore ADRO got higher discount on the coal to the benchmark price. With blended stripping ratio of 5.9x, we expect EBITDA of USD1.2b, up 38.2% y-y, also in line with ADRO’s guidance of USD1.1-1.3b.
Cost reduction initiatives to lower cash costs by 13-14%
ADRO is taking steps to reduce its cash costs. First, it is installing USD150m Out Pit Overburden Crushing and Conveyor (OPCC), to be operational in 2013 allowing savings of USD1-2 per bcm. At 80m tons production, ADRO will produce about 380mbcm, and assuming USD1.5 savings per bcm translates to total savings of USD570m, some 13% of total production cash costs. Second, Shell has set up a fuel terminal at the Indonesian Bulk Terminal (IBT), ADRO’s terminal for coal stock piling, expected to reduce ADRO’s fuel procurement cost. This should provide savings of USD2-3 cents/liter, implying 3% savings on fuel cost, some 0.42% of total production cash costs. Additionally, other cost reduction initiatives, including bio diesel facilities, will cut oil dependency. To further encourage efficiencies, ADRO has set up agreements with 3 barge-related contractors, allowing for additional tonnages at 15% lower freight cost per ton for ADRO. Thus, we expect cash cost to rise 13.4% y-y to USD46.3/ton, in line with ADRO’s guidance of USD47/ton.
Retain BUY with 3% lower TP of IDR2,950 on slightly lower earnings
Adjusting for 2010 earnings, we cut ADRO’s net profit by 4% in 2011, translating to slightly lower TP of IDR2,950. ADRO plans to report in USD, and we forecast USD440m for its 2011 net income or IDR3.9t, 22% below consensus due to the following: (1) Current consensus earnings assume higher ASP than ours; (2) ADRO may also plan to raise debt by some USD600m, raising interest costs, as it is seriously considering acquiring 3-4 low grade deposits in Indonesia. Additionally, with new deposits acquired, amortization of mining rights will increase going forward, which we have not considered in our forecasts. Over the longer run, ADRO maintains its plan of achieving 80m tons in 2014, and it also plans to invest in 2GW of coal fired power plant projects, which will be heavily debt-financed. While this will add to ADRO’s future revenues, we have not included their impact in our forecasts. With strong earnings growth in 2011, we retain our BUY.
Jumat, 15 April 2011
Take Profit Jasa Marga (JSMR), Buy Construction names - JP Morgan
* Heavy capex cycle ahead. Toll-road regulator (BPJT) currently works hard to amend the 24 “sleeping” toll-road licences, seeking resolution to kick-start construction. Some licences could be revoked if license-holder could not meet the new terms, with automatic termination clause. This process could bring new opportunities, and threats, to JSMR.
* JORR-S legal case may re-emerge. At the time of JSMR IPO, one of the key risk disclosed in the prospectus is the unfinished legal business surrounding Jasa Marga’s JORR-S toll-road segment (Pondok-Pinang to Taman Mini, known as TB Simatupang toll-road). Industry sources said that legal actions on the matter will intensify this year, and that JSMR could be put on the spotlight. The event could remind investors of this particular legal risk on JSMR, that arguably has been forgotten by the market. The complete JORR system contributes around 16% to JSMR’s EBITDA, and JORR-S is a key component to the overall JORR system.
* Political capital of previous JORR-S owners has risen. According to the media, the consortium that previously owns JORR-S consists of Mrs. Siti Hardijanti Soeharto (Mbak Tutut), Bambang Soeroso (now DPD Bengkulu as appointee by president SBY), and Djoko Ramiadji (Mustika Ratu family, father-in-law to Mr. Hatta Rajasa’s son). The consortium lost the JORR-S during Megawati’s PDI-P government.
* Management change at JSMR in May 2011. Mr. Frans Sunito’s term as CEO is ending soon and talks of new management selection have started. Mr. Frans has been an effective leader for JSMR for many years; the new CEO may have a big shoe to fill.
* Uncompelling valuation. The stock trades on 14.1x FY11 P/E with a 22% growth forecast for FY12. Valuation is neither excessive nor compelling. Downside risk if JSMR loses the ownership of JORR-S segment. JPMorgan analyst Liliana Bambang rates the stock as OW, with PxT of Rp3600 or 9% upside. It has been a good call, but the risk-reward profile has changed.
* JORR-S legal case may re-emerge. At the time of JSMR IPO, one of the key risk disclosed in the prospectus is the unfinished legal business surrounding Jasa Marga’s JORR-S toll-road segment (Pondok-Pinang to Taman Mini, known as TB Simatupang toll-road). Industry sources said that legal actions on the matter will intensify this year, and that JSMR could be put on the spotlight. The event could remind investors of this particular legal risk on JSMR, that arguably has been forgotten by the market. The complete JORR system contributes around 16% to JSMR’s EBITDA, and JORR-S is a key component to the overall JORR system.
* Political capital of previous JORR-S owners has risen. According to the media, the consortium that previously owns JORR-S consists of Mrs. Siti Hardijanti Soeharto (Mbak Tutut), Bambang Soeroso (now DPD Bengkulu as appointee by president SBY), and Djoko Ramiadji (Mustika Ratu family, father-in-law to Mr. Hatta Rajasa’s son). The consortium lost the JORR-S during Megawati’s PDI-P government.
* Management change at JSMR in May 2011. Mr. Frans Sunito’s term as CEO is ending soon and talks of new management selection have started. Mr. Frans has been an effective leader for JSMR for many years; the new CEO may have a big shoe to fill.
* Uncompelling valuation. The stock trades on 14.1x FY11 P/E with a 22% growth forecast for FY12. Valuation is neither excessive nor compelling. Downside risk if JSMR loses the ownership of JORR-S segment. JPMorgan analyst Liliana Bambang rates the stock as OW, with PxT of Rp3600 or 9% upside. It has been a good call, but the risk-reward profile has changed.
China Coal-Prices climb, sentiment bullish ahead of summer - Reuters
China's thermal coal prices rose to a three-month high of 790 yuan ($120.92) per tonne this week, while port stocks fell for a sixth-straight session as power plants boost inventories ahead of summer.This is buoying traders' hopes that the appetite for imports would rebound significantly.Coal with a heating value of 5,500 kcal/kg ticked up to 780-790 yuan a tonne on Thursday -- the highest since the week of Jan. 17, while 6,000 kcal/kg NAR coal rose for a third week to 845 yuan, reported industry portal sxcoal.com.The top coal port Qinhuangdao posted its 6th straight week of declines, with stocks falling 7 percent to 6.4 million tonnes.
They have dropped more than 2 million tonnes or 25 percent from a high of 8.47 million tonnes in early March."Sentiment on domestic coal prices has changed and the market has turned a lot more bullish. Most are of the view that there is quite a lot of room for prices to move higher," said a Beijing-based trader.Chinese steam coal prices rose more than 8 percent from April to end-May last year."Stocks at some utilities have fallen quite strongly and many are replenishing their inventories, which explains the steady decline in port stocks," the trader added.Some power plants in the southern coastal provinces such as Guangdong and Fujian have also started to book imports for delivery starting as early as May from Indonesia to take advantage of the price arbitrage."I'm sure we will be seeing quite strong import numbers in the coming months," said a second trader.After a near three-month lull in import demand, overseas producers and traders would welcome gains in Chinese prices with much relief, as a recent pullback in Japanese demand after the March 11 quake has led to ample spot supplies and casting a pall on prices.
CHINA DEMAND LIMITED TO INDONESIA COAL
Most of China's coal demand is limited to Indonesia's sub-bituminous material, whereby imports could be cheaper than domestic supplies by between $2 and $4 a tonne on a landed basis, traders and producers said. Indonesia's sub-bituminous coal prices have been on a downtrend on expectations of increased output on the back of a returning dry season as well as the imminent retreat of Indian buyers ahead of the monsoon season.A growing number of smaller Indonesian miners have since begun to reduce their price offers to secure summer deals with Chinese buyers, as they considered how Japanese demand may take longer than expected to rebound.Supplies from Australia, South Africa and Colombia are still uncompetitive compared with domestic supplies at current price levels.Australia's thermal coal prices stood at $123.86 a tonne FOB this week, supported by a higher settlement for the annual Japanese thermal coal contract, while South African FOB Richards Bay coal prices were at $124.
They have dropped more than 2 million tonnes or 25 percent from a high of 8.47 million tonnes in early March."Sentiment on domestic coal prices has changed and the market has turned a lot more bullish. Most are of the view that there is quite a lot of room for prices to move higher," said a Beijing-based trader.Chinese steam coal prices rose more than 8 percent from April to end-May last year."Stocks at some utilities have fallen quite strongly and many are replenishing their inventories, which explains the steady decline in port stocks," the trader added.Some power plants in the southern coastal provinces such as Guangdong and Fujian have also started to book imports for delivery starting as early as May from Indonesia to take advantage of the price arbitrage."I'm sure we will be seeing quite strong import numbers in the coming months," said a second trader.After a near three-month lull in import demand, overseas producers and traders would welcome gains in Chinese prices with much relief, as a recent pullback in Japanese demand after the March 11 quake has led to ample spot supplies and casting a pall on prices.
CHINA DEMAND LIMITED TO INDONESIA COAL
Most of China's coal demand is limited to Indonesia's sub-bituminous material, whereby imports could be cheaper than domestic supplies by between $2 and $4 a tonne on a landed basis, traders and producers said. Indonesia's sub-bituminous coal prices have been on a downtrend on expectations of increased output on the back of a returning dry season as well as the imminent retreat of Indian buyers ahead of the monsoon season.A growing number of smaller Indonesian miners have since begun to reduce their price offers to secure summer deals with Chinese buyers, as they considered how Japanese demand may take longer than expected to rebound.Supplies from Australia, South Africa and Colombia are still uncompetitive compared with domestic supplies at current price levels.Australia's thermal coal prices stood at $123.86 a tonne FOB this week, supported by a higher settlement for the annual Japanese thermal coal contract, while South African FOB Richards Bay coal prices were at $124.
Bank Internasional Indonesia: Menjadi lebih - Mandiri
Kunci berinvestasi
q Jaringan bisnis yang kuat. Dengan kepemilikan Maybank pada saham Perseroan yang sebesar 97.4%, ruang gerak Perseroan menjadi lebih luas. Maybank merupakan bank no.1 di Malaysia (Islamic bank terbesar berdasarkan aset), dan no.4 di Asia Tenggara. Memiliki lebih dari 1,750 cabang yang melayani lebih dari 18 juta nasabah di 14 negara.
q Posisi strategis di industri yang konsentrasinya tinggi. Tingkat konsentrasi industri bank umum cukup tinggi, dengan 60% pangsa pasar dikuasai oleh 10 bank dari 122 bank umum yang ada di industri. Pada industri yang konsentrasinya tinggi, ukuran (size) merupakan faktor penentu untuk bisa tetap unggul dan bertahan. Perseroan merupakan bank yang termasuk ke dalam kelompok 10 bank terbesar berdasarkan aset, kredit maupun DPK dari tahun ke tahun. Per Des10 total aset Perseroan mencapai Rp75.1triliun, DPK Rp59.9triliun dan kredit yang disalurkan mencapai Rp50.1triliun atau sebesar 2.4%, 2.6% dan 2.8% dari total aset, DPK dan kredit bank umum.
q Kualitas aktiva sehat. Meskipun sedikit berada di atas rata-rata industri, NPL Perseroan relatif stabil di level 3% dari tahun 2007-2010. Saat ini NPL industri adalah sebesar 2.6% dan ketentuan BI adalah maksimum 5%. Sementara itu, coverage ratio semakin membaik dari tahun ke tahun yaitu dari 66% di 2007 menjadi 97% di 2010.
q Likuiditas yang baik. Pertumbuhan DPK juga terus meningkat di atas industri (26%yoy vs. 19%yoy), hal ini menunjang pendanaan sehingga dapat menjaga likuiditas pada tingkat yang memadai. Selain itu, LDR meningkat pesat dari 77.1% di 2007 menjadi 83.8% di 2010. Hal ini membuktikan bahwa Perseroan berada dalam batas aman tingkat LDR yang diwajibkan oleh BI yaitu 78-100%
Risiko yang dihadapi
q Transparansi suku bunga dasar kredit. Seiring dengan ketentuan BI yang mewajibkan bank untuk mengumumkan suku bunga dasar kredit, maka kedepannya NIM bank umum tidak bisa lagi berada pada tingkat yang tinggi. Untuk itu, Perseroan menerapkan konsep value chain dalam sistem pemasarannya. Hal ini bertujuan untuk meningkatkan pendapatan di luar bunga dalam hal pendapatan administrasi dan jasa perbankan lainnya, sehingga tidak sepenuhnya bergantung pada pendapatan bunga.
q Persaingan di sektor UKM dan konsumer terus meningkat. Tingkat persaingan kredit di sektor UKM dan konsumer saat ini semakin meningkat di pasar, dikhawatirkan hal ini dapat menurunkan pangsa pasar Perseroan di segmen ini. Namun, pengalaman Perseroan yang lama di segmen ini serta layanan yang semakin baik diyakini dapat mengurangi risiko penurunan pangsa pasar secara berarti di masa datang. Dalam mengatisipasi kondisi tersebut di atas, Perseroan telah menyusun dan melaksanakan strategi pengembangan bisnis dan infrastruktur untuk memperkuat daya saing Perseroan menjadi sebuah institusi perbankan terbaik di Indonesia. Perseroan mendapat dukungan kuat dari Maybank sebagai pemegang saham pengendali dan juga melakukan sinergi yang kuat dengan seluruh jaringan Maybank dalam melayani nasabah Perseroan. Fokus implementasi strategi di setiap bidang tersebut selalu diarahkan dengan mengacu pada international best practices untuk memastikan Perseroan dapat memenangkan kompetisi baik level domestik maupun regional.
q Jaringan bisnis yang kuat. Dengan kepemilikan Maybank pada saham Perseroan yang sebesar 97.4%, ruang gerak Perseroan menjadi lebih luas. Maybank merupakan bank no.1 di Malaysia (Islamic bank terbesar berdasarkan aset), dan no.4 di Asia Tenggara. Memiliki lebih dari 1,750 cabang yang melayani lebih dari 18 juta nasabah di 14 negara.
q Posisi strategis di industri yang konsentrasinya tinggi. Tingkat konsentrasi industri bank umum cukup tinggi, dengan 60% pangsa pasar dikuasai oleh 10 bank dari 122 bank umum yang ada di industri. Pada industri yang konsentrasinya tinggi, ukuran (size) merupakan faktor penentu untuk bisa tetap unggul dan bertahan. Perseroan merupakan bank yang termasuk ke dalam kelompok 10 bank terbesar berdasarkan aset, kredit maupun DPK dari tahun ke tahun. Per Des10 total aset Perseroan mencapai Rp75.1triliun, DPK Rp59.9triliun dan kredit yang disalurkan mencapai Rp50.1triliun atau sebesar 2.4%, 2.6% dan 2.8% dari total aset, DPK dan kredit bank umum.
q Kualitas aktiva sehat. Meskipun sedikit berada di atas rata-rata industri, NPL Perseroan relatif stabil di level 3% dari tahun 2007-2010. Saat ini NPL industri adalah sebesar 2.6% dan ketentuan BI adalah maksimum 5%. Sementara itu, coverage ratio semakin membaik dari tahun ke tahun yaitu dari 66% di 2007 menjadi 97% di 2010.
q Likuiditas yang baik. Pertumbuhan DPK juga terus meningkat di atas industri (26%yoy vs. 19%yoy), hal ini menunjang pendanaan sehingga dapat menjaga likuiditas pada tingkat yang memadai. Selain itu, LDR meningkat pesat dari 77.1% di 2007 menjadi 83.8% di 2010. Hal ini membuktikan bahwa Perseroan berada dalam batas aman tingkat LDR yang diwajibkan oleh BI yaitu 78-100%
Risiko yang dihadapi
q Transparansi suku bunga dasar kredit. Seiring dengan ketentuan BI yang mewajibkan bank untuk mengumumkan suku bunga dasar kredit, maka kedepannya NIM bank umum tidak bisa lagi berada pada tingkat yang tinggi. Untuk itu, Perseroan menerapkan konsep value chain dalam sistem pemasarannya. Hal ini bertujuan untuk meningkatkan pendapatan di luar bunga dalam hal pendapatan administrasi dan jasa perbankan lainnya, sehingga tidak sepenuhnya bergantung pada pendapatan bunga.
q Persaingan di sektor UKM dan konsumer terus meningkat. Tingkat persaingan kredit di sektor UKM dan konsumer saat ini semakin meningkat di pasar, dikhawatirkan hal ini dapat menurunkan pangsa pasar Perseroan di segmen ini. Namun, pengalaman Perseroan yang lama di segmen ini serta layanan yang semakin baik diyakini dapat mengurangi risiko penurunan pangsa pasar secara berarti di masa datang. Dalam mengatisipasi kondisi tersebut di atas, Perseroan telah menyusun dan melaksanakan strategi pengembangan bisnis dan infrastruktur untuk memperkuat daya saing Perseroan menjadi sebuah institusi perbankan terbaik di Indonesia. Perseroan mendapat dukungan kuat dari Maybank sebagai pemegang saham pengendali dan juga melakukan sinergi yang kuat dengan seluruh jaringan Maybank dalam melayani nasabah Perseroan. Fokus implementasi strategi di setiap bidang tersebut selalu diarahkan dengan mengacu pada international best practices untuk memastikan Perseroan dapat memenangkan kompetisi baik level domestik maupun regional.
Asia Equity Strategy - Overvalued cyclicals: Take profit - Credit Suisse
● While we continue to Overweight undervalued cyclicals (namely Korean tech, autos, industrials, Chinese oils and Australian resources), in this note we highlight some overvalued cyclicals where we believe investors should take profits.
● In our 12 April report, Cyclicals have outperformed defensives by 82%, we highlighted Indonesian coal as trading on a 50% premium to the region. Figures 1, 2 and 3 highlight premiums of 106% for ITMG, 102% for PTBA and 69% for Adaro Energy. We highlight that CS analyst Fonny Surya in her 13 April note downgraded Adaro Energy to UNDERPERFORM as rising costs pose downside risks.
● In the 12 April report, we also highlighted the 23% premium for Singapore/Malaysia palm oil stocks. While IOI’s premium is 24%, Figure 4 highlights the 78% premium for Sime Darby. CS analyst Tan Tingmin has UNDERPERFORM ratings on both stocks.
● Within Chinese cement, Anhui Conch’s premium is 62% versus 8% for CNBM (China National Building Materials).
● In our 12 April report, Cyclicals have outperformed defensives by 82%, we highlighted Indonesian coal as trading on a 50% premium to the region. Figures 1, 2 and 3 highlight premiums of 106% for ITMG, 102% for PTBA and 69% for Adaro Energy. We highlight that CS analyst Fonny Surya in her 13 April note downgraded Adaro Energy to UNDERPERFORM as rising costs pose downside risks.
● In the 12 April report, we also highlighted the 23% premium for Singapore/Malaysia palm oil stocks. While IOI’s premium is 24%, Figure 4 highlights the 78% premium for Sime Darby. CS analyst Tan Tingmin has UNDERPERFORM ratings on both stocks.
● Within Chinese cement, Anhui Conch’s premium is 62% versus 8% for CNBM (China National Building Materials).
South East Asia Coal Sector - Focusing on company specific momentum - Credit Suisse
● With CS’s view that coal prices will be capped in a tight range this year, we continue to believe coal stock share performance will be company specific rather than sector specific. We focus our analysis on: 1) cost inflation mainly due to rising oil prices, 2) ASP momentum and 3) share price valuation.
● We prefer companies with strong earnings momentum or positive company-specific catalysts (Figure 1). We expect strong momentum for ITMG and PTBA and potential disappointment at ADRO on costs and at BORN on volume shortfall.
● For positive company-specific catalysts, we like INDY (listing of Petrosea by June 2011 to unlock value) and Straits Asia Resources (the granting of forestry permit at the Northern Lease to reduce earnings risks and allow stronger volumes growth in 2011 and beyond).
● Our target price is set at 16x 2011E P/E for all coal peers, in line with the JCI target index multiple. On a valuation basis, ADRO looks the most expensive while INDY appears the cheapest stock.
● We prefer companies with strong earnings momentum or positive company-specific catalysts (Figure 1). We expect strong momentum for ITMG and PTBA and potential disappointment at ADRO on costs and at BORN on volume shortfall.
● For positive company-specific catalysts, we like INDY (listing of Petrosea by June 2011 to unlock value) and Straits Asia Resources (the granting of forestry permit at the Northern Lease to reduce earnings risks and allow stronger volumes growth in 2011 and beyond).
● Our target price is set at 16x 2011E P/E for all coal peers, in line with the JCI target index multiple. On a valuation basis, ADRO looks the most expensive while INDY appears the cheapest stock.
Metals Update - Softer physical demand in play, supply-side issues still largely feature as positive price influence - JP Morgan
KEY POINTS
· We broadly increase our calendar 2011 price forecasts, reflecting largely a mark-tomarket exercise as opposed to a wholesale fundamental view change. The exception is copper, where we drop our 2011 forecast basis the absence of Chinese spot demand in 2011YTD and expectation for still subdued off-take in the near to medium term.
· The macro backdrop remains supportive for metals, in spite of headwinds from higher energy prices and the onset of fiscal austerity. Global GDP in 2011 is pegged at an above-trend pace of 3.3% in 2011 and 3.6% in 2012, with DM at 2.3%oya and 2.7%oya respectively, and EM at 6.0%oya over 2011-2012. IP – the main driving force for industrial metal consumption – is seen at 6.1%oya and 6.7%oya in calendars 2011 and 2012. Under such growth expectations the onus once again rests on the supply side to maintain steady capacity expansions, particularly in markets prone to tightness; copper, nickel and tin near term and (potentially) lead/zinc into the medium to longer term.
· We haven’t changed our gold forecasts materially from December. For the full 2011 calendar year we have increased our forecast by 2.5% to just above $1460 on average for the year. For 2012 we have bumped up the price forecast by around 7%, from around $1400 to around $1460. We have however made more material forecast changes to silver. We increased our average price forecast for silver from the $30 level in 2011 to around $35 for the full year and bumped up 2012 by around $3/oz as well.
· Overall we see the current underlying drivers of gold and silver investment demand – negative real interest rates in the US, ongoing geopolitical risk in Europe and bloated central bank balance sheets as supportive – and likely driving prices higher again through 2011. Gold is seen peaking over $1500 and averaging $1500 in Q4. Silver – already stretched on valuation – may yet move towards $45-$50 given relatively inelastic short term supply parameters but its ability to hold these levels without ongoing unprecedented investment allocations is limited.
· We broadly increase our calendar 2011 price forecasts, reflecting largely a mark-tomarket exercise as opposed to a wholesale fundamental view change. The exception is copper, where we drop our 2011 forecast basis the absence of Chinese spot demand in 2011YTD and expectation for still subdued off-take in the near to medium term.
· The macro backdrop remains supportive for metals, in spite of headwinds from higher energy prices and the onset of fiscal austerity. Global GDP in 2011 is pegged at an above-trend pace of 3.3% in 2011 and 3.6% in 2012, with DM at 2.3%oya and 2.7%oya respectively, and EM at 6.0%oya over 2011-2012. IP – the main driving force for industrial metal consumption – is seen at 6.1%oya and 6.7%oya in calendars 2011 and 2012. Under such growth expectations the onus once again rests on the supply side to maintain steady capacity expansions, particularly in markets prone to tightness; copper, nickel and tin near term and (potentially) lead/zinc into the medium to longer term.
· We haven’t changed our gold forecasts materially from December. For the full 2011 calendar year we have increased our forecast by 2.5% to just above $1460 on average for the year. For 2012 we have bumped up the price forecast by around 7%, from around $1400 to around $1460. We have however made more material forecast changes to silver. We increased our average price forecast for silver from the $30 level in 2011 to around $35 for the full year and bumped up 2012 by around $3/oz as well.
· Overall we see the current underlying drivers of gold and silver investment demand – negative real interest rates in the US, ongoing geopolitical risk in Europe and bloated central bank balance sheets as supportive – and likely driving prices higher again through 2011. Gold is seen peaking over $1500 and averaging $1500 in Q4. Silver – already stretched on valuation – may yet move towards $45-$50 given relatively inelastic short term supply parameters but its ability to hold these levels without ongoing unprecedented investment allocations is limited.
Unilever Indonesia P&G presses the go button on Indo - Macquarie
Event
Procter & Gamble Indonesia (P&G) has announced that it intends to invest US$100m over the next three years to build local production facilities in Indonesia. At present, P&G imports all of its products from production facilities located in Thailand and other regions. Limited details have been provided at this stage, but we believe initial commissioning could occur much sooner than three years. We also note that the US$100m size is material relative to the current book value of UNVR’s PP&E of US$480m (at at FY10A).
Impact
Implications: We believe the implications of this announcement are two-fold. Firstly, we believe it highlights P&G’s growing commitment to the Indonesian marketplace, being one of the four key regions (the others being India, China, and sub-Saharan Africa) that P&G highlighted in recent market commentary as offering significant growth potential for the company. Secondly, we believe the commissioning of local facilities has the potential to make P&G more cost competitive in the medium term, given the relatively high cost of importation in Indonesia, and thereby facilitate more aggressive pricing strategies.
An aggressive competitor: Our Indian analyst Amit Mishra highlighted in his recent note No respite (1 April 2011) on Hindustan Unilever (HUVR IN, Rs274, Underperform, PT Rs235) that P&G has recently taken price cuts of 15–33% across its hair care brands Pantene and Heads & Shoulders in India, despite a backdrop of rising raw materials costs. We also recently highlighted in our note Where for art thou upside? (24 March 11) that P&G had failed to follow UNVR’s recent price increases in the hair care space in Indonesia.
We believe P&G’s track record of aggressive competitive actions in other emerging markets increases the risk of a similar modus operandi being pursued in Indonesia, with market share acquisition being made to be the priority. Given UNVR’s current elevated NPAT margins of 17%, we believe there is likely to be considerable scope for P&G to cut prices to build scale.
Earnings and target price revision
No change: We are already 8–11% below FY11–12E consensus estimates, and in any case we expect the impact of this announcement to be felt incrementally over a 2–5 year timeframe rather than a 12 month timeframe.
Price catalyst
12-month price target: Rp13,000 based on a DDM methodology.
Catalyst: 1Q11E results (expected towards the end of April).
Action and recommendation
MarQuee Underperform call maintained: The implications for UNVR are driven by its premium pricing, and the high degree of complacency that continues to exist about growing competitive risks, in our view. Our Rp13,000 valuation is the most we can justify on maturity issues alone, prior to factoring in any impact from competitive pressures on margins. With P&G ramping up its Indonesian competitive assault, we believe this represents an important and growing risk area for which investors are not being compensated.
Procter & Gamble Indonesia (P&G) has announced that it intends to invest US$100m over the next three years to build local production facilities in Indonesia. At present, P&G imports all of its products from production facilities located in Thailand and other regions. Limited details have been provided at this stage, but we believe initial commissioning could occur much sooner than three years. We also note that the US$100m size is material relative to the current book value of UNVR’s PP&E of US$480m (at at FY10A).
Impact
Implications: We believe the implications of this announcement are two-fold. Firstly, we believe it highlights P&G’s growing commitment to the Indonesian marketplace, being one of the four key regions (the others being India, China, and sub-Saharan Africa) that P&G highlighted in recent market commentary as offering significant growth potential for the company. Secondly, we believe the commissioning of local facilities has the potential to make P&G more cost competitive in the medium term, given the relatively high cost of importation in Indonesia, and thereby facilitate more aggressive pricing strategies.
An aggressive competitor: Our Indian analyst Amit Mishra highlighted in his recent note No respite (1 April 2011) on Hindustan Unilever (HUVR IN, Rs274, Underperform, PT Rs235) that P&G has recently taken price cuts of 15–33% across its hair care brands Pantene and Heads & Shoulders in India, despite a backdrop of rising raw materials costs. We also recently highlighted in our note Where for art thou upside? (24 March 11) that P&G had failed to follow UNVR’s recent price increases in the hair care space in Indonesia.
We believe P&G’s track record of aggressive competitive actions in other emerging markets increases the risk of a similar modus operandi being pursued in Indonesia, with market share acquisition being made to be the priority. Given UNVR’s current elevated NPAT margins of 17%, we believe there is likely to be considerable scope for P&G to cut prices to build scale.
Earnings and target price revision
No change: We are already 8–11% below FY11–12E consensus estimates, and in any case we expect the impact of this announcement to be felt incrementally over a 2–5 year timeframe rather than a 12 month timeframe.
Price catalyst
12-month price target: Rp13,000 based on a DDM methodology.
Catalyst: 1Q11E results (expected towards the end of April).
Action and recommendation
MarQuee Underperform call maintained: The implications for UNVR are driven by its premium pricing, and the high degree of complacency that continues to exist about growing competitive risks, in our view. Our Rp13,000 valuation is the most we can justify on maturity issues alone, prior to factoring in any impact from competitive pressures on margins. With P&G ramping up its Indonesian competitive assault, we believe this represents an important and growing risk area for which investors are not being compensated.
Indonesia Market Strategy - Credit Suisse
Inflation winners and losers
2011 inflation outlook: Manageable Current level of inflation remains low compared to the historical trend and we believe that 2011 inflation outlook remains manageable and is unlikely to induce demand destruction. Given improving weather conditions, we believe pressure of food prices on headline inflation will ease in the remainder of 2011. The main risk to this view is if the government raises the subsidised fuel price significantly, which we think is unlikely. However, given the
money supply uptrend, we see the risk of upward pressure on core inflation, leading to our expectation for 75 bp increase in policy rate in 2011. However, the 75 bp increase will bring Indonesia’s policy rate to 7.5%, well below the historical average. We do see longterm risk to Indonesia’s core inflation, given Indonesia’s lack of investment in the past ten years, which may induce capacity constraints. In the event that infrastructure development fails to kick off in 2012 and the country struggles to add capacity into the economy, we see the risk of demand-pull inflation.
Inflation winners and losers
We run a bottom-up analysis to examine inflation winners and losers. We set assumptions on cost increase and estimate the impact on operating expenses (COGS + SG&A) and in turn on FY11E earnings. We separately calculate the impact of higher interest rates resulting from the central bank’s efforts to stem inflation. Our key input assumptions are: 1) 10% rise in energy, soft commodities, transport and metal prices, 2) 5% rise in wages and 3) 1 pp rise in interest rates. On the revenue side, each analyst assumes a percentage pass-through of cost increases based on industry structure, demand elasticity and historical precedents. Based on our bottom-up analysis, metal (ANTM, INCO) and coal (INDY) producers as well as banks with strong CASA (BBCA, BBNI and BMRI) are net beneficiaries. Banks with low CASA (BDMN, BBTN), heavy equipment companies (UNTR) and companies with high debt position (ISAT) are net losers to higher inflation and policy rates, in our view.
Our recommendations
Indonesia is trading at the highest premium relative to regional peers of 25%, based on our ‘P/B less ROE’ method, and consensus earnings momentum is subsiding. However, we believe that Indonesia’s equity market is not over-bought and the central bank is not as behind the curve as the market perceives it to be. Net net, we maintain our Index target of 4,150, implying 12% potential upside from the current level. Our top buys are stocks that are currently trading at a discount both to the Indonesian market and regional peers, while at the same time exhibiting relatively robust consensus earnings momentum and have been relative underperformers. Our top buys comprise: 1) two banks (BMRI and BBNI) to capture Indonesia’s domestic consumption story as well as increasing credit penetration, 2) one integrated consumer play (INDF) with strong consumer brand products and control over the upstream feedstock and 3) a cement producer (SMGR) to benefit from Indonesia’s infrastructure development ahead. We recognise that the current valuation of Indonesian market is no longer at a discount and could be demanding, if the country fails to add capacity in the coming years, inducing a risk for Indonesia to enter into a demand-pull inflationary period. However, under the
scenario that Indonesia successfully jumpstarts its infrastructure development in 2012, the country could move into a multi-year capex addition phase. Under such a circumstance, while valuations may not be at discount, we believe they will be largely reasonable and may be at least sustainable.
2011 inflation outlook: Manageable Current level of inflation remains low compared to the historical trend and we believe that 2011 inflation outlook remains manageable and is unlikely to induce demand destruction. Given improving weather conditions, we believe pressure of food prices on headline inflation will ease in the remainder of 2011. The main risk to this view is if the government raises the subsidised fuel price significantly, which we think is unlikely. However, given the
money supply uptrend, we see the risk of upward pressure on core inflation, leading to our expectation for 75 bp increase in policy rate in 2011. However, the 75 bp increase will bring Indonesia’s policy rate to 7.5%, well below the historical average. We do see longterm risk to Indonesia’s core inflation, given Indonesia’s lack of investment in the past ten years, which may induce capacity constraints. In the event that infrastructure development fails to kick off in 2012 and the country struggles to add capacity into the economy, we see the risk of demand-pull inflation.
Inflation winners and losers
We run a bottom-up analysis to examine inflation winners and losers. We set assumptions on cost increase and estimate the impact on operating expenses (COGS + SG&A) and in turn on FY11E earnings. We separately calculate the impact of higher interest rates resulting from the central bank’s efforts to stem inflation. Our key input assumptions are: 1) 10% rise in energy, soft commodities, transport and metal prices, 2) 5% rise in wages and 3) 1 pp rise in interest rates. On the revenue side, each analyst assumes a percentage pass-through of cost increases based on industry structure, demand elasticity and historical precedents. Based on our bottom-up analysis, metal (ANTM, INCO) and coal (INDY) producers as well as banks with strong CASA (BBCA, BBNI and BMRI) are net beneficiaries. Banks with low CASA (BDMN, BBTN), heavy equipment companies (UNTR) and companies with high debt position (ISAT) are net losers to higher inflation and policy rates, in our view.
Our recommendations
Indonesia is trading at the highest premium relative to regional peers of 25%, based on our ‘P/B less ROE’ method, and consensus earnings momentum is subsiding. However, we believe that Indonesia’s equity market is not over-bought and the central bank is not as behind the curve as the market perceives it to be. Net net, we maintain our Index target of 4,150, implying 12% potential upside from the current level. Our top buys are stocks that are currently trading at a discount both to the Indonesian market and regional peers, while at the same time exhibiting relatively robust consensus earnings momentum and have been relative underperformers. Our top buys comprise: 1) two banks (BMRI and BBNI) to capture Indonesia’s domestic consumption story as well as increasing credit penetration, 2) one integrated consumer play (INDF) with strong consumer brand products and control over the upstream feedstock and 3) a cement producer (SMGR) to benefit from Indonesia’s infrastructure development ahead. We recognise that the current valuation of Indonesian market is no longer at a discount and could be demanding, if the country fails to add capacity in the coming years, inducing a risk for Indonesia to enter into a demand-pull inflationary period. However, under the
scenario that Indonesia successfully jumpstarts its infrastructure development in 2012, the country could move into a multi-year capex addition phase. Under such a circumstance, while valuations may not be at discount, we believe they will be largely reasonable and may be at least sustainable.
Ciputra Development - Bahana
3M marketing sales: 16% of 2011, in line on 2H project acceleration
§ CTRA reported March 2011 marketing sales of IDR161b (-16% m-m and -3.8% y-y), mostly stemming from a new residential project launch in Kendari (IDR90b), the 4th new project launched this year.
§ This brought 3M11 sales to around IDR560b (+19.5% y-y) sales in 3M11, supported by the company’s existing 18 residential projects and 2 mixed-used developments.
§ Going forward, CTRA has prepared 8 new residential projects (including Shenyang – China ) and launches from 2 new apartments/ premium residences to achieve 2011 marketing sales of IDR3.4t, doubled compared to 2010’s level of IDR1.7t.
Outlook: More projects, higher marketing sales
We think the growth story is imminent in the coming years for CTRA, supported by existing and upcoming projects. With IDR3t marketing sales in 2009-10, we estimate 2011-12 revenue to grow at least 16% and 24% respectively. On the bottom line, with higher than expected 2010 net margin, it is possible that we may upgrade our earnings this year.
Recommendation and valuation
We continue to like CTRA for its prudent management, project diversification and additional recurring incomes in the future. More aggressive expansions this year should support the company’s growth going forward. This will result in continued positive sentiment on the stock, allowing continued ytd market outperformance (exhibit 4). Thus, we reiterate our BUY rating on CTRA and retain our target price of IDR520, which is based on 30% discount to NAV.
§ CTRA reported March 2011 marketing sales of IDR161b (-16% m-m and -3.8% y-y), mostly stemming from a new residential project launch in Kendari (IDR90b), the 4th new project launched this year.
§ This brought 3M11 sales to around IDR560b (+19.5% y-y) sales in 3M11, supported by the company’s existing 18 residential projects and 2 mixed-used developments.
§ Going forward, CTRA has prepared 8 new residential projects (including Shenyang – China ) and launches from 2 new apartments/ premium residences to achieve 2011 marketing sales of IDR3.4t, doubled compared to 2010’s level of IDR1.7t.
Outlook: More projects, higher marketing sales
We think the growth story is imminent in the coming years for CTRA, supported by existing and upcoming projects. With IDR3t marketing sales in 2009-10, we estimate 2011-12 revenue to grow at least 16% and 24% respectively. On the bottom line, with higher than expected 2010 net margin, it is possible that we may upgrade our earnings this year.
Recommendation and valuation
We continue to like CTRA for its prudent management, project diversification and additional recurring incomes in the future. More aggressive expansions this year should support the company’s growth going forward. This will result in continued positive sentiment on the stock, allowing continued ytd market outperformance (exhibit 4). Thus, we reiterate our BUY rating on CTRA and retain our target price of IDR520, which is based on 30% discount to NAV.
For longer term perspective, I will be buyers of domestic consumption names - CLSA
“If you ask me if the US dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years from now, I will tell you it will not” Warren Buffet
It is interesting to note that China posted a US7.3bn trade deficit, the biggest monthly trade deficit in the past 7 years. Although it is expected only to be a temporary blip, the overall trend is something that cannot be ignored. China trade surplus for 2010 was $183bn, down slightly from 2009 and sharply off peak of $296 in 2008. The function of this trend is stemmed by a slightly strengthening RMB but more importantly China (as well as many EMs in the region) shift to focus/stimulate domestic consumption (all those luxury goods = higher imports here) as they realize export to the west model is not sustainable.
A shrinking surplus has many far reaching implications. Most importantly, it implies less money available to buy US treasuries eventually sending yields much higher to attract buyers. Sure a bounce of the dollar is possible, but a weaker dollar is structural (just keep printing) as it is really the only democratically acceptable solution to reduce debt (by inflating).
At the same time Japan is also embarking their latest and biggest QE program. In the aftermath of the earthquake, the BOJ’s massive liquidity stimulus and intervention in the bond market is equivalent to their own QE2 relative to the size of their economy. No doubt this added liquidity is likely going to exert higher inflation pressures in a global context together with US dollar liquidity and emerging market demand pressures.
One of our NY colleague Lucy Chuah wrote an interesting angle on the psychological effect of a strong Rupiah/weak dollar. Most Indonesians think in US$. This is the inevitable outcome when out local currency has been depreciating for a long time. If you are acutely aware every day that you are worse off in Rupiah terms, you will adopt certain behaviour such as depositing your USD offshore, pricing your goods in USD first then only the Rupiah (more inflation), and watching your spending because your staples will cost more tomorrow.
Not only an appreciating Rupiah is positive for the corporate profit line (because of the dollarized cost structure). It is equally or even more positive for people's psychology: Indonesians will start to keep/bring back money on-shore, inflation will be tempered, and there will be a sense of being more well-off.
An appreciating Sing dollar does not have the same impact on consumer behaviour because Singaporeans are used to it. The impact on the Indo consumer is massive because of not just higher purchasing power but also the fact that we start from a much lower base. When you are from low income bracket going towards middle class, your propensity to spend is high. Every extra Rupiah of wealth you have, you are going to spend 90% of it. When you are rich like the Japanese households, your propensity to spend is very low. So every extra Yen of wealth you have you are going to SAVE most of that. The impact of an appreciating currency is not the same between countries with low income per capita and hi income per capita.
Lastly, the Central Bank stated today that strong Rupiah will be a good formula to curb inflation threat. Central Bank (BI) stated Indonesia’s inflation rate is still manageable despite 19% increase in money circulation in 1Q due to strong rupiah. Every 1% appreciation of Rupiah helps ease headline inflation by 0.06-0.1%. So far, 3.5% gain in Rupiah has helped reduce the inflation rate by 0.35%.
For longer term perspective, I will be buyers of domestic consumption names.
It is interesting to note that China posted a US7.3bn trade deficit, the biggest monthly trade deficit in the past 7 years. Although it is expected only to be a temporary blip, the overall trend is something that cannot be ignored. China trade surplus for 2010 was $183bn, down slightly from 2009 and sharply off peak of $296 in 2008. The function of this trend is stemmed by a slightly strengthening RMB but more importantly China (as well as many EMs in the region) shift to focus/stimulate domestic consumption (all those luxury goods = higher imports here) as they realize export to the west model is not sustainable.
A shrinking surplus has many far reaching implications. Most importantly, it implies less money available to buy US treasuries eventually sending yields much higher to attract buyers. Sure a bounce of the dollar is possible, but a weaker dollar is structural (just keep printing) as it is really the only democratically acceptable solution to reduce debt (by inflating).
At the same time Japan is also embarking their latest and biggest QE program. In the aftermath of the earthquake, the BOJ’s massive liquidity stimulus and intervention in the bond market is equivalent to their own QE2 relative to the size of their economy. No doubt this added liquidity is likely going to exert higher inflation pressures in a global context together with US dollar liquidity and emerging market demand pressures.
One of our NY colleague Lucy Chuah wrote an interesting angle on the psychological effect of a strong Rupiah/weak dollar. Most Indonesians think in US$. This is the inevitable outcome when out local currency has been depreciating for a long time. If you are acutely aware every day that you are worse off in Rupiah terms, you will adopt certain behaviour such as depositing your USD offshore, pricing your goods in USD first then only the Rupiah (more inflation), and watching your spending because your staples will cost more tomorrow.
Not only an appreciating Rupiah is positive for the corporate profit line (because of the dollarized cost structure). It is equally or even more positive for people's psychology: Indonesians will start to keep/bring back money on-shore, inflation will be tempered, and there will be a sense of being more well-off.
An appreciating Sing dollar does not have the same impact on consumer behaviour because Singaporeans are used to it. The impact on the Indo consumer is massive because of not just higher purchasing power but also the fact that we start from a much lower base. When you are from low income bracket going towards middle class, your propensity to spend is high. Every extra Rupiah of wealth you have, you are going to spend 90% of it. When you are rich like the Japanese households, your propensity to spend is very low. So every extra Yen of wealth you have you are going to SAVE most of that. The impact of an appreciating currency is not the same between countries with low income per capita and hi income per capita.
Lastly, the Central Bank stated today that strong Rupiah will be a good formula to curb inflation threat. Central Bank (BI) stated Indonesia’s inflation rate is still manageable despite 19% increase in money circulation in 1Q due to strong rupiah. Every 1% appreciation of Rupiah helps ease headline inflation by 0.06-0.1%. So far, 3.5% gain in Rupiah has helped reduce the inflation rate by 0.35%.
For longer term perspective, I will be buyers of domestic consumption names.
Astra Agro, a potential div yield play - CLSA
Plantation analyst Di Shui downgrades Astra Agro Lestari (AALI IJ) slightly to Outperform (from a BUY). Despite a very strong 1Q11 production number (record), our analyst lowers her recommendation on the back of valuation.
The TP is now Rp26,350, suggesting 16% upside. TP is derived from a sector P/E of 14.4x AALI is poised for 43% earning growth in FY11. A limited growth profile and modest capex needs in FY11 could mean higher future div payouts.
With parent Astra Int’l (ASII IJ) needs the cash to subscribe to UNTR’s US$700mn rights issue (ASII owns 59.5% of UNTR), the chance is good that ASII will upstream the cash from its subsidiaries. Assuming AALI to pay 100% div payout out of FY10 earnings, we are looking at 5.6% div yield. On top of that, AALI’s balance sheet is debt free with cash holdings of over US$140mn. Special dividend is not impossible.
Key points from the report:
· Off to a strong start in 2011: 1Q CPO production +26% YoY, ASP likely rose >20% from FY10.
· We forecast 43% EPS growth in FY11 on the back of higher production (+7% YoY) and ASP (+16% YoY).
· We like the dividend angle. Historically paid out 65% of earnings.
· However, limited capex needs, US$140m net cash B/S, and a rights issue for sister company UNTR IJ could drive higher payout near term.
· 65% payout on FY10 earnings implies 3.7% dividend yield, 100% payout 5.6%.
· AALI further has Rp6.2tn (US$715mn) in retained earnings, which could be allocated for special dividends of up to Rp3,926/share or a 17.3% yield (unlikely, but who knows).
· Valuation: the stock is currently trading on 12.4x '11 P/E and implied EV/planted ha of US$20,202, or compelling 18% and 33% discount to M'sian peers.
· Our TP is derived from a sector P/E of 14.4x and offers 16% upside. OUTPERFORM.
The TP is now Rp26,350, suggesting 16% upside. TP is derived from a sector P/E of 14.4x AALI is poised for 43% earning growth in FY11. A limited growth profile and modest capex needs in FY11 could mean higher future div payouts.
With parent Astra Int’l (ASII IJ) needs the cash to subscribe to UNTR’s US$700mn rights issue (ASII owns 59.5% of UNTR), the chance is good that ASII will upstream the cash from its subsidiaries. Assuming AALI to pay 100% div payout out of FY10 earnings, we are looking at 5.6% div yield. On top of that, AALI’s balance sheet is debt free with cash holdings of over US$140mn. Special dividend is not impossible.
Key points from the report:
· Off to a strong start in 2011: 1Q CPO production +26% YoY, ASP likely rose >20% from FY10.
· We forecast 43% EPS growth in FY11 on the back of higher production (+7% YoY) and ASP (+16% YoY).
· We like the dividend angle. Historically paid out 65% of earnings.
· However, limited capex needs, US$140m net cash B/S, and a rights issue for sister company UNTR IJ could drive higher payout near term.
· 65% payout on FY10 earnings implies 3.7% dividend yield, 100% payout 5.6%.
· AALI further has Rp6.2tn (US$715mn) in retained earnings, which could be allocated for special dividends of up to Rp3,926/share or a 17.3% yield (unlikely, but who knows).
· Valuation: the stock is currently trading on 12.4x '11 P/E and implied EV/planted ha of US$20,202, or compelling 18% and 33% discount to M'sian peers.
· Our TP is derived from a sector P/E of 14.4x and offers 16% upside. OUTPERFORM.
Flavour (Indo): Banks and Holcim Indonesia - CLSA
The Asean banking sector team that meet clients in Singapore and HK sense that clients are well weighted in the outperforming Indo and Thai banks, neutral on Malaysian banks and underweight the Singapore banks. As such, there was a receptive ear to our relatively contrarian view that the tactical play for 2Q may be to lighten positions in the hard-running Thai and Indo banks where valuations now appear full; and switch into laggard, more defensive Malay and Sing banks. Anand’s preference among Indonesian banks remain state-owned banks i.e. Bank Mandiri (BMRI IJ -BUY), BRI (BBRI IJ - BUY) and BNI (BBNI IJ - BUY), especially as the two more obvious catalysts (firstly, the long-awaited passing of the land acquisition reform bill in 2H11; and secondly, allowing state-owned banks to give haircuts on NPLs to accelerate work-outs) should primarily be to their benefit.
Demand for industrial estate land was reported to have increased by 150% q-o-q in 1Q11 and up by seven-fold y-o-y. Industrial estate land sales in 1Q11 recorded 320ha compared to 130ha in 4Q10 and 41ha in 1Q10, largely within surrounding the Greater Jakarta areas such as Karawang. Demand came from expansions by auto manufacturer and food industry, which also represents foreign direct investments mainly from Japan and Korea. More of such demand for industrial estate land could be expected as Indonesia’s investment profile rises resulting in pick up in foreign direct investments and expansion of local manufacturing capacity. Listed property companies who may benefit from this trend of rising demand for industrial land include Lippo Cikarang (LPCK IJ – Not rated), Lippo Karawaci (LPKR IJ – Not rated), Jababeka (KIJA IJ – Not rated), and Surya Semesta (SSIA IJ – Not rated).
The Indonesian Toll Road Authority (BPJT) was reported to have submitted budget request to Ministry of Finance for Rp2.8 tn (US$300m) for land acquisition. The budget is part of the mechanism implemented by the Government to help acquire land for infrastructure projects under the land capping program and revolving fund, whereby the Government will use the fund to help initially acquire the land for infrastructure projects. This funding for land acquisition is temporary in nature as it will later be reimbursed by the infrastructure projects developer with the agreed target amount. The fund essentially helps secure certainty on land acquisition costs for project developers as any realized land acquisition cost in excess of the target amount would be absorbed by the Government.
We would also like to highlight the strong volume growth of Holcim Indonesia in 1Q11 (up 15.4% yoy) taking up market share from others. Holcim (SMCB IJ) has strong position and leading market share in bulk cement and thus any acceleration of infrastructure projects and high rise property development will benefit Holcim. Stock is a laggard in recent rally as market concern over rising energy costs. Energy cost accounts for around 40%-50% of Cogs in cement companies.
Demand for industrial estate land was reported to have increased by 150% q-o-q in 1Q11 and up by seven-fold y-o-y. Industrial estate land sales in 1Q11 recorded 320ha compared to 130ha in 4Q10 and 41ha in 1Q10, largely within surrounding the Greater Jakarta areas such as Karawang. Demand came from expansions by auto manufacturer and food industry, which also represents foreign direct investments mainly from Japan and Korea. More of such demand for industrial estate land could be expected as Indonesia’s investment profile rises resulting in pick up in foreign direct investments and expansion of local manufacturing capacity. Listed property companies who may benefit from this trend of rising demand for industrial land include Lippo Cikarang (LPCK IJ – Not rated), Lippo Karawaci (LPKR IJ – Not rated), Jababeka (KIJA IJ – Not rated), and Surya Semesta (SSIA IJ – Not rated).
The Indonesian Toll Road Authority (BPJT) was reported to have submitted budget request to Ministry of Finance for Rp2.8 tn (US$300m) for land acquisition. The budget is part of the mechanism implemented by the Government to help acquire land for infrastructure projects under the land capping program and revolving fund, whereby the Government will use the fund to help initially acquire the land for infrastructure projects. This funding for land acquisition is temporary in nature as it will later be reimbursed by the infrastructure projects developer with the agreed target amount. The fund essentially helps secure certainty on land acquisition costs for project developers as any realized land acquisition cost in excess of the target amount would be absorbed by the Government.
We would also like to highlight the strong volume growth of Holcim Indonesia in 1Q11 (up 15.4% yoy) taking up market share from others. Holcim (SMCB IJ) has strong position and leading market share in bulk cement and thus any acceleration of infrastructure projects and high rise property development will benefit Holcim. Stock is a laggard in recent rally as market concern over rising energy costs. Energy cost accounts for around 40%-50% of Cogs in cement companies.
ASEAN Banks: Event driven catalysts ahead - DBS Vickers
Malaysian banks excitement driven by M&As. Thai banks should see the investment recovery cycle supporting growth. Indonesian banks are facing policy changes and macro pressures.
Within Emerging ASEAN, we still prefer Malaysian banks over Thai and Indonesian banks. Singapore banks continue to lag as it waits for rate hikes but has lowest downside risks vs. peers. Top ASEAN picks are OCBC, HLBK, KBANK and BBRI. Notable valuation calls are BBNI, BBL and RHBC.
An event driven year; Malaysian banks steal the limelight. Malaysian banks
are likely to witness the next M&A wave with changes imminent in strategic ownerships. The target banks will benefit from input the potential stakeholders could bring to the table to improve stand-alone value propositions, e.g. AMMB-ANZ. RHBC is our best bet for an M&A play.
Thailand banks are expected to see sustainable earnings growth in 2011 from an
investment recovery cycle coupled with rate hikes via loan growth and higher NIM. Indonesian banks are overwhelmed with policies apart from inflation and rate hike issues. Singapore banks are still waiting for rate hikes.
Inflation and rate hikes are themes to note. All eyes are on Indonesia and how it battles with inflation and possible rate hikes. We believe that micro lending business such as BBRI's is an inflation hedge story. BBRI's asset quality and loan growth for micro lending has been robust throughout the inflation cycle. Rate hikes are still expected for the year. Thai banks, particularly KBANK are the best proxy for rate hikes with NIM outperforming ASEAN peers.
Our preference. Singapore banks have lagged as it waits for rate hikes but has the lowest downside risks vs. peers. We are keeping Singapore banks on top of our Buy list as valuations are cheap, asset quality is robust, capital is intact, and downside risk is the most limited vs ASEAN peers.
The sterling loan growth rates of 16%/17% y-o-y in Jan/Feb this year coupled with a GDP growth forecast at 7% poses a potential further upside to our estimates. Within Emerging ASEAN, we still prefer Malaysian banks over Thai and Indonesian banks. OCBC, HLBK, KBANK and BBRI are our ASEAN picks. Our top picks are OCBC, HLBK (replacing MAY), KBANK and BBRI. Of these, we believe BBRI, our top Indonesian bank pick, is a non-consensus view. We have replaced MAY with HLBK as our top pick among Malaysian banks for its strength domestically, leveraging on its China exposure and potential M&As ahead. Notable valuation calls are BBNI, BBL and RHBC. RHBC is our bet for an M&A.
Within Emerging ASEAN, we still prefer Malaysian banks over Thai and Indonesian banks. Singapore banks continue to lag as it waits for rate hikes but has lowest downside risks vs. peers. Top ASEAN picks are OCBC, HLBK, KBANK and BBRI. Notable valuation calls are BBNI, BBL and RHBC.
An event driven year; Malaysian banks steal the limelight. Malaysian banks
are likely to witness the next M&A wave with changes imminent in strategic ownerships. The target banks will benefit from input the potential stakeholders could bring to the table to improve stand-alone value propositions, e.g. AMMB-ANZ. RHBC is our best bet for an M&A play.
Thailand banks are expected to see sustainable earnings growth in 2011 from an
investment recovery cycle coupled with rate hikes via loan growth and higher NIM. Indonesian banks are overwhelmed with policies apart from inflation and rate hike issues. Singapore banks are still waiting for rate hikes.
Inflation and rate hikes are themes to note. All eyes are on Indonesia and how it battles with inflation and possible rate hikes. We believe that micro lending business such as BBRI's is an inflation hedge story. BBRI's asset quality and loan growth for micro lending has been robust throughout the inflation cycle. Rate hikes are still expected for the year. Thai banks, particularly KBANK are the best proxy for rate hikes with NIM outperforming ASEAN peers.
Our preference. Singapore banks have lagged as it waits for rate hikes but has the lowest downside risks vs. peers. We are keeping Singapore banks on top of our Buy list as valuations are cheap, asset quality is robust, capital is intact, and downside risk is the most limited vs ASEAN peers.
The sterling loan growth rates of 16%/17% y-o-y in Jan/Feb this year coupled with a GDP growth forecast at 7% poses a potential further upside to our estimates. Within Emerging ASEAN, we still prefer Malaysian banks over Thai and Indonesian banks. OCBC, HLBK, KBANK and BBRI are our ASEAN picks. Our top picks are OCBC, HLBK (replacing MAY), KBANK and BBRI. Of these, we believe BBRI, our top Indonesian bank pick, is a non-consensus view. We have replaced MAY with HLBK as our top pick among Malaysian banks for its strength domestically, leveraging on its China exposure and potential M&As ahead. Notable valuation calls are BBNI, BBL and RHBC. RHBC is our bet for an M&A.
Ramayana Lestari Sentosa March same-store sales growth: Continued weakness - Bahana
§ In spite of the start of the harvesting period, RALS reported weak March same-store sales growth (SSG) of 3.2% y-y, further decelerating compared to 6.7% in January and 3.9% in February (exhibit 5). Taking into account inflation, RALS continued to register negative real SSG.
§ Like in the first two months of the year, March sales of IDR402b disappointed, coming in 7.5% below management’s expectation.
§ This brought 1Q11 sales to IDR1.24t, 21.8% of our full-year estimate, but only 18.1% of management’s expectation and 18.6% of consensus estimate. With 1Q11 sales already more than 5% below management’s guidance, we expect the street will be revising down forecasts to our level.
Outlook: Earnings downgrades on the cards
It is clear that RALS is suffering operationally given declining margin trend. Note that gross margin in March decelerated to 23.5% (exhibit 7), compared to 24.9% in January and 24.3% in February, partly due to lower contribution from the higher margin ex-Java region of 52.8% from 54.5% in January and 53.8% in February. This will necessitate earnings downgrades in our numbers as we have assumed 31.9% gross margin for RALS in 2011.
Recommendation and valuation
Going forward, we expect lack of pricing power for RALS shoppers to persist. This coupled with rising prices from suppliers (cotton prices: +38.5% ytd to USD4,420/ton) will mean further margin weakness. RALS is a HOLD at best.
§ Like in the first two months of the year, March sales of IDR402b disappointed, coming in 7.5% below management’s expectation.
§ This brought 1Q11 sales to IDR1.24t, 21.8% of our full-year estimate, but only 18.1% of management’s expectation and 18.6% of consensus estimate. With 1Q11 sales already more than 5% below management’s guidance, we expect the street will be revising down forecasts to our level.
Outlook: Earnings downgrades on the cards
It is clear that RALS is suffering operationally given declining margin trend. Note that gross margin in March decelerated to 23.5% (exhibit 7), compared to 24.9% in January and 24.3% in February, partly due to lower contribution from the higher margin ex-Java region of 52.8% from 54.5% in January and 53.8% in February. This will necessitate earnings downgrades in our numbers as we have assumed 31.9% gross margin for RALS in 2011.
Recommendation and valuation
Going forward, we expect lack of pricing power for RALS shoppers to persist. This coupled with rising prices from suppliers (cotton prices: +38.5% ytd to USD4,420/ton) will mean further margin weakness. RALS is a HOLD at best.
EXCL AN EVIDENCE OF FIT BUSINESS STRATEGY - BNI Sekuritas
Investment Highlights:
􀂄 Continues To Note Positive Results
􀂄 All Figures Surpassed Our Expectation
􀂄 Some Of The Key Growth Drivers
􀂄 Shifting Revenue Composition
􀂄 The Potential Of Continuing Growth In Non-Voice Business
􀂄 Improving Margin
Our previous report in the 1H10 highlighted that EXCL 1H10 result could become as a clearer future growth signal which it had been confirmed by the company's FY10 result. On the back of the strategic initiatives and an effort through the execution of various strategies not only impacting on EXCL's FY10 revenue but also increasing the value creation of the stockholders.
In that period, company's total revenues grew by 27.07% YoY to IDR 17.63tn (FY10) compared to the same period of last year amounting IDR 13.88tn (FY09). Out of the total amount voice revenue remained to become the highest revenue contribution (47.95%) or equal to around IDR 8.45tn (FY10). The second meaningful contribution was noted by company's sms revenue, which in the same period it posted a growth of 28.63% to IDR 3.47tn (FY10) and gave around 19.71% to EXCL's total revenue, or higher compared to last year contribution of 19.47% (FY09).
Various promotional tariff plans and tariff optimization as well as a number of continuing sms promotion program last year had helped company's total cellular revenue up by 26.47% from IDR 12.77tn (FY09) to IDR 16.15tn (FY10) . The hasty development of social networking applications such as facebook and others instant messaging services were also becoming a positive sentiment that drove the Data and VAS contribution increased by 4.15%, from around 9.07% (FY09) to 13.22% (FY10) or equal to approximately IDR 2.33tn (FY10) versus IDR 1.25tn (FY09) or jumped by 85.23% YoY. The latest significant sales drivers were coming from company's infrastructure businesses. Consists of leased lines, leased towers, national roaming and internet service provider; the total infrastructure income posted 34.08% higher from IDR 1.10tn (FY09) to IDR 1.48tn (FY10) which equal to a contribution of 8.43% (FY10) to EXCL's total consolidated revenue, or increased from around 7.99% (FY09).
We forecast that the company is potentially to record at least a low double digit growth by the end of this year to IDR 19.56tn (FY11F) or in line with the consensus
expectation of IDR 19.77tn (FY11F) with a growing bottom line of around 20.16% to IDR 3.68tn (FY11F) or 4.1% below average net profit projection of IDR 3.84tn (FY11F). With such historical growth (Net Revenue CAGR 22.99% and Net Profit CAGR 23.03%) we deem that EXCL's shares should be traded at premium around P/E 17,0x higher than its peers (TLKM) with 13,63x P/E multiple. Over the counter EXCL's is traded at P/E 17,21x or below the industry average P/E of 24,35x. We maintain our BUY recommendation with 12 months target price of around IDR 6.700 per share or equal to P/E 15,10x (FY11F) or equivalent compared to the consensus FY11F industry P/E of around 15,08x and approximately 15.51% of upside potential using the closing price of IDR 5.800 per share as of April 13th 2011.
􀂄 Continues To Note Positive Results
􀂄 All Figures Surpassed Our Expectation
􀂄 Some Of The Key Growth Drivers
􀂄 Shifting Revenue Composition
􀂄 The Potential Of Continuing Growth In Non-Voice Business
􀂄 Improving Margin
Our previous report in the 1H10 highlighted that EXCL 1H10 result could become as a clearer future growth signal which it had been confirmed by the company's FY10 result. On the back of the strategic initiatives and an effort through the execution of various strategies not only impacting on EXCL's FY10 revenue but also increasing the value creation of the stockholders.
In that period, company's total revenues grew by 27.07% YoY to IDR 17.63tn (FY10) compared to the same period of last year amounting IDR 13.88tn (FY09). Out of the total amount voice revenue remained to become the highest revenue contribution (47.95%) or equal to around IDR 8.45tn (FY10). The second meaningful contribution was noted by company's sms revenue, which in the same period it posted a growth of 28.63% to IDR 3.47tn (FY10) and gave around 19.71% to EXCL's total revenue, or higher compared to last year contribution of 19.47% (FY09).
Various promotional tariff plans and tariff optimization as well as a number of continuing sms promotion program last year had helped company's total cellular revenue up by 26.47% from IDR 12.77tn (FY09) to IDR 16.15tn (FY10) . The hasty development of social networking applications such as facebook and others instant messaging services were also becoming a positive sentiment that drove the Data and VAS contribution increased by 4.15%, from around 9.07% (FY09) to 13.22% (FY10) or equal to approximately IDR 2.33tn (FY10) versus IDR 1.25tn (FY09) or jumped by 85.23% YoY. The latest significant sales drivers were coming from company's infrastructure businesses. Consists of leased lines, leased towers, national roaming and internet service provider; the total infrastructure income posted 34.08% higher from IDR 1.10tn (FY09) to IDR 1.48tn (FY10) which equal to a contribution of 8.43% (FY10) to EXCL's total consolidated revenue, or increased from around 7.99% (FY09).
We forecast that the company is potentially to record at least a low double digit growth by the end of this year to IDR 19.56tn (FY11F) or in line with the consensus
expectation of IDR 19.77tn (FY11F) with a growing bottom line of around 20.16% to IDR 3.68tn (FY11F) or 4.1% below average net profit projection of IDR 3.84tn (FY11F). With such historical growth (Net Revenue CAGR 22.99% and Net Profit CAGR 23.03%) we deem that EXCL's shares should be traded at premium around P/E 17,0x higher than its peers (TLKM) with 13,63x P/E multiple. Over the counter EXCL's is traded at P/E 17,21x or below the industry average P/E of 24,35x. We maintain our BUY recommendation with 12 months target price of around IDR 6.700 per share or equal to P/E 15,10x (FY11F) or equivalent compared to the consensus FY11F industry P/E of around 15,08x and approximately 15.51% of upside potential using the closing price of IDR 5.800 per share as of April 13th 2011.
Cement Industry (OVERWEIGHT) Strong growth in Java - Danareksa
Another strong month
Given a boost by the better weather, domestic cement demand picked up further in March to reach 3.8mn tonnes, or up 11.3% yoy. On a mom basis, domestic demand grew by 14.9% mom, outpacing the expected impact coming from seasonality since February is a shorter month. Cumulatively, total domestic demand was up by 8.6% yoy to 10.6mn tonnes – or inline with our 8% demand growth estimate for FY11. Exports were very low as cement producers preferred to sell cement on the more lucrative domestic market. All in all, the supply demand conditions look tight as cement producers have not been firing up their old and inefficient plants.
Better contribution from Java
Over the last couple of years, Java has been underperforming the outer islands in terms of growth. We believe this is because the economies of the outer islands have been benefiting from the soaring commodity prices which, in turn, have led to improving purchasing power. Furthermore, it is also the case that the outer islands are starting from a much lower base. This means there is more room for potential growth. However, in the early part of this year, demand from Java (except East Java) was surprisingly higher than in other areas.
The strong demand in Java favors Indocement and Holcim
The strong demand growth in West and Central Java basically favors Indocement and Holcim. This is reflected in the domestic demand growth for Indocement of 8.4% to 3.2mn tonnes and for Holcim of 24.4% to 1.6mn tonnes in the year up to March. In contrast, Semen Gresik recorded only minor growth of 1.4% to 4.3mn tonnes, meaning that the company lost market share. The big gainer was ultimately Holcim.
Moderately higher pricing
Rising coal prices forced cement producers to nudge up their selling prices. By March 2011, ASP had reached Rp1.1mn per tonne at the retail end. This is 4.0% Ytd higher than last year’s ASP of Rp1.06mn per tonne. For the time being, the cement producers don’t have any immediate plans to hike prices further. The price increases at the beginning of the year should be sufficient to maintain margins. Note also that cement producers have been a beneficiary of the stronger rupiah since about 60% of the COGS are US dollar linked.
Indocement remains our preferred stock
Indocement is our top pick in the sector. We like the company since it has the largest idle capacity, strong support from its parent company for product innovation in addition to having the most efficient cement production operations. BUY with a Target Price of Rp18,700.
Given a boost by the better weather, domestic cement demand picked up further in March to reach 3.8mn tonnes, or up 11.3% yoy. On a mom basis, domestic demand grew by 14.9% mom, outpacing the expected impact coming from seasonality since February is a shorter month. Cumulatively, total domestic demand was up by 8.6% yoy to 10.6mn tonnes – or inline with our 8% demand growth estimate for FY11. Exports were very low as cement producers preferred to sell cement on the more lucrative domestic market. All in all, the supply demand conditions look tight as cement producers have not been firing up their old and inefficient plants.
Better contribution from Java
Over the last couple of years, Java has been underperforming the outer islands in terms of growth. We believe this is because the economies of the outer islands have been benefiting from the soaring commodity prices which, in turn, have led to improving purchasing power. Furthermore, it is also the case that the outer islands are starting from a much lower base. This means there is more room for potential growth. However, in the early part of this year, demand from Java (except East Java) was surprisingly higher than in other areas.
The strong demand in Java favors Indocement and Holcim
The strong demand growth in West and Central Java basically favors Indocement and Holcim. This is reflected in the domestic demand growth for Indocement of 8.4% to 3.2mn tonnes and for Holcim of 24.4% to 1.6mn tonnes in the year up to March. In contrast, Semen Gresik recorded only minor growth of 1.4% to 4.3mn tonnes, meaning that the company lost market share. The big gainer was ultimately Holcim.
Moderately higher pricing
Rising coal prices forced cement producers to nudge up their selling prices. By March 2011, ASP had reached Rp1.1mn per tonne at the retail end. This is 4.0% Ytd higher than last year’s ASP of Rp1.06mn per tonne. For the time being, the cement producers don’t have any immediate plans to hike prices further. The price increases at the beginning of the year should be sufficient to maintain margins. Note also that cement producers have been a beneficiary of the stronger rupiah since about 60% of the COGS are US dollar linked.
Indocement remains our preferred stock
Indocement is our top pick in the sector. We like the company since it has the largest idle capacity, strong support from its parent company for product innovation in addition to having the most efficient cement production operations. BUY with a Target Price of Rp18,700.
Avoid Coals, Plantation and Hard Metals as Oil Prices Dropped Significantly, Indonesia’s Banks and Consumer Goods Back to Business (Early Bird) - AmCapital
Goldman Sachs’s negative call on oil prices (estimating $20 price drop by spring) and Alcoa’s missing estimate dragged down Dow (↓1%) and S&P (↓0.78%). Declining energy prices, WTI Crude (↓$3.67 to $106.25) and Brent (↓$3.06 to $120.92), driven by Goldman’s negative call, and declining Yen triggers Asian Market to open mixed this morning, Nikkei 225 (↑0.39%), Kospi (↓0.02%), ASX (↑0.23%) and NZX (↓0.21%). JCI might be opened a bit lower as coal price and metal price might be under selling pressure, Rupiah headed lower this morning (↑10 IDR to 8,662) and Indo’s CDS accelerating to 140 bps, implying Indo’s Gvt bond might facing selling pressure as well. We recommend taking a hard look at banks (small caps such as BJBR IJ having the most attractive PBV and big caps such as BBRI IJ and BMRI IJ) and consumer goods names such as INDF IJ and MYOR IJ benefiting from declining energy prices and food Prices (wheat price ↓to $7.55/bushel).
Corporate Headlines:
PT Astra Otoparts Tbk (AUTO IJ): will split its stock 1:3 to add more liquidity in the market. Thus free float will be accumulating to 100 million shares from 33 million shares. Thus, rumor of go private dies down.
PT XL Axiata Tbk (EXCL): is planning to increase dividend payout ratio this year from traditionally 15%-20% of payout ratio to 30% payout ratio, pending the General Meeting Shareholders
Banking Sector:
Bank Indonesia extended the one- month holding period on central bank notes, or SBI, to six months, Governor Darmin Nasution told local business newspapers.
Corporate Headlines:
PT Astra Otoparts Tbk (AUTO IJ): will split its stock 1:3 to add more liquidity in the market. Thus free float will be accumulating to 100 million shares from 33 million shares. Thus, rumor of go private dies down.
PT XL Axiata Tbk (EXCL): is planning to increase dividend payout ratio this year from traditionally 15%-20% of payout ratio to 30% payout ratio, pending the General Meeting Shareholders
Banking Sector:
Bank Indonesia extended the one- month holding period on central bank notes, or SBI, to six months, Governor Darmin Nasution told local business newspapers.
Indonesia Nickel Strong prices factored-in - DBS Vickers
• Nickel prices have risen respectably, limited upside from current levels
• China is key driver of nickel demand
• Expect moderate earnings growth this year; capacity expansion insufficient to offset risk of volatile nickel prices
• Nickel prices need to rise further to justify higher valuations; reinstate coverage of ANTM and INCO with Hold rating
Limited upside to nickel prices. After surging 48% yoy last year, we expect nickel prices to moderate with rising supply as idle capacities are revived, and there is greater extent of substitution. The strong prices are encouraging substitution to lower or non-nickel content stainless steel, which would cap nickel demand, and hence, prices. We estimate nickel prices would reach US$23,000/ton in FY11-12F before normalizing to US$22,000 in FY13F. Our FY11F nickel price is 10% below the current spot price.
Slower earnings momentum. Nickel producers’ net profit had surged by 157-175% yoy in FY10, but we expect growth to moderate to only 2-7% this year on expectations of limited upside to nickel prices. We also expect lower production due to routine maintenance. ANTM has stronger earnings growth supported by 45% higher gold production at its newly acquired Cibaliung gold mine and stronger price outlook for gold, while INCO’s growth will stall as we estimate 7% lower production on maintenance. However, we expect short term share price volatility in response to strong 1Q11 earnings (arising from strong nickel prices in Jan-Feb11)
Rich valuations capping share price upside. We believe the current share prices have priced-in most of the positive news flow on strong nickel prices. Stocks are also trading at 12x FY11F PE against regional peers’ 10x, despite their smaller size and narrower product range (nickel contributes 70-100% of revenue). We believe that higher nickel price is necessary to justify higher valuation. Reinstate coverage of Aneka Tambang (ANTM) with a Hold call and Rp2,500 TP, and International Nickel Indonesia (INCO) with a Hold call and Rp5,000 TP. Risks to our call is stronger-than- expected nickel prices.
• China is key driver of nickel demand
• Expect moderate earnings growth this year; capacity expansion insufficient to offset risk of volatile nickel prices
• Nickel prices need to rise further to justify higher valuations; reinstate coverage of ANTM and INCO with Hold rating
Limited upside to nickel prices. After surging 48% yoy last year, we expect nickel prices to moderate with rising supply as idle capacities are revived, and there is greater extent of substitution. The strong prices are encouraging substitution to lower or non-nickel content stainless steel, which would cap nickel demand, and hence, prices. We estimate nickel prices would reach US$23,000/ton in FY11-12F before normalizing to US$22,000 in FY13F. Our FY11F nickel price is 10% below the current spot price.
Slower earnings momentum. Nickel producers’ net profit had surged by 157-175% yoy in FY10, but we expect growth to moderate to only 2-7% this year on expectations of limited upside to nickel prices. We also expect lower production due to routine maintenance. ANTM has stronger earnings growth supported by 45% higher gold production at its newly acquired Cibaliung gold mine and stronger price outlook for gold, while INCO’s growth will stall as we estimate 7% lower production on maintenance. However, we expect short term share price volatility in response to strong 1Q11 earnings (arising from strong nickel prices in Jan-Feb11)
Rich valuations capping share price upside. We believe the current share prices have priced-in most of the positive news flow on strong nickel prices. Stocks are also trading at 12x FY11F PE against regional peers’ 10x, despite their smaller size and narrower product range (nickel contributes 70-100% of revenue). We believe that higher nickel price is necessary to justify higher valuation. Reinstate coverage of Aneka Tambang (ANTM) with a Hold call and Rp2,500 TP, and International Nickel Indonesia (INCO) with a Hold call and Rp5,000 TP. Risks to our call is stronger-than- expected nickel prices.
MNCN/BMTR WEAKER: MIGHT HAVE LOST THE TPI CASE - CLSA
MNCN down 4.4%, BMTR down 4.9%.
Local media saying that the judge has ruled in favor of the previous owner of the TPI television station (daughter of ex-President Soeharto).
MNCN owns the TPI station, and has previously said that they had won the dispute about TPI's ownership.
The ex-owner also said it will now change the name back to TPI TV; it was re-named MNC TV by owner MNCN after they alledgedly won back ownership.
MNCN said it will appeal this decision.
Local media saying that the judge has ruled in favor of the previous owner of the TPI television station (daughter of ex-President Soeharto).
MNCN owns the TPI station, and has previously said that they had won the dispute about TPI's ownership.
The ex-owner also said it will now change the name back to TPI TV; it was re-named MNC TV by owner MNCN after they alledgedly won back ownership.
MNCN said it will appeal this decision.
Buy Ciputra Development (CTRA) - JP Morgan
* 2011 is looking like a bumper year: marketing sales reached Rp834bn in 1Q11, already accounting for 48% of full year 2010 figure of Rp1,713bn. For full year 2011, the company is looking at Rp3,091bn, or 80% yoy increase. Main driver for the yoy growth would be the 143% yoy increase in marketing sales from revenue sharing projects, from Rp596bn in 2010 to Rp1,452bn in 2011E. CTRA keeps around 70% of revenue from these projects; if we only account for CTRA’s proportionate ownership, the yoy growth in marketing sales still strong at 73%.
* Marketing sales to profit transmission good: CTRA just reported consensus beating 4Q10 net profit number on 28 March, that was up by 125% yoy and 314% qoq, beating consensus by 51%. Typically reported net profit lags marketing sales by around one year, as profit from landed property sales can only be booked after 100% completion.
* Land price appreciation has accelerated so far in year 2011: let’s focus on one of CTRA’s many projects, Citra Garden City, where the project’s saleable land value accounts for 15% of total. In 2009, the average land selling price is Rp3.25mn/sqm. In 2010, the ASP was Rp3.93mn/sqm or 20% higher. Currently in April 2011, the ASP is around Rp5.2mn/sqm according to management, or 32% higher already. JPMorgan analyst Liliana Bambang has an NAV estimate of Rp568/share for CTRA, assuming a 15% land price appreciation in Citra Garden City. The actual 32% land price appreciation so far gives scope for NAV upgrade. At Rp380 close, the stock trades on a 33% discount to Liliana’s NAV estimate. Her price target of Rp495 implies a 13% discount to NAV.
* New NAV estimate from the company may come out in May: CTRA’s management has stopped disclosing NAV estimate from third party valuer, as last study was conducted in year 2007. The new NAV estimate may bring fresh excitement into the stock, as the number may account for the current property price rally, that arguably has not been fully accounted by the Street analysts.
* To pay first dividend after a long period of draught: legacy from Asian financial crisis, CTRA’s retained earnings was negative Rp5bn in year 2009. The retained earnings have turned positive in year 2010, allowing the company to start paying dividends based on FY10 profit. The company expects to approve dividend payment in upcoming May EGM, marking the first cash dividend from CTRA after many years of draught.
* No rights issue on the horizon: the management outlined the fact that net gearing is now below 5%, and that they are comfortable to gear-up to 30%. The company expects a potential tripling in monthly recurring income once Ciputra World project coming to fruition sometime in early 2012.
* Marketing sales to profit transmission good: CTRA just reported consensus beating 4Q10 net profit number on 28 March, that was up by 125% yoy and 314% qoq, beating consensus by 51%. Typically reported net profit lags marketing sales by around one year, as profit from landed property sales can only be booked after 100% completion.
* Land price appreciation has accelerated so far in year 2011: let’s focus on one of CTRA’s many projects, Citra Garden City, where the project’s saleable land value accounts for 15% of total. In 2009, the average land selling price is Rp3.25mn/sqm. In 2010, the ASP was Rp3.93mn/sqm or 20% higher. Currently in April 2011, the ASP is around Rp5.2mn/sqm according to management, or 32% higher already. JPMorgan analyst Liliana Bambang has an NAV estimate of Rp568/share for CTRA, assuming a 15% land price appreciation in Citra Garden City. The actual 32% land price appreciation so far gives scope for NAV upgrade. At Rp380 close, the stock trades on a 33% discount to Liliana’s NAV estimate. Her price target of Rp495 implies a 13% discount to NAV.
* New NAV estimate from the company may come out in May: CTRA’s management has stopped disclosing NAV estimate from third party valuer, as last study was conducted in year 2007. The new NAV estimate may bring fresh excitement into the stock, as the number may account for the current property price rally, that arguably has not been fully accounted by the Street analysts.
* To pay first dividend after a long period of draught: legacy from Asian financial crisis, CTRA’s retained earnings was negative Rp5bn in year 2009. The retained earnings have turned positive in year 2010, allowing the company to start paying dividends based on FY10 profit. The company expects to approve dividend payment in upcoming May EGM, marking the first cash dividend from CTRA after many years of draught.
* No rights issue on the horizon: the management outlined the fact that net gearing is now below 5%, and that they are comfortable to gear-up to 30%. The company expects a potential tripling in monthly recurring income once Ciputra World project coming to fruition sometime in early 2012.
PT Telkom upgraded to OW - JP Morgan
Upgrade TLKM to OW, OW ISAT, N EXCL – The dominant factor in Indonesia appears to be the impact of cost control on margins, as overall revenue growth may be held back due to pricing pressures. TLKM and ISAT continue to show strong reductions in network OpEx per minute, driving our positive view – we increase ourPT for TLKM to Rp8,700 from Rp8,200. Staying N on EXCL, asearnings revisions have stalled out.
https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-576993-0.pdf
https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-576993-0.pdf
Kamis, 14 April 2011
Vallar says no tender offer for Bumi even if it takes 51 pct - Reuters
* Vallar says Bakrie Group will remain controlling shareholder of Bumi/Vallar
* In talks with Bumi's institutional investors to swap shares in them for Vallar
* Says China Investment Corp wants to be a long-term partner of Bumi/Vallar
* Plans to focus on organic growth in the group
London-listed Vallar said on Monday it would not have to tender for the remaining shares in coal miner Bumi Resources if it achieved its aim of taking a stake of up to 51 percent as sister company Bakrie Group would remain Bumi's controlling shareholder.
Bakrie & Brothers , a major Vallar shareholder, told Reuters last month that the Jersey-based firm would increase its stake in Asia's biggest thermal coal exporter, Bumi Resources , to up to 51 percent by June this year.
Indonesian capital market law requires that a firm conducts a tender offer if it buys a majority stake in a Jakarta-listed company. However, Vallar will be exempt from the regulation if it can prove that the controlling shareholder is unchanged.
"Bakrie will always keep a large stake ... The Bakrie Group will stay as a controlling shareholder of the group [Vallar]," said Vallar's co-founder, Daren Morris, adding that the completion of talks with Bumi shareholders to swap their shares for stock in Vallar was expected in May.
A Vallar prospectus issued in February said Vallar would issue new shares for Bumi stock owned by other shareholders if there were future transactions to increase its ownership in Bumi.
The Bakrie Group, including Bakrie & Brothers, and the Rothschild banking dynasty joined forces in November for Vallar to take a 25 percent stake in Bumi and a 75 percent stake in Berau Coal Energy . The Bakrie Group will own 43 percent in Vallar, which will be renamed Bumi Plc.
Vallar will focus on expanding the group organically as it aims to produce up to 140 million tonnes of coal in 2013 from both Bumi and Berau, although it does not rule out acquisitions.
DEBT AND CIC
High debt levels and corporate governance have been the main concerns for investors in Bumi Resources and other firms linked to the politically connected Bakrie Group.
Bumi, which already controls 10 percent of the global thermal coal market, has $3.6 billion of net debt at high interest rates and its debt-to-equity ratio is 2.52, higher than other Indonesian coal miners, such as Adaro Energy at 0.68, according to ThomsonReuters Starmine.
Bumi obtained a $1.9 billion loan from China Investment Corp (CIC) , one of its biggest single creditors, in 2009 with a 12 percent annual interest rate.
"The level of leverage on Bumi is not an issue at all ... The issue obviously is that the cost of debt should be a lot lower," said Nathaniel Rothschild, Vallar co-chairman. "So if we're borrowing in London today we could borrow at between 8 to 8.5 percent."
Vallar is currently in talks with CIC to repay a first tranche of the debt worth $600 million in October and is looking for several options for payment, including cash and a debt for equity swap.
"CIC wants a long-term relationship with Bumi. They want to be a partner," Morris said.
* In talks with Bumi's institutional investors to swap shares in them for Vallar
* Says China Investment Corp wants to be a long-term partner of Bumi/Vallar
* Plans to focus on organic growth in the group
London-listed Vallar said on Monday it would not have to tender for the remaining shares in coal miner Bumi Resources if it achieved its aim of taking a stake of up to 51 percent as sister company Bakrie Group would remain Bumi's controlling shareholder.
Bakrie & Brothers , a major Vallar shareholder, told Reuters last month that the Jersey-based firm would increase its stake in Asia's biggest thermal coal exporter, Bumi Resources , to up to 51 percent by June this year.
Indonesian capital market law requires that a firm conducts a tender offer if it buys a majority stake in a Jakarta-listed company. However, Vallar will be exempt from the regulation if it can prove that the controlling shareholder is unchanged.
"Bakrie will always keep a large stake ... The Bakrie Group will stay as a controlling shareholder of the group [Vallar]," said Vallar's co-founder, Daren Morris, adding that the completion of talks with Bumi shareholders to swap their shares for stock in Vallar was expected in May.
A Vallar prospectus issued in February said Vallar would issue new shares for Bumi stock owned by other shareholders if there were future transactions to increase its ownership in Bumi.
The Bakrie Group, including Bakrie & Brothers, and the Rothschild banking dynasty joined forces in November for Vallar to take a 25 percent stake in Bumi and a 75 percent stake in Berau Coal Energy . The Bakrie Group will own 43 percent in Vallar, which will be renamed Bumi Plc.
Vallar will focus on expanding the group organically as it aims to produce up to 140 million tonnes of coal in 2013 from both Bumi and Berau, although it does not rule out acquisitions.
DEBT AND CIC
High debt levels and corporate governance have been the main concerns for investors in Bumi Resources and other firms linked to the politically connected Bakrie Group.
Bumi, which already controls 10 percent of the global thermal coal market, has $3.6 billion of net debt at high interest rates and its debt-to-equity ratio is 2.52, higher than other Indonesian coal miners, such as Adaro Energy at 0.68, according to ThomsonReuters Starmine.
Bumi obtained a $1.9 billion loan from China Investment Corp (CIC) , one of its biggest single creditors, in 2009 with a 12 percent annual interest rate.
"The level of leverage on Bumi is not an issue at all ... The issue obviously is that the cost of debt should be a lot lower," said Nathaniel Rothschild, Vallar co-chairman. "So if we're borrowing in London today we could borrow at between 8 to 8.5 percent."
Vallar is currently in talks with CIC to repay a first tranche of the debt worth $600 million in October and is looking for several options for payment, including cash and a debt for equity swap.
"CIC wants a long-term relationship with Bumi. They want to be a partner," Morris said.
PGAS Kaji Bangun Terminal Penerima LNG - TopSaham
PT Perusahaan Gas Negara Tbk (PGAS) berencana akan bangun terminal penerima LNG di Sulawesi bagian Timur dan Kalimantan.
"Kami berinisiatif, namun tengah dilakuan validasi di berbagai tempat dan komunikasi ke beberapa pihak," demikian penuturan
Direktur Utama PGN, Hendi Prio Santoso, di Jakarta, Rabu (13/4) mengatakan saat ini tengah mengkaji dan dilakukan validasi di berbagai tempat dan komunikasi ke beberapa pihak.
"Belum dapat disiimpulkan berapa kapasitas yang akan dibangun serta investasi untuk terminal penerima LNG tersebut. " jelasnya
PGN juga berencana membangun Terminal Penerima LNG Terapung (LNG Receiving Terminal) di Jawa Barat dan Sumatera Utara. Pembangunan ini guna mengatasi krisis kekurangan pasokan gas di Indonesia. Rencananya, proyek terminal ini akan tuntas pada 2011 dengan nilai investasi mencapai US$200 juta.
Menanggapi masalah pasokan gas dalam negeri, diakuinya, ada ketimpangan antara permintaan dan suplai. Namun, perseroan selalu memasok gas dalam negeri mencapai 900 mmscdf.
"Kami mengharapkan adanya kenaikan harga gas tahun ini," pungkasnya
"Kami berinisiatif, namun tengah dilakuan validasi di berbagai tempat dan komunikasi ke beberapa pihak," demikian penuturan
Direktur Utama PGN, Hendi Prio Santoso, di Jakarta, Rabu (13/4) mengatakan saat ini tengah mengkaji dan dilakukan validasi di berbagai tempat dan komunikasi ke beberapa pihak.
"Belum dapat disiimpulkan berapa kapasitas yang akan dibangun serta investasi untuk terminal penerima LNG tersebut. " jelasnya
PGN juga berencana membangun Terminal Penerima LNG Terapung (LNG Receiving Terminal) di Jawa Barat dan Sumatera Utara. Pembangunan ini guna mengatasi krisis kekurangan pasokan gas di Indonesia. Rencananya, proyek terminal ini akan tuntas pada 2011 dengan nilai investasi mencapai US$200 juta.
Menanggapi masalah pasokan gas dalam negeri, diakuinya, ada ketimpangan antara permintaan dan suplai. Namun, perseroan selalu memasok gas dalam negeri mencapai 900 mmscdf.
"Kami mengharapkan adanya kenaikan harga gas tahun ini," pungkasnya
TINS:Cheap metal stock - Mandiri
TINS surprisingly booked FY10 net profit that was 30%-40% above our estimates and consensus followed by stronger margin following tin price hike in 4Q10. TINS confirmed there is no major impact on its export sales to Japan since there is no big electronic producer in devastated area. Interestingly, the Ukrainian nuclear specialist, Chernobyl team, recently suggested that low melting and chemically neutral metal like tin could be used to cool down Fukushima nuclear reactor. This should become a positive catalyst for tin demand amid anti global nuclear power plant following Japan disaster. We have positive view on tin sector outlook but in the company level we found some discrepancy regarding its cost control in the past. However, with tin price level of above US$30k/ton, it could support its valuation. We upgraded our rating to Buy with higher TP at Rp3,600/share implies 12.0xPER11F.
Robust FY10 results. Timah reported FY10 net profit of Rp948bn (+202.2% yoy, 208.9% qoq) followed by stronger FY10 ASP of US$19,869/ton (+46.5% yoy, +28.8% qoq). Timah produced refined tin of 40,413tons (-10.4% yoy, +18.5% qoq). Surprisingly gross margin surged significantly from 15.8% in 3Q10 up to 34.5% in 4Q10, which was mostly caused by laggard on its tin ore concentrate purchases. As a result 4Q10 operating margin doubled to 25.2%.
Will 4Q10’s margin be sustained? Significant higher margin in 4Q10 occurred since TINS moved towards low cost mining area followed by unexpectedly significant surged in tin price. At higher tin price, TINS will economically mine in high cost mining area. Considering its weighted average inventory approach, TINS’s delivered cost should follow the ASP’s trend (as seen in exhibit 3). Therefore we expect TINS’s 1Q11’s gross margin should be adjusted downward.
Strong tin price outlook. Average LME tin price in 1Q11 has reached US$29.9k/ton suggesting 21.2% qoq increase vs TINS’s 4Q10 ASP. Tin price continuously surged to its record high of up to US$33k/ton this week supported by strong tin outlook forecast from consensus until 2012. To fully incorporate this momentum we revised up our ASP by 5.3% respectively up to US$30k/ton in FY11F onwards. As a result, we upgrade our earnings in FY11F and FY12F up to Rp1,513bn (+34.3%) and Rp1,820bn (+19.3%) respectively. Our new forecasts only imply 24.7% gross margin and 18.6% operating margin, slightly higher than previously.
Upgrade Buy, higher TP. Based on our new forecasts we derived higher blended ASP for TINS at Rp3,600/share implying only 12.0xPER11F. Currently TINS is traded attractively at 9.4xPER11F, one of the cheapest stocks in the metal industry and wider divergence between tin price and TINS’s price suggest buying opportunity.
Robust FY10 results. Timah reported FY10 net profit of Rp948bn (+202.2% yoy, 208.9% qoq) followed by stronger FY10 ASP of US$19,869/ton (+46.5% yoy, +28.8% qoq). Timah produced refined tin of 40,413tons (-10.4% yoy, +18.5% qoq). Surprisingly gross margin surged significantly from 15.8% in 3Q10 up to 34.5% in 4Q10, which was mostly caused by laggard on its tin ore concentrate purchases. As a result 4Q10 operating margin doubled to 25.2%.
Will 4Q10’s margin be sustained? Significant higher margin in 4Q10 occurred since TINS moved towards low cost mining area followed by unexpectedly significant surged in tin price. At higher tin price, TINS will economically mine in high cost mining area. Considering its weighted average inventory approach, TINS’s delivered cost should follow the ASP’s trend (as seen in exhibit 3). Therefore we expect TINS’s 1Q11’s gross margin should be adjusted downward.
Strong tin price outlook. Average LME tin price in 1Q11 has reached US$29.9k/ton suggesting 21.2% qoq increase vs TINS’s 4Q10 ASP. Tin price continuously surged to its record high of up to US$33k/ton this week supported by strong tin outlook forecast from consensus until 2012. To fully incorporate this momentum we revised up our ASP by 5.3% respectively up to US$30k/ton in FY11F onwards. As a result, we upgrade our earnings in FY11F and FY12F up to Rp1,513bn (+34.3%) and Rp1,820bn (+19.3%) respectively. Our new forecasts only imply 24.7% gross margin and 18.6% operating margin, slightly higher than previously.
Upgrade Buy, higher TP. Based on our new forecasts we derived higher blended ASP for TINS at Rp3,600/share implying only 12.0xPER11F. Currently TINS is traded attractively at 9.4xPER11F, one of the cheapest stocks in the metal industry and wider divergence between tin price and TINS’s price suggest buying opportunity.
BUMI (TP Rp4,750) - Nomura: BUMI, BI maintain rate and extend SBI holding period - Nomura
Our mining analyst, Isnaputra Iskandar, reaffirms his BUY rating on Bumi Resources (BUMI IJ) and raise price target to Rp4,750, implying 2011-12F EV/EBITDA of 8.3-4.3x, on better-than-expected 2010 results. He has also done a few assessments on potential BUMI/Vallar debt/equity swap to settle the CIC debt, and suggests that the CIC debt-Vallar share swap would be the most likely scenario, saving pre-tax interest costs of US$361mn p.a. Another development is the change of auditor to PwC. Please find attached Nomura latest report on BUMI.
As expected, Bank Indonesia (BI) kept its policy rate on hold at 6.75%. Nomura still expects BI to continue its policy normalization process, with another 25bps 2Q11 if headline inflation resumes an upward trajectory. Nomura also expects 25bp hikes in 3Q11 and 4Q11 taking the policy rate to 7.5% by 4Q1. With FX reserves growing to US$105.7bn by end-March and sterilization costs increasing BI may also raise the RR on IDR deposit again. On the holding period on BI bonds (SBI), BI also announced the it would extend the holding period on its bonds (SBI) from the current one month to six months, effective 13 May. Nomura has already raised this possibility last year and in the context of likely continued capital inflows, Nomura expects further capital management measures. Please find attached Nomura latest economic report.
As expected, Bank Indonesia (BI) kept its policy rate on hold at 6.75%. Nomura still expects BI to continue its policy normalization process, with another 25bps 2Q11 if headline inflation resumes an upward trajectory. Nomura also expects 25bp hikes in 3Q11 and 4Q11 taking the policy rate to 7.5% by 4Q1. With FX reserves growing to US$105.7bn by end-March and sterilization costs increasing BI may also raise the RR on IDR deposit again. On the holding period on BI bonds (SBI), BI also announced the it would extend the holding period on its bonds (SBI) from the current one month to six months, effective 13 May. Nomura has already raised this possibility last year and in the context of likely continued capital inflows, Nomura expects further capital management measures. Please find attached Nomura latest economic report.
Indonesia Macro Flash - BI on Hold, but Extends SBI Holding Period to 6 Months - Citigroup
Rates were kept on hold, as expected… — BI kept the policy rate at 6.75%, in line with our view and consensus, and also decided to extend the SBI holding period to 6 months (prev: 1 month) effective 13 May. We do not think the measure is retroactive for those who bought SBIs before this date, but it is not yet entirely clear.
…after inflation continued to fall in Mar — BI noted that headline inflation was exhibiting a declining trend (Mar: 6.65%YoY, Feb: 6.84%) but cautioned that inflation
risks remained high. Core inflation continued to climb to 4.45%YoY in Mar (Feb: 4.36%) on pass through from food inflation and rising inflation expectations. Going
forward, inflation pressures are expected to remain high due to high commodity prices, robust domestic demand, and high inflation expectations.
Global economic recovery to support exports; FX reserves reach new heights — BI expects 2Q11 economic growth of 6.4%YoY (2011: 6.0-6.5%, 2012: 6.1-6.6%). FX reserves hit a record US$105.7bn as of end-Mar, equivalent to 6.3 months of
imports and official debt repayments (3-Mar: US$101.8bn, 6.2 months).
BI to continue using IDR to reduce inflation pressures — BI views IDR appreciation as effective in controlling imported inflation from rising commodity prices and believes IDR appreciation has so far not dented export competitiveness. However, we see the recent measure on SBIs highlighting the desire to dissuade too much speculative capital inflows that could be a source of volatility later on.
What’s next for rate hikes? BI noted in its statement that there was still room to adjust the BI rate to absorb inflation pressures going forward. However, greater tolerance of IDR appreciation, delay in fuel subsidy reforms and bias to boost bank lending have likely pushed back BI’s timetable for rate hikes. BI Governor Nasution
earlier mentioned that the March harvest will keep inflation at “comfortable levels” in April and May, though we think rising core would still prompt 2 more hikes this year – possibly 25bps in June and one more in 3Q.
Market reaction muted but could see IDR weaken temporarily on repatriation flow — While the BI rate decision was expected, the extension of the SBI holding period was not, and resulted in the yield curve steepening as investors switched out of SBIs into the short end bond curve. We expect the new regulation to be positive for
front-end recaps and cause forward points of the NDF curve to fall further. The new
measure will likely be short-term negative for the IDR given the large number of offshore holdings of SBIs (Rp77.4trb as of end-March) which we think they can only
partially roll over to other IDR instruments given limited supply. However, given the underlying positive fundamental drivers of IDR, and BI's ability to cap volatility given significant FX reserves, we expect weakness to be temporary and could see USDIDR drift back to the 8,600 range in the coming months.
…after inflation continued to fall in Mar — BI noted that headline inflation was exhibiting a declining trend (Mar: 6.65%YoY, Feb: 6.84%) but cautioned that inflation
risks remained high. Core inflation continued to climb to 4.45%YoY in Mar (Feb: 4.36%) on pass through from food inflation and rising inflation expectations. Going
forward, inflation pressures are expected to remain high due to high commodity prices, robust domestic demand, and high inflation expectations.
Global economic recovery to support exports; FX reserves reach new heights — BI expects 2Q11 economic growth of 6.4%YoY (2011: 6.0-6.5%, 2012: 6.1-6.6%). FX reserves hit a record US$105.7bn as of end-Mar, equivalent to 6.3 months of
imports and official debt repayments (3-Mar: US$101.8bn, 6.2 months).
BI to continue using IDR to reduce inflation pressures — BI views IDR appreciation as effective in controlling imported inflation from rising commodity prices and believes IDR appreciation has so far not dented export competitiveness. However, we see the recent measure on SBIs highlighting the desire to dissuade too much speculative capital inflows that could be a source of volatility later on.
What’s next for rate hikes? BI noted in its statement that there was still room to adjust the BI rate to absorb inflation pressures going forward. However, greater tolerance of IDR appreciation, delay in fuel subsidy reforms and bias to boost bank lending have likely pushed back BI’s timetable for rate hikes. BI Governor Nasution
earlier mentioned that the March harvest will keep inflation at “comfortable levels” in April and May, though we think rising core would still prompt 2 more hikes this year – possibly 25bps in June and one more in 3Q.
Market reaction muted but could see IDR weaken temporarily on repatriation flow — While the BI rate decision was expected, the extension of the SBI holding period was not, and resulted in the yield curve steepening as investors switched out of SBIs into the short end bond curve. We expect the new regulation to be positive for
front-end recaps and cause forward points of the NDF curve to fall further. The new
measure will likely be short-term negative for the IDR given the large number of offshore holdings of SBIs (Rp77.4trb as of end-March) which we think they can only
partially roll over to other IDR instruments given limited supply. However, given the underlying positive fundamental drivers of IDR, and BI's ability to cap volatility given significant FX reserves, we expect weakness to be temporary and could see USDIDR drift back to the 8,600 range in the coming months.
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