ASII guides for downbeat car & 2-wheeler volume for 2009; This is not surprising due to weak commodity px and lack of affordable financing. We like ASII as one of the best name for investor who are willing to sit/wait in a bit of pain for LT gain. Tom Price expects thermal coal contracts settled in next few months at lower range at US$60-70/t. Pls join our conf call w/ Dave Rosenberg this Friday at 9am HK/Singp. He brings forward the trough and now expects Q309 to be the first quarter of positive growth in the US.
ASII: 2009 guidance
Management guides for 2-wheeler sales to decline by 20-25% to 4.8mn units (10% above MLf) and car sales to drop 30-35% to 415k (6% above MLf) in 2009. The weakness is due to: (1) lack of affordable financing as lending rates for 2-wheelers have risen by 2ppt YoY to 35% and car by 7ppt to 25%, (2) higher down-payment, and (3) collapse in commodity px which adversely affected demand from outer Java. Good news is delinquency rates at end-08 was lower than expected at 2.7% for 2-wheeler (overdue >60 days) vs 5% in 2005-06, while NPL for car was only 1.7%. ASII expects moderate deterioration in NPL in 2009, thanks to resilient domestic economy and govt’s fiscal stimulus program which will strengthen purchasing power. Watch these catalysts: (1) stable Rp will enable greater flexibility in monetary & fiscal policies, and (2) 3-4ppt decline in financing companies’ borrowing costs, and lower down payment. Shr price has declined 55% from 2008 peak but increased 18% YTD. ASII is Indo's blue chip with prudent mgmt, solid B/S and good brand equity;
Would accumulate upon correction. Buy PxT Rp 14,150.
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