CIMB Astra Internasional Cloudy Outlook

Astra Internasional Quick takes - Cloudy outlook - by Erwan Teguh
(ASII IJ / ASII.JK, UNDERPERFORM - Maintained, Rp11,250 - Tgt. Rp10,650, Automobiles and Parts)

Weak demand and a weak currency had forced Astra to cut inventory aggressively in 4Q08, at the expense of margins, and boosted provisioning for nearly all business units. The auto business remains highly uncertain, admitted management, despite a somewhat resilient first two months of the year. With 60% earnings contributed by the auto unit in FY08, this unit remains key to its FY09 performance. We remain bearish on the auto business and maintain our Underperform rating and target price of Rp10,650, which is at a 15% discount to sum-of-the-parts valuation, implying 8x and 6.3x CY09-10 earnings.