CIMB Strategy – Market Outlook – Reviewing 1Q09 results

1Q09 corporate results proved resilient, rising 9% yoy, generally in line to ahead of expectations. Resources were a drag but cyclicals and coal surprised positively. More importantly, banks produced strong earnings growth of 20% yoy with NPLs remaining manageable. Cash was aplenty, rising to over Rp61tr, while net gearing dropped to 18%. Still on a bottom-up basis, our JCI target has been raised to 1,900 from 1,755, representing 10.8x CY10 earnings and still below the 3-year moving average P/E of 12.5x. A peaceful presidential election is expected to be a key re-rating catalyst. Key sector overweights are banks and cement.

Top buys are BMRI, BDMN and BBRI for banks; UNTR and INTP for cyclicals; ADRO and LSIP for commodities. Laggards with strong earnings momentum are BUMI and INDF, for which we have Trading Buys.