Credit Suisse - ASEAN EQ STRAT: Implied RoE for Indonesian Energy/Consumer Cyclicals 15.5-16%

Again, as the Asian markets have also gone up, Shakti Siva’s Top-3 Indonesian Stocks (ASII, BUMI, UNTR) are still relatively attractive (PB-RoE are still Discounts to Asian markets). I personally continue to like ASII (Core Holding on diversified Consumer Discretion/Coal-CPO earnings growth) and Energy/Coals (ADRO, ITMG, PTBA, BUMI, UNTR, and PGAS).

· Sakthi Siva (Daily): Our call to switch (further) from Taiwan into ASEAN is driven largely by valuations. In this report, we look at the implied ROE for the cheapest sectors within ASEAN, which are Indonesian energy (114% discount), Philippine telecoms (75% discount), Indonesian consumer cyclicals (61% discount), Thai banks (38% discount) and Singapore industrials (30% discount). In other words, at what level of ROE does the discount go to zero?

· For Indonesian energy, the implied ROE is 15.5% versus the current ROE of 27.8%. Figure 1 illustrates that the implied ROE of 15.5% appears conservative, as the lowest ROE for the sector since it listed was 17.3% in December 2003. Average ROE for the Indonesian energy sector is 30% since December 2003.

· For Indonesian consumer cyclicals (Figure 3), the implied ROE is 16% versus the current ROE of 22.7%, the implied ROE of 16% is similar to the lows seen in the previous cycle in January 2007.