Mandiri Sekuritas Strategy: Back to fundamentals

With the end of elections, we expect fundamental issues to be back in the driving! seat. Wi th IDX mostly concentrated in commodity stocks (32%) besides financial (30%), its trend will be heavily influenced by movements in commodity prices globally. We are maintaining our FY09E IDX target at 2,140, a PE09F of 14.0x. As the trend of global economic recovery is still debated, we stick to our domestic demand story with a bias on energy. We like sectors with near full utilization rates such as cement, electricity or its proxy, and infrastructure. We also like consumer goods. Despite our target prices for some stocks have been exceeded, we think these counters still have catalysts to outperform the market.

Theme 1 : Demand resiliency. As shown in 1Q GDP contributor, private consumption grew 5.8% yoy, one of the strongest growth post Asian crisis. Election campaign spending was one of the main contributors, but anecdotal evidences indicated that demand still grew at a healthy pace. In IDX! , we can only think of one name, which we think still has the upside : Indofood (INDF), a leader in noodle, milk products, snacks, and baby food.

Theme 2 : Infrastructure bottleneck. This theme could probably be the most overplayed theme for Indonesia. Progress has been slow, but it progresses anyhow. We picked proxy to electricity, coal producers such as Bukit Asam (PTBA), Indika Energy (INDY), proxy for infrastructure Semen Gresik (SMGR).

Theme 3 : Government’s larger role in economy. With governments everywhere unleashing stimulus programs, Indonesia also launched its own in the amount of 1.4% of GDP. This would benefit paying agents such as SOE banks, particularly Bank Rakyat Indonesia (BBRI). These banks could act as conduit for the programs and benefit from the multiplier effects of the program.