Dowjones BHP agrees to 60pc cut in coking coal price

BHP Billiton has agreed to cut coking coal prices for the 2009-10 contract year by about 60 per cent, analysts said.
Citigroup said today that BHP, the world’s largest supplier of seaborne coking coal, has agreed to sell coking coal at $US115-$US125 a tonne to Japan’s Nippon Steel Corp.

Merrill Lynch said BHP appeared close to settling coking coal prices at $US129 tonne for its premium Peak Downs brand.

The potential benchmark deal - if confirmed - is a win for coal producers, after Japanese steel mills pushed for prices below $US100 a tonne, analysts said.

“Prices are above market expectations, even for metallurgical coal bulls. A good outcome for producers in a clearly bear steel market,” Merrill Lynch said in a note.

Last year, contract prices concluded at $US300 a tonne after huge floods in Australia’s Bowen basin shut down many mines.

BHP declined to confirm the news, and Nippon Steel couldn’t be reached due to a public holiday in Japan.

South Korean steelmaker Posco confirmed it has settled pulverised coal injection prices at $US90 a tonne with Australian suppliers, down 63 per cent on year.

“Prices of $US120 a tonne would give producers a healthy margin,” said Citi.

Japanese steel production in February plunged a record 44.2 per cent on year and confirmed the dire outlook from January, when output fell 38 per cent.

Annual contract talks for thermal coal benchmark prices were settled earlier this month at $US70-$US72 a tonne.

“The big unknown is volumes - both new contract tonnes and last year’s carry-over tonnes,” said ANZ commodity strategist Mark Pervan.

During the 2007-08 financial year, commodity exports accounted for over 46 per cent of Australia goods and services balance.

Reuters Indonesia orders temporary halt at Bayan coal mine

Indonesia orders temporary halt at Bayan coal mine
JAKARTA, March 20 (Reuters) - Indonesia has ordered a coal mining unit of PT Bayan Resources (BYAN.JK) to temporarily stop production for operating outside approved areas, a government official said on Friday.

PT Teguh Sinar Abadi, which operates a coal mine in East Kalimantan, had operated in areas outside those approved by the government in its feasibility study, said MS Marpaung, director of engineering and environmental at the energy and mines ministry.

"The firm has to make a new feasibility study when exploring a new block," Marpaung said.

"We ordered them to temporarily stop production and to fix the problem before resuming operations," he said, adding the ministry has sent the letter to inform the company.

Teguh Sinar Abadi started operations in 2008 and it is expected to produce 1 million tonnes of coal this year, Bayan said previously in a presentation to investors.

Jenny Quantero, Bayan's corporate secretary, said the company was not aware of an order to temporarily halt production.

"We haven't heard about it. We need to check it first," Quantero said.

Bayan, Indonesia's eighth-largest coal producer, plans to produce 9.5 million tonnes of coal this year, up 56 percent from an estimated 6.1 million tonnes in 2008, it said.

The firm has eight mining companies with total concession areas of 81,265 hectares (200,800 acres).

The firm expects to sell 10 million tonnes of coal this year, up from 6.7 million tonnes in 2008. It said that demand remained strong and that all coal sales volumes were fully committed.

Source: Reuters (20 Mar 2009)

Associated Press Indonesian economy seen further signs of decline

JAKARTA, Indonesia (AP) -- Indonesia, the largest economy in Southeast Asia, is coming under increasing strain from the financial crisis with new projections showing plummeting exports and slowing growth.

Bank Indonesia Deputy Chief Hartadi Sarwono said Thursday economic growth may slow to below 4 percent in 2009, down from 6.1 percent last year, due largely to declining exports.

Exports could contract by up to 28 percent annually in 2009, he said, after falling more than 30 percent in January. Indonesia is a major exporter of coal, gold, palm oil, rubber and other precious metals. It also manufacturers textiles, shoes, electronics, automobiles and motorcycles.

Although Indonesia is relatively less reliant on exports than other Asian nations, declining shipments to overseas markets has started dragging down domestic consumption and gross domestic product.

"We have to see the risk of a (GDP) fall to below 4 percent, but BI's growth projection remains 4 percent because it's too early to make a revision," Sarwono said. Indonesia, which has weathered the global crisis better than many Asian countries so far, has allocated funds for a fiscal stimulus package but those measures have yet to take effect. A steep fall in commodities prices is also hurting businesses, which have been forced to lay off hundreds of thousands of workers.

Semen Gresik Targetkan Kredit Karbon Rp 30 Miliar Per Tahun

Jakarta - PT Semen Gresik Tbk menargetkan bisa mengantongi Rp 30 dari kredit karbon dalam ketentuan Clean Development Mechanism (CDM) yang diselenggarakan oleh Konvensi Kerangka Kerja PBB mengenai Perubahan Iklim (UNFCCC).

Untuk mengejar target tersebut, perseroan meresmikan proyek bahan bakar alternatif bekerjasama dengan Sindicatum Carbon Capital (SCC) yang berbasis di London..

Perjanjian kerjasama antara Semen Gresik dan SCC ditandatangani di hadapan Menteri Negara Badan Usaha Milik Negara (BUMN) Sofyan Djalil di kantornya, Gedung Garuda, Jalan Medan Merdeka Selatan, Jakarta, Jumat (20/3/2009).

"Ini bisa jadi sumber pendapatan tambahan bagi Semen Gresik dan efek positif untuk lingkungan. Secara moneter memang tidak selalu besar tapi secara sosial ini cukup besar," katanya. more...

Jaya Pari Steel

Jaya Pari Steel membantah berita di sejumlah media massa yang mengatakan bahwa saham perseroan akan diakuisisi oleh Posco dan Arcelor Mittal. Bantahan ini disampaikan sekretaris perusahaan Yurnalis Ilyas jumat. "Sampai saat ini manajemen tidak mengetahui adanya rencana akuisisi," katanya. Saham JPRS hari ini disuspen BEI karena telah mengalami kenaikan siginifikan dalam beberapa hari. End (AF)

Laba bersih per desember 2008 Indocement Tunggal

Laba bersih per desember 2008 Indocement Tunggal
Prakarsa naik 78,09 persen menjadi Rp1,74 triliun dibanding periode sama tahun sebelumnya yang meraih laba bersih Rp980,10 miliar. Keterangan perseroan jumat menyebutkan pendapatan bersih naik jadi Rp9,78 triliun dari Rp7,32 triliun dan laba usaha naik jadi Rp2,45 triliun dari Rp1,59 triliun dan laba sebelum pajak menjadi Rp2,33 triliun dari Rp1,41 triliun. End (AF)

Danareksa Penjualan Alat Berat UNTR baru mencapai 14,6% dari FY09

Penjualan alat berat masih di bawah target kami
Penjualan sampai saat ini (YTD) baru mencapai 14,6% dari FY09 forecast kami. Downside risk saat ini adalah penjualan yang masih didominasi oleh segmen mining
(tambang) dengan memberikan kontribusi terbesar dalam penjualannya. Namun demikian, kami meperkirakan suku cadang dan servis masih menjadi buffer yang dapat diandalkan oleh UNTR.

Produksi tertunda disebabkan cuaca yang tidak mendukung
Saat ini segmen tambang Pama terganggu oleh jeleknya cuaca. Produksi Pama untuk batubara YTD baru mencapai 14,2% dari forecast kami. Sebenarnya bila dicermati, hal yang serupa pernah terjadi. Di Feb07, produksi Pama saat itu baru mencapai angka 13% dari target produksi. Karena itu, kami memperkirakan Pama akan meningkatkan level produksinya di 2H09 seperti yang terjadi di 2007.

Penjualan DEJ YTD masih rendah (10,9% dari forecast kami). Walaupun begitu, penjualan DEJ ke depan diperkirakan akan meningkat dengan memperhitungkan kontrak mereka dengan klien. Mempertahankan TP Rp6.100, BUY

Mandiri Sekuritas Share of vehicle sales rising (ASII)

Feb09 vehicles sales were neither disheartening nor spectacular. Astra widened its market share as of 2M09 on both segments, capturing 49% and 57% market share of the 2 and 4-wheeler market, impressively higher albeit lower volumes than its FY08 market share of 46% and 52%, respectively. With calibrate our FY09-01F profits in line with (a) changes in assumption and valuations of main subsidiaries and (b) carry-over effect of FY08 balance sheet items. Our revised net earnings for FY09-10F yielded a 7.2% decline from previous estimates. We maintain Buy on the stock, now trading at PER09F of 7.3x and P/BV09F of 1.3x.

Higher market share for cars….. Official figures pointed to a 9.1% mom increase in domestic 4-wheeler sales, the first mom recovery since July08. This could be mainly be attributed to pre-emptive buying in anticipation of further selling price increase and introduction of various new models. However, 2M09 car sales was still 25.6% lower yoy and only represents about 14.6% of our FY09F estimates of 450k. On a positive note, Astra brands expanded market share with 57% of the cumulative sales, only dropping by 14.3%yoy.

….and 2 wheelers as well. Two-wheelers also recovered, up by 12.7%mom in Feb09, marking the first mom recovery since Aug08. 2M09 two-wheeler sales were at 782k units, still down by 16.6%yoy and representing 15.6% of our FY09F of 5mn units. However, Astra improved its market share to 49% as of 2M09 with units sold of 381k, falling less than market by only 8.3%yoy.

Maintain Buy. Although it may be premature to indicate a sustained demand recovery, the pressure to lower lending rates to afford buyers of more flexible credit remains. We think that lowering the rates will be a gradual process due to continued risk aversion which has created liquidity segmentation in the banking system (i.e., deposit rate discrepancy between private and state banks), that has resulted in higher cost of funds. Note that about 70-80% of the car m arket relies on credit financing. Without any significant changes in our assumptions, we maintain Buy at TP of Rp17,900/share for the stock which now trades at PER09F of 7.3x. Main risks are (a) inability of banks to lower lending rates to afford better financing terms and (b) further depreciation of the rupiah, which could potentially lead to further selling price hikes.

BASML INDO Indocemet FY08 Flows CPO

Indocement delivered solid FY08 result, with net profit rose 77% YoY to Rp 1.75tn, exceeding Arief's and consensus est'. On flows, investors has stopped selling Asian equities but remained cautious, and inflow into EM remained tiny; Our flow trading rule is still pointing to Neutral at this stage. CPO: India's move to scrap 20% import tax on soybean oil bodes well with Jeffrey's bearish view on CPO px.

INTP solid FY08
FY08 net profit rose 77% YoY at Rp1,746bn, 14% higher than Arief's forecast and 11% higher than consensus'. Solid results was due to combination of robust domestic sales volume growth and sharp increase in avg. domestic selling px. Revenues rose 34% YoY at Rp 9,780bn, or 8% higher than Arief's est'. Operating profit +55% YoY at Rp 2,460, or 6% higher than Arief's. INTP is a beneficiary of the next property boom cycle, which we expect to occur in 2010. INTP also has the most ample unused capacity with utilization at 85%, while peers' capacity will only come on stream at end-2012. Trades at 9.8x '09 PE with 4% EPSg, 19% RoE. Reiterate Buy PxT Rp 8,200.

CPO softness?
Investors holding SGRO, AALI, LSIP or UNSP should be aware of this: India, the world’s biggest buyer of vegetable oils after China, scrapped a 20% tax on imports of crude soybean oil to the bring duties on the commodity on par with palm oil, its main substitute. Jeffrey Ng says this implication means India is likely to slow down CPO purchase, and this development brings our expectations one step closer to reality. CPO discount to soybean oil in India will narrow to 25% (3-yr mean level) against 45% if the tax is imposed. Jeff highlighted 2 possible scenarios to CPO price: 1) Soybean oil px soars to wide the discount and this will limit CPO px’s upside. However, this will not last beyond 31 Mar '09 if US soybean planting intention increases; 2) CPO px has to fall to maintain its px attractiveness.

MacQ from Salesdesk

Macquarie Asean conference – PT Telkom

Take-aways that maybe new to the Street:
1. January mobille net adds around 2.0million for Telkomsel, more than 75% of industry net adds. Take up strong outside java.
2. Competition holding back capex spending in a major way. Only two operators issuing purchase orders since the beginning of 2009.
3. After a flat rate bill trial for fixedline service in Manado, the trial has expanded nationwide as of two weeks ago. Fixed line customers have the option to pay flat rate for fixed line calls, around 200 out of 8.6mn has migrated. Effective revenue impact is more than 10% positive for those who migrated.
4. Regulatory approval for mandatory migration to flat rate billing for fixed line has not been obtained, which why the migration is optional at this stage.
5. A toned down message on overseas investments. Management promises not to step further on iran investment until they completely study the political implications. But Iran is the most preferred overseas investment (compared to srilanka, bangladesh, vietnam opportunities) purely on commercial sense, before political considerations.
6. The re-juggling of tower business is mostly a defensive move. PT Telkom must share towers under new regulation.

My take – PT Telkom and PGAS top my list as post-election beneficiaries for Indonesia (potential tariff increases!). Election process should conclude by September 2009. Parliament and president inaugurations are scheduled for 1 and 20 October 2009. TLKM trades on 10.6x P/E 2009. Macquarie rates the stock as Outperform.

MacQ Macro Strategy – bullish on gold, oil, base metals

Macro Strategy – bullish on gold, oil, base metals
[Report attached] Macquarie’s macro strategist based in Canada, Steve Harris, commented that the $1.15tr expansion of the Fed’s quantitative easing (QE) initiative is a bullish development for both equity and credit market. More QE = more future inflation. His highest conviction idea is to buy gold and gold equities. He also recommends oil, base metals, and agricultural commodities and their related equities, as prices should benefit from inflationary monetary policies. Against short term consensus view, he is bearish on US treasuries as the market could be ignoring the rising long-term inflationary implications of QE policies and overly focused on short-term supply/demand impact.

Quantitative easing factsheet
[Report attached] Macquarie’s economist Aimee Kaye provides a factsheet on quantitative easing, a subject that has become popular in recent days. Quantitative easing (QE) refers to an unconventional monetary policy tool whereby the central bank flushes the banking system with new deposits. This is accomplished by using newly-created money, in the form of bank deposits as opposed to cash, to buy up large quantities of assets from banks. This creates excess deposits in the banking system, while expanding the central banks’ balance sheet with the purchased assets.

The risks of pursuing QE are high, and most commonly cited is the risk to inflation. In the current environment, some inflationary pressures would not go awry. Rampant inflation only becomes a problem if QE works ‘too well’, with additional reserve deposits simultaneously extended as credit to households and business. The risk of this occurring is low. Indeed, with ongoing financial tensions and an economy in recession, QE can be considered the lesser risk.

CIMB Bank Sector Note - Greater risk appetite?

Banks
Sector Note - Greater risk appetite? - by Mulya Chandra CFA ( - )

The current bear market has led to fragmentary valuations for Indonesian banking stocks. BCA is trading at a valuation premium to BRI on risk aversion. However, we note a slight improvement in investors' risk appetite as signalled by a down trend in bond yields. If this continues, we believe the BCA-BRI valuation gap would narrow, and recommend a switch out of BCA to BRI. We also downgrade BCA to Neutral from Outperform on higher provisioning assumptions. Mandiri should be the next favourite of investors, but only if yields continue to come down. Maintain Neutral on the sector.

CLSA INDO dirt cheap, scanning the bedrock values

"When you concentrate on agriculture and industry and are frugal in expenditures, Heaven cannot impoverish your state." - Xun Zi

The quote highlights the importance of agriculture and are even more relevant in light of news that South Korea Daewoo’s plan to transform Madagascar into its breadbasket came to an abrupt end. Madagascar’s new president Andry Rajoelina said they would shelve the plan, which some considered as “neo-colonial”.

The announcement was made just hour after Daewoo officials said they would press ahead with their project, regardless of the political situation in Madagascar.

The South Korean Daewoo Group had planned to develop 1.3m ha of farmlands that would create 45k jobs.

This case highlights the growing importance of global food security issue. We are living in the resource-constrained world, crisis or no crisis. Chances are good that the next bull market is in agriculture.

The world adds about 70mn people to the population a year and many developing countries (China especially) are increasingly moving to a more protein-rich diet – accelerating demand.

On the supply side, there are severe constraints on new land that can be brought under production (in addition to other issues such as falling water table, shrinking number of farmers, and top soil erosion). And about the only new land that’s being cleared for agriculture now is either in the Amazon or Indonesia.

This is where Indonesia can shine. Indonesia could be Asia’s next food basket, as the country has comparative advantage in the agriculture area.

The plantation sector is one way to play the agri theme in Indonesia. Stocks such as Sampoerna Agro (SGRO IJ) and London Sumatra (LSIP IJ) are trading at US$2,175 and US$3,075 EV/ha respectively, well below the replacement cost of US$3,500/ha. Buying these plantations would not only save investment cost but also many years of waiting time (takes around 5 years before a palm tree becomes productive)

We also learned that work on plantation can be quite strenuous and dangerous. Worksites are usually remote and isolated. Physical risks are high too (even higher than physical risks for stock brokers these days), as they are working in a hot climate without proper protection against insects, snakes, and even lightning. Clearly, I prefer buying plantation stocks rather than operating plantation assets.

CLSA INDO Implication of India scraps CPO/Soy oil

India scraps its 20% import tax on Soybean oil, comment from our analyst Wilianto

There is alot of talk about potential negative implication to CPO price.

My view is that any move that will make edible oils (soyoil, palm oil, rapeseed, sunflower) is a good news as it encourage consumption.

A lot of people looks at Soy oil as a competitor for CPO. Indeed, both are the same edible oil and a full subtitute. Demand for soy oil = demand for palm oil. If India buy more soy oil, and soy oil price move up, palm oil price will follow or people will turn again to buy more palm oil.

Given that soyoil is still trades at premium to palm oil, I will be less concern that if palm oil trades at premium to soyoil (as the premium might diminish).

The tax issue will selectively impact players that has exposure (benefit) from tax structure in India. If you are a soybean/soy oil importer in India, this is a good news. Otherwise neutral in my view.

BHPB moving towards $129/t ‘benchmark’ for HCC

BHPB moving towards $129/t ‘benchmark’ for HCC

BHP Billiton was understood to be close today to settling a 2009-2010 ‘benchmark' price of $129/t FOB for its top-rated Peak Downs hard coking coal with Japanese steel mills.

Information was still being tightly-held, but several sources indicated that BMA (a 50:50 joint venture between BHPB and Japan's Mitsubishi) had placed offers to Nippon Steel and the two sides were moving towards agreement.

The sources indicated BMA had also offered its Goonyella brand at $128/t FOB, with Norwich Park offered at $120/t FOB and Gregory at $115/t FOB.

The prices represent cuts of close to 60% on the 2008-9 price range of $285-$300/t FOB for these brands, and the role of carryover tonnes is uncertain in the latest agreements, although it is believed BMA has minimal carryover exposure with Nippon.

However, the Peak Downs price would still represent the second highest on record in Japan. On 2007-8 relativities, the latest indicated prices would put BMA's Blackwater brand at just over $100/t FOB and Blackwater weak brand at just under $90/t FOB.

Source: McCloskeys

Associated Press Coal companies shares up at the close of trading

Shares of some top coal companies were up at the close of trading:
Arch Coal rose $1.55 or 11.1 percent, to $15.53.
Consol Energy rose $2.01 or 7.1 percent, to $30.45.
Massey Energy rose $1.38 or 12.9 percent, to $12.10.
Peabody Energy rose $1.26 or 4.7 percent, to $28.29.

Bloomberg U.S. Spring-Wheat Acres May Decline

March 19 (Bloomberg) -- U.S. spring-wheat acreage in North Dakota, the biggest state producer, may decline by 15 percent this year after snow last week saturated fields that already were too wet for planting, Allendale Inc. said.

Acreage may drop by as many as 1 million after 10 inches (25.4 centimeters) of snow fell in the state on March 10, Allendale said today in a report. A cold, wet spring in Minnesota and South Dakota also may leave fields too muddy for heavy equipment used for seeding.

Snow depths as of March 1 were almost 17 inches in North Dakota, up from 3.6 inches last year, Allendale said. About 6.8 million spring-wheat acres were planted in the state in 2008. Farmers being sowing this year’s spring crop late next month.

“The vast majority of the private weather forecasting agencies” indicate that fieldwork may be delayed, analyst Joe Victor said in the report.

Allendale, based in McHenry, Illinois, is a researcher and commodity brokerage.

Wheat futures on the Minneapolis Grain Exchange gained 20.5 cents, or 3.3 percent, to $6.3925 a bushel today. The price is up 4.9 percent this week.

North Dakota grows about 45 percent of all spring wheat in the U.S., Department of Agriculture data show. The state produced 246.4 million bushels last year.

Spring wheat is used to make bread and cereal. Including all varieties, wheat is the fourth-biggest U.S. crop, valued at $16.6 billion in 2008, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.

CNBC Oil Settles Above $51 on Fed's Move, Weak Dollar

Oil jumped more than 7 percent Thursday to top $51 a barrel after the U.S. Federal Reserve announced a new plan to fight recession and a weak dollar boosted the appeal of commodities to investors.

"It's all about the Fed move,'' said Tom Knight of Truman Arnold. "[The] weaker dollar supports higher dollar-denominated oil [and other commodity prices] and fuels inflation fears, too.''

The Fed said Wednesday it will purchase $300 billion of long-dated Treasuries over the next six months, its first large-scale purchases of government debt since the early 1960s, while also boosting buying of mortgage-backed securities and agency debt in its bid to rescue the economy.

The U.S. dollar extended a sharp sell-off Thursday, a day after posting its biggest one-day loss against a basket of currencies since at least 1985.

The lower dollar supported other commodities, with the Reuters-Jefferies CRB index, a global commodities benchmark, hitting a five-week high Thursday. more...

Bloomberg U.S. Markets Wrap: Stocks Fall, Commodities Jump Most This Year

March 19 (Bloomberg) -- U.S. stocks retreated, paring a global rally, as financial shares fell for the first time in three days on growing skepticism the Federal Reserve’s plan to buy bonds will revive the economy. Commodities surged the most this year, and the dollar weakened against the euro.

The Standard & Poor’s 500 Index dropped 1.3 percent to 784.04. The Dow Jones Industrial Average lost 85.78 points, or 1.2 percent, to 7,400.80. The Russell 2000 Index of small companies slumped 1.1 percent to 413.26. The MSCI World Index of 23 developed markets added 1.5 percent to 800.98, giving it an eight-day winning streak that’s the longest since 2006.

“With one hand the government is issuing debt, and with the other it’s repurchasing it using paper that it is printing,” said Lawrence Creatura, a Rochester, New York-based money manager at Federated Investors Inc., which oversees $407 billion. “This is a shell game that’s not going to be overlooked by global investors.”

Inflation Hedge
Commodities surged the most this year, led by precious metals and energy, on speculation that the Fed’s steps to revive the U.S. economy will spur demand for raw materials as a hedge against inflation. more...

Crude palm oil futures inch up as oil surges

March 20, 2009 1:00 GMT+8 Reuters - Malaysian crude palm oil futures inched higher yesterday as oil markets surged but top vegetable oil buyer India cutting import duties on rival soya oil dented some sentiment.

India’s latest move feeds into fears that demand for palm oil would not be sustained beyond the second half of this month as palm oil trades at a slight premium to competitor soya oil.

The benchmark June contract settled up RM6 at RM1,911 per tonne after rising as high as RM1,945. Other traded months mostly fell except for the July contract, which rose RM22 ringgit. Overall volumes doubled to 21,334 lots of 25 tonnes each.

“It’s going to be downhill for palm oil since it’s trading at almost the same levels as soya oil. India will slow palm oil purchases even more, it’s quite upsetting,” said a local trader who deals extensively with India.

India has cut import duty on soya oil to keep domestic prices stable, Trade Secretary G.K. Pillai told reporters yesterday. Pillai did not give details but traders said import tax on crude soya oil, currently at 20 per cent, may be totally withdrawn like on crude palm oil that is imported duty free.

Cargo surveyors Societe Generale de Surveillance and Intertek Testing Services will unveil March 1-20 Malaysian palm oil shipments today. Traders are forecasting a roughly 9 per cent fall to 720,000 tonnes from about 794,000 tonnes Feb. 1-20.

Oil rallied to US$49 (US$1 = RM3.66) a barrel yesterday after a move by the Federal Reserve to buy government bonds on a large scale hit the US dollar and revived hopes the US economy could soon begin its recovery. In the physical market, palm oil for March was quoted at RM2,025-RM2,040 per tonne in the southern region. Trades were done between RM2,030 and RM2,040. - Reuters

Associated Press New jobless claims fall more than expected to 646K

WASHINGTON (AP) -- New jobless claims fell more than expected last week, but continuing claims set a new record for the eighth straight week and few economists expect the labor market to improve anytime soon.

The Labor Department said Thursday that initial requests for unemployment insurance dropped to a seasonally adjusted 646,000 from the previous week's revised figure of 658,000. That was better than analysts' expectations.

But continuing claims jumped 185,000 to a seasonally adjusted 5.47 million, another record-high and more than the roughly 5.33 million that economists expected.

Other economic news was slightly more upbeat. A private sector group's index of leading economic indicators dropped less than expected in February, although growth is not expected before next year. On the housing front, rates on 30-year mortgages dipped below 5 percent, and may fall further after the Federal Reserve launched a new effort to prop up that flailing market. more...

Danareksa Astra Agro Lestari No Cost Benefit

Higher costs squeeze profits
AALI’s 2008 core profits reached Rp2.2tn, or 14.5% lower than our estimate. The lower-than-expected core profits was attributable to higher fertilizer and labor costs which drove up the ex-factory cost to Rp2,637/kg pp, some 11.9% higher than forecast. Higher opex squeezed AALI’s profits further (note that AALI’s selling expenses surged 28% qoq in 4Q08 as greater efforts were needed to sell its products that quarter).

Not fully enjoying the decline in fertilizer prices
AALI is not fully enjoying the 50-60% drop in fertilizer prices from their 2008 highs. This is because the company still has plenty of high priced fertilizer (mostly urea) carried over from last year. Indeed, by the end of last year, AALI had some Rp357bn worth of fertilizer in its inventory due to the late delivery of urea. As such, going forward, AALI is expected to start securing urea again only in 2H09. Meanwhile, the price of potash seems to be fairly stable while the drop in prices of phosphate fertilizer are offset by the weaker rupiah. All in all, our 09-10F cash cost assumptions are revised down by only 2%-3.2% to Rp3.3-3.4bn.

Expecting a lower yield following the asset disposal to ADRO
We have revised down our 09-10F yield to 20-19.3ton/Ha after taking into account the disposal of the “Right to Exploit” areas of 7,163Ha in South Kalimantan to ADRO in order to settle the issue of overlapping plantation areas. In return, AALI has received $60mn in compensation and booked a Rp403bn gain in 2008. As a result of the asset disposal, AALI’s current mature area is some 4% lower than our previous expectation of 192,000Ha.



TP raised to Rp7,800 but SELL recommendation maintained
We raise our 09-10F profit forecasts by 8%-13% to Rp1,025bn-1,346bn on the back of lower cash costs (due to lower fertilizer costs) and lower depreciation assumptions (due to less planted areas). Although this leads to an 11.4% increase in our TP to Rp7,800, the stock still looks expensive, and we therefore maintain our SELL recommendation.

CIMB Aneka Tambang - Indonesia Company update - Gold outshining nickel

Aneka Tambang - Indonesia Company update - Gold outshining nickel - by Rania Rahmundita (ANTM IJ / ANTM.JK, OUTPERFORM - Upgraded, Rp1,060 - Tgt. Rp1,280, Basic Resources)

Antam's earnings could decline significantly this year, but we should see a return to profits in 1Q09 on cost reductions and shipment resumption. Ferronickel profitability is starting to stabilise, while gold is poised for a more significant role in Antam's earnings. 4Q08 profit was already gold-driven. We have cut our FY09 EPS forecast by 3.5% on pricing adjustments for 1Q09, but raise our FY10 forecast by 12.5% on higher gold price assumptions. Our DCF target price has been jacked up to Rp1,280 from Rp815 on higher long-term gold price assumptions, expectations of longer gold operations and higher cash generation. Current valuation has priced in FY09's earnings contraction, we believe. Upgrade to Outperform from Underperform.

BAS-ML PT Bukit Asam - Contract repricing seen; cut PO 6% to Rp8,000

Domestic contracts apparently not as secure as thought In a recent meeting, PLN said it intends to discuss lowering coal contract prices with its domestic suppliers. We do not think this move is unreasonable considering: (1) the JFY09 coal price was fixed at US$70/t, 50% below contracts priced in 2H08; (2) during coal rallies, Indonesian coal players like PTBA have had prices raised threefold in a year; and (3) lower contract prices could ease government subsidies (at Rp630, the electricity tariff is way below the cost of Rp1,022 in 2009). We are aware of the President Director of Indonesia Power’s comment that it would not revisit PTBA’s coal price, but find the downside too large to ignore while the upside is capped.

Cut earnings estimates, PO 6% to Rp8,000
While domestic sales account for 70% of total coal sales, our ASP adjustment is relatively small. For starters, we have always assumed a conservative domestic coal price: US$64/t vs the recently settled US$73/t. Assuming repricing negotiations are successful, we think they would take three months, and we would only expect the new price to be valid in July and it is unlikely to be retroactive. We cut our 2009 domestic ASP 11% and net profit 13%. We trim our PO by 6% to Rp8,000.

PTBA still looks best among pack
On concerns over weakening global coal demand, rising competition from Australian coal, exacerbated by an unfavorable new trade policy, ie, the new government requirement to use L/C for all coal exports, we still favor coal players with a dominant presence in the domestic market, such as PTBA. Even after adjusting for contract repricing, we think PTBA’s valuation still looks inexpensive compared with peers, trading at a 32% discount to local peers’ 2009E P/E. PTBA remains our top pick.

Peers with majority export contracts not spared
Platts reported that Indian rival JSW Steel said late in February that it won a price cut from Rio Tinto to US$175/mt FOB Queensland on the remaining contracted coking coal deliveries for the current fiscal year. While we have not heard of any Indonesian contract price being renegotiated, we see this as a sizeable downside. Up to 75% of Indonesia’s coal export volume in 2009 has been priced around 50% higher than the recent JFY price settlement of US$70/t.

JP Morgan J.P.Morgan - Astra International: February vehicle sales up m/m as anticipated, driving stock rally

February vehicle sales wrap – first uptick since July/August:
Indonesian 4-wheeler sales ticked up in February, rising 9% m/m, the first respite from declines since July. 2-wheeler sales also saw their first m/m gain since August, up 12% m/m. YTD volumes are down 26%/16% y/y for 4-wheelers/2-wheelers, and are keeping pace with our full-year run rate estimates.

The prospect of stabilizing sales has catalyzed a sharp rally: While stabilizing volumes is an encouraging development, stabilization is not necessarily recovery. The length of this downturn is still short compared to previous cycles, suggesting that it may take a while for volumes to change trajectory in a secular manner. In our note published 10 March 2009, we commented that there seemed to be a break in the trend of declining vehicle sales. This trend has been widely flagged recently and
we note that Astra’s stock price has rallied sharply recently, gaining almost 25% in a fortnight. We would advise against chasing the stock higher in the short term.

Consensus FY09E EPS is skewed by few forecasts and hence is misleading:
One concern that we have had on Astra has been that with our FY09 EPS forecast 16% below consensus, expectations may still be too rich. However, we see the consensus average being skewed by a small number of outliers. Median FY09E EPS of Rp1,466 is more representative of expectations, in our view. We see lower expectations as a positive, although we are below consensus.

Maintain Neutral and Rp11,000 PT: We retain our SOTP-based, Dec-09 Rp11,000 PT on Astra. Our PT values Astra’s unlisted businesses using DCF (18.5% cost of equity). We set a 30% conglomerate discount, and our PT translates to 8.2x FY09E EPS. The key risk to our view and PT is if the February vehicle sales advance proves to be an aberration (downside risk) or is the precursor to a swift recovery (upside risk).

Reuters Indonesia's PLN appoints KPC to supply coal - sources

Indonesia's PLN appoints KPC to supply coal - sources
JAKARTA, March 18 (Reuters) - State electricity firm Perusahaan Listrik Negara (PLN) appointed PT Kaltim Prima Coal to supply 1 million tonnes of coal per annum to Tanjung Jati B power plant in Central Java, sources close to the tender on Wednesday.

KPC, a unit of coal giant PT Bumi Resources Tbk (BUMI.JK), will sign a contract to deliver the coal starting in June for five years at around 740,000 rupiah ($61.87) a tonne, for 5,800 kcal/kg, a source said.

But PLN has not officially awarded the supply deal, waiting approval from the board of directors, the source said.

"It's just an administration issue. It is in the process of being approved. If all goes well, the tender committee will announce it this week," the source said.

KPC beat another coal supplier PT Indominco Mandiri, a unit of Indo Tambangraya Megah, another source said. ($1=11,960 Rupiah)

Source: Reuters (18 Mar 2009)

Associated Press Coal companies shares up at noon

Shares of some top coal companies were up at the close of trading:
Arch Coal rose $.18 or 1.3 percent, to $13.98.
Consol Energy rose $.29 or 1.0 percent, to $28.44.
Massey Energy rose $.15 or 1.4 percent, to $10.72.
Peabody Energy rose $.56 or 2.1 percent, to $27.03.

CNBC Oil Settles Near $48 After US Inventories Rise

Oil fell $1 a barrel on Wednesday after fresh industry data showing a build in U.S. crude oil stocks and the World Bank cut its forecast for China's economic growth this year.

In its weekly report, the U.S. Energy Information Administration (EIA) said crude oil stocks rose 2.0 million barrels to 353.3 million last week.

A Reuters poll had forecast a rise of 1 million barrels as refinery demand remained tepid and imports increased.

The EIA also said gasoline supplies rose to 215.7 million barrels, up by 3.2 million barrels, countering forecasts of a 1.2-million barrel drop.

Oil had fallen earlier in the session after data from the American Petroleum Institute on Tuesday showed crude stocks rose much more than expected last week. more...

Crude palm oil futures fall as investors take profits

March 19, 2009 3:00 GMT+8
Crude palm oil futures fell 0.9 per cent yesterday as players booked profits on fears demand would not flow in at above current price levels.

The global benchmark for palm oil, the second largest producer of the tropical oil after Indonesia, slid 58 per cent from a record RM4,486 last year as recession sapped demand and inflated inventories.

“Traders felt uncomfortable when the market tried to test RM1,950 level, the fear is that palm oil becomes more uncompetitive against soya oil and loses market share,” said a trader with a local comodities brokerage.

The benchmark June contract on the Bursa Malaysia Derivatives Exchange settled down RM17 to RM1,905 per tonne after going as high as RM1,948.

Other traded months were marginally lower. Overall volumes stood at 13,530 lots of 25 tonnes each.

Exports rose by as much as a fifth to above 550,000 tonnes for March 1-15, cargo surveyors reported on Monday but traders expect the pace of growth to halve in the second half of March.

In the physical market, palm oil for March was quoted at RM2,035-RM2,050 per tonne in the southern region.

Trades were done between RM2,035 and RM2,050.

DJ European Veg Oil AM Palm Oil - Lauric Oil Prices- Mar 18

HAMBURG, Mar 18, 2009 (Dow Jones Commodities News via Comtex) — Lowest known offers at 1330 local time in U.S. dollars a metric ton, bulk, with changes on the day unless otherwise stated as quoted by European traders:

Palm oil, Mal/Sumatran origin Palm oil, Mal/Sumatran origin
crude (max 5% FFA), refined, FOB Malaysia
CIF Rotterdam

Apr-Jun 09 592.50 - 2.50 Apr 09 595.00 unch
Jul-Sep 09 580.00 unch May-Jun 09 580.00 - 10.00
Jul-Sep 09 560.00 - 5.00

Palm olein, Mal origin, RBD Stearin, (Poram), RBD
(max 0,1% FFA) FOB Malaysian FOB Malaysian

Apr 09 625.00 unch Apr 09 470.00 - 5.00
May-Jun 09 610.00 - 10.00
Jul-Sep 09 590.00 - 5.00 Palm Fatty Acid Distillate
FOB Malaysia

Apr 09 340.00 unch

Palm kernel oil, Mal/Indo origin Coconut oil, Phil/Indo origin
max 5% FFA, CIF Rotterdam 3-4% FFA, CIF Rotterdam

May-Jun 09 585.00 - 5.00 Mar-Apr 09 630.00 unch
Jun-Jul 09 595.00 + 5.00 Apr-May 09 620.00 + 15.00
Jul-Aug 09 605.00 unch May-Jun 09 610.00 + 5.00

tr = traded level
unch = unchanged
unq = unquoted
RBD = refined, bleached and deodorized
Poram = contract specification of the Palm Oil Refiners Association of Malaysia.

Bloomberg U.S. Stocks Gain, 10-Year Treasury Yields Fall Most Since 1962

March 18 (Bloomberg) -- U.S. stocks and Treasuries surged and the dollar tumbled after the Federal Reserve unexpectedly announced plans to buy $1 trillion of bonds in an effort to lower consumer borrowing costs and end the recession.

The Standard & Poor’s 500 Index added 2.1 percent, extending its rally since last week’s 12-year low to 17 percent. Yields on 10-year notes dropped the most since at least January 1962 after the central bank said it will spend $300 billion buying Treasury debt and up to another $750 billion on bonds backed by government-controlled mortgage companies. The dollar sank the most against the euro since September 2000.

“This is a huge step,” said Thomas Girard, who helps manage $115 billion in fixed-income securities with New York Life Investment Management in New York. “It’s a draw the line in the sand-type of event.”

Fed Chairman Ben S. Bernanke is trying to bolster housing and hasten the end of the 14-month U.S. recession. He stepped up efforts after unemployment increased to 8.1 percent and economists forecast the economy will shrink through the middle of the year. Fed officials also kept the benchmark interest rate at between zero and 0.25 percent to combat the “weak” short- term economic outlook, according to a statement today.

‘Big Positive’

“This is definitely a big positive,” said Noman Ali, a Toronto-based money manager at MFC Global Investment Management whose group manages $20 billion of U.S. equities. “This will bring down the risk premium and interest rates for corporate borrowers as well. That helps credit growth and hopefully helps turn the economy.”

‘Powerful Bullet’

“We thought it was a lower-probability event but we always knew that if the Fed did use this clearly powerful bullet it would cause a huge drop in yields,” said Suvrat Prakash, an interest-rate strategist in New York at BNP Paribas Securities Corp., another primary dealer.

Yields on 10-year Treasury notes rose 33 basis points in the two days after the last policy meeting Jan. 28, when the Federal Open Market Committee said the central bank might buy longer-term Treasuries to revive lending but gave no further details. more...

Reuters Fed to buy long-term U.S. government debt

WASHINGTON (Reuters) - The Federal Reserve on Wednesday said it would pump an additional $1 trillion into the U.S. economy to try to pull it out of a deep recession, partly by buying longer-term government debt for the first time in more than 40 years.

In a statement at the end of a regular two-day policy meeting, the central bank's panel said it would buy up to $300 billion in longer-term Treasuries.

The decision caught many off guard. While the Fed has said it was considering such a move, it had seemed to be backing away from it recent weeks. As recently as March 6, New York Fed President William Dudley had said such a move would not be the most efficient way to ease market conditions.

The surprise announcement jolted markets. U.S. stocks shot higher and yields on U.S. government bonds took their biggest one-day tumbled since 1987, while the dollar plunged to a two-month low against the euro. more...

Kim Eng BNI: Government to sell 10%?

BNI: Government to sell 10%?

Minister of State Owned Enterprises was quoted by a media saying that the government is planning to sell 10% stake (including 3% greenshoe) at Bank Negara Indonesia through strategic sale.
The strategic sale is being assessed by privatization committee at the moment.
According to the media, the main purpose is to improve good corporate governance of the bank.
The minister was reported as saying that the price offered will be Rp2,050, the same as that at the time of second offering in August 2007 as it refers to the sale of greenshoe shares. At the moment there is estimated 473.89 shares in the form of greenshoe options, equivalent to 3.1% of issued shares.
The privatization, if materializes, will increase free float, and hopefully shares liquidity. However, given the current price, we see very small likelihood for the sale to take place at Rp2,050.
At current price of Rp700, BNI is trading at 0.7x latest book value

Fitch Naikkan Peringkat PGN

Jakarta - Fitch Ratings menaikkan peringkat jangka panjang dalam mata uang asing dan mata uang lokal PT Perusahaan Gas Negara Tbk (PGN) ke 'BB' dari 'BB-' (BB minus) dan menegaskan peringkat nasional jangka panjang di 'AA(idn)'. Prospek (Outlook) dari peringkat-peringkat tersebut adalah Stabil.

Fitch juga menaikkan peringkat obligasi PGN Euro Finance 2003 Limited sejumlah US$ 125 juta yang akan jatuh tempo di tahun 2014 dan US$ 150 juta yang akan jatuh tempo di tahun 2013 ke 'BB' dari 'BB-' (BB minus). Kedua obligasi tersebut dijamin oleh PGN dan anak perusahaannya.

"Kenaikan peringkat-peringkat tersebut mencerminkan membaiknya performa keuangan dan operasional PGN serta ekspektasi Fitch bahwa perusahaan akan mampu mempertahankan profil kredit yang moderat," bunyi siaran pers Fitch Ratings, Rabu (18/3/2009). more...

Credit Suisse - Bumi Resources (BUMI.JK, Rp770, N, TP Rp945) - Too big to ignore

Bumi Resources (BUMI.JK, Rp770, N, TP Rp945) - Too big to ignore

· We are reinstating coverage of Bumi with a target price of Rp945 (30% discount to DCF-derived equity value) and NEUTRAL rating.
· While we believe Bumi is intrinsically undervalued, stock rerating may be possible only if management allays investors' concerns on disclosure, meets/beats operational and financial targets and peers' performance, and returning capital to shareholders.
· Even then it is difficult to ignore Bumi's 70% ownership of KPC and Arutmin, highly scaleable and efficient mines with 2 bn tonne (t) reserves and plans to expand production capability to 100 mn tpa.
· Our volume assumptions are slightly below guidance. And while we raise unit cost above previous estimates and guidance, on sector-wide evidence of stickiness of cost base, we expect total unit cost to drop from the peak US$51/t observed in 3Q08 to US$40/t in FY09E.
· Assuming changes in operating assumptions, we estimate Bumi's cash breakeven to be at about US$55-60/t equivalent regional coal price in 2010. Barring the acquisition of Herald Resource in 2008, we have not included any non-coal cash flows in our forecast.

Associated Press Asian market rally loses steam despite Wall Street's surge as investors take profits

SHANGHAI (AP) -- Asia's stock market rally seemed to be running out of steam Wednesday, despite an overnight surge on Wall Street, as investors cashed in on recent gains amid persistent doubts about the outlook for the global economy.

"So far, the market has followed the U.S. rebound, but the index is facing resistance," said Castor Pang, an analyst at Sun Hung Kai Financial in Hong Kong. "The rebound has almost reached its limit," he said, noting that turnover in most markets is not rising quickly enough to suggest a recovery.

Hong Kong's Hang Seng index led the region, gaining 204.30 points, or 1.5 percent, to 13,082.77, while Shanghai's benchmark Composite Index added 0.5 percent to 2,229.72.

Tokyo's Nikkei 225 stock average briefly surpassed 8,000 for the first time in a month, but succumbed to selling as investors cashed in on recent gains. As afternoon trading began, the index slid 0.5 percent to 7,910.94.

Australia's benchmark S&P/ASX 200 edged 0.1 percent lower to 3,449.50 after miner Rio Tinto dropped 8.6 percent on worries over its deal with Aluminum Corp. of China. South Korea's key index was flat.

Wall Street got a surprise boost Tuesday, posting its fifth gain in six trading sessions, from a government report that home construction picked up in February. The news, which was unexpected, injected new energy into a week-old rally.

Banking shares in Asia extended gains, with Mitsubishi UFJ Financial Group up more than 1 percent and Mizuho Financial Group advancing more than 3 percent. more...

Credit Suisse - Medco Energi (MEDC.JK, Rp2,025, N, TP Rp2,000) - Lower oil price assumptions, with cut in earnings estimates

Medco Energi (MEDC.JK, Rp2,025, N, TP Rp2,000) - Lower oil price assumptions, with cut in earnings estimates

· The Credit Suisse global oil team has revised down its oil price assumptions, as the recovery in oil price is likely to take longer than previously expected. We have now assumed a WTI oil price of US$50/bbl (barrel) for 2009E, down from US$60/bbl; and US$60/bbl for 2010E, down from US$80/bbl. Our long-term oil price assumption is now US$70/bbl, down 30% from US$100/bbl.

· In addition to the oil price assumption change, we have also assumed a 15% cut in Medco’s capital expenditure for likely difficulties in getting financing. Consequently, we have reduced our 2009E net profit estimate by around 33% to US$38 mn and our 2010E estimate 38% to US$35 mn. 2009E and 2010E EPS are revised down around 33% and 38%, respectively.

· Medco has always traded at discount to its valuation. Therefore, we retain our target price of Rp2,000, as it reflects an implied oil price of US$42/bbl. We believe in the long-term potential upside of Medco, but retain our NEUTRAL rating, as we expect a fall in earnings this year on lower oil prices and oil/gas output.

UBS Investment Research - Indonesia Property Sector: Eyeing mispricing opportunity

Eyeing mispricing opportunity
Lower mortgage rates could reignite demand appetite There has been government pressure to lower lending rates on the ground recently. Our checks suggest mortgage rates have only declined around 100bps from January to average 14% pa by end-February 2009. We believe only rates near 10% pa will lift demand close to sales levels in 2007-08.

Landed residential segment sales to relatively outperform. The property segment that benefits the most from lower mortgage rates is landedresidential especially for mid-to-lower income earners. High-rise residentials earn lower margins than landed and are hence less attractive for developers although demand in the mid-low segment can persist reasonably, in our view. We are negative on investment properties this year. We believe a meaningful increase in rental rates is unlikely.

50% discount to our calculated RNAV is attractive. We believe that over 50% discount to our property sector universe RNAV has been an attractive entry level. However, the length and intensity of RNAV recovery may vary. Our property stock universe is currently trading at average 4% discount.

Top pick is SMRA on a relative basis. We maintain our Buy ratings for Bakrieland, Ciputra Development, and Summarecon given discount to target RNAV at 38%, 37% and 58%, respectively.

We maintain our Sell rating on Lippo Karawaci and Jababeka. Rolling over our RNAV target to year 2010 and adjusting for 2008 figures, we raise our price targets by 14-26%. Our RNAV-derived price targets assume 16.1-16.9% WACC for development properties and 13.1-13.9% single cap-rate for investment properties.

Credit Suisse - Semen Gresik (SMGR.JK, Rp3,475, O, TP Rp4,500) - Strong 4Q08 results reaffirm our positive view on the stock

· Semen Gresik’s 2008 results were strong (+42% YoY), 12% above our FY08 forecast (and 13% above consensus) on the back of better top-line growth (in both volume and prices) and higher net interest income.

· The company’s EBITDA margin increased to a high 32% during 4Q08, resulting in EBITDA jumping 39% YoY. Below the operating line, the company’s stronger cash position has resulted in better net interest income, which came in 21% above our forecasts.

· Regarding de-bottlenecking its capacity, the company plans to increase its capacity by 1 mn tonnes to 19 mn tonnes in 2009, while the big capex plans are still in tact. SMGR’s plans of exploring overseas opportunities are in a very early stage.

· We maintain our OUTPERFORM rating due to our positive stance on the stock, especially on pricing power and strong balance sheet. We believe that the key risk for Semen Gresik and the industry is demand, which has started to show some declining trend in the past two months.

Bakrie Group: Bakrie restructure its Rp1.4tn debt

Bakrie Group: Bakrie restructure its Rp1.4tn debt. BNBR’s Director and secretary, R.A. Sri Dharmayanti said that the management has signed debt resturing agreement with Interventures Capital Pte Ltd, and Skybird Ventures Ltd on March 12, 2009. Under the agreement, each parties agree to restructure promissory notes, which has been issued by Bakrie to Long haul Holding Ltd and PT Brantas Indonesia, worth Rp1.4tn, but been sold to Interventures and Skybird on March 10, 2009. She said the promissory notes, which initially mature on July 5, 2009 will be restructured and to be matured on March 12, 2011. (Bisnis Indonesia)

KPC Menang Tender Batubara PLTU Tanjung Jati B

Jakarta - Kaltim Prima Coal (KPC) memenangkan tender batubara untuk pasokan PLTU Tanjung Jati B. Volume batubara yang akan dipasok adalah sebesar 1 juta ton per tahun selama 5 tahun.

"Keputusan itu sudah positif. Tinggal mengurus administrasi dan akan diumumkan dalam waktu dekat," kata seorang sumber PLN kepada wartawan di Jakarta, Rabu (18/3/2009).

KPC memenangkan tender tersebut setelah mengalahkan empat perusahaan lainnya seperti Berau Coal dan Indominco. Harga yang disepakati adalah Rp 740 ribu per ton dan pengiriman dimulai Juli 2009.

"Tapi itu masih harga tahun lalu," katanya. more...

Mandiri Sekuritas PT Inco, seeks US$250mn revolving credit facility

PT Inco: seeks US$250mn revolving credit facility from affiliated
company (INCO, Rp2,100, Sell, TP:Rp1,350)

PT Inco disclosed that it plans to have a US$250mn short-term revolving
credit facility from an affiliate Vale International, a company wholly owned
by Vale Canada (which owns 100% of Vale Inco Ltd, the 60.8% owner of
PT Inco). PT Inco will seek approval of this transaction in an EGM on
April 17, 2009. The revolving facility will be used to fund Inco’s working
capital requirements and various general activities.

With the revolving credit facility, Inco loses its net cash position and
would have a net gearing ratio of 5.5%, still a comfortable level in our
view. We surmise that by tapping this facility, it would preserve its cash
on hand (about US$166mn beg of 09) and nickel in matte sales collection
to fund its capital expenditures of US$229mn this year, mainly attributed
for its hydro generating Karebbe project. With no imminent growth
prospects on nickel price and demand, we maintain sell on the stock,
which currently trades at PER09F of 20.8x.

Kim Eng Good 2008, challenging 2009

Good FY08 results
Semen Gresik posted a better-than-expected FY08 net profit. The bottom line was up 42% YoY to Rp2,523b from Rp1,775b in 2007. This was 12% higher than our estimates. Revenues was up 27% YoY on the back of 9.8% YoY increase in domestic sales volume and around 21% price increase. EBITDA grew 35% YoY to Rp3,867b, EBITDA margin went up significantly to 31.7% from 29.7% in 2007. Although fuel cost which accounted for 27.6% of total production cost grew 52% YoY, Semen Gresik managed to keep its total production cost grew by only 17% YoY, thanks to manageable costs such as electricity and raw material cost.

Challenges ahead
As for 2009, cost pressure will come from increase of annual re-pricing of contracted coal price which rises from US$40-45/ton to US$60-70/ton. As coal accounted for 27.6% of total production cost, coal price increase could bring substantial impact for the profitability. However, the good news is electricity and transportation cost which accounts for 28.6% of total production cost will decline as a result of reduction in electricity tariff and fuel price by the government in January 2009. Management also will launch some cost efficiency initiatives such as reducing coal and electricity consumption index, reducing oil consumption, improving plant utilization by increasing number of plant operating days, maximizing use of local raw material sources, and improving synergy among subsidiaries.

Price outlook
Management indicated that cement price increase could be very tough in 2009 given the softening domestic demand. Therefore, Semen Gresik now expects no price increase in 2009. This was different with initial expectations of cement producers that there would still be a room for price increase. We therefore cut our cement price increase assumption from 5% to 0%. After seeing consumption decline in January 2009, to be conservative we also have changed our domestic cement demand growth assumption for 2009 from flat to -3%.

To acquire a regional cement maker
The management recently said to the media that it may buy as much as 40% ownership in a regional cement company in order to maintain growth. The indicated acquisition price was US$80-90 per ton. This is roughly the same with current Semen Gresik and Indocement EV/ton of US$85 and US$93 respectively. However, compared to replacement cost of US$150 per ton, the acquisition price is considered cheap in our view. Given the high capex requirement for new plants development, Semen Gresik may have to partially finance the acquisition using debt. The company currently has a shortlist of six target acquisitions in Southeast Asia with annual capacity range from 1.3m to 13m tons. The management plans to seek shareholder approval for acquisition in May 2009.

Maintain BUY with lower target price
Following our lower adjustment in price and domestic demand assumption we lower our target price to Rp4,100 (from Rp4,400). Our TP is based on DCF valuation and WACC of 15.7%. At current juncture, our new target price still offers 20% upside potential. BUY recommendation maintained.

CIMB Jasa Marga Company update - Focusing on what it does best

Jasa Marga Company update - Focusing on what it does best - by Liliana Bambang
(JSMR IJ / JSMR.JK, OUTPERFORM - Upgraded, Rp880 - Tgt. Rp1,090, Transport Infrastructure)

We view JSMR's recent additional stakes in four toll roads positively. The acquisitions should provide synergies and enhance traffic volume on its existing toll roads, provide operational efficiencies and opportunities for cost savings, and the potential for traffic growth. To refocus on operating toll roads instead of investing, the company plans to divest minority stakes. Given the above positive developments, we upgrade JSMR to OUTPERFORM from Neutral, with a new DCF-based target price of Rp1,090 (from Rp1,050).

CLSA Upgrade Indo plantation and CPO price

CPO price outlook is improving and we revise up our CPO price assumption from a bedrock price of US$300/ton to US$500/ton. This lead to 165-215% earnings upgrade in plantations stocks (from a low base) as Indonesian plantations are highly geared to CPO price.

Palm oil price has seen a strong support from food demand and lower supply, which has supported prices in 1Q09. Malaysian palm oil inventory has fallen 31% from the peak in Nov08 and export in the first 15 days of Mar09 still up 16% mom.

We upgrade Indo plantation sector from Underweight to Overweight and believe bad news is largely priced in. Our preferred plantation stocks are Lonsum, Sampoerna Agro, and Astra Agro.

AALI sell to OPF TP 13500, LSIP UPF to Buy TP 5000, UNSP sell to Buy TP 500

Source: CLSA Asia-Pacific Markets

Lautandhana from Daily Update

Data Pembangunan Rumah AS rebound Diluar Perkiraan, Indeks S&P 500 Terdongkrak 3,2%. Wallstreet kembali bergairah dengan indeks S&P 500 berhasil rebound 3,2%, indeks Dow Jones naik 2,4%,d an indeks Nasdaq meroket 4%.

Bursa Eropa dituutp melemah dengan indeks DJ Euro Stoxx turun 1% didorong oleh turunnya saham-saham sector pertambangan setelah Alcoa akan memangkas dividennya dan harga sahamnya melemah 8,7%.

Positifnya Wallstreet tidak begitu berimbas pada pergerakan indeks bursa Asia pagi ini yang bergerak mixed dalam range terbatas. Nikkei naik 0,05%, Kospi turun 0,04%, St times naik 0,9%, KLCI naik 0,6%.

Bursa Indonesia hari ini diperkirakan akan bergerak mixed dalam range terbatas, lanjutan aksi jual saham-saham blue chip perlu diwaspadai, namun hal ini terbuka kesempatan untuk buy on weakness. Potensi penguatan masih terbuka seiring positifnya bursa AS.

Nilai pasar merger capai Rp5 triliun
Kimia Farma (KAEF) dan Indofarma (INAF) perkuat pasar obat generik Pemerintah akhirnya memilih opsi merger PT Kimia Farma Tbk dan PT Indofarma Tbk. Nilai pasar gabungan dua BUMN farmasi itu diperkirakan mencapai Rp5 triliun, dan total aset Rp2 triliun.Proses merger akan memerlukan waktu 6 bulan hingga 9 bulan dan diharapkan efektif pada kuartal I/2010.

Menara XL (EXCL) ditawar Rp9 triliun
PT Excelcomindo Pratama Tbk (XL) kembali menjajaki penjualan menara secara langsung dengan kisaran harga Rp5 triliun-Rp9 triliun, setelah sebelumnya penjualan melalui mekanisme tender urung dilaksanakan. Direktur Utama XL Hasnul Suhaimi mengatakan hingga saat ini sudah ada calon pembeli yang menyatakan minatnya untuk mengambil alih menara milik perseroan.

Semen Gresik (SMGR) Semakin Kokoh
Laba bersih konsolidasi PT Semen Gresik Tbk (SMGR) sepanjang tahun 2008 mencapai Rp2,523 trilyun atau Rp426 per saham. Keuntungan ini menunjukkan pertumbuhan 42,1 persen ketimbang tahun 2007 sejumlah Rp1,775 trilyun atau Rp299 per saham.

J.P.Morgan - BUMI Resources, The saga might not be over

The saga might not be over: Based on news flows from Tempo, Bisnis Indonesia and Jakarta Post, we believe there is a possibility that Bapepam could block the three proposed acquisitions by BUMI. We believe that the “repo”/loan-linked pressure on the group may not have fully eased, which could in turn lead to fresh responses from BUMI. At Energi Mega Persada (an affiliated company of Bumi), three attempts were made to spin off Lapindo Brantas before finally securing Bapepam’s assent. If that is anything to go by, we believe there could be further twists remaining in the saga.

• We value DEWA at about Rp130/share: Based on publicly available information, we estimate that DEWA is worth about Rp130 per share:
46% lower than the proposed acquisition price of Rp240 per share. The proposed acquisition price of Rp240 per share hinges on DEWA’s ability to deliver 25MM tons of coal by FY12 (4.4x the current level of 5.7MM tons). In addition, our estimated fair value (Rp130) is relatively in line with the recent acquisition of another mining contractor, Petrosea (PTRO IJ), by Indika Energy (INDY IJ).

• Sell into strength: We think that if BUMI is made to step back from the acquisitions, it may have a positive impact on the stock price. However, considering our view that there may be further developments on the acquisition front, we would recommend to sell into strength.

• We maintain our UW and lower our PT to Rp580: We maintain our Underweight rating and lower our Dec-09 PT from Rp620 to Rp580. Our PT is based on SOTP valuation with a WACC of 19.9% and a 50% discount to our fair value of Rp1,154. We incorporate the 50% discount to account for potential unfavorable future developments in terms of corporate actions. Risks to our PT are : (1) undervaluation of coal assets; and (2) any kind of corporate action that could unlock a steep discount to the fair value.

Bloomberg Amara's Ngo Likes DBS, Golden Agri, Bumi Resources: NewsClip

March 16 (Bloomberg) -- Johan Tazrin Ngo, chief executive officer of Amara Investment Management Sdn., talks with Bloomberg Television about his investment strategy for Singapore and Indonesia stocks. (This is an excerpt. Source: Bloomberg)

Running time 01:59 Video...

Associated Press Coal companies shares up at noon

Shares of some top coal companies were up at the close of trading:
Arch Coal rose $.09 or .7 percent, to $13.80.
Consol Energy rose $.67 or 2.4 percent, to $28.15.
Massey Energy rose $.30 or 2.9 percent, to $10.57.
Peabody Energy rose $1.32 or 5.2 percent, to $26.47.

Bloomberg Oil to Test Resistance, May Break Upwards: Technical Analysis

March 17 (Bloomberg) -- Oil will test resistance near $49 a barrel and a breakthrough would set up a stronger rally, according to technical analysis from London-based broker PVM Oil Associates Ltd.

Oil futures in New York will meet resistance at around $48.59 and $48.83 a barrel, the highest intraday prices this year, PVM said in a report. The 500-week moving average, currently at $48.88, is another important level, it said.

Yesterday, April futures rose $1.10 to $47.35 a barrel, the highest settlement since Jan. 6. It was the first close above the 100-day moving average of closing prices since Aug. 1, a bullish signal for some analysts. The contract rose as high as $48.02 today before giving up its gains. Oil has traded within a $13 range since the start of February.

“When the break comes it will be to the upside,” PVM analyst Robin Bieber said in a report today. “However, timing is everything and once again we are up and testing the higher end of the recent range. We’re back at hazardous resistances.”

The 100-day moving average will now become a support line for prices, PetroMatrix GmbH said in its daily report. Resistance will be found at $50 a barrel and the upper Bollinger band, currently $50.17.

Analysts use moving averages and historical highs and lows to find support and resistance levels for prices. Bollinger bands, a technique developed by analyst John Bollinger in the 1980s, use historical volatility to set upper and lower targets. They typically run either side of the 20-day moving average.

To contact the reporter on this story: Will Kennedy at wkennedy3@bloomberg.net
Last Updated: March 17, 2009 08:48 EDT

Bloomberg Oil Unlikely to Weaken, Supporting Biofuels, Former BP CEO Says

March 17 (Bloomberg) -- Oil prices are “unlikely to weaken,” helping to support demand for alternative fuels, according to the former chief executive officer of BP Plc.

Oil “may firm over the medium to long term,” said John Browne, now a London-based managing director of buyout company Riverstone Holdings LLC. “Biofuels have the potential to play a critical long-term role in the global energy mix,” he said today at a World Biofuels Markets conference in Brussels.

The U.S. and Europe encouraged the development of fuels made from crops such as corn and soybeans to limit their dependence on oil imports as prices climbed to a record. Crude has risen 4.9 percent this year, after plunging 54 percent last year. Ethanol futures traded in Chicago fell 3.2 percent this year.

“My sense is the biofuels industry has not put its best foot forward in recent months. There’s been a tendency for the industry to fragment,” Browne said.

A European Union mandate requiring that biofuels power at least 10 percent of road transportation in each member country by 2020 may result in 120,000 jobs, he said.

“These are the important messages in which our industry should be communicating.”

To contact the reporter on this story: Claudia Carpenter in Brussels at ccarpenter2@bloomberg.net
Last Updated: March 17, 2009 06:32 EDT

Bloomberg Wheat Prices Rise to One-Month High as Kansas Crop Deteriorates

March 17 (Bloomberg) -- Wheat prices rose to a one-month high on speculation that rains failed to relieve a drought in parts of the southern U.S. Great Plains, eroding prospects for winter plants emerging from dormancy.

Crops in Kansas, the largest U.S. wheat-growing state, were rated 42 percent good or excellent as of March 12, down from 45 percent a week earlier, after the state got little precipitation, the Department of Agriculture said yesterday.

“It looks like the dry weather is starting to catch some interest,” said Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas. “Concern is increasing in the grain states.”

Wheat futures for May delivery rose 8.25 cents, or 1.5 percent, to $5.525 a bushel on the Chicago Board of Trade. The price earlier reached $5.5375, the highest for a most-active contract since Feb. 11. Yesterday, the grain jumped 5 percent, the most in three months. Wheat has tumbled 51 percent in the past year on increased global production and shrinking demand. more...

Crude palm oil futures up on higher soy oil, lower output

Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives ended higher yesterday, spurred by firmer soy oil prices, dealers said.

The local palm oil market usually moves in tandem with the US soy oil market as both compete for the same export destinations.

“The better-than-expected export figures released yesterday and lower palm oil production has also helped lift prices,” a dealer said.

Cargo surveyor, Intertek Testing Services had estimated that exports of Malaysian palm oil products for the first 15 days of March rose 16.18 pc to 591,567 tonnes from the 509,200 tonnes shipped in February 1-15.

At the close, the benchmark third month June 2009 contract went up RM20 to settle at RM1,922 per tonne. CPO futures for April 2009 rose RM22 to RM2,030 per tonne, May 2009 gained RM37 to RM1,982 per tonne and July 2009 climbed RM12 to RM1,875 per tonne.

The day’s turnover stood higher at 15,564 lots compared to the 15,293 lots transacted on Monday while open interests declined to 89,196 contracts from 89,686 contracts previously.

In the spot market, March South remained at RM3,050 per tonne.

Bloomberg U.S. Markets Wrap: Stocks Rise on Homebuilding Data, Oil Climbs

March 17 (Bloomberg) -- U.S. stocks advanced, erasing more than half the loss in the Standard & Poor’s 500 Index since President Barack Obama took office, on an unexpected rebound in homebuilding and speculation the Federal Reserve will outline plans to bolster the economy. Oil climbed to a three-month high.

Citigroup Inc. and JPMorgan Chase & Co. rose at least 7.7 percent as the KBW Bank Index extended its gain since March 6 to 46 percent. KB Home, the fourth-largest U.S. homebuilder, rallied 9.3 percent and Home Depot Inc. rose 6.7 percent as housing starts unexpectedly increased 22 percent in February, the most since 1990. Apple Inc. added 4.4 percent to help lead technology shares higher after updating its iPhone software.

The S&P 500 added 3.2 percent to 778.12, led by a 6.6 percent gain in financial companies. The Dow Jones Industrial Average advanced 178.73 points, or 2.5 percent, to 7,395.7. The Nasdaq Composite Index surged 4.1 percent. About eight stocks rose for each that fell on the New York Stock Exchange.

“The market was depressed to an extreme level because of the constant stream of bad news and events,” said Mark Freeman, a money manager at Westwood Management Corp. in Dallas, which oversees $7 billion. “The mere fact that the negative news has stopped allows the market to come back up to a reasonable level.” moew...

Permintaan Tinggi, Obligasi ASF Dinaikkan Jadi Rp 900 Miliar

Jakarta - PT Astra Sedaya Finance, anak usaha PT Astra International Tbk (ASII) menaikkan jumlah obligasinya menjadi Rp 900 miliar dari semula direncanakan sebesar Rp 600 miliar. Kelebihan permintaan mencapai 1,7 kali.

"ASF menutup penawaran obligasinya yang ke-10 sejumlah Rp 900 miliar," ujar Presiden Direktur ASF Djony Bunarto Tjondro dalam siaran persnya, Selasa (17/3/2009).

Semula, perseroan menawarkan obligasi ASF X sebesar Rp 600 miliar. Rupanya, obligasi yang diterbitkan dalam 5 seri ini mengalami kelebihan permintaan hingga 1,7 kali. Oleh sebab itu, perseroan menutup penawaran obligasinya menjadi Rp 900 miliar.

Berikut rincian obligasi ASF X Rp 900 miliar:

Seri A jangka waktu 370 hari dengan kupon 13,50%
Seri B jangka waktu 18 bulan dengan kupon 13,83%
Seri C jangka waktu 24 bulan dengan kupon 14,56%
Seri D jangka waktu 30 bulan dengan kupon 14,90%
Seri E jangka waktu 36 bulan dengan kupon 14,90%

Bertindak sebagai penjamin emisi obligasi adalah PT Indo Premier Securities, PT Mandiri Sekuritas, PT ING Securities Indonesia dan PT HSBC Securities Indonesia. more...

Laba Bersih Semen Gresik 2008 Terkerek 42%

Jakarta - Perusahaan semen terbesar di Indonesia, PT Semen Gresik Tbk (SMGR) membukukan kenaikan laba bersih tahun 2008 sebesar 42% menjadi Rp 2,523 triliun dibanding tahun 2007 yang sebesar Rp 1,775 triliun.

Kenaikan laba bersih didukung oleh peningkatan penjualan selama 2008 yang naik 27% menjadi Rp 12,209 triliun dibanding tahun 2007 yang sebesar Rp 9,6 triliun. Laba usaha juga ikut terkerek 41,3% menjadi Rp 3,387 triliun dibanding tahun 2007 yang sebesar Rp 2,396 triliun. Demikian laporan keuangan Semen Gresik 2008 yang dipublikasikan, Selasa (17/3/2009).

Sepanjang tahun 2008, Semen Gresik juga membukukan rugi bersih Rp 9,235 miliar membengkak cukup tinggi dibanding tahun 2007 yang untung kurs sebesar Rp 622 juta.
Hingga akhir Desember 2008, Semen Gresik memiliki total aset Rp 10,602 triliun atau naik 25% dibanding tahun 2007 yang sebesar Rp 8,515 triliun. Semen Gresik adalah perusahaan BUMN yang memiliki anak usaha di Semen Gresik, Semen Padang dan Semen Tonasa. (ir/ir)

Sejumlah Bank Berperilaku Monopoli

Jakarta - Perbankan di Indonesia mempunyai struktur yang oligopolis. Namun ada satu sampai empat bank yang mempunyai kelakuan monopolis seperti dalam hal penurunan bunga.

"Perbankan kita strukturnya oligopolis, namun ada satu sampai empat bank yang bertindak sebagai satu bank, jadi kelakuannya seperti monopolis," ujar pengamat ekonomi dan perbankan Danareksa Research Institute, Purbaya Yudhi Sadewa seusai menjadi pembicara dalam seminar Prospektif Bisnis di Hotel Nikko, Jakarta, Selasa (17/3/2009).

Ia mengatakan, satu bank tidak menurunkan bunga maka itu memberikan signal untuk bank lain, sehingga bank-bank lain tidak juga menurunkan bunganya.

"Sama halnya apa yang terjadi sekarang, BI Rate turun, dan semua diam, tidak ada yang mengikuti, ini semacam kode dari bank yang satu untuk bank lain agar tidak menurunkan bunganya," papar Purbaya.

Jika saat ini, lanjut Purbaya, BI Rate 7,75 persen maka bunga pinjaman tepatnya antara 12,5-13%. Tapi apa yang terjadi sekarang pada kenyataannya bunga pinjaman masih 15 persenan dan sepertinya ada permainan antar bank.

"Solusinya, pemilik modal atau bank dipanggil saja untuk menurunkan bunganya oleh pemerintah, jika sampai sebulan tidak turun juga, lebih baik ganti aja direkturnya," pungkasnya.

Reuters Asia stocks at 1-month high as bears squeezed

HONG KONG (Reuters) - Asian stocks climbed on Tuesday, with banks extending gains on hopes the struggling global financial system is stabilizing, despite reports showing the U.S. economy is deteriorating further.

The dollar edged higher against the euro and the yen while U.S. Treasuries were steady, awaiting word on whether the Federal Reserve would buy government debt to stimulate the economy.

Barclays Plc (BARC.L) said on Monday it has had a strong start to the year, echoing upbeat comments in recent weeks from Citigroup (C.N), JPMorgan (JPM.N) and Bank of America (BAC.N) which have sent battered banking shares higher.

The rebound has squeezed some investors who bet against equities, forcing them to buy back shares, but analysts are divided over whether the rally can be sustained without a broad recovery in investor confidence. more...

China’s February palm oil imports surge

March 17, 2009 3:00 GMT+8
China’s imports of palm oil, the world’s biggest, surged in February from a year ago after traders took advantage of a widening discount to rival soyabean oil to boost purchases.

Imports of palm oil gained 54 per cent to 410,000 metric tonnes last month as shipments of soyabean oil fell 89 per cent to 40,000 tonnes, the Beijing-based Customs office said yesterday. Imports of soyabeans added 61 per cent to 3.3 million tonnes.

Palm oil competes with the more expensive soyabean oil for use in foods and cooking in China, the world’s third-largest economy. Palm oil became more competitive compared with its main rival as the discount widened after a drop in crude oil, said Gao Yingbin, an analyst at China Cereals and Oils Business Net.

The sharp rise in palm oil imports “will exert great pressure on the domestic vegetable oil market,” Gao said by phone from Beijing. “If Malaysian futures don’t hold steady, people who bought these shipments will incur losses.”

The commodity for May delivery traded at RM1,969 a tonne at 11:11am in Beijing.

CIMB Oil and Gas Still-weak outlook

Demand keeps falling. The outlook for oil demand has deteriorated due to weak global economic growth. Three major energy agencies, IEA, EIA and OPEC, continue to lower their demand projections for FY09. Based on their latest forecasts in Mar 09, global oil demand in 2009 is expected to contract by 1.2% (OPEC) to 1.6% (EIA).
These projections are much lower than previous forecasts. The International Energy
Agency (IEA) expects global oil demand this year to shrink by as much as 1.4 mmbopd, after a drop of almost 300,000 bbl/d in 2008. OPEC forecasts a 1.0mmbopd drop for 2009.

Maintaining oil price forecasts. We are maintaining our crude oil price assumptions US$45/bbl for 2009, US$55 for 2010, and US$60/bbl for 2011 onwards. We remain optimistic on crude oil prices in the longer term and expect prices to recover to US$60/bbl within the next three years as oil demand improves along with the global economy and lower oil supply growth. We believe that long-term supply and demand dynamics will keep crude oil prices elevated as many of the major older fields are depleting. In addition, with prices at current lows, there will be less incentive for oil companies to invest and expand. However, downside risks to our assumptions could come from a prolonged economic slowdown.

Maintain UNDERWEIGHT. We are maintaining our UNDERWEIGHT gas sector. With a negative near-term outlook for oil prices, E&P companies’ will be lower in the next few years, especially for those with high crude oil-based revenue but limited volume growth. Lower crude oil price assumptions are also negative for the DCF-based valuations of E&P companies.

We are maintaining our UNDERPEFORM ratings on PTT and PTTEP. PTTEP’s earnings would be affected by low oil and gas prices. Its volume growth should be affected by less domestic gas demand as the Thai economy contracts. PTT’s outlook is also not positive due to: 1) slow domestic gas demand; 2) less earnings contributions from its refinery and petrochemical associates; and 3) lower chances for the government to raise its gas pipeline tariffs. Our top pick for the sector remains PGAS, which should be less affected by weak oil prices as its current gas selling prices of US$5.50 are still at 30-40% discounts to domestic diesel prices. Strong volume growth from PLN should also more than compensate a drop in PGAS’s gas volume sales to industrial customers.

CLSA coal downgrade, stick to quality, ITMG top pick

Research Today: coal downgrade, stick to quality, ITMG top pick

Our mining analyst Olie lowers his earnings forecasts for Indonesian coal companies by 3-39% in 2009 and 2010, following our downward revisions on thermal coal price assumptions (10% this year and 6% next year).

The interesting point is that change from the previous coal price assumptions is only 6% for 2010 (when coal contracts have expired). But the impact on earnings is bigger for some companies. Olie cut Bumi (BUMI IJ) and Indika (INDY IJ) earnings by 39% in 2010. In addition to lower coal price assumptions, both the operating and financial leverages will not help BUMI’s numbers in 2010. For INDY, rising contractor fees contribute to the earnings forecast cut.

We agree with our coal analyst’s view to stick with quality and most defensive characteristics. Stock picking is the key here. Indo Tambang (ITMG IJ) is our only BUY call in the sector. Dividend yield, we expect to be around 17% this year, will provide some cushion. Balance sheet is strong (US$220mn cash balance as of Dec 08), and robust cash flows. Good CG is another reason to like ITMG.

Key points from the report:
Lowering our earnings forecasts for Indonesian coal companies by 3% to 39% in 2009 and 2010, on 6% to 12% lower thermal coal price assumptions.
Indo Tambang (ITMG IJ): the least adjustment due to its contracted tonnage while BUMI has had the sharpest revision in earnings.
Stay with defensive coal names, those with cash rich balance sheet and good earnings visibility.

ITMG is still our preferred play given its defensive characteristics. The stock trades at 15% to 25% discounts to peers and dividend yields of 17%.

Maintain Outperform rating on Bukit Asam (PTBA IJ), on strong balance sheet, contracted tonnage, and above average production growth. However, a lot seem to be priced in as it trades at 15% to 40% premium to peers.

Downgrade Adaro (ADRO IJ) to UPF. The company remains an intriguing prospect given its size and long-term growth potential. However, recent plan to acquire related-party companies raised an issue, particularly as investment in an asset management firm remains unclear.

Downgrade Indika (INDY IJ) to UPF. While we like the coal assets, visibility on other businesses is limited. The recent acquisitions fit the long-term strategy but offers limited near-term upside.

We cut our rating on Bumi (BUMI IJ) to a SELL. Investment risk is high as the announced acquisitions look excessively valued and do not fit strategically.