Bloomberg Wheat Jumps Most in Five Months; Russia, Ukraine Output May Ebb

May 1 (Bloomberg) -- Wheat jumped the most in five months on speculation that dry weather will curb yields from crops in Russia and Ukraine, where farmers plan to start harvesting next month.

The dry spell may hurt winter wheat and some developing spring crops, such as corn and sunflowers, DTN Meteorlogix LLC said today in a report. Rain expected next week will help ease the stress on crops, the forecaster said. Wheat futures jumped 6.2 percent, the biggest gain among 19 raw materials in the Reuters/Jefferies CRB Index.

“I’ve heard talk about dry, cold weather in Russia and Ukraine, which isn’t a real great combination,” said Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa.

Wheat futures for July delivery rose 33.5 cents to $5.70 a bushel on the Chicago Board of Trade. The percentage gain was the biggest for a most-active contract since Nov. 24. Earlier today, the price reached $5.74, the highest since Feb. 9.

Futures still are down 6.7 percent this year, partly on declining demand for U.S. grain.

The CRB headed for its biggest daily gain in almost a month on signs that the global economy may rebound. Grains and energy led the raw-material rally.

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.

Bloomberg Coffee Prices Jump Most Since January as Inventories Decline

May 1 (Bloomberg) -- Coffee prices in New York jumped the most since January as inventory declines spurred speculation that supplies will trail demand.

Stockpiles at warehouses certified by ICE Futures U.S. have dropped every month since October and tumbled 18 percent from a four-year high on Oct. 24. The price of the commodity has climbed 7.5 percent this year, partly on supply concerns.

“Coffee has extremely strong fundamentals, and prices will remain supported,” said Jaime Menahem, a trader at Alaron Trading Corp. in Miami. “The large reduction in warehouse stocks is helping prices.”

Arabica-coffee futures for July delivery rose 4.5 cents, or 3.9 percent, to $1.204 a pound on ICE in New York. That marks the biggest gain for a most-active contract since January 6.

Futures also rose after Brazil said it will seek a higher minimum price for government purchases of beans to help boost farmer income, Menahem said.

“The government in Brazil is taking action, and that’s also helping support the price,” Menahem said. “It makes the overall fundamental picture stronger.”

Brazil, the world’s biggest coffee producer, may buy as many as 3 million bags of beans, Agricultural Production Secretary Manoel Bertone said on March 12. Government purchases will further reduce coffee available for exports in a year when the country’s output is set to drop. A bag of coffee weighs 60 kilograms, or about 132 pounds.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

Bloomberg Sugar Prices Surge to Highest Since July 2006 on Supply Deficit

May 1 (Bloomberg) -- Sugar prices in New York surged to the highest since July 2006 on forecasts for a global supply deficit sparked by a record drop in output in India, the world’s second- largest producer. Cocoa futures dropped.

India’s output will be 14.7 million metric tons in the 12 months ending Sept. 30, down from a February forecast of 17 million tons, Czarnikow Group Ltd. said yesterday. Global demand will exceed production by 9 million tons, Sucden Financial Ltd. said this week.

Raw-sugar futures for July delivery rose 0.69 cent, or 4.8 percent, to 15.05 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 15.13 cents, the highest for a most- active contract since July 26, 2006.

Prices climbed for the fourth straight day amid speculation that 810,000 metric tons will be delivered to India and other countries, said Michael McDougall, a senior vice president for Newedge USA LLC in New York. The price may reach 15.44 cents, McDougall said in a report.

A rally in global equities also boosted futures, he said.

This week, the price gained 6.1 percent, the most in four months. Brazil is the world’s biggest sugar producer.

“The decline in Indian production has exceeded all expectations and has once again seen India become the critical factor in the global sugar market,” Czarnikow said.

On ICE, cocoa futures for July delivery fell $51, or 2.1 percent, to $2,324 a metric ton. The price slumped 5.2 percent this week.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.

Reuters Fresh signs of recovery bolster Wall Street

NEW YORK (Reuters) - U.S. stocks rose on Friday as surging oil prices pushed energy shares higher and fresh economic data suggested key parts of the economy could be stabilizing.

The U.S. factory sector contracted further in April, but at a slower pace, while consumers reported feeling more confident about the economy last month than at any time since September when Lehman Brothers collapsed, paralyzing the global financial system.

Exxon Mobil Corp (XOM.N) rose 2 percent to end at $68.01 and the S&P energy index .GSPE gained 3 percent after crude oil futures settled above $53 a barrel.

"The energy stocks, if you can determine the word cheap, are reasonably priced," said Carl Birkelbach, chairman and CEO of Birkelbach Investment Securities in Chicago.

"If the economy is going to turn, which is what the market, the Fed and Obama are telling us, then naturally energy prices should go back up again," he said.

The Dow Jones industrial average .DJI gained 44.29 points, or 0.54 percent, to 8,212.41 points. The Standard & Poor's 500 Index .SPX rose 4.71 points, or 0.54 percent, to 877.52. The Nasdaq Composite Index .IXIC edged up 1.90 points, or 0.11 percent, to 1,719.20 points.

For the week, the Dow rose 1.7 percent, the S&P gained 1.3 percent and the Nasdaq ended up 1.5 percent.

The Nasdaq's gains marked the eighth straight weekly advance for the index, it's longest streak since December 1999. more...

Bloomberg China Manufacturing Expands, Adding to Recovery Signs

May 1 (Bloomberg) -- China’s manufacturing expanded for a second month as government stimulus spending stoked a fledgling recovery in the world’s third-biggest economy.

The Purchasing Manager’s Index rose to a seasonally adjusted 53.5 in April from 52.4 in March, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.

Stronger Chinese demand is helping exporting nations across Asia, where South Korea reported today a 9 percent gain in shipments in April from the previous month. Goldman Sachs Group Inc. says the Chinese economy will grow 8.3 percent this year even as countries from the U.S. to Japan are mired in recessions.

“The worst is already behind China,” said Sun Mingchun, an economist at Nomura Holdings Inc. in Hong Kong. “Domestic strength should outweigh the tougher external environment.”

In the manufacturing data, the output index rose to 57.4 from 56.9 in March, the new order index climbed to 56.6 from 54.6, and the export order index increased to 49.1 from 47.5.

The Chinese and South Korean numbers show “global demand is no longer in freefall,” said David Cohen, an economist with Action Economics in Singapore. “Maybe the global downturn is bottoming out -- maybe the first quarter will prove to have been the worst.” more...

Bloomberg Oil Rises to a Five-Week High as Consumer Confidence Improves

May 1 (Bloomberg) -- Crude oil rose to a five-week high as U.S. consumer confidence improved and manufacturing shrank at the slowest pace in seven months, signaling that the recession may end later this year.

Oil gained 4.1 percent after a report showed that confidence in April climbed to its highest level since before the collapse of credit late last year. Factory orders and production are steadying after plunging last year as companies cut stockpiles. Prices were down earlier as U.S. supplies rose to the highest since 1990 and fuel demand dropped.

“Like a lot of markets we are rising on hope,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “Some people think that the rise in consumer confidence will result in increased petroleum demand.”

Crude oil for June delivery climbed $2.08 to $53.20 a barrel at 2:55 p.m. on the New York Mercantile Exchange, the highest settlement since March 26. Prices are up 3.2 percent this week and 19 percent this year.

The Reuters/University of Michigan final index of consumer sentiment rose to 65.1, the second straight gain, from 57.3 in March. The index reached a three-decade low of 55.3 in November. The Institute for Supply Management’s factory index increased to 40.1 last month, higher than forecast, from 36.3 in March. Readings less than 50 signal a contraction.

“Traders are looking at poor statistics and looking at them as bullish because they are better than a month ago,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “These moves are unsustainable because the fundamentals of the market are poor.” more...

Bloomberg U.S. Markets Wrap: Commodities, Stocks Gain on Economic Outlook

May 1 (Bloomberg) -- Commodities jumped the most in four weeks, led by grains and energy, as signs of improving economic conditions boosted speculation that demand will strengthen for raw materials. Equities also climbed.

The Reuters/Jefferies CRB Index surged 3 percent, the most since April 2. Wheat soared 6.2 percent, the most in five months. Crude oil climbed 4.1 percent.

U.S. consumer sentiment last month unexpectedly advanced to the highest level since the credit crisis intensified in September, an industry report showed today. Manufacturing in China expanded for a second straight month in April.

“More sentiment change toward the economy has been driving these prices,” said Evan Smith, who helps manage $2 billion at U.S. Global Investors in San Antonio. “The manufacturing numbers have been a catalyst for someone who’s been sitting on cash to start putting money to work in these markets again.”

The CRB index gained 6.65 to 299.04. Sixteen of 19 components in the gauge climbed. The UBS Bloomberg Constant Maturity Commodity Index rose 3.5 percent to 964.9.

The gain in equities capped a weekly advance. Consumer confidence and manufacturing jumped to their highest levels since September, signaling the worst of the recession may be over. more...

GlobalCoal Newcastle Coal Index

Weekly NEWC Coal Index
03-Apr-09 60.79
10-Apr-09 63.18
17-Apr-09 63.12
24-Apr-09 63.11
01-May-09 62.26

Monthly NEWC Coal Index
Jan-2009 82.69
Feb-2009 75.03
Mar-2009 61.37
Apr-2009 62.55

Business Times Palm futures rebound

CPO FUTURES
[Friday - May 01, 2009]

Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives closed higher yesterday, rebounding from previous losses on higher soyoil prices and positive exports data, dealers said.

Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products for April rose 2.5 per cent to 1,191,960 tonnes from 1,163,008 tonnes the previous month.

The dealers said that despite the swine flu threat, the short supply of soyoil due to the declining harvest in South America meant a worldwide shortage of vegetable oil, thus helping to push up palm oil prices.

At close to yesterday's trading, May 2009 gained RM74 to RM2,716 per tonne, June 2009 increased RM88 to RM2,634 per tonne, July 2009 went up RM115 to RM2,595 per tonne and August 2009 added RM138 to RM2,535 per tonne.

Turnover rose to 32,076 lots from 24,260 lots the previous day while open interests declined to 87,025 contracts from 86,590 contracts earlier.

As for the physical market, May South increased to RM2,750 per tonne from RM2,650 per tonne the previous day.

PT Bumi Resources Tbk - Outturn - Q109 vs Q108

Here is a summary of Bumi’s financials Q109 vs Q108 – the unaudited financials are being posted on our web site and conveyed electronically to the IDX

Net Sales Revenue
$752.9 million vs $ 663.6 million – increases by $ 89.3 million or up by + 13.5%

Gross Margin
$392.5 million vs $250.5 million – increases by $ 142.0 million or up by + 56.7%

% Gross Margin to Net Revenue
52.1% in Q109 from 37.8% in Q108

Operating Income
$283.3 million vs $ 160.9 million – increases by $ 122.4 million or up by 76.1%

% Operating Income to Net Revenue
37.6% in Q109 vs 24.2% in Q108

EBITDA
$266.7 million in Q109 vs $ 175.9 million in Q108 – increases by $ 90.8 million or up by 51%

% EBITDA to Net Revenue
35.4% in Q109 vs 26.5% in Q108

Profit Before Tax
$212.5 million vs $ 147.4 million – increases by $65.1 million or up by 20.6%

% Profit Before tax to Net Revenue
24.3% in Q109 vs 22.8% in Q108

Net Income (on 100% basis – without minority adjustment)
$183.2 million vs $151.9 million – increases by $31.3 million or up by 20.6%

Net Income ( after minority adjustment)
$124.5 million vs $ 103.3 million – increases by $21.2 million or up by 20.6%

% Net Income (after minority adjustment) to Net Revenue
16.5% in Q109 vs 15.5% in Q108

Average FOB Selling Price of Coal
$75.4/ ton in Q109 vs $ 57.9/ton in Q108 – increase by $17.4/ton or up by 30.1%

Coal Inventories
3.8 m tons on 31 Mar ’09 vs 3.0 m tons on 31 Mar ’08 or up by 26.0%

Port Stock increases to 1.5 m tons or up by 173%

Production Cash Costs
$27.46/ ton in Q109 vs $ 30.73/ton in Q108 or reduced by 10.6%

General comments on Q109
30.1% increase in selling price and 10.6% drop in production cash costs overcompensated for a calculated drop in volume (of 1.2 m tons) characteristic of any Q1 – to control supplies in a soft market; take opportunity to rebuild inventory (to an optimal 4 m tons level), optimize and increase planned sales in Q209 and maximise sales between Q2 to Q4.

Q109 was again a challenging period on account of continuing unsually heavy rainfall which hampered mining activity – however, priority was accorded to exposing coal by exponentially increasing overburden removal activity – 146.6 Mbcm in Q109 vs 118.7 Mbcm in Q108 - an increase of 27.9 Mbcm was achieved or up by 23.5%. This augurs well for Bumi to step up coal mining activity as weather conditions normalize beginning Q2.

Contracted quantities are now around 80% of expected FY09 sales. New export markets have opened up, notably, China.

Bumi is on track to achieve its 2009 guided metrics –
+ 10% increase in production and sales volume (vs FY08)
Reduce production cash costs by 15% in FY09 (vs FY08)
Achievable FOB price in FY09 would be indicated next month when the Asian contract settlements are completed – no change to present view ie mid $60’s/ton.

Darma Henwa has been equity accounted and Fajar Bumi Sakti has been consolidated in Bumi Accounts beginning Q109.

Pendopo expenses have been capitalized as it is non-earning from Q109 in our books.

Global Non Deal roadshows, Investor Forums were attended to address the concerns of our investor fraternity directly ( through CLSA, UOB Kay Hian, Macquarie, Credit-Suisse, Citi, ICAP) to Las Vegas, Singapore, Hongkong, London, New York and Tokyo. We also held global dial in conference calls arranged by HSBC and UBS. The company is focused on governance, addressing investor concerns during this challenging environment.

CLSA INDO - Total Bangun Persada 1Q09 results in line

Total Bangun Persada (TOTL IJ) 1Q09 result: inline with expectation. Here are comments from Hadi:

1Q09 Net profit Rp13.4bn grew 27% YoY or accounts for 19% of our forecast.
This is inline with our forecast as we expect seasonality in construction industry.

1Q09 Revenue Rp460bn was increased by 3%YoY as the company is more selective in securing new projects. Slight improvement in 1Q09 gross margin was up to 7.8% driven by stabilizing material prices.

1Q09 operating margin was down to 4.9% but mostly because of the lower effect of Joint Operation income. Further earnings pressure came from higher tax expense due to the new tax formula implementation.

We think the slowdown in high rise building and tightening competition in big cities should continue to limit the company’s growth potential. Maintain SELL

CLSA INDO - Ramayana 1q09 results disappointing

Ramayana reported disappointing 1Q09 results. Please see comments from Swati below. Maintain Sell.

Ramayana posted net profit of Rp43bn for 1Q09 (12% of our FY09 forecasts). Operating profits was only Rp5bn (1% of our FY09 forecasts). Operating margin was only 0.6% compared to 3.2% for 1Q08.

Ramayana has a high operating leverage. Almost 60% of Ramayana’s operating expenses are fixed. Weak sales means operating margins get squeezed sharply.

Ramayana -0.1% operating margin in 4Q08 was the worst ever since 2Q95. The 0.6% operating margin in 1Q09 was the second worst since 2Q95! Rp5bn in operating profit is also the second lowest since 2Q95.

Overall ssg for 1Q09 was -8.9% yoy. We have forecasted -7% for 09CL.

We will be reviewing our numbers for downward revision on back of higher opex/sales and lower sales.

Maintain Sell

CLSA PGas reports both FY08 results and 1Q09

Perusahaan Gas Negara (PGas IJ, 2500) , result comment from Swati
Market cap: US$5.76bn

On the first glance, 2008 numbers look rather weak. Net income is Rp634bn vs. our forecast of Rp1.25tn and consensus at Rp2tn. We forecasted forex translation loss of Rp2.57tn. But Pgas reported Rp2.50tn of translation loss and another Rp547bn loss on derivative transaction entered into to hedge part of the yen loan (Outstanding Yen loan about Yen 39bn of which Yen19bn is hedged by the derivative transaction). Note that the derivative transaction is profitable in 1Q09.

Pgas operating profit was Rp4.65tn vs. our forecast of Rp4.98tn (93% of our forecasts). This was because we used slightly higher average exchange rate for US$ to Rupiah conversion compared to the company.

Our distribution volumes number of 583mmscfd was broadly inline with 577mmscfd distribution volumes realized by the company.

Pgas operating cash flow was Rp3.77tn and cash on balance sheet as of 31 Dec was Rp3.5tn.

Note: Pgas can pay more than its net income by way of dividends. The forex loss is tax deductible.

1Q09 results
Pgas reported excellent 1Q09 results. It reported Rp1.22tn net income (29% of CL09 forecasts). Operating profit was Rp1.99tn (31% of CL09 forecasts). Operating margins expanded to 44.6% in 1Q09 on back of lower operating expenses as a percentage of sales. The operating margins are highest ever since 2000.

Distribution volumes were 721mmscfd higher than our full year forecasts of 670mmscfd. We will be revising up our distribution volumes upwards but with rupiah strengthening, forex losses of last year should reverse.

Pgas reported Rp2.09tn of operating cash flow for 1Q09 and Rp1.84tn of free cash flow. The cash balance as of 31 march 09 was Rp5.4tn.

We remain buyers of Pgas. It is expected to generate rich cash flow stream going forward. Lower average cost of gas as proportion of cheap contracted gas from SSWJ increases should expand margins. Higher volumes and lower costs should expand earnings. Higher dividends are also possible.

Credit Suisse - Ciputra Development 1Q09 results

In line with our expectation, CTRA reported 1Q09 net income of Rp53.8 bn, 46% YoY, -62% QoQ and 26.5% of our and 29% of consensus full-year forecasts.

After experiencing a significant collapse in its marketing sales on the back of the global economic crisis, we believe that CTRA’ marketing sales may have found the bottom, with March 2009 marketing sales exhibiting a slight recovery on a MoM basis (even after excluding sales from new launches).

We maintain our OUTPERFORM rating on CTRA with a target price of Rp610. CTRA is currently trading at a 58% discount to 2009E RNAV, versus the regional average of a 25% discount.

In addition, CTRA is currently trading at a wider discount to RNAV than its historical range. Our target price is based on a 45% discount to 2009E RNAV of Rp1108/share.

Danareksa Banking sector A letter from Singapore

A short trip to our neighboring country
We made a short 3-day trip to Singapore this week and met with 20 investors and fund managers to convey our bullish view on the banking sector. Most investors agree that the Indonesia economy is sound but see uncertainties in the political arena. They also share the same view that the Indonesian banking industry is expensive on a regional comparison but also see potential upside in some of the banks - in particular those that lend to the consumer sector where growth is still aplenty.

Slower loans growth and rising NPLs
These are the two main concerns raised by investors. Yes, amid the ongoing economic slowdown marked by higher risk aversion, we have seen loans growth slow to about 4% in 4Q08 from its peak of 10% in 2Q08. In fact, loans growth even turned negative in Jan-Feb 09 (compared to Dec 08). And a search for greater liquidity has also led to a higher cost of funds. As for NPLs, they rose to around 4.3% in Feb 09. Moreover, the NIM has declined to 7.5% in Jan-Feb 09. However, we still believe the banking sector has good prospects. Although banks are not lending as aggressively as they were last year, they should still be able to grow loans by 10-22% this year. We also believe the fears on NPLs are overdone. Note that the NPLs are still lower than the 5-year average of 6.7% and still way down from 2001’s 18%.

A turnaround in 2H09
We believe loans growth shall accelerate in 2H09E, supported by benign inflation of 6% by YE09 and a lower BI rate of 7.25%. In addition, the fiscal stimulus initiated by the government should help boost domestic consumption. Note that of the Rp73trn fiscal stimulus (1.4% of GDP), about Rp43trn is intended for tax incentives. We expect the impact from the stimulus to be felt in 2H09 with a rebound in domestic consumption. Consumption credit for SME has seen the highest growth in recent years (30% 6-yr CAGR), and we believe this will remain the case in the future. We expect industry loan growth to average about 10% this year, before picking up to about 15-20% next year.

Top picks: BBRI and BDMN
Our message is simple: a consumer recovery – helped by benign inflation and cuts in interest rates – will give banks the opportunity to channel more loans to the consumer segment this year. Moreover, they will be in a position to do this since they have strong balance sheets. We believe BBRI and BDMN should do well since more than 80% of their loans are channeled to the micro and consumer & micro segments. Lending rates in these segments tend to be high and sticky with a wide NIM at around 10-11%. Moreover, BDMN should benefit from declining interest rates since 70% of its deposits are costly in nature. On top of that, both BDMN and BBRI have a higher proportion of loans in comparison to their assets. This should cushion them from declining interest rates. We have BUY recommendations on both BBRI and BDMN. For BBRI, our TP is Rp6,300, implying 3.0-2.6x FY09-10E PBV, and for BDMN our TP is Rp3,600, implying 2.3-2.1x FY09-10E PBV.

UBS Investment Research on PGN's FY08 and 1Q09 results

Happy ending to a month long drama

2008 results: revenue inline, core profit below
PGAS reported 2008 revenue of Rp12.8tr, 4% higher than UBS 2008e. The company recorded Rp2.5tr of forex loss (management did not get approval to capitalise forex loss) and Rp505bn of derivative loss. This resulted in reported profit of only Rp634bn, but core profit (forex and derivative losses are non-cash) was Rp2.7tr, 9% lower than UBS 2008e.

Q109 results: revenue above, core profit above
PGAS reported Q109 revenue of Rp4.5tr, which is 26% of UBS full year 2009e. We had expected Q109 revenue to be c24% of full year, as we believe gas distribution volume should grow during the course of the year. Margins also improved as we are proven to be too conservative on gas price cost. As a result, PGAS’ Q109 core profit of Rp1.2tr is 29% of UBS full year 2009e, above expectation.

Scope for earnings upside
We believe there is scope for 2009 earnings upside, driven by higher than expected gas distribution volume (721mmscfd in Q109 versus UBS full year 2009e of 700mmscfd). We caution of near-term pullback however, since the stock has rallied by 10.6% ahead of results announcement (published after market closed).

Valuation: Rp2,500 DCF-based price target under review
Our DCF approach uses an explicit forecast up to 2014, with a LT growth rate of 5% afterwards and a WACC assumption of 15.2%. Our rating and price target are currently under review.

Danareksa Bank Danamon Foundation for growth

The decision to acquire an additional 20% stake in Adira is a positive move
For an additional 20% stake in Adira (the largest multifinance company by market cap), BDMN will have to pay around Rp1.6trn. The deal will lift BDMN’s ownership in Adira to 95%. While there will not be a significant impact at the operating level, the transaction will give a slight boost to earnings after accounting for goodwill amortization and lower minorities. All in all, we view the deal positively: it is not earnings dilutive and BDMN will benefit from greater exposure to the profitable consumer sector and Adira’s higher ROE. The transaction is expected to be completed by July.

The deal is not dilutive
At 8x PER’08, the transaction is not earnings dilutive given that BDMN’s current multiple is much higher at 14x FY09 PER. Yes, on a PBV basis, the deal appears to be quite rich at around 4.2x PBV’08, yet the phenomenal 64% ROE more than compensates. Effectively, Adira is valued at only 7x its ability to generate returns (PBV/ROE) vis-à-vis BDMN’s 13x. Besides, if we assume a 20% increase in earnings next year, Adira’s PBV will decline to just 2x by 2010E.

A good strategic fit
We believe the acquisition fits well with BDMN’s current strategy of expanding its consumer lending - in particular to the mass market segment. This segment accounts for around 47% of the bank’s total loans or up significantly from 2004’s 24%. Besides the stable NPLs of just 3%, lending rates on consumer loans can reach as high as 32% and also tend to be sticky when interest rates are on the decline. In fact, BDMN’s strategy of focusing on consumer lending has boosted its NIM to an enviable 10-11%, the highest in the industry. Going forward, BDMN is well placed to grow its consumer loans by around 15%-20% in FY09-10, supported by the declining BI rate, benign inflation and the Rp73trn fiscal stimulus.

Higher earnings already anticipated; slight adjustment to CAR
Our forecast already anticipated the acquisition of an additional 20% stake in Adira with the minorities lowered to account for a higher stake in Adira. Nonetheless, we do expect a slight decline in the CAR to around 15.2% from our previous estimate of 17%. However, this is still way above BI’s minimum requirement of 8%, showing there is still plenty of room for the bank to extend new loans. For the time being, we make no changes to our forecast or TP. At Rp3,600, our TP offers 24% upside to the current share price. Our DDM derived TP implies 2.3-2.1x FY09-10E PBV and 17.8-12.9x FY09-10E PER. Maintain BUY.

CLSA - 1Q09 Results

Our analyst Olie looked at 1Q09 results in the resource sector. Adaro (ADRO IJ), Indika (INDY IJ), and Aneka Tambang (ANTM IJ) results were generally in line with expectations.

Olie warns that resource companies no longer look cheap from valuation standpoint. Sales desk here is a big believer in inflation scenario and would argue that we should be buying commodity stocks when the PE looks expensive (trough cycle).

Key points from the report:
ADRO posted Rp1,145bn in net profit during 1Q09, in line, a sharp turnaround from a net loss of Rp12bn a year ago.
INDY: in line, net profit Rp451bn in 1Q09, +61% YoY, 36% of our FY.
The key here is not to annualize coal companies 1Q09 numbers due to higher-priced-carry-over-contracts from last year.
ANTM: poor 1Q09 as expected, net profit of Rp90bn in 1Q09, -87% YoY, the result accounted some 28% of FY09, but only 15% of consensus.
On commodity price recovery, Indo Tambang (ITMG IJ) is the top pick in the coal sector, thanks to high export portion and operating leverage.

Perusahaan Gas (PGAS IJ) 1Q09 looks strong, by Swati
1Q09 numbers appear excellent with Rp1.2tn net income. Our full year is Rp 4.2tn. We would revise our volume number upwards. Besides with rupiah strengthening, forex losses should reverse.

Interestingly, PGAS released results of both FY2008 and 1Q09 together, at the same time. On the first glance, 2008 numbers look very weak. Net income is Rp633.86bn vs our forecast of Rp1.2tn and consensus at Rp2tn +

We forecasted forex loss of Rp2.57tn. Bt the company’s forex loss was immense. It reported Rp2.50tn of translation loss and another Rp547bn loss on derivative transaction they entered to hedge the yen loan. This loss I had not forecasted. Besides we also used higher average exchange rate for Usd to rupiah which also resulted in lower actual net income.

Jasa Marga (JSMR IJ) posted a solid 1Q09 result by Hadi
1Q09 Net profit Rp708bn grew 4.0%YoY on the back of steady traffic volumes.
1Q09 traffic volume increased 2.9%YoY slightly better than our full year estimate of 2.7%; note that the company’s current operations are mostly matured tollroads. 1Q09 Revenue Rp832.9bn grew by 4.2%YoY or 23% of our estimate. We expect revenue seasonality with stronger 4Q performance due to September 2009 tariff adjustment.

Jasa Marga’s cash balance maintained at Rp4tn with 37.5% net gearing; should be enough to complete the expansion plan.

Our target price of Rp1,100 was based on DCF valuation assuming 15% WACC and 18% tariff adjustment. We think 14% WACC is more appropriate with current 12% yield for 10Y government bonds. While 16% tariff adjustment is more conservative to reflect low inflation environment. This adjustments would increase NAV to Rp1,396/share - sensitivity matrix below. Maintain BUY.

Gudang Garam (GGRM IJ): 1Q09 at 781bn, up 115%YoY.
Good numbers as its gaining market share. Actually, all big producers are gaining mkt share as the smaller producers have started to lose their tax advantages.

CIMB Bank Negara Indonesia Result note - Upside surprise, but sustainable?

(BBNI IJ / BBNI.JK, NEUTRAL - Downgraded, Rp1,210 - Tgt. Rp1,300, Financial Services)

We downgrade BNI to Neutral from Outperform, as we believe most of the positives have been priced, even after raising our DDM-based target price to Rp1,300 from Rp1,080 on trimming the cost-to-income ratio. BNI's 1Q09 results surprised on the upside, mainly due to a significantly lower CIR. However, we believe CIR will d rise in the coming quarters, to around 48%. The bank's gross NPL ratio rose to 5.6% from 5.0%, but this was still within control as provisioning coverage was kept above 100%. Further write-offs are expected, and we have factored in Rp4.4tr of provisioning.

Business Times Crude palm oil close mixed

CPO FUTURES

Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives closed mixed yesterday as investors remained wary of the impact of the current swine flu epidemic on demand for grains and meat, dealers said.

Vegetable oil prices have a tendency to move in tandem with grains prices.

Dealers said investors cut their positions ahead of the long weekend and took the opportunity to sell amid the lack of fresh news.

"Concerns that demand for vegetable oil from China may be reducing has also affected buyers sentiment," a dealer said.

May 2009 declined RM10 to RM2,642 per tonne, June 2009 eased RM8 to RM2,546 per tonne, July 2009 rose RM24 to RM2,480 per tonne and August 2009 increased RM4 to RM2,397 per tonne.

Turnover was higher at 24,260 lots from 16,596 lots yesterday while open interests was higher at 86,590 contracts from 85,628 contracts.

As for the physical market, May South declined to RM2,650 per tonne from RM2,670 per tonne yesterday.

Bloomberg Oil Rises, Capping a 3-Month Gain, as Recovery Optimism Grows

April 30 (Bloomberg) -- Crude oil rose, capping a third monthly gain, on signs that the global economy and fuel demand will recover this year.

Oil advanced as stock markets strengthened on better-than- expected earnings and speculation that the worst of the global recession is over. Industrial output in Japan increased for the first time in six months while U.K. consumer confidence climbed to the highest level in a year. Prices fell earlier on concern that the spread of influenza will cut fuel demand.

“There are increasing signs that the economy is starting to get better,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “In the end this should be more important than the disruption caused by the flu.”

Crude oil for June delivery rose 15 cents, or 0.3 percent, to settle at $51.12 a barrel at 2:47 p.m. on the New York Mercantile Exchange. Prices gained 2.9 percent in April and are up 15 percent this year.

Other commodities also climbed. The Reuters/Jefferies CRB Index of 19 commodities rose 1.22 points, or 0.6 percent, to 222.39, the highest since April 17.

Mexico has been the focal point of the outbreak of the swine flu virus. The World Health Organization has confirmed cases in 11 countries, including the U.S. Twenty states have identified probable or confirmed cases of swine flu.

Trading Range

Futures in New York traded between $43.83 and $53.90 this month as inventories climbed and equities rebounded on speculation the economy will soon rebound.

“This market doesn’t want to move far from $50,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “We’ve have been tracking the stock market a lot lately.” more...

Reuters Dow, S and P dip on Chrysler bankruptcy, MetLife off late

NEW YORK (Reuters) - The Dow and S&P 500 fell on Thursday after Chrysler's bankruptcy filing undercut optimism about upbeat corporate profits and reassuring job market data.

Even so, the S&P 500 closed out its best month in nine years despite the big U.S. automaker's bankruptcy after talks to restructure its debt broke down.

Uneasiness about Chrysler's bankruptcy wiped out earlier gains of more than 1 percent in both the Dow industrials and the S&P 500.

"We've got some fairly heavy-handed government intervention here, and the market is concerned about that," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

Exxon Mobil Corp was the top drag on the Dow, down 2.6 percent at $66.67, after the world's largest publicly traded company posted a 58 percent drop in quarterly profit that missed Wall Street's estimates.

The Dow Jones industrial average dropped 17.61 points, or 0.22 percent, to 8,168.12. The Standard & Poor's 500 Index dipped just 0.83 of a point, or 0.09 percent, to 872.81.

But the Nasdaq Composite Index gained 5.36 points, or 0.31 percent, to 1,717.30.

FINANCIALS RANK AS TOP SECTOR IN APRIL

For the month of April, the Dow rose 7.4 percent, the S&P 500 gained 9.4 percent and the Nasdaq jumped 12.4 percent.

The gains for the broad S&P were the largest since March 2000, while the Nasdaq scored its biggest percentage rise since October 2002.

The best-performing sectors in the S&P 500 for the month were financials, up 22 percent, and consumer discretionary stocks, up 18.5 percent. more...

Bloomberg U.S. Stress Test Results Delayed as Early Conclusions Debated

April 30 (Bloomberg) -- The Federal Reserve will postpone the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials.

The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as tomorrow, they said.

Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices.

“Everybody understands they’ve got a tiger by the tail here,” said Mark Tenhundfeld, a senior vice president at the American Bankers Association in Washington. “If they don’t let him go gently there will be a lot of mauling going on.”

The 19 firms include Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc., GMAC LLC, MetLife Inc. and regional lenders including Fifth Third Bancorp and Regions Financial Corp. The banks in the test hold two-thirds of the assets and more than half of the loans in the U.S. banking system, according to a Fed study released April 24.

The Fed led the stress tests, using as many as 140 staff members working in consultation with 60 people from other bank oversight agencies.

While the banks were ordered not to release the results of the stress assessments prematurely, Goldman yesterday may have provided a hint with its decision to sell bonds and shares, issuing $2 billion in five-year notes without a government guarantee and making a $750 million stock offering. A spokesman for Goldman declined to comment. more...

UBS INDF Earnings bump ahead

At a Glance
• 1Q09 should turnaround to profit
• Stable rupiah will reduce FX losses
• Valuation updated following revised EV/EBITDA and DCF valuations for IndoAgri
• Upgrade to Buy with new TP of Rp1,650

1Q09F should turnaround to profit. Stabilized raw material prices (wheat and CPO) are expected to improve Indofood (INDF) 1Q09F profit, following multiple price increases last year. We also expect FX losses to drop markedly q-o-q (it caused 4Q08 to register a loss), as the rupiah had depreciated at a much slower pace in 1Q09.

Volume recovery expected. Unlike the 9.5% and
13.6% y-o-y drop in flour and instant noodle sales volumes last quarter, we expect the sales volumes to recover in 1Q09 based on indications by the group for the first two months of this year. We attribute this to industry-wide price adjustments that would prompt consumers to switch back to branded products.

SOP revised. Following our upgrade of IndoAgri’s DCF-based valuation, we raised INDF’s SOP value. We now peg the group’s consumer branded products and Bogasari’s EV/EBITDA ratio to 6x and 5x, respectively.
We forecast 24% 3-year EPS CAGR, and the counter is currently trading at 5.3x FY10F EV/EBITDA.

Upgrade to Buy. The group’s plan to refinance its maturing bonds and most of its USD short-term debt with long-term debts are steps in the right direction. Given its effort to reduce gearing, recovering sales
volumes, and moderating raw material costs, we believe INDF is undervalued. We upgrade the counter to BUY from Hold, with a revised Rp1,650 target price.

BASML - BUMI Solid 1Q not an indicator of 2009 performance, in our view

1Q09 seen solid, but our concerns on 2Q onward remains
We share Bumi’s optimism that 1Q results are likely to be solid. We see net profit surging 228% YoY, revenues up 73% and EBIT 305%, largely driven by 2008 contracts that were carried forward and settled at much higher prices. Yet, a robust 1Q may not be a pointer to BUMI’s full-year performance prospects, as half of its 2009 volume is still not priced, and coal demand is weakening even as coal price falls. Maintain Underperform.

Higher ASP in 1Q might not last through 2009
We estimate ASP to increase 47% YoY to US$85/t in 1Q. Yet, with about 20% of BUMI’s volumes still not committed and around 50% not priced yet, we see ASP falling 47% QoQ to around US$46/t and net profit dipping 88% in 2Q and beyond. Coal price currently hovers around US$60/t, more than 50% below 2008 prices.

Watch out for balance sheet issues
Our concern has been more with BUMI’s balance sheet rather than its P&L. In the past, BUMI has negatively surprised with higher-than-expected debt and capex. In 4Q, BUMI’s debt surged to US$1.3bn, up 4-fold in six months. With the acquisition of three coal assets (at about US$600mn), we see its debt levels rising further in 1Q. If coal price slides, we are concerned that interest costs and debt repayment would also weigh on earnings and cash flow.

We are still not buyers of the stock
Unless coal price recovers, 1Q seems like peak-cycle earnings. While we do not see a plunge in coal prices here on, we also do not see any catalysts for a coal price rally in the next 3-6 months. The stock’s current valuation based on US$70/t coal price, 12% volume increase, and a 20% drop in cash cost, is not as cheap as perceived – at 5.4x 2009E PE and 7.6x 2010E PE, comparable to ITMG’s 2009E PE of 5.8x and 2010E PE of 7.8x (consensus estimates).

UBS Indonesia Nickel Additional surplus warnings; re-iterate Sell

INSG warns of continuously weak 2009
The global nickel market will exhibit an 80k tonnes surplus in 2009 as falling demand continues to outpace supply cuts, according to the International Nickel Study Group (INSG). This surplus is 207% higher from 2008’s 26k tonnes, by our estimates, and 300% above our UBS forecast of 20k tonnes for 2009.

No near-term recovery in primary nickel demand
The INSG furthermore highlights that while the economic crises has created a large degree of supply and demand uncertainty, it remains unlikely that any substantial improvement will take place in the nickel market this year.

Bearish sentiment supports our view
As we move into the seasonal slow industrial growth period of May-July, we highlight that nickel prices could fall further from last week’s -10% YoY. As such, we re-iterate our Sell on Indonesian nickel stocks, Antam and Inco Indonesia, who we believe are overvalued at 17.2x and 33.3x PE 09 respectively.

Deutsche Bank - Resilient operating performance

Indofood {Ticker: INDF.JK, Closing Price: 1,250 IDR, Target Price: 1,300 IDR, Recommendation: Buy}

1Q09 operating results were above our estimates, net profit was below due to fx losses. Interesting to flag out, operating profit exceeded our estimates by 8% although DB had highest estimates on the street (7% above consensus). 1Q09 sales in increased by 1% yoy (5% ahead of DB's) but operating profit saw a decline of -10% on lower CPO prices.

Below the line, fx losses were substantial which contributed to the divergence in our net profit estimate. Going forward, with Rupiah stabilizing, we expect fx losses to reverse. Interest expense increased markedly by 64% on the back of higher re-priced interest rate and loan for Indolakto acquisition, this is largely within our expectation. Divisional earnings will be out shortly. (Finc. summary attached below)

we believe it is one of the most undervalued large cap in Indo. Although concerns on corporate governance and high debt exposure mean it should trade at discount, we believe the current discount appears too steep. Indeed we believe these risks appear to have peaked and that operational improvement going forward, esp. from its instant
noodle business (c. 70% of net profit), could be a significant share price driver. At our recent meeting, CEO confirmed there will not be anymore acquisition this year since the debt ratio of 1.6X has peaked.Interestingly, on apple to apple basis, incl minority interests, its net debt to equity ratio is at a more palatable 1.0X.

.P.Morgan Indofood Sukses Makmur 1Q09 results

1Q09 core net income in-line: INDF reported 1Q09 net income of Rp110B; down 70.4% Y/Y. The sharp decline in net income is due to a Rp362.2B of forex loss from Rp depreciation. Taking out the forex loss, the estimated 1Q09 core profit is Rp327B; down 13.5% Y/Y. The core net income is in-line with J.P. Morgan's (28.6%) full year core income forecast of Rp1,142B, but slightly ahead of consensus’ (30.3%) estimate of Rp1,078B.

Margin compressed: Gross margin compressed by 185bp while excellent expense management caused operating margin to decline by 119bp. If we exclude the non-recurring items such as forex, core net income margin declined by 61bp. We hypothesize that lower CPO price could be the cause of the margin decline.

Milder profit decline: The operating profit decline of 7.9% is lower than our forecasted figure of 24.6% decline in FY09E operating profit. The core net income decline of 13.5% Y/Y is less than our full year estimated figure of 28.1%. Despite the Y/Y decline in profit, the declines are milder than originally expected.

Maintain Neutral and Dec-09 PT of Rp1,100: We maintain Neutral and our Dec-09 PT of Rp1,100 on INDF. We will revisit our model once more details are available. Our SOTP-based PT is derived using the market value of IndoAgri and the sum of DCF values of other divisions. The DCF values are derived using a risk free rate of 13% and terminal growth rate of 7%. In addition, we apply 25% conglomerate discount and 35% discount to reflect investors’ negative sentiment towards Indolakto acquisition. Risks: unexpected positive or negative swing in profit.

CIMB Indofood Sukses Makmur Result note - Ugly at the top, but sweeter within

(INDF IJ / INDF.JK, TRADING BUY - Maintained, Rp1,250 - Tgt. Rp1,350, Consumer)

Indofood's 1Q09 results beat our forecast and consensus by quite a wide margin despite a reported net profit of only Rp110.4bn, down 70.4% yoy on flat revenue of Rp8.9tr. Core profit, taking out forex losses, grew less than 1% qoq (because of better margins) and yoy (lower taxes paid). Strong downstream performances were the main driver. But balance sheet remained fragile as gross debt increased to Rp20tr, pushing net gearing to 231% from 219% qoq. That said, operating improvements and a more conducive domestic bond market bode well for Indofood's attempts to refinance its US$ and short-term debt to Rp debit with a longer duration. Maintain Trading BUY and forecasts pending an analysts' meeting tomorrow morning, and target price of Rp1,350, based on sum-of-the parts analysis.

Nomura - Mr Macro reviews his reasons to prepare for despair

Investors lack conviction and consequently risk exposure should be light until the macro fog clears.

Mr Macro concludes that the balance of evidence favours a sharp turn lower in risky assets.

Mr Macro has spent the past couple of days in Helsinki. The flight home was an opportunity to reflect on his 20 April missive proclaiming that now was time to prepare for despair. The operative scenario, a 75% probability, is that the risk rally is over. The alternative scenario is that after the recent pause another melt-up drives global equity indices toward the 200-day moving average benchmark before turning lower. Either way, the ingredients for a self-sustaining recovery in risk assets and the related V-shaped economic outcome are not in place. The recent choppy trade in a narrow range is testament to investor uncertainty and a lack of conviction. Positions will likely remain light until the macro fog clears. Here is a list of some of the important factors to consider:

Macro – Business survey data, consumer confidence, US housing, and Asian exports are all showing signs of bottoming. More generally, data continue to beat expectations. The negatives are that ISM is just 36.3, near the bottom of the 60-year range. Mr Macro thinks it quite possible that a new low is reached by June and eventually the all-time low of 29.4 set in 1980 is taken out. Why should not the worst recession since the Great Depression set the new standard for the weakest ISM reading of all time? The first indicator for a period of more negative macro news is the CESIUSD, the Citigroup economic data surprise index. Expectations are catching up with the improved outlook and it is likely to be more difficult to continue to achieve positive surprises. Call it negative.

Liquidity – Cash levels are still excessive relative to market capitalisation. Short interest is 4.23% of outstanding, high by historical standards. Since February the Fed has added $300bn to the balance sheet. On the negative side, State Street reported that US equity inflows are the highest in 12-years. Central bank reserves are shrinking. The forward looking Taylor Rule says that the US economy requires negative 7% rates by the end of the year, so each day monetary policy is becoming more restrictive. Call it neutral.

Valuation – The SP500 trades at 21 times 2009 earnings ($40), expensive against the long-run 16 times average. US housing is still expensive relative to rents. Rogoff showed that balance sheet recession bear markets for stocks and housing last 3.5 and 6 years respectively. In the fixed income space Europe peripheral spreads have narrowed significantly. Italy CDS is 82bp narrower from the 198 high. Money markets spreads like OIS-Libor and 3m6m basis swaps are back to trading at pre-Lehman levels. Meanwhile, central bank policy forwards are discounting a V-shape or hiking cycles to begin at the end of the year. Inflation is priced to normalize in line with higher commodity forwards which already look too optimistic given the collapse of global industrial production and trade. Call it negative.

Credit provision – Bank credit continues to shrink. The IMF says US banks need an injection of $500bn of new capital to return to 1990 levels of assets/shareholder equity capital ratios. For all the good intentions of TALF, PPIF, and PPIP, the securitized market remains stressed with ABS new issuance down 95% from peak levels. Call it negative.

Sentiment/Market internals – VIX, put/call ratios and % AAII bears are all warning of complacency. In the past few days, quality is outperforming high-beta names with poor underlying fundamentals. Some argue that this only means that the period of poor performance from quant strategies is finally coming to an end. Call it negative.

Intangibles – Banks know the stress test results and are now in a period of negotiation with the Fed/Treasury. Uncertainty is never a good thing for risky assets. The other major issue is the swine flu virus, something that was not on the radar a week ago, an unknown unknown. Now it is very much a known unknown. Investors are drawing comparisons with SARS and believe it is manageable and unlikely to morph into a pandemic. This may be right, and let us hope so, but the risk is all on the downside if this expectation proves inaccurate. Call it negative.

On balance the body of evidence points to a return to despair. How consensus is this view? It is hard to judge. Sure there are those who argue that flat is the new short or the more traditional view of “sell in May and go away”. It is possible that newly entered risk aversion trades get unwound in one final move towards the 200-day as even more cash sitting on the sidelines is deployed and short interest shrinks to more normal levels. Those holding this view also argue that there is no clear catalyst. Mr Macro concedes that is also the case – there is no smoking gun, just yet.

CIMB Bank Central Asia Result note - Mending leaks with provisioning coverage

(BBCA IJ / BBCA.JK, NEUTRAL - Maintained, Rp3,325 - Tgt. Rp3,600, Financial Services)

We remain Neutral on BCA, despite slightly better-than-expected 1Q09 results, attributable to low costs and a sustained NIM. The bank was burdened by two huge loans turning sour in 1Q09. Provisioning coverage dropped from 408% to 192% as the bank attempted to minimise the damage to its P/L. NIM was kept above 7%, but we believe it should come down to 6% level. Cost-to-income ratio was 41%, but is very likely to revert to its historical mean of around 45%. Maintain Neutral and DDM-based target price of Rp3,600.

CIMB United Tractors Result note - Strong set of results

(UNTR IJ / UNTR.JK, OUTPERFORM - Maintained, Rp7,950 - Tgt. Rp10,850, Industrial Goods and Services)

UNTR's 1Q09 earnings of Rp812bn are above our forecast and consensus, due to stellar performances from all its divisions. Heavy equipment caught us by surprise with margin improvements. Pama benefited from higher production and a depreciating rupiah. We upgrade our EPS estimates by 14-33% for FY09-11 to incorporate the good 1Q09. Maintain OUTPERFORM with a higher target price of Rp10,850 (from Rp9,600) following our earnings upgrade, still based on 12x CY10 earnings. With easing worries on its heavy equipment business coupled with its sizeable market cap, UNTR should able to maintain its premium to the market.

CIMB Astra Internasional Result note - Better margins, but...

(ASII IJ / ASII.JK, UNDERPERFORM - Maintained, Rp15,750 - Tgt. Rp16,200, Automobiles and Parts)

Astra's 1Q09 net profit was Rp1.875tr, -17% yoy on flat sales of Rp21.5tr. The results are ahead of consensus and our forecasts by 15%, driven by better-than-expected margins, primarily from the heavy equipment business. While auto margins also rebounded, we are less convinced about their sustainability. We raise our earnings forecasts by 2-6%, mostly for 59%-owned UT. Consequently, our NAV estimate has been boosted by 6%, and our sum-of-the-parts target price rises to Rp16,200 from Rp15,300, implying 10.4x and 9.3x CY09-10 earnings, at a slight discount to our implied index target of 9.9x P/E. Unless its auto business turns around convincingly, we view Astra an Underperform.

CIMB Bank Mandiri Result note

(BMRI IJ / BMRI.JK, OUTPERFORM - Maintained, Rp2,600 - Tgt. Rp3,450, Financial Services)

Mandiri remains an Outperform and our top banking pick. Handling the NPL cycle well in 1Q09 is a good indication that it can weather the current NPL cycle, we believe. Mandiri's 1Q09 results beat consensus and our expectations slightly, on low costs and sustained loans. Although gross NPL ratio climbed to 5.9% from 4.7% at Dec 08, the bank only needed to lower its coverage to 117% from 127%, and yet sustained its ROE at 18%. Growth following this NPL cycle should bring upside for Mandiri, we believe. Our DDM-based target price is unchanged at Rp3,450.

CLSA Astra's net profit holding up better than expected

Astra's net profit holding up better than expected - due to the strong performance of United Tractors, comment by Wilianto

Astra International (ASII IJ)'s net profit down 17% yoy and +3% qoq to Rp1.87tn. The net profit in 1Q09 amounted to 32% of our full year forecast, but we expect earnings momentum to remain weak in the coming quarter.

1Q09 profit is boosted by strong performance of United Tractors (UNTR IJ - Rp7,400 - BUY),+57% YoY, that is well above our expectation and market consensus.

Excluding United Tractors, Astra’s net profit was down 29% from last year as earnings fell sharply in motorcycle (-45% yoy) and agribusiness (-74% yoy).

We remain negative and believe earnings recovery will be slow.

CIMB Semen Gresik Result note - Defiant selling prices

(SMGR IJ / SMGR.JK, OUTPERFORM - Upgraded, Rp3,975 - Tgt. Rp4,800, Construction and Materials)

We upgrade Semen Gresik to Outperform from Neutral as we believe consensus upgrades are likely following better-than-expected 1Q09 results. Higher-than-expected ASPs were the positive surprise, while consensus was expecting ASP declines. Management wants to maintain the company's 1Q09 ASP throughout the year and at least a 30% EBITDA margin, but this would hinge on the profitability and behaviour of peers, in our view. Adjusting for 1Q09 ASP and costs, our FY09-11 EPS estimates have been raised by 3-11% and our target price, to Rp4,800 from Rp4,650 (still based on US$125 EV/tonne), on higher net-cash expectations.

CIMB Bank Rakyat Indonesia Result note - Only slight NPL deterioration

(BBRI IJ / BBRI.JK, OUTPERFORM - Maintained, Rp5,250 - Tgt. Rp7,000, Financial Services)

BRI's 1Q09 results slightly beat consensus and our expectations, on a stronger-than-expected topline. No significant problems in its asset quality. NPL ratio only climbed to 3.2% from 2.8% at Dec 08, still lower than Mar 08's 3.8%. Operations remained strong, with loans growing 3% qoq and 40% yoy, ahead of peers. ROE was sustained at a high industry level of 28%. BRI again demonstrated its resilience in a challenging and dynamic banking landscape. Maintain Outperform and DDM-based target price of Rp7,000.

Mandiri Sekuritas CTRA: 1Q09 - Boosted by forex gains

Hurt by high material costs. Although the company posted a respectable top-line of Rp306bn, cost of sales went up by18.4% brought about by rising costs of materials such as steel and cement. Thus, it resulted in a significantly trimmed-down operating profit of Rp47.3bn (-21.5%yoy) and margin of 15.4% from 22.2% a year ago. To compensate the current margin squeeze, CTRA is pinning its hopes on more sales of higher-margin land lots, especially on its newly launched projects in Makassar and Pangkal Pinang.

Recurring sources remain steady while net income beautified by gains on foreign currency investments. Of the Rp306bn revenues, about 29% or Rp89bn(-3.3%yoy) came from recurring sources (ie Ciputra malls and hotels), which should remain quite a stable source of cashflow in our view for the remainder of the year due to the high hotel and mall occupancy rates of 97% and 78%, respectively. Likewise, CTRA’s investments in foreign currencies ( in US$ and euro) have yielded gain s of about Rp47bn(+80.8%yoy), which boosted higher- than-expected earnings. However, since the rupiah has recently strengthened against the greenback, forex gains in the remaining quarter could diminish.

Maintain Buy. Despite the challenges of rising costs, we remain upbeat on the stock given its strong balance sheet (net cash position of Rp2.0tn) as well as its deep sales backlog of Rp1.4tn in 2008, of which 30%-40% are up for realization this year. Additionally, the recently lowered mortgage rates will be a boost for demand particularly for its landed residential home-buyers. Maintain buy as the stock price remains underwhelming as it currently trades at a 52.1% discount to NAV09F.

CLSA 1Q09 banking sector result summary

Indonesian banks 1Q09 net profit was in generalwithin expectations - Danamon reported the weakest result i.e. below expectations, while BCA and Mandiri were in-line and BRI the strongest.

Outside our coverage, BNI also posted strong headline numbers, but if we exclude Rp221bn of non-recurring fees net profit was in-line with consensus.

Post release of results and discussing with managements, we still maintain our view that in the next few quarters earnings momentum for all banks will slow dramatically and we cannot annualize what appears to be a decent 1Q09 results.

NIM, for example, on average declined QoQ and flat at best with state-owned banks experiencing the worst NIM performance despite surprisingly strong credit growth.

Managements continue to guide for lower NIM in the future driven by a combination of lower lending rates and bottoming cost of funds.

It is interesting that state owned banks posted strong loans growth in a typically weak 1Q and in the face of sharply rising NPLs, while private banks such as BCA and

Danamon continue to tighten the credit spigot. BCA and Danamon saw loans contract QoQ, while all state owned banks showed 1-3% QoQ loans growth mainly to the corporate segment

NPL rose for all banks with BCA experiencing the sharpest increase to 1.6% of loans in 1Q09, albeit from a low base.

Provisioning charges were also high, offsetting some of the positive increase in NIM.

In summary, while 1Q09 results were within expectations we would be selling into any share price rally as underlying drivers are weak with state-owned banks in particular exacerbating NPL risk with continued strong credit growth. As a result, provisioning burden should remain at high levels driving down lower ROE for all banks.

We currently only have a positive rating on BRI (O-PF)

CLSA BBCA downgrade to UPF (from OPF), TP maintained at 2,800

Our versatile banking guru Nico Oentung, finally downgrades his favorite bank: Bank Central Asia (BBCA IJ) to UPF. This could well be Nico’s last report with CLSA. If you would like to know what his next plans are, then have “a quiet word” with him. Hint: he is crossing over to the enlightened side and taking real responsibility now, after spending 5 years in the dark side of the force.

Back to BBCA, for sure this is a bank with a great franchise, very well managed, and great CG. But at 3x 09 P/B, BBCA valuations are steep and upside looks limited. Plus, the trend is not our friend:

NIM under pressure, expect NIM to decline from current 6.8% to 6.1% by year end.
Loans growth moderated: from 37% YoY in 4Q08 to 27% in 1Q09.
Provisioning remains high: due to NPL risks.
NPL ticking, higher than expectation at 1.6% (from 0.6% in 4Q08) mainly driven by downgrades from the corp segment.

Danareksa Bakrie Telecom (BTEL IJ, Rp103 BUY) Going International]

Entering the IDD market
Bakrie Telecom (BTEL) has entered the international direct dialing (IDD) market with the prefix 009. It is the third player in this market segment – the others being Indosat and Telkom. In our estimates, the total size of the IDD market is around Rp2.5tr per year. BTEL hopes to attain a small but valuable market share of around 20-30% within the next three years. It is true that Indonesia’s IDD business is stagnant in general and that growth prospects going forward are rather limited. Yet if BTEL can attain its goals in terms of market share, then the IDD segment would contribute around 15% to BTEL’s total revenues. Nonetheless, this new business is not yet incorporated into our model since it will take time before it makes a significant contribution.

Towers sale completed
The towers sale has been completed with final touches being made to the Sale and Purchase Agreement. In principal, BTEL has agreed to sell and lease back 543 towers to Solusi Tunas Pratama (which we know is linked to the Ciptadana Group). The amount agreed was Rp450bn. This includes Rp60bn which is retained for land rental for up to 10 years. As such, BTEL will receive fresh funds of only Rp390bn – most probably next month. These proceeds will be used to partly finance the capex of US$200mn in FY09.

Wary of providing guidance
Telecom firms are very wary of providing guidance for FY09. This is because of the uncertainties on the global economy coupled with the very stiff competition within the domestic telecoms market. All we know is that BTEL targets total subscribers of 10.5mn by the end of FY09 and that it plans to spend US$200mn on capex during the year. BTEL may be the only operator to achieve positive net additions in 1Q09 (Indosat and XL have already indicated that they will record negative net additions in this period).

Maintain BUY
We retain our BUY recommendation on the stock as the valuation remains attractive. Our target price is Rp114. BTEL is pursuing the right strategy of becoming a budget operator which is light on assets (as shown by the just-completed towers sale). Its entry into the IDD market has the potential to lift revenues going forward – although it may take some time before it makes a significant contribution.

NISP BNGA Slightly Ahead 1Q09, but Valuation has Turned Expensive

Bank CIMB Niaga booked a net profit of Rp263bn in 1Q09, a decline of 18.8% YoY from Rp324bn booked in 1Q08 mainly due to higher provision charges (+102% YoY to Rp327bn) and Rp115bn merger cost.

PPOP rose by 39.2% YoY to Rp778bn as amid the 23.6% YoY rise in net interest income to Rp1.37tn due to 15%

YoY loan growth to Rp72.9tn as well as higher earnings asset yields. On a quarterly basis, net profit improved significantly from a net loss of Rp288bn in 4Q08 due to lower provisioning (-57.1% QoQ), lower opex (-7.5% QoQ) and less merger cost (Rp115bn vs. Rp315bn). Loan growth was at -1.2% QoQ as the bank deliberately held back in anticipation of deteriorating economic condition.

NIM expanded to 5.9% in 1Q09 from 5.4% in 2008 amid faster deposit downward re-pricing and improvement in funding mix.

As expected and happened in other banks, NPL also deteriorated to 2.9% from 2.5% in Dec’08, mainly from business segment in trading sector.

Overall, the results were slightly ahead of our estimate at 26.4% of our full year forecast of Rp997bn as our assumption on funding cost was more conservative in light of liquidity imbalance in the banking sector.

Going forward, the bank will continue its integration process with a single platform completion by 3Q09. It will continue to leverage on the best of Bank Niaga and Bank Lippo as well as its parent, CIMB Group. The bank is to remain cautious in 2009F, with loan focusing on resource based industry, trade finance, and mortgage.

The slightly ahead 1Q09 results were not something to be excited for. The merger has made the bank bigger but not yet better as it will still take time to complete the single platform and address their differences. On the positive side, the bank will benefit from the decline in interest rate as 56% of its funding was high cost time deposit.

We are currently reviewing our recommendation on the counter as we believe that the stock price has run ahead of its fundamental given the recent 50% rise in the stock price during the past one month. Thus, we are likely to downgrade our recommendation to Sell from Hold previously. At current price, the bank is trading at 2009F P/BV of
1.7x and PER of 17.4x, which are relatively expensive for low teen’s ROE.

Indopremier SMGR (BUY - TP Rp 4.980)

1Q09 solid performance’s growth amid crisis
In 1Q09 Semen Gresik managed to book solid performance amid gloomy domestic and export volume which have fallen by 2.0% YoY and 4.6% YoY, respectively, due to global financial crisis. In this period, the company’s revenue expanded by 26.2% YoY attaining at Rp 3.22 trillion compared to Rp 2.56 trillion in 1Q08 which was much backed by 28.7% YoY cement’s average selling price (ASP) hike.

Fluctuated profitability in 1Q09
Profitability was also improved in the last quarter, thanks to management’s policy to maintain production cost remain stable. We noted that the ASP hike in 1Q09, reaching to Rp 804 thousand per tones managed to cushion the upsurge of COGS per tones (27.9% YoY, accounted to Rp 463 thousand per tones) which mainly driven by 49.9% YoY jumped in energy cost. As a result, gross margin improved to 42.7% in 1Q09 compared to 42.5% level in 1Q08. On the other hand, operating margin and EBITDA margin moved to the opposite direction, which tumbled 70 bps – 420 bps due to a significant increase in raw material, packaging, fuel and transportation costs.

Healthy balance sheet was an added value
Amidst gleaming profit and loss result, SMGR has also booked a healthy balance sheet. We viewed that this is an added value for the company amid financial crisis for facilities its expansion plan funding. On 31 March 2009, we noted that the company’s cash and cash equivalent grew by 2.1% YoY, becoming to Rp 3.05 trillion, still net cash position book and lowered in gearing ratio (registered below 0.05x in DER).

Maintain Buy – New target price at Rp 4,980
We believe that Government’s stimulus worth of Rp 12.2 trillion in infrastructure sector could stimulate domestic cement’s purchasing power to prop up cement domestic decline. Therefore, we maintain our BUY recommendation for this stock with new target price at Rp 4,980,- per share (previous TP Rp 4,420 per share) which is derived by using 14.19% WACC assumption (Rf= 11.84% and Rm= 5.45%) in DCF model calculation. At yesterday’s closing price, this new TP reflected 25% upside potential and represented PE and PBV valuation by 9.38x and 2.32x for FY09E.

Associated Press Stocks end higher as Fed sees recession easing

Stocks end higher as Fed sees 'somewhat slower' slide in economy; S&P 500 hits 3-month high

NEW YORK (AP) -- The Fed confirmed what Wall Street has already concluded: The recession is starting to ease.

Federal Reserve policymakers said at the end of a two-day meeting Wednesday that while the economy is still receding, the pace of decline "appears to be somewhat slower" than the last time they met in mid-March.

That was confirmation enough for the stock market. Major indexes, which had already been up sharply ahead of the announcement on other signs the economy is stabilizing, posted gains of more than 2 percent. The Dow Jones industrial average jumped 169 points to its highest close since Feb. 9.

"You had the Federal Reserve endorsing the basic stance that the economy is beginning to stabilize," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

The Dow is now 25 percent above its early March lows, though stocks have been unsteady over the past several days on fears of a potential swine flu pandemic and persistent concerns about the country's biggest banks.

Stocks began the day higher as investors responded to bright spots within a weaker-than-expected report on the nation's economic output for the first three months of the year.

Gross domestic product contracted at an annual rate of 6.1 percent, much steeper than the 5 percent forecast by economists polled by Thomson Reuters. But the glimmers of good news in the report drove the Standard & Poor's 500 rose to its highest trading level since late January.

Investors were encourage by a rebound in consumer spending, which accounts for more than two-thirds of U.S. economic activity, and a decline in business inventories. On President Barack Obama's 100th day in office, the GDP report at least provided signs that the nation is seeing its economic slide start to moderate.

The Dow jumped 168.78, or 2.1 percent, to 8,185.73. The gain leaves the blue chips down about 591 points, or 6.7 percent for the year.

The Standard & Poor's 500 index gained 18.48, or 2.2 percent, to 873.64, its highest close since Jan. 28.

The Nasdaq composite index advanced 38.13, or 2.3 percent, to 1,711.94. The tech-heavy index posted its highest finish since Nov. 4 and is up 8.6 percent for the year.

Michael Sheldon, chief market strategist at Westport, Conn.-based RDM Financial, said the drop in business stockpiles "should set the stage for a pickup in production, employment and profits." more...

Bloomberg Sugar Rises on Deficit Forecast, Crude-Oil Rally; Cocoa Drops

April 29 (Bloomberg) -- Sugar prices rose for the sixth time in seven sessions on forecasts that consumption will exceed output and as a crude-oil rally increases the appeal of ethanol made from cane in Brazil. Cocoa declined.

Global demand may exceed production by 2 million metric tons in the year through September 2010, after a deficit of 9 million tons in the current year, Sucres et Denrées SA said today. Crude oil rose as much as 3 percent. Brazil’s largest sugar-producing area, the Center South, will turn 42 percent of its cane into sweetener this year, up from 39.5 percent in the past season, an industry group said. The rest will be turned into ethanol.

“The fact that crude oil has held is very supportive,” said Charles Nedoss, a senior account manager at Peak Trading in Chicago, division of Rosenthal Collins. “I am very bullish sugar.”

Raw-sugar futures for July delivery rose 0.04 cent, or 0.3 percent, to 14.08 cents a pound on ICE Futures U.S. in New York. The price has gained 19 percent this year on forecasts that a decline in output by India will lead to a global production deficit.

“All the fundamental news continues to be constructive,” said Nick Hungate, a senior trader at Rabobank International in London. “Demand has been fairly well maintained. India will have to come into the market fairly soon.”

On ICE, cocoa futures for July delivery fell $1 to $2,403 a metric ton. The price has dropped 9.8 percent this year amid concerns that the recession will reduce demand.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

Bloomberg Crude Oil, Gasoline Rise as Supplies of the Motor Fuel Decline

April 29 (Bloomberg) -- Crude oil and gasoline rose after a government report showed an unexpected drop in U.S. inventories of the motor fuel as refiners reduced operating rates.

Gasoline supplies declined 4.7 million barrels to 212.6 million last week, the biggest reduction since September, the Energy Department said. Stockpiles were forecast to climb by 200,000 barrels, according to a Bloomberg News survey. Prices also increased after stocks rallied and the dollar fell.

“Nobody was looking for a gasoline decline of that size,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “This shows that refineries are keeping processing rates too low because there’s obviously some demand out there for gasoline.”

Crude oil for June delivery rose $1.05, or 2.1 percent, to settle at $50.97 a barrel at 2:43 p.m. on the New York Mercantile Exchange. Prices are up 14 percent this year.

Gasoline futures for May delivery climbed 5.07 cents, or 3.6 percent, to $1.4484 a gallon in New York, the highest settlement since April 17.

Refineries operated at 82.7 percent of capacity, down 0.8 percentage point from the prior week. Analysts forecast that operating rates would climb 0.2 percentage point.

Inventories of crude oil rose 4.05 million barrels to 374.7 million in the week ended April 24, the report showed. The gain left supplies the highest since September 1990 and 15 percent greater than the five-year average for the period. Stockpiles were forecast to increase by 1.8 million barrels, according to the median response of 14 analysts surveyed. more...

Business Star KL and Jakarta plan carbon trading for oil palm industry

Malaysia and Indonesia are exploring the possibility of adopting carbon trading system for its oil palm industry.

Primary Industries and Commodities Minister Tan Sri Bernard Dompok said the two countries were establishing a focal point to work out details relating to carbon trading for the industry.

“We are committed to addressing the issues and concerns raised by the international community,” he told reporters at a joint press conference with Indonesian Agriculture Minister Dr Anton Apriyantono at the end of the three-day fourth joint committee meeting on Bilateral Cooperation on Commodities here yesterday.

Carbon credit is a system that allows a company or country which reduces its carbon dioxide emissions below a targeted level to sell the extra reduction as credit to a company or country which has not met the target level.

The meeting also agreed to the establishment of focal points to coordinate work under the Reduced Emission from Deforestation and Degradation.

Both countries would also work together to address barriers to palm oil trade, they said in a joint communique.

The meeting also agreed for more cooperation in research and development initiatives for cocoa; while Indonesia has agreed to assist Malaysia in diversifying the use of pepper to include non-food applications such as in traditional medicine.

CLSA United Tractors (UNTR IJ) – Good 1Q09 numbers

The company posted Rp812bn in net profit during 1Q09, up by 35% YoY. The numbers came in ahead of our and consensus estimates, representing some 40% and 36% of full year target, respectively.

Better than expected result was attributable to Rupiah depreciation that helped push gross margin on equipment distribution and mining contracting, and higher selling price on coal. Therefore, this number should not be annualized, in our view, but still strong figures indeed.

Total revenue was up by 20% YoY, driven largely by contribution form mining contracting, up by 46% YoY, and coal mining, up by 20% YoY. Note that total equipment sales volume was down by 46% YoY, with sales to mining sector as the only support.
More to follow later. At this juncture, we maintain our BUY rating on the company.

CLSA PTBA good 1Q09 results, raise the TP to Rp9,600

Our resource analyst Olie looked at Bukit Asam (PTBA IJ) 1Q09 results. PTBA posted net profit of Rp921bn in 1Q09, up by 321% YoY and 138% QoQ ahead of our estimates due to better than expected pricing and costs. Maintain OPF and raise the TP to Rp9,600 (from Rp7,400).

It is interesting that despite the 1Q09 result represents 35% of our and consensus full year forecast, we are only revising up our forecasts by 12% in FY09 and 5% in FY10. We believe that earnings in the coming quarters should be lower than in 1Q09. There was carry over effect in 1Q09, as about 20% of the 5.8mn tonnes of export this year was contracted at higher prices (US$85-90/t). We assume the remaining balance will be sold at much lower prices going forward. We expect PTBA to sell about 14.1mn tonnes of coal in total this year (domestic client is mainly state owned power company PLN, price is @ US$77/t).

In term of valuation, PTBA is trading at 6.8x 09 CL PE, compared to our top pick in the coal sector ITMG 5.9x 09 PE. However, it is worth noting that PTBA is the 2nd most liquid stock in the coal sector after BUMI.

Key points from the report:
1Q09 results ahead of our expectations: net profit of Rp921bn in 1Q09 (=35% of our and consensus earnings), +321% YoY and 138% QoQ.
Good operating numbers, balance sheet remains solid. Sales volume during 1Q09 was up by 4% YoY only, but coal delivery via railway was up by 15% YoY to 2.6mn tonnes.
Limited progress on key long term projects. Still struggling to formalize its JV. Tax is the main issue.
Revising up earnings by 12% in FY09 and the new TP is Rp9,600.

There is news this morning that PTBA is eying 17% stake in Adaro Energy (ADRO IJ). This is the ADRO stake currently controlled by the consortium of Goldman Sachs, Farallon, Citi and Robert Kuok. At Rp1,200/share (price mentioned by the media), ADRO is priced at about 8x 09 CL PE. Another potential deal that PTBA can potentially be involved in: 17% stake in Newmont Nusa Tenggara. All boiling down to prices, both will be minority stakes.

CLSA INDO: Lonsum: 1Q09 = 20% of FY09CL due to weak commodity prices. The weak result is expected.

Lonsum (LSIP IJ - Rp4,575 - BUY), a palm oil plantation, reported net profit of Rp103bn which is 19% of our FY09 forecast. The weak profit in 1Q09 is widely expected given underlying palm oil and rubber price has fallen significantly from last year high.

All its business units (palm oil, rubber, and seed garden) show a sharp yoy decline in profitability due to low underlying commodity price. Worse hit was rubber and seed garden that combined account for 26% of its operating profit in 1Q08, but only contribute 8% to profit in 1Q09.

In addition, production volume is also hit by tree stress and FFB harvest (nucleus) declined 11% qoq and flat yoy. CPO production dropped 19% qoq and 9% yoy as Lonsum purchased less FFB from its plasma and 3rd parties (partly reflects poor harvest of plasma and partly due to plasma selling their fruit to independent CPO mills in search for higher price).

Note that sales and therefore profit contribution from its seed garden has declined significantly in the past two quarters as plantation companies put a hold on expansion. Seedling used to account for around 15% of profit and now only accounts for 6% of profit in 1Q09.

Indopremier Stock Pick 28 April 2009 - UNTR (BUY TP Rp 8.878)

Liquidity and Business Dominance
As of April 24th, 2009 UNTR market capitalization, at Rp24.29 triliun, is among the 15 highest ones listed in the Indonesia Stock Exchange. In addition, its two main sources of revenues claimed the highest market share in the sectors in Indonesia. Its Komatsu brand heavy equipment commands a 50.3% market share, while mining contracting subsidiary Pama Persada commands a 41% market share as of 3M09. With these traits, we view that UNTR share price appreciation during 2009, to bring back to its 8 times historical PER multiple range in 3M09 (vs. 3 times historical PER in 4Q08) is not excessive.

3M09 Operational Performances
UNTR’s March 2009 operational data for heavy equipment division showed a continued stabilization, while mining contracting and coal divisions showed a MoM improvement. The MoM drop in heavy equipment sales to 189 unit in March 2009 (vs. 223 unit in February 2009) was due to delay of delivery while purchase order had already been received. 3M09 Komatsu sales at 628 unit is 5% higher than our expectation of 600 unit. Meanwhile, mining contracting delivered a MoM improvement to both coal delivery (+6%), overburden removal (+16%). On coal sales, Dasa Eka Jasatama posted a MoM growth of 8% at 0.254 mn ton in March 2009. We are positive operational targets can be met for this year.

Positive climate
Investment activities in the agro industry that has resulted from the recent increase of the CPO price will have positive impact on sales of heavy equipment for UNTR. Year to date, CPO price has increased by 44%, and this bode well with the fact that Indonesia is biggest CPO producer in the world, at 45% production share and at 19 mn ton as at end of 2008. The government has made statement this week that the country will double its CPO production in ten years time. Heavy equipment from the agro industry is the second biggest units sold that accounted for 24% in the division as of December 2008. We did not factor in the impact of higher CPO price in 3M09 in our current estimates.

Valuation and Recommendation
We still believe that our current model contain positive surprises (stock note 31/03/09). At our target price of Rp8.878, the share is trading at 10 times our FY10 earnings estimate, to yield a 20% capital gain from yesterday’s closing price of Rp7.400. We continue to rate the share a BUY

CIMB Tambang Batubara Bukit Asam Result note - Stellar 1Q09, but still rich

(PTBA IJ / PTBA.JK, NEUTRAL - Maintained, Rp8,700 - Tgt. Rp9,800, Basic Resources)

We remain Neutral on PTBA, although we have increased our FY09-11 EPS estimates by 7-10% and DCF-based target price to Rp9,800 from Rp9,300 (WACC 14%, LTG 0%). 1Q09 net profit grew 221% yoy to Rp921bn, making up 35% and 30% of consensus and our FY09 expectations respectively. Domestic ASP and sales volumes should remain solid, but its spot export ASP and sales volume carry downside risks. Valuations remain the highest among peers, even on our 23-39% more optimistic forecasts than consensus.

CIMB - Adhi Karya Company update - Running out of time

(ADHI IJ / ADHI.JK, UNDERPERFORM - Maintained, Rp330 - Tgt. Rp285, Construction and Materials)

Various news sources have been indicating that Jakarta's city administration remains keen on the monorail project. We view the reinstatement of the Rp114bn write-off ADHI made for the project unlikely in the short term as project profitability remains in question. Nevertheless, we are upgrading our EPS estimates for ADHI by 14-23% to take into account new projects secured in 1Q09. We attach a new target price of Rp285 (from Rp172), now based on 7x CY10 earnings (5x previously). Maintain UNDERPERFORM as we believe the positive news on government stimulus has been priced in.

CIMB London Sumatra Result note - More room for growth

(LSIP IJ / LSIP.JK, OUTPERFORM - Maintained, Rp4,575 - Tgt. Rp5,020, Plantations)

Lonsum booked Rp103bn of net profit for 1Q09, making up 19% and 20% of our full-year forecast and consensus. 1Q09 results are line with our expectations as we are anticipating a stronger 2H09, on the back of cost declines and an improvement in its non-CPO divisions. We are maintaining our forecasts, OUTPERFORM rating, and our target price of Rp5,020, based on 10x CY10 earnings. LSIP remains our top pick for the sector. Near-term catalysts could come from upside in its rubber and seedling businesses.

CIMB Adaro Energy – Singapore Court of Appeal ruling

Quick Takes – Adaro Energy – Singapore Court of Appeal ruling
We maintain Outperform on Adaro and our DCF-based target price of Rp1,200 (WACC 15%, LTG 0%). We do not believe there will be any material impact on Adaro or current shareholders following the ruling by the Singapore Court of Appeal over Adaro's 2001 ownership change yesterday, although short-term sentiment on the stock may be affected. As far as Adaro and current shareholders are concerned, nothing is going to change. In fact, the court has found the 2001 purchase of Adaro lawful, confirming Dianlia as the rightful owner of Adaro. What pans out next between Beckett and Deutsche Bank should not affect Adaro and existing shareholders.

Citigroup - Flash: China Shenhua Energy (1088.HK): Buy: 1Q09 NI Good; Coal Sales Mix Unsustainable Lowering ASP

1Q09 NI RMB7,936m, down -14% YoY, up 102% QoQ - Strong results at a headline level for Shenhua. Annualized 1Q09 would be 3.5% ahead of our FY09E EPS. QoQ improvement in production up 5.5%, gross margin up 14%pts and net margin up 7.1%pts.
Performance driven by high spot sales mix at 36% (norm. c20%) - Spot sales at 36% compares with 1Q08 at 20% and 4Q08 at 32.6%. Spot "seaborne" (QHD equivalent) volumes were up 48% YoY. Moreover, the price was at a 4.7% premium to the contract priced seaborne coal for 1Q09

Contract settlement could reverse this trend, lowering ASP by -4.2% - With contract settlement imminent volumes could shift back from spot to contract. Our analysis shows that if we place 1Q09 volumes on 1Q08 product mix, then ASP would fall by -26% for spot sales. This is because the higher ASP products are de-emphasized. Aggregating, domestic sales ASP drops -4.2%, equivalent to lowering earnings by 5.3%.

1Q09 achieved contract prices look shy of market expectations - On average, contract prices look to be up 3.9% YoY, with the benchmark seaborne coal contracts up 7.5%. Even if the top IPP customers sign up 10% then an average 10% increase is unlikely to be achieved. We currently assume a 5% total contract price increase.

Macquarie Bank Danamon: BIG correction on special mention loan figure

When BDMN had its analyst meeting on 23 April, the bank showed an alarming 44% q-o-q increase in special mention loans, from Rp5,398bn (Dec-08) to Rp7,805bn (Mar-09). The figure has caused some concerns, as it implies that in just one quarter, about 20% of BDMN’s corporate loan book (or Rp1,921bn) had received special mention status.

Yesterday, BDMN amended the presentation with a corrected special mention loan figure of just Rp5,978bn, 23% lower than the earlier reported figure. The company made a mistake calculating the Mar-09 special mention loan number the first time, by including category 3, 4, and 5 loans. The corrected figure implies only Rp132bn corporate loans became special mention in 1Q09, as opposed to an earlier (much more alarming) figure of Rp1,921bn.

Since the analyst meeting, BDMN share price has corrected by 3% while the JCI bank index was flat. Macquarie rates BDMN as Outperform with PxT of Rp3,750, with the stock trading on 12.1x and 8.2x FY09-10 P/E and 1.4x FY09 P/BV.

Macquarie NDRC coal analysis - interesting points (Yeeman Chin)

=> The NDRC published their analysis on the coal industry in 1Q09 on the website, with some interesting points:

Market balance in China
=> They view the market as "roughly balanced leaning towards a surplus".
=> They expect this surplus to continue into the rest of the year.

Production and distribution
=> Raw coal production of "medium to large scale" producers was 602m tonnes, up 6.3% YoY.
=> Total coal throuput on the national rail network was 307m tonnes, down 8.5% YoY and 4.7% QoQ.
=> Port dispatch volumes was 107m tonnes, down 17.5% YoY and 1.3% QoQ.
=> Notice that total production was up whereas rail throughput and port dispatch is down.
=> This has two possible explanations:

1) Production numbers are not reliable because some small mine production goes unreported and thus the headline growth number is overstated; and
2) the coal is not getting out for some reason?

Profitability of the industry
=> Total profits for large coal mining enterprises was Rmb18.1bn, down 17% YoY.
=> Interestingly, after stripping out Shenhua Group and China Coal Group, profits are down ~40% YoY.
=> The article also commented that more than half these producers are "barely profitable" .
=> With further weakness in the coal market and increased policy-related costs and higher fixed costs, profitability is expected to decline further.
=> This is interesting because as it suggest that the downside for prices is somewhat limited.
=> People often focus on the strong profitability of companies like Shenhua, China Coal, Yanzhou but they seem to be the exception rather than the norm in the industry.

Other comments
=> Consumption was 674m tonnes, down 4% YoY but up 5.4% QoQ.
=> Consumption in the power industry fell 8% YoY and rose 8.7% QoQ to 378m tonnes.
=> Coal consumption in steel industry was 109m tonnes, up 2% YoY and 15.7% QoQ.
=> Usage in cement was 70m tonnes, up 7.6% YoY but down 24.7% QoQ. Coal use in chemicals was 34m tonnes, up 2.3% YoY and 9.7% QoQ.
=> Imports were up 21% YoY and 63% QoQ to 13.59m tonnes.
=> Exports fell 28% YoY and 24% QoQ to 7.38m tonnes.
=> Net imports increased by 7.6mt QoQ and 5.15mt YOY to 6.2m tonnes.
=> The average ex-mine price for large mining enterprises was Rmb452/t in 1Q09, up 13.5% YoY but down 3.3% YoY.
=> Total inventories was 206m tonnes, up 20.7% YoY but down 12.7% since last December.
=> Inventories at coal mines was 48m, up 27.8% YoY but down 5.7% QoQ.
=> Port inventories were 13.16mt, down 10% YoY and 33.4% QoQ.
=> IPP inventories were 27.94m tonnes, up 23.3% YoY and down 35.5% QoQ.

Link to full article (in Chinese): http://www.ndrc.gov.cn/jjxsfx/t20090427_274995.htm