May 7 (Bloomberg) -- Cocoa futures rose the most in a month as a weaker dollar boosted the appeal of commodities in New York.
The U.S. Dollar Index, a six-currency gauge of the dollar’s strength, fell as much as 0.5 percent. The Reuters/Jefferies CRB Index of 19 commodities reached a four-month high, led by natural gas, cocoa and wheat. Crude-oil futures touched the highest in almost six months in New York.
“Since the dollar is lower, it’s going to be bullish for cocoa,” said Adam Klopfenstein, a senior market strategist in Chicago for MF Global’s Lind-Waldock unit. “Also, we are seeing energy markets up.”
Cocoa futures for July delivery soared $94, or 4 percent, to $2,462 a metric ton on ICE Futures U.S. in New York, the biggest gain for a most-active contract since April 7. The price earlier touched $2,469, the highest since April 24.
Cocoa still has fallen 7.6 percent this year as the world recession eroded demand.
“All signs continue to point toward there being a significant reduction in global consumption, with recent figures coming out of Asia all supporting this assumption,” Stephanie Garner, a Sucden Financial Ltd. analyst, said today in a report.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
Jumat, 08 Mei 2009
Bloomberg Crude Oil Rises on Speculation Worst of Recession Is Past
May 7 (Bloomberg) -- Crude oil rose to the highest close since November on speculation that the worst of the recession is over and that fuel consumption will rebound.
Prices gained as Treasury Secretary Timothy Geithner said a report today will show a “reassuring” picture of the U.S. banking system. Oil retreated from the day’s high after equities fell. A government report yesterday showed that oil supplies climbed to a level not seen since 1990 as fuel use tumbled.
“There’s a lot more positive sentiment, although it hasn’t shown up in any of the demand numbers yet,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “This is a great example of the importance of psychology to all markets.”
Crude oil for June delivery rose 37 cents, or 0.7 percent, to $56.71 a barrel at the 2:56 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 14. Oil fell as low as $55.46 at 2:18 p.m. as stock markets declined. Prices have gained 6.6 percent this week and are up 27 percent this year. more...
Prices gained as Treasury Secretary Timothy Geithner said a report today will show a “reassuring” picture of the U.S. banking system. Oil retreated from the day’s high after equities fell. A government report yesterday showed that oil supplies climbed to a level not seen since 1990 as fuel use tumbled.
“There’s a lot more positive sentiment, although it hasn’t shown up in any of the demand numbers yet,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “This is a great example of the importance of psychology to all markets.”
Crude oil for June delivery rose 37 cents, or 0.7 percent, to $56.71 a barrel at the 2:56 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 14. Oil fell as low as $55.46 at 2:18 p.m. as stock markets declined. Prices have gained 6.6 percent this week and are up 27 percent this year. more...
Reuters China April iron ore imports hit new record
Chinese iron ore imports hit a new record high for the third consecutive month in April, showing a rising reliance on imports and undermining efforts by steelmakers to force mining companies to cut prices.
China's iron ore imports rose to a new high of 53.5 million tonnes in April, up 24.2 percent from a year earlier, the Ministry of Transport said in a report on its website citing preliminary statistics in late Tuesday.
The figure may vary from data to be issued by the General Administration of Customs early next week.
Chinese steelmakers have been pushing for a 40 percent price cut in annual negotiations with global mining majors BHP Billiton, Rio Tinto and Vale, citing a steel glut and low demand for ore.
But a slew of data showing record iron ore imports, heavier port inventories and solid domestic steel production recently are providing miners with arguments to limit any price cuts.
"This could make it difficult for the mills to win that 40 percent or so price cut they've been pushing for this year," said James Wilson, a mining analyst for DJ Carmichael & Co in Perth, referring to the record imports for April.
Wilson said part of the reason for the rise in imports could be linked to a drop in domestic production of magnetite-type ore in China, which is more costly to produce and buy than spot market ore ready to use and widely available from importers.
An industry group executive told Reuters on Tuesday that Chinese steel mills led in the negotiations by Baosteel (600019.SS: Quote) and should be able to get a price below the spot market, which would mean a cut of more than 30 percent.
But Sam Walsh, the chief executive of Rio Tinto's iron ore division, has warned that the company may walk away from negotiations with Chinese steelmakers over contract iron prices if an agreement cannot be reached by the end of June, according to some media reports in Australia.
Source: Reuters
China's iron ore imports rose to a new high of 53.5 million tonnes in April, up 24.2 percent from a year earlier, the Ministry of Transport said in a report on its website citing preliminary statistics in late Tuesday.
The figure may vary from data to be issued by the General Administration of Customs early next week.
Chinese steelmakers have been pushing for a 40 percent price cut in annual negotiations with global mining majors BHP Billiton, Rio Tinto and Vale, citing a steel glut and low demand for ore.
But a slew of data showing record iron ore imports, heavier port inventories and solid domestic steel production recently are providing miners with arguments to limit any price cuts.
"This could make it difficult for the mills to win that 40 percent or so price cut they've been pushing for this year," said James Wilson, a mining analyst for DJ Carmichael & Co in Perth, referring to the record imports for April.
Wilson said part of the reason for the rise in imports could be linked to a drop in domestic production of magnetite-type ore in China, which is more costly to produce and buy than spot market ore ready to use and widely available from importers.
An industry group executive told Reuters on Tuesday that Chinese steel mills led in the negotiations by Baosteel (600019.SS: Quote) and should be able to get a price below the spot market, which would mean a cut of more than 30 percent.
But Sam Walsh, the chief executive of Rio Tinto's iron ore division, has warned that the company may walk away from negotiations with Chinese steelmakers over contract iron prices if an agreement cannot be reached by the end of June, according to some media reports in Australia.
Source: Reuters
Bloomberg U.S. Markets Wrap: Stocks Drop as Banks Fall, Treasuries Slump
May 7 (Bloomberg) -- U.S. stocks slid from a four-month high as declines in financial, telephone and technology shares snuffed out an early rally. Treasury 30-year bonds fell the most since February as investors demanded higher-than-forecast yields at an auction of $14 billion of the securities.
Wells Fargo & Co. and KeyCorp lost more than 7.7 percent. AT&T Inc. and Verizon Communications Inc. tumbled at least 2.9 percent after JPMorgan Chase & Co. downgraded the shares on concern over slowing subscriber growth and pricing pressures. Symantec Corp., the biggest maker of security software, plunged 15 percent for the biggest loss in the Standard & Poor’s 500 Index after forecasting sales below analysts’ estimates.
“We just came a long way off of the idea of the world coming to an end and at some point we’d be getting a pullback,” said Michael Holland, chairman of New York-based Holland & Co. LLC, which oversees assets in excess of $4 billion. “The market has been hoping for less uncertainty. It’s not clear if the results of the stress tests are giving us that.”
The S&P 500, which has risen 34 percent from a 12-year-low in March, slid 1.3 percent to 907.39 at 4:06 p.m. in New York. The Dow Jones Industrial Average decreased 102.43 points, or 1.2 percent, to 8,409.85. The benchmark 30-year bond yield climbed 18 basis points, 0.18 percentage point, to 4.28 percent. Three stocks fell for each rising on the New York Stock Exchange.
A gauge of 75 technology companies, which accounts for 17 percent of the S&P 500, slumped 3.2 percent today and was the biggest drag on the index. The group has had the biggest advance among 10 industries this year, rising more than 15 percent. The S&P 500 has added less than 0.5 percent in 2009.
Early Gains Erased
The S&P 500 yesterday climbed to the highest since January as investors speculated banks don’t need as much capital as had been projected and a report showed employers cut fewer jobs than economists estimated. The index this week erased its loss for 2009 on expectations the global recession is easing.
Benchmark indexes opened higher today after Treasury Secretary Timothy Geithner said results of bank stress tests will be reassuring to investors and a government report showed the worst of the nation’s job cuts may be over.
Treasury 30-year bonds fell the most since February as investors demanded higher-than-forecast yields at today’s auction of $14 billion of the securities with the U.S. slated to sell a record amount of debt this year. more...
Wells Fargo & Co. and KeyCorp lost more than 7.7 percent. AT&T Inc. and Verizon Communications Inc. tumbled at least 2.9 percent after JPMorgan Chase & Co. downgraded the shares on concern over slowing subscriber growth and pricing pressures. Symantec Corp., the biggest maker of security software, plunged 15 percent for the biggest loss in the Standard & Poor’s 500 Index after forecasting sales below analysts’ estimates.
“We just came a long way off of the idea of the world coming to an end and at some point we’d be getting a pullback,” said Michael Holland, chairman of New York-based Holland & Co. LLC, which oversees assets in excess of $4 billion. “The market has been hoping for less uncertainty. It’s not clear if the results of the stress tests are giving us that.”
The S&P 500, which has risen 34 percent from a 12-year-low in March, slid 1.3 percent to 907.39 at 4:06 p.m. in New York. The Dow Jones Industrial Average decreased 102.43 points, or 1.2 percent, to 8,409.85. The benchmark 30-year bond yield climbed 18 basis points, 0.18 percentage point, to 4.28 percent. Three stocks fell for each rising on the New York Stock Exchange.
A gauge of 75 technology companies, which accounts for 17 percent of the S&P 500, slumped 3.2 percent today and was the biggest drag on the index. The group has had the biggest advance among 10 industries this year, rising more than 15 percent. The S&P 500 has added less than 0.5 percent in 2009.
Early Gains Erased
The S&P 500 yesterday climbed to the highest since January as investors speculated banks don’t need as much capital as had been projected and a report showed employers cut fewer jobs than economists estimated. The index this week erased its loss for 2009 on expectations the global recession is easing.
Benchmark indexes opened higher today after Treasury Secretary Timothy Geithner said results of bank stress tests will be reassuring to investors and a government report showed the worst of the nation’s job cuts may be over.
Treasury 30-year bonds fell the most since February as investors demanded higher-than-forecast yields at today’s auction of $14 billion of the securities with the U.S. slated to sell a record amount of debt this year. more...
CNBC Stress Tests: Ten Banks Need to Raise $74.6 Billion in Capital
US regulators told 10 of the top 19 banks Thursday to raise a total of $74.6 billion in capital over the next six months to cushion against any worsening of the deepest recession in decades.
The results of bank "stress tests"—which involved more than 150 regulatory officials poring over the books of the 19 largest financial firms—effectively drew a line between healthy and weak, and quantified exactly how much those institutions struggling under the weight of souring loans must raise.
The bank reviews, led by the Federal Reserve, showed 10 banks needed additional capital to withstand heavier losses that would likely come if the recession worsened.
Bank of America had the largest need at $33.9 billion, while Citigroup needed $5.5 billion. In addition, Wells Fargo was found to need $13.7 billion and GMAC $11.5 billion.
Morgan Stanley will need to raise $1.8 billion and Regions Financial needs $2.5 billion.
Other big banks do not need to raise any capital, including Bank of New York Mellon, American Express, Capital One Financial, Goldman Sachs Group, JPMorgan Chase, MetLife and State Street. Click here for full results. more...
The results of bank "stress tests"—which involved more than 150 regulatory officials poring over the books of the 19 largest financial firms—effectively drew a line between healthy and weak, and quantified exactly how much those institutions struggling under the weight of souring loans must raise.
The bank reviews, led by the Federal Reserve, showed 10 banks needed additional capital to withstand heavier losses that would likely come if the recession worsened.
Bank of America had the largest need at $33.9 billion, while Citigroup needed $5.5 billion. In addition, Wells Fargo was found to need $13.7 billion and GMAC $11.5 billion.
Morgan Stanley will need to raise $1.8 billion and Regions Financial needs $2.5 billion.
Other big banks do not need to raise any capital, including Bank of New York Mellon, American Express, Capital One Financial, Goldman Sachs Group, JPMorgan Chase, MetLife and State Street. Click here for full results. more...
Associated Press New jobless claims plunge unexpectedly to 610,000, while retail sales improve in April
WASHINGTON (AP) -- New applications for jobless benefits plunged to the lowest level in 14 weeks, a possible sign that the massive wave of layoffs has peaked. Still, the number of unemployed workers getting benefits climbed to a new record.
Retail results also improved as discounter Wal-Mart Stores Inc. and other stores reported April sales figures that beat expectations. Analysts acknowledged the positive economic signals but cautioned that any recovery will be subdued as long as unemployment stays high.
The Labor Department reported Thursday that the number newly laid off workers applying for benefits dropped to 601,000 last week. That was far better than the rise to 635,000 claims that economists expected.
But the total number of people receiving jobless benefits climbed to 6.35 million, a 14th straight record.
The four-week moving average of initial jobless claims, which smooths out volatility, totaled 623,500 last week, a decrease of more than 30,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.
Meanwhile, retailers' business last month was helped by warmer weather, tax refunds, and a shift in the Easter holiday, helping Wal-Mart and many mall clothing chains post better-than-expected results. more...
Retail results also improved as discounter Wal-Mart Stores Inc. and other stores reported April sales figures that beat expectations. Analysts acknowledged the positive economic signals but cautioned that any recovery will be subdued as long as unemployment stays high.
The Labor Department reported Thursday that the number newly laid off workers applying for benefits dropped to 601,000 last week. That was far better than the rise to 635,000 claims that economists expected.
But the total number of people receiving jobless benefits climbed to 6.35 million, a 14th straight record.
The four-week moving average of initial jobless claims, which smooths out volatility, totaled 623,500 last week, a decrease of more than 30,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.
Meanwhile, retailers' business last month was helped by warmer weather, tax refunds, and a shift in the Easter holiday, helping Wal-Mart and many mall clothing chains post better-than-expected results. more...
Macquarie Indonesia strategy - More to come
Thursday, 07 May, 2009
INDONESIA
Indonesia strategy - More to come
Event
Our regional strategists, Tim Rocks and Daniel McCormack, have just published their quarterly strategy report (4 May 2009), maintaining their Overweight stance on Indonesia. We provide reasons to remain Overweight the Indonesian market from a bottom-up view.
Impact
Resilient demand and rebound in data points: Despite the slowdown in economic growth since 4Q08 (5.2% YoY in 4Q08 and 4.3% in 1Q09), the Indonesian consumer appears to be weathering the downturn fairly well. Car, motorcycle and retail sales data indicates a slowdown in the first two months of the year, but the latest data shows a rebound (Figures 3–6). Credit growth and value-added tax receipts have picked up in April. T he upcoming presidential elections should also provide a boost to the cash economy and consequently consumer spending.
Better-than-expected 1Q09 results; consensus upgrades to continue . Based on our analysis, overall net profit in 1Q09 was up 39% QoQ and 13% YoY. This strong performance beats our and consensus estimates (Figure 7). The bank, cement, automotive and coal sectors all posted strong 1Q09 results. After six months of downward earnings revisions since October 2008, analysts upgraded their earnings estimates by 12.8% in April following strong 4Q08 results; we expect the upgrades to continue with the strong 1Q09.
Supportive macro-economic environment. Inflation eased to 7.3% YoY in April (0.05% YTD) from the peak of 12.2% in September. The sharp decline in inflation sets the stage for Bank Indonesia (BI) to lower rates towards 6%, in our opinion, vs the current 7.25% (there is an inverse relationship between the SBI rate and index performance) The trade surplus widened in March towards US$2bn and the current account returned to surplus in 1Q09. The relatively better economic outlook and the stable rupiah have also helped to attract portfolio capital back into the market.
Stable political environment – SBY likely to be re-elected. Despite the split between incumbent Susilo Bambang Yudhoyono (SBY) and Jusuf Kalla, we believe that SBY will likely be elected for a second term. Three candidates are running in the presidential elections, but it is almost certain that no one would be able to beat SBY. If re-elected, we believe SBY should use this renewed political capital to advance reforms, and thus help sustain the currently smooth-going reform process over the medium term.
Outlook
Remain bullish on the market; our top picks. Despite its strong performance YTD, the market's current consensus valuation is still attractive at 2009E PER of 12.0x, a 26% discount to the average regional valuation. Given the better-than-expected earnings so far and positive outlook, we suggest that investors focus more on high beta rather than defensive stocks, although we continue to like the domestic market-oriented sectors. Our top five large-cap picks are Astra International, PGAS, Indocement, Danamon and BNI
INDONESIA
Indonesia strategy - More to come
Event
Our regional strategists, Tim Rocks and Daniel McCormack, have just published their quarterly strategy report (4 May 2009), maintaining their Overweight stance on Indonesia. We provide reasons to remain Overweight the Indonesian market from a bottom-up view.
Impact
Resilient demand and rebound in data points: Despite the slowdown in economic growth since 4Q08 (5.2% YoY in 4Q08 and 4.3% in 1Q09), the Indonesian consumer appears to be weathering the downturn fairly well. Car, motorcycle and retail sales data indicates a slowdown in the first two months of the year, but the latest data shows a rebound (Figures 3–6). Credit growth and value-added tax receipts have picked up in April. T he upcoming presidential elections should also provide a boost to the cash economy and consequently consumer spending.
Better-than-expected 1Q09 results; consensus upgrades to continue . Based on our analysis, overall net profit in 1Q09 was up 39% QoQ and 13% YoY. This strong performance beats our and consensus estimates (Figure 7). The bank, cement, automotive and coal sectors all posted strong 1Q09 results. After six months of downward earnings revisions since October 2008, analysts upgraded their earnings estimates by 12.8% in April following strong 4Q08 results; we expect the upgrades to continue with the strong 1Q09.
Supportive macro-economic environment. Inflation eased to 7.3% YoY in April (0.05% YTD) from the peak of 12.2% in September. The sharp decline in inflation sets the stage for Bank Indonesia (BI) to lower rates towards 6%, in our opinion, vs the current 7.25% (there is an inverse relationship between the SBI rate and index performance) The trade surplus widened in March towards US$2bn and the current account returned to surplus in 1Q09. The relatively better economic outlook and the stable rupiah have also helped to attract portfolio capital back into the market.
Stable political environment – SBY likely to be re-elected. Despite the split between incumbent Susilo Bambang Yudhoyono (SBY) and Jusuf Kalla, we believe that SBY will likely be elected for a second term. Three candidates are running in the presidential elections, but it is almost certain that no one would be able to beat SBY. If re-elected, we believe SBY should use this renewed political capital to advance reforms, and thus help sustain the currently smooth-going reform process over the medium term.
Outlook
Remain bullish on the market; our top picks. Despite its strong performance YTD, the market's current consensus valuation is still attractive at 2009E PER of 12.0x, a 26% discount to the average regional valuation. Given the better-than-expected earnings so far and positive outlook, we suggest that investors focus more on high beta rather than defensive stocks, although we continue to like the domestic market-oriented sectors. Our top five large-cap picks are Astra International, PGAS, Indocement, Danamon and BNI
Credit Suisse - United Tractors - New report: Still positive, with ample catalysts. TP raised to Rp 11400/sh
We have just published a report on United Tractors (UT). UT’ robust 1Q09 results, stemming from higher ASPs, a weaker IDR and therefore margins –due to inventory gains and a bigger proportion of higher margins in the parts and services division –have beaten our as well as the street’ expectations.
The strong results reaffirm our view that UT’ business is not only resilient, but also offers positive leverage on a weaker IDR. We have therefore upgraded our forecasts by 17-42% over FY09-11E (putting our forecasts 13-23% above the street’), while maintaining our volume assumptions.
Despite the positive share price performance, we believe that the recovery in equipment volumes and strong earnings are likely to be the main catalysts for the company. Low gearing should give UT flexibility for future expansion.
We have increased our sum-of-the-parts-based (SOTP) target price by 24% to Rp11,400 (from Rp9,200), implying 27% upside, a P/E multiple of 11.5x FY10E and 5.8x FY10E EV/EBITDA. We therefore maintain our OUTPERFORM rating on the stock.
The strong results reaffirm our view that UT’ business is not only resilient, but also offers positive leverage on a weaker IDR. We have therefore upgraded our forecasts by 17-42% over FY09-11E (putting our forecasts 13-23% above the street’), while maintaining our volume assumptions.
Despite the positive share price performance, we believe that the recovery in equipment volumes and strong earnings are likely to be the main catalysts for the company. Low gearing should give UT flexibility for future expansion.
We have increased our sum-of-the-parts-based (SOTP) target price by 24% to Rp11,400 (from Rp9,200), implying 27% upside, a P/E multiple of 11.5x FY10E and 5.8x FY10E EV/EBITDA. We therefore maintain our OUTPERFORM rating on the stock.
CLSA cement upgrades
Our analyst Hadi Susilo has been putting many hours to write reports on cement sectors. And Hadi upgrades his TP for all the 3 cement names and raise the recommendation for SMCB from UPF to BUY.
The sector looks pretty robust. Top pick is Indocement (INTP IJ) but if you want more leverage Holcim (SMCB IJ) is the name to look at.
Indocement (INTP IJ) : TP Rp6,400 (fr Rp5,650), maintain OPF
Semen Gersik (SMGR IJ) : TP Rp5,000 (fr Rp3,800), maintain OPF
Holcim (SMCB IJ) : TP Rp1,100(fr Rp910), upgrade from UPF to BUY
From EV/tonne perspective, SMCB looks the cheapest at US$90/t compared to SMGR (US$125/t) and INTP (US$104). From PE point of view, SMGR is the cheapest at 12.6x 09 CL PE. However, we would argue that a more appropriate comparison is EV/EBITDA. EV/t ignores the fact that the companies are running at different capacity utilization. PE is largely affected by forex swing, especially in the case of SMCB. If we want to be able to compare the cement stocks on an apple for apple basis (or cement bag to cement bag comparison), look at EV/Ebitda. INTP followed by SMCB looks most attractive (2010).
Additional comments from Nick Cashmore:
We have made substantial revisions to our kitchen-sink forecasts. Our forecasts for 2009 earnings have been revised 22% for Indocement, 15% for Semen gresik and five-fold for Holcim. That reflects the leverage for each stock.
We are assuming a recovery in demand by 2010 as interest rates fall and housing demand recovers. We are now expecting 7% volume growth and 3% price growth. A more bullish scenario would approach that of 2008 where volume grew by 15% and price 10%.
Over the last decade, cement demand has grown by a cagr 7%, we have assumed 6% going forward. Indonesia's per capita cement consumption is still the second lowest in Asia after India. Urbanisation, interest rates, infrastructure development and per capita income growth are all fundamental cement demand drivers.
Valuations are now approaching five-year average multiples based on 2010 forecasts, but offer considerable upside in a "melt-up" liquidity driven environment.
The sector looks pretty robust. Top pick is Indocement (INTP IJ) but if you want more leverage Holcim (SMCB IJ) is the name to look at.
Indocement (INTP IJ) : TP Rp6,400 (fr Rp5,650), maintain OPF
Semen Gersik (SMGR IJ) : TP Rp5,000 (fr Rp3,800), maintain OPF
Holcim (SMCB IJ) : TP Rp1,100(fr Rp910), upgrade from UPF to BUY
From EV/tonne perspective, SMCB looks the cheapest at US$90/t compared to SMGR (US$125/t) and INTP (US$104). From PE point of view, SMGR is the cheapest at 12.6x 09 CL PE. However, we would argue that a more appropriate comparison is EV/EBITDA. EV/t ignores the fact that the companies are running at different capacity utilization. PE is largely affected by forex swing, especially in the case of SMCB. If we want to be able to compare the cement stocks on an apple for apple basis (or cement bag to cement bag comparison), look at EV/Ebitda. INTP followed by SMCB looks most attractive (2010).
Additional comments from Nick Cashmore:
We have made substantial revisions to our kitchen-sink forecasts. Our forecasts for 2009 earnings have been revised 22% for Indocement, 15% for Semen gresik and five-fold for Holcim. That reflects the leverage for each stock.
We are assuming a recovery in demand by 2010 as interest rates fall and housing demand recovers. We are now expecting 7% volume growth and 3% price growth. A more bullish scenario would approach that of 2008 where volume grew by 15% and price 10%.
Over the last decade, cement demand has grown by a cagr 7%, we have assumed 6% going forward. Indonesia's per capita cement consumption is still the second lowest in Asia after India. Urbanisation, interest rates, infrastructure development and per capita income growth are all fundamental cement demand drivers.
Valuations are now approaching five-year average multiples based on 2010 forecasts, but offer considerable upside in a "melt-up" liquidity driven environment.
Credit Suisse - Asian Equity Strategy
Upgrading Singapore (laggard) and Indonesia (cheap cyclicals)
We are upgrading Singapore to OVERWEIGHT from Underweight. In our report on 24 April, Time to look at the laggards?, we suggested that Singapore was the most attractive among the laggard markets. While Singapore’s absolute price-to-book has risen from 1.19x then to 1.35x now and the discount has narrowed from 21% to 18%, we believe that the stronger-than-expected bank results could act as a catalyst for further gains.
We are upgrading Indonesia to OVERWEIGHT from Neutral – cheap cyclicals. In our reports on 23 April and 4 May, Any Cheap Cyclicals Left?, we suggested that Indonesian coal was trading at a 176% discount to the region. We are funding these upgrades by trimming our Overweight calls on China (up 96% from the October lows, the best performer) and Korea.
Top picks – UOB, SGX, SIA, Astra International, Bumi Resources, United Tractors. We are adding UOB, SGX and SIA to the Credit Suisse regional portfolio and dropping Wilmar on valuation grounds. In Indonesia, we are keeping Astra International but adding Bumi Resources and United Tractors.
We are upgrading Singapore to OVERWEIGHT from Underweight. In our report on 24 April, Time to look at the laggards?, we suggested that Singapore was the most attractive among the laggard markets. While Singapore’s absolute price-to-book has risen from 1.19x then to 1.35x now and the discount has narrowed from 21% to 18%, we believe that the stronger-than-expected bank results could act as a catalyst for further gains.
We are upgrading Indonesia to OVERWEIGHT from Neutral – cheap cyclicals. In our reports on 23 April and 4 May, Any Cheap Cyclicals Left?, we suggested that Indonesian coal was trading at a 176% discount to the region. We are funding these upgrades by trimming our Overweight calls on China (up 96% from the October lows, the best performer) and Korea.
Top picks – UOB, SGX, SIA, Astra International, Bumi Resources, United Tractors. We are adding UOB, SGX and SIA to the Credit Suisse regional portfolio and dropping Wilmar on valuation grounds. In Indonesia, we are keeping Astra International but adding Bumi Resources and United Tractors.
Kamis, 07 Mei 2009
MacQ Commodities Comment
Base metals stock changes; some more bullish trends emerging
Feature article
The latest trends in reported stock changes are more bullish in copper, nickel and zinc (declining stocks) and less bearish in aluminium (stocks still increasing, but at a slowing trend rate).
Latest news
Base metals traded sharply higher on Wednesday, as April private employment figures in the US finished above expectations. Copper recovered from Tuesday’s losses to close 4.7% higher, despite a 1.8% stock increase, as workers went on strike at Xstrata’s Lomas Bayas mine (65ktpa).
China’s iron ore imports in April rose to a record 53.5mt, according to preliminary reports from the Ministry of Transport. If confirmed, this would mark the second month in a row in which imports have exceeded 50mt, up more than 24% from April 2008. Stocks of iron ore at Chinese ports, at 74.5mt, are near record highs, up by around 10mt over March and April.
Freight rates boomed on Wednesday, with the BDI surging by 168 points (8.9%) to end at 2,065. Capesize spot rates rose by 15.7%. Vale, Rio Tinto and BHP Billiton chartered 69 capesize vessels last month, surpassing fixtures in April and May 2008, at the top of the bulk shipping market.
Speaking at the Macquarie Australia Conference, Ian Ashby, President of BHP Billiton Iron Ore, said that the company would fall “a few million tonnes” short of its previous 130mt iron ore production target in the current financial year after a number of accidents at its operations. BHP Billiton remains committed to expanding its iron ore capacity in the Pilbara from around 129mt currently to 205mtpa by 2011. BHP Billiton has not made any voluntary cuts to production as its marketing approach aims to displace higher-cost production by targeting spot-market sales.
Alcoa Inc. said that production will be curtailed by 40% (870kt) at the Suriname Aluminium Co. (Suralco) alumina refinery in Paranam, Suriname. The facility, which has a production capacity 2.2mtpa, is a joint venture between Suralco (55%) and NV BHP Billiton Maatschappij Suriname (BMS).
Feature article
The latest trends in reported stock changes are more bullish in copper, nickel and zinc (declining stocks) and less bearish in aluminium (stocks still increasing, but at a slowing trend rate).
Latest news
Base metals traded sharply higher on Wednesday, as April private employment figures in the US finished above expectations. Copper recovered from Tuesday’s losses to close 4.7% higher, despite a 1.8% stock increase, as workers went on strike at Xstrata’s Lomas Bayas mine (65ktpa).
China’s iron ore imports in April rose to a record 53.5mt, according to preliminary reports from the Ministry of Transport. If confirmed, this would mark the second month in a row in which imports have exceeded 50mt, up more than 24% from April 2008. Stocks of iron ore at Chinese ports, at 74.5mt, are near record highs, up by around 10mt over March and April.
Freight rates boomed on Wednesday, with the BDI surging by 168 points (8.9%) to end at 2,065. Capesize spot rates rose by 15.7%. Vale, Rio Tinto and BHP Billiton chartered 69 capesize vessels last month, surpassing fixtures in April and May 2008, at the top of the bulk shipping market.
Speaking at the Macquarie Australia Conference, Ian Ashby, President of BHP Billiton Iron Ore, said that the company would fall “a few million tonnes” short of its previous 130mt iron ore production target in the current financial year after a number of accidents at its operations. BHP Billiton remains committed to expanding its iron ore capacity in the Pilbara from around 129mt currently to 205mtpa by 2011. BHP Billiton has not made any voluntary cuts to production as its marketing approach aims to displace higher-cost production by targeting spot-market sales.
Alcoa Inc. said that production will be curtailed by 40% (870kt) at the Suriname Aluminium Co. (Suralco) alumina refinery in Paranam, Suriname. The facility, which has a production capacity 2.2mtpa, is a joint venture between Suralco (55%) and NV BHP Billiton Maatschappij Suriname (BMS).
MacQ Holcim Indonesia: 45% EPS upgrade post 1Q09 results
Reggy Sustanto (analyst) has upgraded his FY09-10 EPS estimate for Holcim Indonesia (SMCB) by 45% and 42%, lifting his PxT to Rp1,150 (26% upside). Currently the stock trades on 10.5x and 8.8x P/E for 2009-10, and on an EV/ton of US$112. Reggy’s FY09 estimate is 72% ahead of consensus on EBIT and 100% ahead on EPS.
The stronger-than-expected 1Q09 results drove the upgrade. Revenue +27% yoy, EBITDA +52% yoy, EBIT +90% yoy, ex-forex PBT +22% yoy (due to higher interest cost). The management said it would accelerate the debt repayment schedule, by re-paying US$60mn this year vs. initial plan of US$45mn (total debt of US$355mn).
The key surprise factor is resilience of the export market. While domestic revenue up 12% yoy, export revenue up by 193% to account for 19% of total revenue (from 8% in 1Q08). Average selling price (ASP) for export averaged at US$50/ton in 1Q09, up from US$37/ton in 4Q08 and US$34/ton in 1Q08. Two key drivers:
(1) More cement than clinker for export – SMCB commissioned its Ciwandan cement plan in 4Q08, perhaps allowing it to export more cement than clinker.
(2) More direct sales than via sister companies – In 1Q09 SMCB exports bigger proportion to African countries. In 2008, key export destination was Bangladesh, Brunei, and Malaysia through sister companies.
The positive 1Q09 progress appears to be sustainable, while the 2010 outlook on domestic market looks positive on (1) stable/improving political environment, (2) improving domestic liquidity and lower interest rates. The financial leverage on SMCB (124% net D/E), mostly on shareholders loan, should work on the company’s favour.
The stronger-than-expected 1Q09 results drove the upgrade. Revenue +27% yoy, EBITDA +52% yoy, EBIT +90% yoy, ex-forex PBT +22% yoy (due to higher interest cost). The management said it would accelerate the debt repayment schedule, by re-paying US$60mn this year vs. initial plan of US$45mn (total debt of US$355mn).
The key surprise factor is resilience of the export market. While domestic revenue up 12% yoy, export revenue up by 193% to account for 19% of total revenue (from 8% in 1Q08). Average selling price (ASP) for export averaged at US$50/ton in 1Q09, up from US$37/ton in 4Q08 and US$34/ton in 1Q08. Two key drivers:
(1) More cement than clinker for export – SMCB commissioned its Ciwandan cement plan in 4Q08, perhaps allowing it to export more cement than clinker.
(2) More direct sales than via sister companies – In 1Q09 SMCB exports bigger proportion to African countries. In 2008, key export destination was Bangladesh, Brunei, and Malaysia through sister companies.
The positive 1Q09 progress appears to be sustainable, while the 2010 outlook on domestic market looks positive on (1) stable/improving political environment, (2) improving domestic liquidity and lower interest rates. The financial leverage on SMCB (124% net D/E), mostly on shareholders loan, should work on the company’s favour.
CIMB KLBF Company Update – Kalbe Farma – Waiting for next catalyst
We upgrade our earnings forecasts for Kalbe by 1% for FY10-11 on the back of stronger currency assumptions. While Kalbe's margins could expand more from a stronger rupiah, we choose to remain conservative, on the view that inventory, coming off a high base, might still have left-over high-cost items. Further, Kalbe is coming off adjustments to stiff competition in the energy drinks section. Lacking catalysts for now, in particular after its share price more than doubled and its share buyback programme is taking a back seat, we downgrade the stock to Neutral from Outperform, although with a higher target price of Rp890 (from Rp825), still DCF-based but with a lower WACC assumption of 16.2% (17% previously).
Crude palm oil futures higher on technical rebound
Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives closed higher yesterday in active trading on technical rebound, dealers said.They said the market managed to recover from yesterday’s losses as concerns over supply shortage helped to boost the prices.
A dealer said the local CPO market also took the cue from the firmer prices of soyabean overnight.
“Market sentiment was generally positive amid strong exports and low stocks level,” he said.
At the close, May 2009 delivery climbed RM56 to settle at RM2,833 per tonne.
June 2009 contract advanced RM59 to RM2,754 per tonne while both July 2009 and August 2009 contracts surged RM55 each to RM2,680 per tonne and RM2,625 per tonne respectively.
Volume rose to 28,609 lots from 22,092 lots on Tuesday. Open interests, however, fell to 82,302 contracts from 83,059 contracts previously.
On the physical market, May South rose to RM2,850 per tonne from RM2,800 the previous day.
More Indonesian Palm Oil Firms Get Green OK
Another two Indonesian oil palm plantation companies — PT London Sumatra Plantation and PT Hindoli — have secured environmental certification from the Roundtable on Sustainable Palm Oil.
This means three of the 10 major palm oil producers in the country have now received the RSPO stamp of approval.
Nine of the firms hold concessions extending to more than 2.9 million hectares around the country. PT Musim Mas was the first plantation company in Indonesia to receive an RSPO certificate in February 2009.
According to the RSPO, which was established in 2004 by palm-oil producers, processors, traders and other industry players, certification represents a seal of environmental approval and reflects sustainable palm oil production.
“Besides the three companies, there are a number of others that are also on the waiting list for RSPO certification,” Achmad Mangga Barani, the Ministry of Agriculture’s director general of plantations, said at a media conference on Wednesday in Jakarta. “We are hoping that 10 companies will have RSPO certificates by the end of the year.”
Among those on the waiting list are PT Perkebunan Nusantara III and PT Sinar Mas, with their certification processes expected to be completed by June and September, respectively.
Apart from encouraging more plantation companies to secure RSPO certificates, the government also plans to boost research and development so as to increase output.
“We will build an R&D center in Sijunjung, West Sumatra, to gather genetic resources from oil palms,” Minister of Agriculture Anton Apriyantono said at the media conference. He acknowledged that Indonesia to date only invested a paltry Rp 3 billion ($288,000) a year on average on palm-sector research.
This means three of the 10 major palm oil producers in the country have now received the RSPO stamp of approval.
Nine of the firms hold concessions extending to more than 2.9 million hectares around the country. PT Musim Mas was the first plantation company in Indonesia to receive an RSPO certificate in February 2009.
According to the RSPO, which was established in 2004 by palm-oil producers, processors, traders and other industry players, certification represents a seal of environmental approval and reflects sustainable palm oil production.
“Besides the three companies, there are a number of others that are also on the waiting list for RSPO certification,” Achmad Mangga Barani, the Ministry of Agriculture’s director general of plantations, said at a media conference on Wednesday in Jakarta. “We are hoping that 10 companies will have RSPO certificates by the end of the year.”
Among those on the waiting list are PT Perkebunan Nusantara III and PT Sinar Mas, with their certification processes expected to be completed by June and September, respectively.
Apart from encouraging more plantation companies to secure RSPO certificates, the government also plans to boost research and development so as to increase output.
“We will build an R&D center in Sijunjung, West Sumatra, to gather genetic resources from oil palms,” Minister of Agriculture Anton Apriyantono said at the media conference. He acknowledged that Indonesia to date only invested a paltry Rp 3 billion ($288,000) a year on average on palm-sector research.
LondonCommodity Baltic Dry Index on the rise again
Volatility is the key word for the trials and tribulations of the Baltic Dry Index and consequently all ship owners involved in the dry bulk trade. The BDI, a gauge that reflects the cost to haul iron ore, coal, grains and other raw materials via ships, edged up higher yesterday to reach 1,897 points, gaining 91 points from the previous session. It had gained a further 1.1 percent or 20 points last Friday, before a break on Monday. Leading analysts keep pointing out that the course of the BDI should be closely monitored as an indication of the world economy's rebound. But the fact remains that even if this well-sought rebound arrives, whether that will be at the end of the year, or at the first months of 2010, the BDI could still be plagued by another crucial factor. That is of course the potential oversupply of bulk carriers, which is expected to hinder the freight market's possible rally back at healthier levels and definitely more sustainable for most ship owners.For the moment, the index remains at very low levels. That said, the main winners from yesterday's upward swing, were the bigger vessel types, with the Capesize Index reaching 2,528 points (up by 152) and the Panamax Index standing at 1,702 (up by 146). Despite this, earnings for panamaxes remain below the smaller Supramaxes. A panamax can average $13,658 on a daily time-charter rate, while a supramax can reach up to $14,952 on average. The relevant daily average rate for a capesize, once the "golden goose" of the market, now stands at $23,744, almost a tenth of the earnings it could fetch almost a year ago.
'Steady steel prices have supported rates' for capesizes, Omar Nokta, an analyst at Dahlman Rose & Co in New York, wrote in a note on Friday. 'The panamax market has benefited from a surge in activity levels during the past few days and rates continue gaining.' Iron ore is the biggest single dry-bulk cargo hauled at sea, accounting for an estimated 26 per cent of the total this quarter, according to Drewry Shipping Consultants in London. Capesize forward freight agreements this quarter, used to bet on future shipping rates, dropped 5 per cent to US$20,925 a day in Oslo. Panamax FFAs slid 4.1 per cent to US$11,875 a day. The data are from broker Imarex NOS.
Source: Hellenic Shipping News
Bloomberg Sugar Jumps to Highest Since 2006 on Deficit;
May 6 (Bloomberg) -- Sugar prices jumped to the highest since 2006 as a global industry group forecast a wider production deficit. Cocoa futures declined.
The International Sugar Organization boosted its estimate for the deficit to 7.8 million metric tons from a February forecast of 4.3 million. Declining output in India and other Asian countries is outpacing increases in Brazil, the world’s biggest producer, Sergey Gudoshnikov, the group’s senior economist, said today in an interview in New York.
“Sugar is still bullish when you look at the fundamentals,” said Mark Hansen, the director of trading at CPM Group in New York. “There have been big declines in India’s production, which is impacting the market.”
Sugar futures for July delivery rose 0.21 cent, or 1.4 percent, to 15.36 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 15.41 cents, the highest for a most- active contract since July 26, 2006. The commodity has surged 30 percent this year on supply concerns.
India, the world’s biggest consumer of the sweetener and the second-biggest producer, has become a net importer of the commodity for the first time in three years to bridge a gap in annual output that was forecast to slump 44 percent. The drop in the 12 months ending Sept. 30 will be the most on record, according to Czarnikow Group Ltd. more...
The International Sugar Organization boosted its estimate for the deficit to 7.8 million metric tons from a February forecast of 4.3 million. Declining output in India and other Asian countries is outpacing increases in Brazil, the world’s biggest producer, Sergey Gudoshnikov, the group’s senior economist, said today in an interview in New York.
“Sugar is still bullish when you look at the fundamentals,” said Mark Hansen, the director of trading at CPM Group in New York. “There have been big declines in India’s production, which is impacting the market.”
Sugar futures for July delivery rose 0.21 cent, or 1.4 percent, to 15.36 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 15.41 cents, the highest for a most- active contract since July 26, 2006. The commodity has surged 30 percent this year on supply concerns.
India, the world’s biggest consumer of the sweetener and the second-biggest producer, has become a net importer of the commodity for the first time in three years to bridge a gap in annual output that was forecast to slump 44 percent. The drop in the 12 months ending Sept. 30 will be the most on record, according to Czarnikow Group Ltd. more...
Bloomberg Crude Oil Rises Above $56 on Supply Gain, Jobs Report
May 6 (Bloomberg) -- Crude oil rose above $56 a barrel for the first time since November after a smaller-than-expected increase in U.S. stockpiles and employers cut fewer jobs than economists estimated.
Crude supplies rose 605,000 barrels to 375.3 million last week, the highest since 1990, the Energy Department said today. A 2.5 million-barrel gain was forecast by analysts surveyed by Bloomberg News. ADP Employer Services said U.S. companies eliminated 491,000 positions last month, less than the 645,000 estimated in a Bloomberg News survey of economists.
“The speculators are piling into oil on signs that the economy is recovering,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “Inventories rose only 600,000 barrels when everyone was expecting a gain of 2.5 million, gasoline supplies dropped and employers cut fewer jobs than expected.”
Crude oil for June delivery climbed $2.50, or 4.6 percent, to $56.34 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 14. Futures are up 26 percent this year.
“Oil is up on indications of an economic recovery,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “Prices are trending upward on speculation this will translate into stronger demand.” more...
Crude supplies rose 605,000 barrels to 375.3 million last week, the highest since 1990, the Energy Department said today. A 2.5 million-barrel gain was forecast by analysts surveyed by Bloomberg News. ADP Employer Services said U.S. companies eliminated 491,000 positions last month, less than the 645,000 estimated in a Bloomberg News survey of economists.
“The speculators are piling into oil on signs that the economy is recovering,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “Inventories rose only 600,000 barrels when everyone was expecting a gain of 2.5 million, gasoline supplies dropped and employers cut fewer jobs than expected.”
Crude oil for June delivery climbed $2.50, or 4.6 percent, to $56.34 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 14. Futures are up 26 percent this year.
“Oil is up on indications of an economic recovery,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “Prices are trending upward on speculation this will translate into stronger demand.” more...
Elnusa Tak Tahu Rencana Tridaya
PT Elnusa (ELSA) menegaskan tidak mengetahui rencana korporasi yang dilakukan salah satu pemegang sahamnya yang akan melepas kepemilikan dari perseroan.
PT Pertamina dan tiga perusahaan bersaing menjadi membeli 37,15% saham PT Elnusa Tbk milik PT Tri Daya Esta.
Selain Pertamina, perusahaan yang berminat membeli Elnusa yaitu Northstar Pacific (AS), Petronas (Malaysia), dan Nippon Oil Corp (Jepang).
Tridaya mengumumkan akan menjual semua sahamnya di Elnusa senilai US$ 92 juta atau setara dengan Rp 315 per saham.
Adapun pemegang saham lain Elnusa yaitu Pertamina sebesar 41,1%, PT Danareksa Daiwa NIF Ventures 1,17%, PT Danareksa 0,39%, karyawan Elnusa 0,12%, serta Yayasan Hari Tua Elnusa 0,05%, Koperasi Karyawan Elnusa 0,01%, sedangkan sisanya 21,75% dikuasai publik.
PT Pertamina sendiri menyatakan telah menunjuk PT Danareksa Sekuritas sebagai penasehat investasi atas rencana pembelian tersebut.
PT Pertamina dan tiga perusahaan bersaing menjadi membeli 37,15% saham PT Elnusa Tbk milik PT Tri Daya Esta.
Selain Pertamina, perusahaan yang berminat membeli Elnusa yaitu Northstar Pacific (AS), Petronas (Malaysia), dan Nippon Oil Corp (Jepang).
Tridaya mengumumkan akan menjual semua sahamnya di Elnusa senilai US$ 92 juta atau setara dengan Rp 315 per saham.
Adapun pemegang saham lain Elnusa yaitu Pertamina sebesar 41,1%, PT Danareksa Daiwa NIF Ventures 1,17%, PT Danareksa 0,39%, karyawan Elnusa 0,12%, serta Yayasan Hari Tua Elnusa 0,05%, Koperasi Karyawan Elnusa 0,01%, sedangkan sisanya 21,75% dikuasai publik.
PT Pertamina sendiri menyatakan telah menunjuk PT Danareksa Sekuritas sebagai penasehat investasi atas rencana pembelian tersebut.
Associated Press Stocks jump as fears ebb about bank 'stress tests'
NEW YORK (AP) -- Investors felt more confident putting their money into banks on the eve of a government report card on big financial companies.
Bank stocks pulled the market higher Wednesday as media reports trickled out that indicated balance sheets at major lenders might not be as frayed as some had feared.
The word came a day ahead of the formal release of results from government "stress tests" aimed at determining which banks need to raise more capital. Investors relieved to have assembled an initial scorecard scooped up shares of most banks, even those expected to have to come up with new money.
The Dow Jones industrial average jumped 100 points in heavy trading volume, while the technology-heavy Nasdaq composite index posted a more modest gain.
"To me, this rally has been more a recognition that maybe the end of the world is not at hand," said Philip S. Dow, managing director of equity strategy at RBC Wealth Management.
The news on banks and a surprise drop in a report on unemployment provided the latest shots of confidence to a market that has barreled higher in the past two months amid signs that the economy is stabilizing. Market indicators have surged more than 30 percent from the 12-year lows hit on March 9.
Financial stocks that had sent the market plunging from its peak in October 2007 led the advance again as worries about the government's report on banks eased. more...
Bank stocks pulled the market higher Wednesday as media reports trickled out that indicated balance sheets at major lenders might not be as frayed as some had feared.
The word came a day ahead of the formal release of results from government "stress tests" aimed at determining which banks need to raise more capital. Investors relieved to have assembled an initial scorecard scooped up shares of most banks, even those expected to have to come up with new money.
The Dow Jones industrial average jumped 100 points in heavy trading volume, while the technology-heavy Nasdaq composite index posted a more modest gain.
"To me, this rally has been more a recognition that maybe the end of the world is not at hand," said Philip S. Dow, managing director of equity strategy at RBC Wealth Management.
The news on banks and a surprise drop in a report on unemployment provided the latest shots of confidence to a market that has barreled higher in the past two months amid signs that the economy is stabilizing. Market indicators have surged more than 30 percent from the 12-year lows hit on March 9.
Financial stocks that had sent the market plunging from its peak in October 2007 led the advance again as worries about the government's report on banks eased. more...
Associated Press Amex, JPMorgan, Bank of New York Mellon pass tests
WASHINGTON (AP) -- Leaked results of the government's stress tests of 19 large banks are boosting investor confidence in the financial sector. American Express Co., JPMorgan Chase & Co. and Bank of New York Mellon Corp. will not be asked to raise more capital when federal officials announce the test results Thursday afternoon, but Regions Financial Corp. will need to bolster its reserves, according to people briefed on the results. The people requested anonymity because they were not authorized to discuss the results.
Citigroup Inc. will need to raise about $5 billion, according to a government source who requested anonymity because he was not authorized to discuss the matter. Earlier news reports put that number closer to $10 billion.
Bank of America Corp. and Wells Fargo & Co. also will be asked to raise capital, sources said earlier this week.
The emerging news is bringing into focus a picture of the financial industry's strength that has had investors guessing for months.
The stress tests were designed to see how the large banks and finance companies would fare if the economy worsens. Analysts expect about half the companies will be asked to raise capital.
Spokesmen for New York-based American Express, JPMorgan and Bank of New York Mellon would not comment. A spokesman for Birmingham, Ala.-based Regions Financial could not immediately be reached for comment.
Bank of America stock rose Wednesday after reports that the Charlotte, N.C.-based company would need to raise $34 billion in additional capital. The New York Times and Wall Street Journal reported the figure. The Journal cited unnamed people familiar with the situation, while the Times quoted a bank executive.
David Skidmore, spokesman for the Federal Reserve, declined comment on whether this constituted a violation of confidentiality policies pertaining to normal bank exams. A Treasury spokesman did not return requests for comment.
The stress tests are a centerpiece of the Obama administration's plan to stabilize the financial industry. They measure how much the banks would be hurt if unemployment rose to 10.3 percent and home prices dropped an additional 22 percent.
The government wants the firms to have enough money to keep lending even if the economy gets much worse. Officials have said none of the banks will be allowed to fold. more...
Citigroup Inc. will need to raise about $5 billion, according to a government source who requested anonymity because he was not authorized to discuss the matter. Earlier news reports put that number closer to $10 billion.
Bank of America Corp. and Wells Fargo & Co. also will be asked to raise capital, sources said earlier this week.
The emerging news is bringing into focus a picture of the financial industry's strength that has had investors guessing for months.
The stress tests were designed to see how the large banks and finance companies would fare if the economy worsens. Analysts expect about half the companies will be asked to raise capital.
Spokesmen for New York-based American Express, JPMorgan and Bank of New York Mellon would not comment. A spokesman for Birmingham, Ala.-based Regions Financial could not immediately be reached for comment.
Bank of America stock rose Wednesday after reports that the Charlotte, N.C.-based company would need to raise $34 billion in additional capital. The New York Times and Wall Street Journal reported the figure. The Journal cited unnamed people familiar with the situation, while the Times quoted a bank executive.
David Skidmore, spokesman for the Federal Reserve, declined comment on whether this constituted a violation of confidentiality policies pertaining to normal bank exams. A Treasury spokesman did not return requests for comment.
The stress tests are a centerpiece of the Obama administration's plan to stabilize the financial industry. They measure how much the banks would be hurt if unemployment rose to 10.3 percent and home prices dropped an additional 22 percent.
The government wants the firms to have enough money to keep lending even if the economy gets much worse. Officials have said none of the banks will be allowed to fold. more...
Bloomberg China - Iron ore
May 6 (Bloomberg) -- China, the world’s largest consumer of iron ore, said its major ports unloaded 24 percent more of the imported steelmaking ingredient in April from a year ago, a record for a second month.
Ships dropped 53.5 million metric tons of iron ore last month at major ports, the Ministry of Transport said on its Web site. That beats the March record of 51 million tons.
Stockpiles at the nation’s major ports reached 62 million tons last month, the statement said.
China is seeking to buy 100 million tons of cheaper iron ore from overseas as high-cost domestic mines close, Brazil’s Cia. Vale do Rio Doce, the world’s largest supplier of the material, said last month. International cash prices for iron ore will bottom this quarter because of rebounding Chinese demand, Goldman Sachs JBWere Pty said May 1.
Ships dropped 53.5 million metric tons of iron ore last month at major ports, the Ministry of Transport said on its Web site. That beats the March record of 51 million tons.
Stockpiles at the nation’s major ports reached 62 million tons last month, the statement said.
China is seeking to buy 100 million tons of cheaper iron ore from overseas as high-cost domestic mines close, Brazil’s Cia. Vale do Rio Doce, the world’s largest supplier of the material, said last month. International cash prices for iron ore will bottom this quarter because of rebounding Chinese demand, Goldman Sachs JBWere Pty said May 1.
Danareksa Gudang Garam (GGRM IJ, Rp8,000 BUY) Earnings upgrade
Earnings upgrade
FY09-10 earnings forecast increased by 27-30%
We have raised our forecasts to reflect the excellent 1Q09 results. We forecast higher sales, higher margins, higher interest expenses, and a lower income tax rate. The net effect is 27-30% higher earnings forecasts for FY09-10. Applying a WACC of 16.5%, we arrive at a higher TP of Rp9,500 compared to Rp7,000 previously. Our new target price translates into a very attractive valuation of 7.5-7.1x PE09-10F and 1.0-0.9x PBV09-10F. Maintain BUY recommendation.
1Q09 Results: outstanding
Gudang Garam has posted an excellent set of 1Q09 results. Net profits jumped 132% to Rp781 bn on the back of a significant margins improvement and efficiency gains. Sales grew 11% to Rp7,651 bn, driven by higher selling prices we believe. The gross profits and operating profits increased by 58% and 94% respectively, beating expectations. Another boost was provided by the lower income tax rate of 28% as a result of new tax regulations, although net interest expenses did rise 11%.
Sales push
A sales push now appears to be in the making. In this regard, Gudang Garam increased its ownership in its now fully owned subsidiary, Surya Madistrindo, a distribution company in 2008. Consequently, Gudang Garam’s sales contribution through this subsidiary continued to increase (it rose to 23% YoY in 1Q09 from 5% in 1Q08). This is good news as it reduces Gudang Garam’s reliance on its existing affiliate distributors. And going forward, it should help Gudang Garam to boost sales further. Given the rosier prospects for the consumer sector as evidenced by high consumer confidence, we raise our sales growth estimate to 7.9% YoY driven by 5% price increases and 3% volume growth assumptions.
Excellent operating performance
The 1Q09 results show excellent operating performance. The gross margin rose to 22% from 15.4% in 1Q08 thanks to lower material costs, lower production overhead costs, and higher selling prices (the company successfully passed on more of its excise tax burden to the consumer). The company also managed to keep its operating expenses at a relatively low level. As a result, the operating margin jumped to 15.6%, its highest level in 6 years. The company’s balance sheet is very strong. Net gearing declined to only 16% from 21% at the end of 2008. Moreover, its net working capital shortened to 223 days, down 11 days y-o-y, largely because of improving inventory turnover.
FY09-10 earnings forecast increased by 27-30%
We have raised our forecasts to reflect the excellent 1Q09 results. We forecast higher sales, higher margins, higher interest expenses, and a lower income tax rate. The net effect is 27-30% higher earnings forecasts for FY09-10. Applying a WACC of 16.5%, we arrive at a higher TP of Rp9,500 compared to Rp7,000 previously. Our new target price translates into a very attractive valuation of 7.5-7.1x PE09-10F and 1.0-0.9x PBV09-10F. Maintain BUY recommendation.
1Q09 Results: outstanding
Gudang Garam has posted an excellent set of 1Q09 results. Net profits jumped 132% to Rp781 bn on the back of a significant margins improvement and efficiency gains. Sales grew 11% to Rp7,651 bn, driven by higher selling prices we believe. The gross profits and operating profits increased by 58% and 94% respectively, beating expectations. Another boost was provided by the lower income tax rate of 28% as a result of new tax regulations, although net interest expenses did rise 11%.
Sales push
A sales push now appears to be in the making. In this regard, Gudang Garam increased its ownership in its now fully owned subsidiary, Surya Madistrindo, a distribution company in 2008. Consequently, Gudang Garam’s sales contribution through this subsidiary continued to increase (it rose to 23% YoY in 1Q09 from 5% in 1Q08). This is good news as it reduces Gudang Garam’s reliance on its existing affiliate distributors. And going forward, it should help Gudang Garam to boost sales further. Given the rosier prospects for the consumer sector as evidenced by high consumer confidence, we raise our sales growth estimate to 7.9% YoY driven by 5% price increases and 3% volume growth assumptions.
Excellent operating performance
The 1Q09 results show excellent operating performance. The gross margin rose to 22% from 15.4% in 1Q08 thanks to lower material costs, lower production overhead costs, and higher selling prices (the company successfully passed on more of its excise tax burden to the consumer). The company also managed to keep its operating expenses at a relatively low level. As a result, the operating margin jumped to 15.6%, its highest level in 6 years. The company’s balance sheet is very strong. Net gearing declined to only 16% from 21% at the end of 2008. Moreover, its net working capital shortened to 223 days, down 11 days y-o-y, largely because of improving inventory turnover.
Danareksa Hexindo Adiperkasa (HEXA IJ, Rp1,360 BUY) 1Q09 preview: Above expectation
09-10 net profit forecasts increased by 24-34%
The 1Q09 net income reached Rp50bn or 5% above our expectations. We believe the better-than-expected performance was due to higher equipment ASP, a weaker rupiah and higher margins. As such, we raise our 09-10 equipment ASP forecast by 10-5%, our rupiah/USD exchange rate forecast by 4-2%, and our spare parts & services margin estimate to 36.6-26% from 30-20%. This boosts our 09-10 net profit forecasts by 24-34%. Our TP is increased by 57% to Rp1,800, implying PE09-10F of 7.4-5.7x. BUY recommendation maintained. Please note that the full statement will be released by the end of the month after it is audited due to the change in the company’s fiscal year to April/March.
Higher equipment ASP due to change in product mix
Sales of small excavators made up about 86% of unit sales in 1Q09, or less than last year’s 95%. Thus, with bigger and more expensive machines accounting for a larger proportion of the sales, the ASP increased. This helped boost 1Q09 revenues (they reached 26% of our 09F forecast of Rp2T). Consequently, we decide to raise our 09F equipment ASP estimate by 10% (it is flat compared to the 2008 ASP).
Small excavator sales have started to pick up
1Q09 sales volume increased 15% qoq to 195 units. This is not far behind our full year 2009 forecast of 900 units. Sales in Mar 09 surged 61% mom to 95 units, helped by strong demand from the forestry sector. If strong sales of small excavators can be maintained, this bodes well for margins as the small excavators have higher margins. As such, we maintain our heavy equipment margin of 16.5%.
Spare parts and service margin estimates increased
Since heavy equipment sales volume has started to pick up, we believe that revenues from spare parts and servicing will not be as high as in our previous forecasts (we expect more clients to replace their old units rather than have them maintained). Yet since purchasing power is improving, we now expect that the company can maintain gross margins at last year’s level of 36.6% for spare parts and at 26% for servicing (higher than our previous expectation of 30% for spare parts and 20% for servicing). We therefore adjust our assumptions accordingly.
The 1Q09 net income reached Rp50bn or 5% above our expectations. We believe the better-than-expected performance was due to higher equipment ASP, a weaker rupiah and higher margins. As such, we raise our 09-10 equipment ASP forecast by 10-5%, our rupiah/USD exchange rate forecast by 4-2%, and our spare parts & services margin estimate to 36.6-26% from 30-20%. This boosts our 09-10 net profit forecasts by 24-34%. Our TP is increased by 57% to Rp1,800, implying PE09-10F of 7.4-5.7x. BUY recommendation maintained. Please note that the full statement will be released by the end of the month after it is audited due to the change in the company’s fiscal year to April/March.
Higher equipment ASP due to change in product mix
Sales of small excavators made up about 86% of unit sales in 1Q09, or less than last year’s 95%. Thus, with bigger and more expensive machines accounting for a larger proportion of the sales, the ASP increased. This helped boost 1Q09 revenues (they reached 26% of our 09F forecast of Rp2T). Consequently, we decide to raise our 09F equipment ASP estimate by 10% (it is flat compared to the 2008 ASP).
Small excavator sales have started to pick up
1Q09 sales volume increased 15% qoq to 195 units. This is not far behind our full year 2009 forecast of 900 units. Sales in Mar 09 surged 61% mom to 95 units, helped by strong demand from the forestry sector. If strong sales of small excavators can be maintained, this bodes well for margins as the small excavators have higher margins. As such, we maintain our heavy equipment margin of 16.5%.
Spare parts and service margin estimates increased
Since heavy equipment sales volume has started to pick up, we believe that revenues from spare parts and servicing will not be as high as in our previous forecasts (we expect more clients to replace their old units rather than have them maintained). Yet since purchasing power is improving, we now expect that the company can maintain gross margins at last year’s level of 36.6% for spare parts and at 26% for servicing (higher than our previous expectation of 30% for spare parts and 20% for servicing). We therefore adjust our assumptions accordingly.
Indopremier BBCA (HOLD - TP Rp. 3,300)
Inspite of posting a 41.8% YoY increases in Q1 2009 net profit driven by strong net interest income by 29.07% YoY and fee income by 32.09%, BBCA also posted a significant soar in its NPL from 0.6% to 1.6% mainly affected by its two customers in toll road and steel making industry.
Furthermore, Decreasing interest rate environment followed by increasing cost of funds will lead to decrease its NIM ratio along year 2009. Thus, we lowered our target price for the most expensive banks in Indonesia to Rp. 3.300,- and suggest HOLD recommendation. We think that the bank’s share price will be threatened by profit taking action after BI rate announcement last Tuesday.
Furthermore, Decreasing interest rate environment followed by increasing cost of funds will lead to decrease its NIM ratio along year 2009. Thus, we lowered our target price for the most expensive banks in Indonesia to Rp. 3.300,- and suggest HOLD recommendation. We think that the bank’s share price will be threatened by profit taking action after BI rate announcement last Tuesday.
Rabu, 06 Mei 2009
Forbes Australian Miners Down
Miners fell the most in Sydney after copper futures dropped 2.9% to $2.08 a pound in New York overnight. BHP Billiton ( BBL - news - people ) lost 2.3%, or 83 Australian cents (61 cents), to 33.67 Australian dollars ($24.77). Its rival Rio Tinto ( RTP - news - people ) slid 2.8%, or 1.98 Australian dollars ($1.46), to 69.00 Australian dollars ($50.74).
Reuters Stocks tumble, yen rises on Bank of America
HONG KONG (Reuters) - Stocks slid and the yen rose on Wednesday after news Bank of America needs $34 billion in fresh capital, sending shivers through investors ahead of official results of stress tests on U.S. banks due for release on Thursday.
U.S. S&P 500 futures were down 1 percent, indicating a lower market open later in the day on Wall Street, after a source familiar with the government test results on 19 banks told Reuters that Bank of America has been deemed to have additional capital needs worth nearly half its current market cap of $69.4 billion.
The yen strengthened across the board as dealers scrambled to relative safety, knocking the Australian dollar down 1.7 percent despite much stronger-than-expected Australian retail sales numbers.
"This could put a dent in the rally we've seen," said Jan Lambregts, head of Asia research at Rabobank in Hong Kong. "Definitely we'll have a breather until we get these (stress test) results. Perhaps there are a few surprises in there," Lambregts said.
The MSCI index of Asia Pacific stocks outside Japan fell 1.2 percent, after hitting a seven-month high on Tuesday. Cyclical sectors like energy and materials in addition to financials led the index lower.
Japan's markets were closed for a holiday. more...
U.S. S&P 500 futures were down 1 percent, indicating a lower market open later in the day on Wall Street, after a source familiar with the government test results on 19 banks told Reuters that Bank of America has been deemed to have additional capital needs worth nearly half its current market cap of $69.4 billion.
The yen strengthened across the board as dealers scrambled to relative safety, knocking the Australian dollar down 1.7 percent despite much stronger-than-expected Australian retail sales numbers.
"This could put a dent in the rally we've seen," said Jan Lambregts, head of Asia research at Rabobank in Hong Kong. "Definitely we'll have a breather until we get these (stress test) results. Perhaps there are a few surprises in there," Lambregts said.
The MSCI index of Asia Pacific stocks outside Japan fell 1.2 percent, after hitting a seven-month high on Tuesday. Cyclical sectors like energy and materials in addition to financials led the index lower.
Japan's markets were closed for a holiday. more...
Associated Press Asian markets mixed ahead of US bank stress tests
SEOUL, South Korea (AP) -- Asian stock markets were mixed Wednesday as investors awaited the release of U.S. government "stress tests" for banks.
Hong Kong's Hang Seng index rose 125.31 points, or 0.8 percent, to 16,550.56, but South Korea's Kospi was down 0.2 percent at 1,394.68 and Australia's benchmark index fell 0.7 percent to 3,864.5.
U.S. stock futures were lower, pointing to another decline on Wall Street, where the Dow Jones industrial average fell 16.09, or 0.2 percent, to 8,410.65 Tuesday following a 2.6 percent rally the previous day.
Investors are "taking a breather" after recent strong gains, said Winson Fong, managing director at SG Asset Management in Hong Kong, which overseas about $2.5 billion.
With the bank stress test results due out Thursday, "people are using that to take some profits," Fong said.
Taiwan's market remained strong, rising 1.9 percent amid continued investor optimism over prospects for increased investment from China after the signing of a financial cooperation agreement last week. Mainland China's Shanghai Composite index was up 1 percent at 2,592.85.
Japan's financial markets have been closed since Monday and will reopen Thursday.
The bank stress test results will provide details on U.S. financial companies in need of more capital. Reports have surfaced indicating that Citigroup Inc., Bank of America Corp. and Wells Fargo & Co., as well as a handful of regional banks, will be among those requiring assistance.
Regulators have said no large institution will be allowed to fail, and have pledged government funds if necessary.
Troubles at U.S. banks sparked the global financial crisis and their return to health is seen as a key requirement for a lasting economic recovery. more...
Hong Kong's Hang Seng index rose 125.31 points, or 0.8 percent, to 16,550.56, but South Korea's Kospi was down 0.2 percent at 1,394.68 and Australia's benchmark index fell 0.7 percent to 3,864.5.
U.S. stock futures were lower, pointing to another decline on Wall Street, where the Dow Jones industrial average fell 16.09, or 0.2 percent, to 8,410.65 Tuesday following a 2.6 percent rally the previous day.
Investors are "taking a breather" after recent strong gains, said Winson Fong, managing director at SG Asset Management in Hong Kong, which overseas about $2.5 billion.
With the bank stress test results due out Thursday, "people are using that to take some profits," Fong said.
Taiwan's market remained strong, rising 1.9 percent amid continued investor optimism over prospects for increased investment from China after the signing of a financial cooperation agreement last week. Mainland China's Shanghai Composite index was up 1 percent at 2,592.85.
Japan's financial markets have been closed since Monday and will reopen Thursday.
The bank stress test results will provide details on U.S. financial companies in need of more capital. Reports have surfaced indicating that Citigroup Inc., Bank of America Corp. and Wells Fargo & Co., as well as a handful of regional banks, will be among those requiring assistance.
Regulators have said no large institution will be allowed to fail, and have pledged government funds if necessary.
Troubles at U.S. banks sparked the global financial crisis and their return to health is seen as a key requirement for a lasting economic recovery. more...
CIMB Indofood Sukses Makmur Company update - The rise of consumer branded products
(INDF IJ / INDF.JK, TRADING BUY - Maintained, Rp1,370 - Tgt. Rp1,485, Consumer)
EBIT margins for Indofood's consumer branded products shot up to 10.9% in 1Q09, as noodle margins rose to 12.2%, the highest in 20 quarters. Consequently, the division's EBIT contribution climbed to 38%, the highest in over five years. We believe this is sustainable given benign competition. Bogasari's worst quarter, margin-wise, should also be over as high-cost stock has been depleted. We raise our earnings forecasts by 18-24% on higher margin assumptions. This lifts our sum-of-the-parts valuation by 15% and our target price to Rp1,485 (from Rp1,350), still based on a 20% discount to NAV. Maintain Trading Buy.
EBIT margins for Indofood's consumer branded products shot up to 10.9% in 1Q09, as noodle margins rose to 12.2%, the highest in 20 quarters. Consequently, the division's EBIT contribution climbed to 38%, the highest in over five years. We believe this is sustainable given benign competition. Bogasari's worst quarter, margin-wise, should also be over as high-cost stock has been depleted. We raise our earnings forecasts by 18-24% on higher margin assumptions. This lifts our sum-of-the-parts valuation by 15% and our target price to Rp1,485 (from Rp1,350), still based on a 20% discount to NAV. Maintain Trading Buy.
Danareksa Bank Central Asia (BBCA IJ, Rp3,500, SELL) Overvalued, take profit
FY09-10E EPS increased slightly, but still a SELL
We raise our FY09-10 EPS estimates by 8-5% to account for higher interest income and higher other income booked in 1Q09. Our DDM derived TP edges up to Rp2,725, implying 2.5x-2.2x FY09-10E PBV and 10.8x-9.5x FY09-10E PER. Yes, the bank did show good performance in 1Q09, but that was attributable to higher lending rates while the COF softened– a carryover from 4Q08. Lending, however, was unimpressive – the bank’s loans actually contracted 5% on a QoQ basis. We expect BBCA to cut its lending rates in 2Q09, although loans growth is only expected to pick up in the second half of the year. The bank trades at a rich valuation of 3.3x FY09E PBV. There is better value elsewhere. Maintain SELL.
Lending has slackened; so where will the bank put its money?
NPLs were low at 1.6% in 1Q09 and bank lending is unlikely to be as aggressive as it was last year. Quality continues to be the bank’s main focus, in our view. Nevertheless, we stick with our 11% loans growth assumption this year despite the 5% QoQ contraction in loans in 1Q09. Lending should pick up once BBCA lowers its lending rates - most likely in 2H09 we believe. For now, though, we think BBCA will likely tilt its portfolio towards SBI and government bonds (together they currently account for 39% of total earnings assets). Note that with BBCA’s low COF of 3.6%, the bank will still be able to generate a high NIM of 6-7%. As for the NPLs, they are expected to remain in check and even decline to 1.3% by YE09 as loan restructuring is completed. This should encourage more lending in the future.
But the high NIM may come under pressure
BBCA doesn’t have much room to lower its deposit rates in our view. And, at the same time, the bank is likely to cut lending rates going forward. We therefore expect the NIM to ease to 6.5% by YE09. Higher operating expenses are also inevitable since BBCA plans to open another 100 branches (as compared to 35 branches last year) as part of its efforts to remain the country’s number one “transactional” bank. As a result, we expect the bank’s cost-to-income ratio to increase to 46% in 2009 from 42% last year.
Benefiting less than other banks from consumer recovery
We argue that BBCA benefits less than other banks from either declining interest rates or recovery of the consumer sector. This is because 75% of the bank’s deposits are already low cost deposits and 42% of its loans are channeled to the corporate segment. In fact, declining interest rates shall likely hurt its profitability given that 85% of its assets are variable in nature. As loans only account for 42% of its assets, there is little to buffer the bank from declining interest rates. While consumer lending shall pick up, the bank’s focus will likely remain on corporate and commercial lending given BBCA’s strategy of securing greater transactional value and therefore higher fee based income.
We raise our FY09-10 EPS estimates by 8-5% to account for higher interest income and higher other income booked in 1Q09. Our DDM derived TP edges up to Rp2,725, implying 2.5x-2.2x FY09-10E PBV and 10.8x-9.5x FY09-10E PER. Yes, the bank did show good performance in 1Q09, but that was attributable to higher lending rates while the COF softened– a carryover from 4Q08. Lending, however, was unimpressive – the bank’s loans actually contracted 5% on a QoQ basis. We expect BBCA to cut its lending rates in 2Q09, although loans growth is only expected to pick up in the second half of the year. The bank trades at a rich valuation of 3.3x FY09E PBV. There is better value elsewhere. Maintain SELL.
Lending has slackened; so where will the bank put its money?
NPLs were low at 1.6% in 1Q09 and bank lending is unlikely to be as aggressive as it was last year. Quality continues to be the bank’s main focus, in our view. Nevertheless, we stick with our 11% loans growth assumption this year despite the 5% QoQ contraction in loans in 1Q09. Lending should pick up once BBCA lowers its lending rates - most likely in 2H09 we believe. For now, though, we think BBCA will likely tilt its portfolio towards SBI and government bonds (together they currently account for 39% of total earnings assets). Note that with BBCA’s low COF of 3.6%, the bank will still be able to generate a high NIM of 6-7%. As for the NPLs, they are expected to remain in check and even decline to 1.3% by YE09 as loan restructuring is completed. This should encourage more lending in the future.
But the high NIM may come under pressure
BBCA doesn’t have much room to lower its deposit rates in our view. And, at the same time, the bank is likely to cut lending rates going forward. We therefore expect the NIM to ease to 6.5% by YE09. Higher operating expenses are also inevitable since BBCA plans to open another 100 branches (as compared to 35 branches last year) as part of its efforts to remain the country’s number one “transactional” bank. As a result, we expect the bank’s cost-to-income ratio to increase to 46% in 2009 from 42% last year.
Benefiting less than other banks from consumer recovery
We argue that BBCA benefits less than other banks from either declining interest rates or recovery of the consumer sector. This is because 75% of the bank’s deposits are already low cost deposits and 42% of its loans are channeled to the corporate segment. In fact, declining interest rates shall likely hurt its profitability given that 85% of its assets are variable in nature. As loans only account for 42% of its assets, there is little to buffer the bank from declining interest rates. While consumer lending shall pick up, the bank’s focus will likely remain on corporate and commercial lending given BBCA’s strategy of securing greater transactional value and therefore higher fee based income.
Indo Premier PTBA – BUY (TP-Rp11,725)
Three things that was indicated by PTBA’s higher-than-expected 1Q09 results. PTBA has a strong bargaining power in domestic market that provide a substitute in times of weak export market (first), stable production costs (second), and a clear indication that electricity consumption is resillient during times of crisis (third).
For 1Q09, PTBA reported a 221% jumped in net profit to Rp920.57bn , on the back of an 89% increased in revenue at Rp2.33trn. Higher selling price and sales volume as well as stable costs have permitted this achievement. At Rp9.750, PTBA stock is trading at 8.2 times our revised FY09 estimates, still below the market that is trading at 11 times FY09 earnings.
From our DCF calculation, lower WACC and higher earnings resulted in higher target price of Rp11,725 per share for PTBA. We continue to like PTBA and rate the share a BUY.
For 1Q09, PTBA reported a 221% jumped in net profit to Rp920.57bn , on the back of an 89% increased in revenue at Rp2.33trn. Higher selling price and sales volume as well as stable costs have permitted this achievement. At Rp9.750, PTBA stock is trading at 8.2 times our revised FY09 estimates, still below the market that is trading at 11 times FY09 earnings.
From our DCF calculation, lower WACC and higher earnings resulted in higher target price of Rp11,725 per share for PTBA. We continue to like PTBA and rate the share a BUY.
Danareksa SMRA - Efisiensi Summarecon Meningkat di 3M09 TP Rp 295, BUY
Laporan Keuangan
Penjualan tumbuh 3% yoy namun turun 40% qoq. Walaupun demikian, biaya menjadi lebih efisien sehingga marjin kotor mampu tumbuh menjadi 48,6%.
Biaya operasional tumbuh 19% yoy dikarenakan meningkatnya biaya pemasaran yang menyebabkan laba operasional tumbuh flat yoy.
Other expense (biaya lain-lain) tumbuh secara signifikan 129% yoy disebabkan interest expense yang meningkat dan forex loss. Akibatnya, laba bersih turun 35% yoy.
Marjin lebih tinggi dari ekspektasi kami, tetapi kami berkeyakinan bahwa kondisi ini tidak akan berkelanjutan mengingat:
■ Marjin selalu mencapai yang tertinggi di 1Q
■ Peningkatan ini dikontribusi dari properti rental
■ Penjualan yang menurun selama melambatnya perekonomian dari tahun kemarin akan dibukukan tahun ini
Kami masih mempertahankan FY forecast kami dengan TP Rp 295.
Efisiensi Summarecon Meningkat di 3M09 TP Rp 295, BUY
Penjualan tumbuh 3% yoy namun turun 40% qoq. Walaupun demikian, biaya menjadi lebih efisien sehingga marjin kotor mampu tumbuh menjadi 48,6%.
Biaya operasional tumbuh 19% yoy dikarenakan meningkatnya biaya pemasaran yang menyebabkan laba operasional tumbuh flat yoy.
Other expense (biaya lain-lain) tumbuh secara signifikan 129% yoy disebabkan interest expense yang meningkat dan forex loss. Akibatnya, laba bersih turun 35% yoy.
Marjin lebih tinggi dari ekspektasi kami, tetapi kami berkeyakinan bahwa kondisi ini tidak akan berkelanjutan mengingat:
■ Marjin selalu mencapai yang tertinggi di 1Q
■ Peningkatan ini dikontribusi dari properti rental
■ Penjualan yang menurun selama melambatnya perekonomian dari tahun kemarin akan dibukukan tahun ini
Kami masih mempertahankan FY forecast kami dengan TP Rp 295.
Efisiensi Summarecon Meningkat di 3M09 TP Rp 295, BUY
London Sumatra To Pay Dividend in June
Palm oil producers PT PP London Sumatra Indonesia announced to pay dividend of Rp 208 per share after retaining dividend pay last year.
An independent commissioner of London Sumatra Rachmat Soebiapradja said after a stakeholder meeting at Indofood Tower in Jakarta on Tuesday (5/5), “our profit spiked as crude palm oil jumped.”
London Sumatra said total dividend payment this year was Rp 278.8 billion or around 30 percent of the company’s Rp 928 billion net profit. The company to make the payment on June 5th and to retain Rp 15.5 billion from the net profit for reserve fund.
The company also planning to expand its plantation area in South Sumatra and build a new factory in East Kalimantan, which to be partially financed by loans.
An independent commissioner of London Sumatra Rachmat Soebiapradja said after a stakeholder meeting at Indofood Tower in Jakarta on Tuesday (5/5), “our profit spiked as crude palm oil jumped.”
London Sumatra said total dividend payment this year was Rp 278.8 billion or around 30 percent of the company’s Rp 928 billion net profit. The company to make the payment on June 5th and to retain Rp 15.5 billion from the net profit for reserve fund.
The company also planning to expand its plantation area in South Sumatra and build a new factory in East Kalimantan, which to be partially financed by loans.
Indonesia’s Astra Agro Sells 3,500 Tons CPO Tuesday
Indonesia’s PT Astra Agro Lestari (AALI.JK) Tuesday said it sold 3,500 metric tons of crude palm oil offered in an auction.
PT Salim Ivomas Pratama bought 2,000 tons CPO at IDR8,755 a kilogram, free-on- board, Bumiharjo.
The company bought another 1,500 tons at IDR8,655 a kilogram, free-on-board, Buluminung.
A further 2,000 tons was withdrawn as the bids made were lower than the company’s offer prices of IDR8,865-IDR8,935 a kilogram, free-on-board, Buatan and Dumai.
The company also withdrew 500 tons of palm kernel oil as bids were lower than the offer price of $850 a ton.
Another auction is expected Wednesday.
PT Salim Ivomas Pratama bought 2,000 tons CPO at IDR8,755 a kilogram, free-on- board, Bumiharjo.
The company bought another 1,500 tons at IDR8,655 a kilogram, free-on-board, Buluminung.
A further 2,000 tons was withdrawn as the bids made were lower than the company’s offer prices of IDR8,865-IDR8,935 a kilogram, free-on-board, Buatan and Dumai.
The company also withdrew 500 tons of palm kernel oil as bids were lower than the offer price of $850 a ton.
Another auction is expected Wednesday.
Crude palm oil futures hit by massive selling
CRUDE palm oil (CPO) futures prices on Bursa Malaysia Derivatives ended lower in bearish market yesterday on massive selling following the previous day’s run up, dealers said.
“The market came under selling pressure today as investors took profits from Monday’s rally which saw CPO prices touching a 38-week high,” a dealer said.
Overall, the market was relatively weak with most investors staying on the sidelines, waiting for the April stock report which is due for release next Monday.
The market is currently concerned with the shortage of CPO stocks.
“Lower output could push the prices up,” the dealer said.
At the close, the May 2009 and June 2009 contracts fell RM60 each to settle at RM2,777 per tonne and RM2,695 per tonne respectively.
The July 2009 contract declined RM77 to RM2,625 per tonne and the August 2009 contract went down RM71 to RM2,570 per tonne.
Total volume was lower at 22,092 lots compared with Monday’s closing of 36,748 lots while open interests eased to 83,059 contracts from 84,885 contracts previously.
On the physical market, May South slipped to RM2,800 per tonne as against RM2,830 per tonne recorded the previous day.
“The market came under selling pressure today as investors took profits from Monday’s rally which saw CPO prices touching a 38-week high,” a dealer said.
Overall, the market was relatively weak with most investors staying on the sidelines, waiting for the April stock report which is due for release next Monday.
The market is currently concerned with the shortage of CPO stocks.
“Lower output could push the prices up,” the dealer said.
At the close, the May 2009 and June 2009 contracts fell RM60 each to settle at RM2,777 per tonne and RM2,695 per tonne respectively.
The July 2009 contract declined RM77 to RM2,625 per tonne and the August 2009 contract went down RM71 to RM2,570 per tonne.
Total volume was lower at 22,092 lots compared with Monday’s closing of 36,748 lots while open interests eased to 83,059 contracts from 84,885 contracts previously.
On the physical market, May South slipped to RM2,800 per tonne as against RM2,830 per tonne recorded the previous day.
Bloomberg ArcelorMittal Opts Against $10 Billion Investment in Indonesia
May 5 (Bloomberg) -- ArcelorMittal, the world’s biggest steelmaker, opted against making a potential $10 billion investment in Indonesia that might have included taking a stake in a state-owned company.
“We have looked at the feasibility of establishing a project in Indonesia and at the moment are not pursuing it,” Chief Executive Officer Lakshmi Mittal said on a telephone conference call on April 29. “The economy in Indonesia has not been growing, and there is not fast economic growth in this part of the world.”
Steelmakers have scaled back investment plans and cut production and payrolls after the world economic slump eroded demand for the metal. Luxembourg-based ArcelorMittal, which last week posted its second consecutive quarterly loss, said in April it might reduce the size of a planned Indian plant by half and indefinitely defer a second facility.
ArcelorMittal walked away from an accord to buy a 40 percent stake in Indonesian steelmaker PT Krakatau Steel because of opposition from the Asian company’s managers and the country’s parliament, the Wall Street Journal reported today. It cited comments from Maxi Gunawan, co-chairman of the Indonesian British Business Council.
The European steelmaker said in May 2008 it planned to invest $10 billion in Indonesia, including taking a Krakatau stake. Giles Read, a London-based spokesman for ArcelorMittal, said today the company had no further comment on plans for
Indonesia beyond the CEO’s remarks on last week’s call.
The Indonesian economy, Southeast Asia’s largest, probably expanded by 4.6 percent in the first quarter, the least in more than four years, Bank Indonesia said last month.
For Related News and Information:
Steel company earnings stories: TCNI STL ERN
Top metals stories: METT
ArcelorMittal revenue breakdown: MT NA PGEO
--Editors: Dan Weeks, Tony Barrett.
“We have looked at the feasibility of establishing a project in Indonesia and at the moment are not pursuing it,” Chief Executive Officer Lakshmi Mittal said on a telephone conference call on April 29. “The economy in Indonesia has not been growing, and there is not fast economic growth in this part of the world.”
Steelmakers have scaled back investment plans and cut production and payrolls after the world economic slump eroded demand for the metal. Luxembourg-based ArcelorMittal, which last week posted its second consecutive quarterly loss, said in April it might reduce the size of a planned Indian plant by half and indefinitely defer a second facility.
ArcelorMittal walked away from an accord to buy a 40 percent stake in Indonesian steelmaker PT Krakatau Steel because of opposition from the Asian company’s managers and the country’s parliament, the Wall Street Journal reported today. It cited comments from Maxi Gunawan, co-chairman of the Indonesian British Business Council.
The European steelmaker said in May 2008 it planned to invest $10 billion in Indonesia, including taking a Krakatau stake. Giles Read, a London-based spokesman for ArcelorMittal, said today the company had no further comment on plans for
Indonesia beyond the CEO’s remarks on last week’s call.
The Indonesian economy, Southeast Asia’s largest, probably expanded by 4.6 percent in the first quarter, the least in more than four years, Bank Indonesia said last month.
For Related News and Information:
Steel company earnings stories: TCNI STL ERN
Top metals stories: METT
ArcelorMittal revenue breakdown: MT NA
--Editors: Dan Weeks, Tony Barrett.
Holcim Rugi Bersih Rp 77,49 M
Holcim Indonesia menderita rugi bersih Rp 77,49 miliar pada triwulan 1-2009 dibanding periode sama tahun sebelumnya yang meraih laba bersih Rp 138,17 miliar.“Penjualan bersih naik menjadi Rp 1,12 triliun dari Rp 885,77 miliar dan laba usaha naik menjadi Rp 252,02 miliar dari Rp 132,59 miliar,” jelas Direktur Utama Holcim Timothy D Mackay dalam laporan tertulis ke BEI, Selasa (5/5).
Adapun, beban lain-lain bersih naik menjadi Rp 349,16 miliar dari pendapatan lain-lain Rp 60,64 miliar dan membuat rugi sebelum pajak menjadi Rp 97,13 miliar dari laba sebelum pajak sebelumnya Rp 193,23 miliar.
Bloomberg Richards Bay Coal Shipments Fall Most in 9 Months
May 5 (Bloomberg) -- Richards Bay Coal Terminal Ltd., Africa’s largest coal-export facility, said shipments fell 24 percent last month, the biggest drop in nine months.Shipments fell to 4.55 million metric tons in April from 5.97 million tons in the same month a year earlier, the terminal said in an e-mailed response to questions today. That’s the biggest drop since July last year, when they declined 26 percent. Stockpiles at the terminal climbed to 4.19 million tons, the highest since March 2007.
“It’s the market, its terrible,” Xavier Prevost, a coal analyst in South Africa, said in an interview from his mobile phone today. “With the prices most of the producers are not keen on actually exporting or selling too much coal.”
Prices of coal shipped from the terminal fell 44 percent Over the last year and traded at an average of $58.50 a ton in the week ended May 1, according to Petersfield, England-based McCloskey Group.
The terminal in north eastern South Africa is owned by South Africa’s largest coal exporters, including Anglo American Plc, BHP Billiton Ltd. and Xstrata Plc. It is the biggest source of coal for European power plants.
Sixty-eight ships were loaded during the month and 572 trains arrived at the facility, RBCT said. It received 5.27 million tons of the fuel by rail.
Falling Shipments
At its current shipment rate Richards Bay will export 56.77 million tons of coal this year compared with a capacity of 76 million tons, expanding to 91 million tons by July. When that expansion is complete Richards Bay will be the world’s single biggest coal export facility.
Richards Bay’s shipments this year are likely to be below those last year, Prevost said, adding that he doesn’t expect substantial improvement in demand in 2009. The terminal shipped 61.79 million tons in 2008 compared with 66.16 million tons the year earlier. Exports were reduced by derailments and increased competition for supplies from power utility Eskom Holdings Ltd.
Terry Howarth, the chief executive officer of the terminal, wasn’t immediately available when his office was called.
Transnet Ltd., which operates South Africa’s railways, will close one of two lines to the terminal from May 4-13 for Xavier maintenance.
source: Bloomberg 05 May 2009
Associated Press Stocks slip as traders take profits after surge
Street slips as traders take profits after big jump; 'Stress test' results loom; Dow falls 16
NEW YORK (AP) -- Sometimes a down day on Wall Street can be a good thing -- especially when it shows that investors are carefully weighing their next steps.
Traders collected a few profits Tuesday, leaving the major indexes with fairly modest losses, as the market waited for key reports on the government's assessment of banks' health and the latest numbers on jobs.
But stocks held on to most of their gains from Monday, which saw the Standard & Poor's 500 index recoup the last of its losses since the beginning of the year. That advance came on hopeful signs in the housing market and extended a two-month rally that brought stocks up from 12-year lows.
"Today's action, just drifting around, is not that surprising given Monday's rally," said Darin Newsom, a senior analyst at DTN in Omaha, Neb.
Many analysts believe it's actually good for the market to pause after a big advance, particularly when Wall Street has had its best two-month performance in nearly 35 years. Tuesday's showing proved that investors aren't buying with abandon, and are considering whether they want to put more money into stocks given the challenges the market faces later this week.
On Thursday, the government will release results of its stress tests on banks, and on Friday, the Labor Department issues some of the most closely watched data on the Street, its monthly tally of job losses and unemployment.
The Dow fell 16.09, or 0.2 percent, to 8,410.65.
The Standard & Poor's 500 index fell 3.44, or 0.4 percent, to 903.80. The modest pullback left the index essentially flat for the year to date. The S&P 500 is widely used as a benchmark for mutual funds and other investments.
The Nasdaq composite index lost 9.44, or 0.5 percent, to 1,754.12, and the Russell 2000 index of smaller companies fell 4.27, or 0.8 percent, to 502.55. more...
NEW YORK (AP) -- Sometimes a down day on Wall Street can be a good thing -- especially when it shows that investors are carefully weighing their next steps.
Traders collected a few profits Tuesday, leaving the major indexes with fairly modest losses, as the market waited for key reports on the government's assessment of banks' health and the latest numbers on jobs.
But stocks held on to most of their gains from Monday, which saw the Standard & Poor's 500 index recoup the last of its losses since the beginning of the year. That advance came on hopeful signs in the housing market and extended a two-month rally that brought stocks up from 12-year lows.
"Today's action, just drifting around, is not that surprising given Monday's rally," said Darin Newsom, a senior analyst at DTN in Omaha, Neb.
Many analysts believe it's actually good for the market to pause after a big advance, particularly when Wall Street has had its best two-month performance in nearly 35 years. Tuesday's showing proved that investors aren't buying with abandon, and are considering whether they want to put more money into stocks given the challenges the market faces later this week.
On Thursday, the government will release results of its stress tests on banks, and on Friday, the Labor Department issues some of the most closely watched data on the Street, its monthly tally of job losses and unemployment.
The Dow fell 16.09, or 0.2 percent, to 8,410.65.
The Standard & Poor's 500 index fell 3.44, or 0.4 percent, to 903.80. The modest pullback left the index essentially flat for the year to date. The S&P 500 is widely used as a benchmark for mutual funds and other investments.
The Nasdaq composite index lost 9.44, or 0.5 percent, to 1,754.12, and the Russell 2000 index of smaller companies fell 4.27, or 0.8 percent, to 502.55. more...
Goldman Sachs - Banks - The beginning of the end: anticipating the final round of bank capital raises
Glimmers of light at the end of the tunnelThe combination of improving macro data and a credible stress test suggests that this will be the final round of capital raises for big banks. The key will be that the stress test is credible and sufficient detail is made public at the individual bank level. Up until now the market has faced a dual uncertainty of no foreseeable bottom in the economy and little credibility in balance sheets of the major banks. If the stress test follows the numbers that have leaked in the press, we think the test has sufficient credibility to represent the true mark-to-market investors have lacked up until now. Not enough is public yet, but the leaks provide a credible base case. Consider:
Leveraged loss risk wanes: In 2008, securities losses were at the core of capital destruction. We are now in a “classic” NPA cycle where pre-provision earnings may offset loan losses.
Macro improvement: Better macro data reduces tail risk of a second round of leveraged losses. That said, any economic recovery will likely be weak, leading to a sustained period of high losses and low bank earnings.
Capital raises could cause indigestion: We expect about $130bn of capital needs this year. While banks have stopped destroying capital, they still face the core issue that they are over-levered. The Fed faces a double edged sword. The stress test needs to force a credible amount of capital in order to be cathartic but it may be tough for the market to absorb the supply. Potential capital raises concern us as the last two bank stock rallies ended following $30-50bn of deals. That said the performance of recent deals is encouraging.
Valuation – tangible book vs. pre-provision: We expect valuations to remain tangible book based until recaps are complete. Here, banks do not look cheap vs. prior crises. The risk is investors view the stress test capital raises as the final round and focus on pre-provision earnings.
CLSA 1Q09 results: Sampoerna Agro (SGRO I)
Sampoerna Agro (SGRO IJ) reported a weak result with net profit of Rp13bn which is only 6% of our full year forecast and market consensus. Although weak 1Q09 is largely expected, the sharp fall in production volume (FFB harvest from inti -70% yoy) has amplified the weakness.
South Sumatera was hurt by low crops season in 1Q09 that caused the 70% yoy fall in FFB production of Sampoerna Agro as 82% of its mature estates are located in South Sumatera.
Low harvest means production costs per ton is higher given production costs per hectare is relatively fixed. Production cost per ton FFB of Sampoerna Agro has increased from Rp657/kg in 2008 to more than Rp1,000/kg in 1Q09. This despite the facts that Sampoerna Agro FFB production costs in 1Q09 is 33% lower than last year at Rp42bn (largely due to lower upkeep and harvest costs).
Management expect harvest to pick up strongly in 2H09, following the pattern in 2005 and 2007 where first quarter harvest only accounts for 11%-12% of full year production. The chart below shows that production pattern of Sampoerna Agro could be very volatile.
lent Rp111bn (US$9.2m) to PT Siak Raya Timber that is claimed to be non related parties. We believe this is part of the process of Sampoerna Agro intention to diversify into sago palm plantation and processing facilities in Riau, Sumatera where Siak Raya Timber is located.
South Sumatera was hurt by low crops season in 1Q09 that caused the 70% yoy fall in FFB production of Sampoerna Agro as 82% of its mature estates are located in South Sumatera.
Low harvest means production costs per ton is higher given production costs per hectare is relatively fixed. Production cost per ton FFB of Sampoerna Agro has increased from Rp657/kg in 2008 to more than Rp1,000/kg in 1Q09. This despite the facts that Sampoerna Agro FFB production costs in 1Q09 is 33% lower than last year at Rp42bn (largely due to lower upkeep and harvest costs).
Management expect harvest to pick up strongly in 2H09, following the pattern in 2005 and 2007 where first quarter harvest only accounts for 11%-12% of full year production. The chart below shows that production pattern of Sampoerna Agro could be very volatile.
lent Rp111bn (US$9.2m) to PT Siak Raya Timber that is claimed to be non related parties. We believe this is part of the process of Sampoerna Agro intention to diversify into sago palm plantation and processing facilities in Riau, Sumatera where Siak Raya Timber is located.
Selasa, 05 Mei 2009
The Star Benchmark and spot CPO futures contracts surge
Petaling JayaThe benchmark July crude palm oil (CPO) futures contract rallied to a nine-month high of above RM2,700 on Bursa Derivatives Exchange yesterday while the spot-month May contract jumped even higher to above RM2,800.
The July contract closed RM107 higher at RM2,702 a tonne while the June and May contracts rose RM121 each to RM2,755 and RM2,837 respectively.
A dealer said the market sentiment was 70% driven by fundamentals and 30% foreign interest.
Palm oil, a substitute for soyoil, closely tracked the sharp rally in soybean futures on the Chicago Board of Trade on Friday on fears over shrinking supply from major soybean producers like the United States and South America.
“I believe that the price discount between CPO and soybean will narrow further by 40% to 45%, given current developments,” the dealer said. CPO is traditionally traded at a US$100 to US$200 per tonne discount to soyoil.
On Bursa Malaysia, plantation stock IOI Corp Bhd closed 12 sen higher at RM4.42, its highest since Sept 26. Sime Darby Bhd rose 10 sen to RM6.70, Tradewinds Plantation Bhd put on 12 sen to RM1.87 and Hap Seng Plantations Bhd added eight sen to RM1.97.
Independent palm oil consultant MR Chandran told StarBiz that the RSPO-certified palm oil was fast attracting strong demand from the global food-based industry.
He said palm oil had proved to be a versatile “feedstock” for food, animal feed, oleochemicals and biofuel production.
“For CPO prices to trade at RM2,700 to RM2,800 per tonne, it clearly indicates the market has factored in reports of lower CPO production this year,” he said. “Malaysia will be hard pressed to achieve last year’s production of 17.9 million tonnes and will definitely miss the Malaysian Palm Oil Board’s 18.3 million target for 2009.”
The active oil palm replanting activities and reduced fertiliser usage due to the recent price hikes were taking a toll on local CPO production, Chandran said, adding that there were also fears over the shortage in other global oilseeds with palm oil being the most prominent.
Reuters U.S. test banks need capital but face manageable losses
WASHINGTON (Reuters) - U.S. regulators are working with the top 19 banks on Tuesday to put the final touches on the results of regulatory stress tests, which are expected to reveal about half the banks need more capital but face manageable losses.
The results -- due to be unveiled on Thursday -- will likely show that the largest U.S. banks do not need dramatic new government interventions, which could further drive the recovery of banks' stock prices and signal an exit strategy for the government's intimate involvement in the sector.
Federal Reserve Chairman Ben Bernanke told lawmakers on Tuesday that those banks needing to raise more capital can do so through the private sector.
"I've looked at many of the banks and I believe that many of them will be able to meet their capital needs without further government capital through either issuance of new capital or through conversions and exchanges or the sales of assets and other measures that would raise capital," Bernanke said.
Michael Poulos, head of the financial services practice at consulting firm Oliver Wyman, said the markets are also looking more positively at the banks undergoing the stress tests. He said investors have mostly priced in what they expect to see.
"My sense is that where they've come out is more optimistic in terms of the ability of banks to recapitalize," Poulos said. "If you look at the biggest banks, their prices have tripled from the bottom, and I'm not expecting them to move much on Thursday."
The KBW Banks stock index, which includes about two dozen large banks, was trading down about 2 percent in morning trading on Tuesday but has almost doubled from its year-low seen on March 6.
About 10 of the banks will likely be directed to aim for a higher capital ratio that puts more emphasis on common equity, which is thought to better absorb losses, according to a source familiar with official talks.
Regulators plan to release the results late Thursday in a 150-page document with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner on hand to explain the findings. more...
The results -- due to be unveiled on Thursday -- will likely show that the largest U.S. banks do not need dramatic new government interventions, which could further drive the recovery of banks' stock prices and signal an exit strategy for the government's intimate involvement in the sector.
Federal Reserve Chairman Ben Bernanke told lawmakers on Tuesday that those banks needing to raise more capital can do so through the private sector.
"I've looked at many of the banks and I believe that many of them will be able to meet their capital needs without further government capital through either issuance of new capital or through conversions and exchanges or the sales of assets and other measures that would raise capital," Bernanke said.
Michael Poulos, head of the financial services practice at consulting firm Oliver Wyman, said the markets are also looking more positively at the banks undergoing the stress tests. He said investors have mostly priced in what they expect to see.
"My sense is that where they've come out is more optimistic in terms of the ability of banks to recapitalize," Poulos said. "If you look at the biggest banks, their prices have tripled from the bottom, and I'm not expecting them to move much on Thursday."
The KBW Banks stock index, which includes about two dozen large banks, was trading down about 2 percent in morning trading on Tuesday but has almost doubled from its year-low seen on March 6.
About 10 of the banks will likely be directed to aim for a higher capital ratio that puts more emphasis on common equity, which is thought to better absorb losses, according to a source familiar with official talks.
Regulators plan to release the results late Thursday in a 150-page document with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner on hand to explain the findings. more...
Associated Press Bernanke: Economy should grow again later in 2009
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Tuesday that the economy should pull out of a recession and start growing again later this year.But in testimony to Congress' Joint Economic Committee, Bernanke warned that even after a recovery gets under way, economic activity is likely to be subpar. That means businesses will stay cautious about hiring, driving up the nation's unemployment rate and causing "further sizable job losses" in the coming months, he said.
The recession, which started in December 2007, already has snatched a net total of 5.1 million jobs.
The unemployment rate "could remain high for a time, even after economic growth resumes," Bernanke said.
Even with all the cautionary notes, the Fed chief offered a far less dour assessment of the economy.
"We continue to expect economic activity to bottom out, then to turn up later this year," he told lawmakers.
Recent data suggest the recession may be loosening its firm grip on the country, Bernanke said.
"The pace of contraction may be slowing," he said. It was similar to an observation the Fed made last week in deciding not to take any additional steps to shore up the economy.
The housing market, which has been in a slump for three years, has shown some signs of bottoming, he said. Consumer spending, which collapsed in the second half of last year, came back to life in the first quarter.
In the months ahead, consumer spending should be lifted by tax cuts contained in President Barack Obama's larger $787 billion stimulus package. Still, rising unemployment, sinking home values and cracked nest eggs will still weigh on consumers willingness to spend freely, Bernanke said. more...
Macquarie SMCB Focused on servicing parent
Event
We reiterate our Outperform on Holcim Indonesia and upgrade our target price to Rp760 from Rp700 due to earnings upgrades.
Impact
Beneficiary of 2010 industry recovery. SMCB has 15% excess capacity, allowing it to benefit from the predicted recovery next year. Its ready-mix and bulk business, which accounts for 36% of revenue, should benefit from a recovery in large-scale property development projects. After a lacklustre 2009, we expect the cement industry to grow 10% and GDP growth to accelerate to 5.5%.
Highly concentrated in Java, main growth area in 2010–11. We believe that Java Island would see the bulk of infrastructure spending post the 2009 parliamentary and presidential elections. With 80% of its sales in Java, SMCB should benefit.
Highly geared, but operationally solid. Although SMCB is highly geared, 94% of its debt is to its parent company. We believe that its focus will be on generating cash to service its US$286m parent company debt, where instalments are set to begin in 2009. As it is still in a deficit, it will not be able to pay out dividends until it turns into a surplus, most likely in 2014. Benign competition will also likely lead to firm prices, despite declining costs as a result of rupiah appreciation and lower coal contracts in 2010.
Helping out parent company. We believe that the company’s move to shift back cash to its parent is an indication of its solid operations and FCF generation. The company announced that it was in the process of acquiring 100% of Holcim Sdn Bhd in Malaysia for US$50m from its parent. In addition, it prepaid US$45m of its US$331m parent company loan in February.
Valuations are attractive on a historical basis. SMCB is currently trading at round one standard deviation to its historical averages on EV/EBITDA and EV/tonne. On PER and P/BV, it is trading below historical averages. As such, its valuation is attractive, in our view.
Earnings and target price revision
We revise up our 2009 and 2010 EPS estimates by 43% and 1%, respectively. Our new target price is Rp760 (previously Rp700)
Price catalyst
12-month price target: Rp760 based on a DCF methodology.
Catalyst: Government infrastructure spending, prepayment of parent loan.
Action and recommendation
We maintain our Outperform call on SMCB due to attractive valuations. However, Indocement remains our top pick in the Indonesian cement sector due to its spare capacity and strong balance sheet.
We reiterate our Outperform on Holcim Indonesia and upgrade our target price to Rp760 from Rp700 due to earnings upgrades.
Impact
Beneficiary of 2010 industry recovery. SMCB has 15% excess capacity, allowing it to benefit from the predicted recovery next year. Its ready-mix and bulk business, which accounts for 36% of revenue, should benefit from a recovery in large-scale property development projects. After a lacklustre 2009, we expect the cement industry to grow 10% and GDP growth to accelerate to 5.5%.
Highly concentrated in Java, main growth area in 2010–11. We believe that Java Island would see the bulk of infrastructure spending post the 2009 parliamentary and presidential elections. With 80% of its sales in Java, SMCB should benefit.
Highly geared, but operationally solid. Although SMCB is highly geared, 94% of its debt is to its parent company. We believe that its focus will be on generating cash to service its US$286m parent company debt, where instalments are set to begin in 2009. As it is still in a deficit, it will not be able to pay out dividends until it turns into a surplus, most likely in 2014. Benign competition will also likely lead to firm prices, despite declining costs as a result of rupiah appreciation and lower coal contracts in 2010.
Helping out parent company. We believe that the company’s move to shift back cash to its parent is an indication of its solid operations and FCF generation. The company announced that it was in the process of acquiring 100% of Holcim Sdn Bhd in Malaysia for US$50m from its parent. In addition, it prepaid US$45m of its US$331m parent company loan in February.
Valuations are attractive on a historical basis. SMCB is currently trading at round one standard deviation to its historical averages on EV/EBITDA and EV/tonne. On PER and P/BV, it is trading below historical averages. As such, its valuation is attractive, in our view.
Earnings and target price revision
We revise up our 2009 and 2010 EPS estimates by 43% and 1%, respectively. Our new target price is Rp760 (previously Rp700)
Price catalyst
12-month price target: Rp760 based on a DCF methodology.
Catalyst: Government infrastructure spending, prepayment of parent loan.
Action and recommendation
We maintain our Outperform call on SMCB due to attractive valuations. However, Indocement remains our top pick in the Indonesian cement sector due to its spare capacity and strong balance sheet.
Macquarie SMGR High utilisation limits upside
Event
We reiterate our Outperform rating on Semen Gresik (SMGR) and raise our target price to Rp4,700 on the back of earnings upgrades.
Impact
Remains a beneficiary of the structural cement demand trend. Cement consumption per capita in Indonesia is very low at 167kg and suggests that long-term prospects remain promising. SMGR is the market leader in this oligopolistic industry, and hence we believe it should continue to benefit from this long-term trend.
However, lack of spare capacity will limit upside relative to peers. SMGR is running at 92% capacity utilisation currently, which we believe will limit its ability to capitalise on the industry recovery forecast for 2010–11. Considering regional acquisitions to mitigate capacity constraints.
Management has stated that it is looking at potentially acquiring cement plants in the region, preferably in Malaysia. We would view this as positive only if the company then delays construction of one of its two plants, which is expected to cost US$670m over the next five years.
Margins set to expand. We expect margins to expand as costs decline due to lower-priced coal contracts and rupiah appreciation. Coal accounts for 30% of costs and around 40% of costs are dollar-denominated.
Java main growth area in 2009–11, SMGR least exposed. The infrastructure projects that have been launched by the government are centred primarily in Java, which is the stronghold of Holcim Indonesia and Indocement. SMGR has the least exposure to Java and would not benefit as much as its rivals.
Valuations attractive on a historical basis. SMGR is trading at one standard deviation below its average PER. On EV/EBITDA and P/BV, it is slightly below historical averages.
Earnings and target price revision
We revise up our 2009 and 2010 EPS estimates by 20% and 9% to Rp492 and Rp559, respectively. We raise our target price to Rp4,700 from Rp3,700.
Price catalyst
12-month price target: Rp4,700 based on a DCF methodology.
Catalyst: Reduced capex spending, regional acquisition, government infrastructure projects.
Action and recommendation
We reiterate our Outperform rating and raise our target price to Rp4,700 . However, our sector preference is INTP, which has spare capacity and low capex requirements going forward.
We reiterate our Outperform rating on Semen Gresik (SMGR) and raise our target price to Rp4,700 on the back of earnings upgrades.
Impact
Remains a beneficiary of the structural cement demand trend. Cement consumption per capita in Indonesia is very low at 167kg and suggests that long-term prospects remain promising. SMGR is the market leader in this oligopolistic industry, and hence we believe it should continue to benefit from this long-term trend.
However, lack of spare capacity will limit upside relative to peers. SMGR is running at 92% capacity utilisation currently, which we believe will limit its ability to capitalise on the industry recovery forecast for 2010–11. Considering regional acquisitions to mitigate capacity constraints.
Management has stated that it is looking at potentially acquiring cement plants in the region, preferably in Malaysia. We would view this as positive only if the company then delays construction of one of its two plants, which is expected to cost US$670m over the next five years.
Margins set to expand. We expect margins to expand as costs decline due to lower-priced coal contracts and rupiah appreciation. Coal accounts for 30% of costs and around 40% of costs are dollar-denominated.
Java main growth area in 2009–11, SMGR least exposed. The infrastructure projects that have been launched by the government are centred primarily in Java, which is the stronghold of Holcim Indonesia and Indocement. SMGR has the least exposure to Java and would not benefit as much as its rivals.
Valuations attractive on a historical basis. SMGR is trading at one standard deviation below its average PER. On EV/EBITDA and P/BV, it is slightly below historical averages.
Earnings and target price revision
We revise up our 2009 and 2010 EPS estimates by 20% and 9% to Rp492 and Rp559, respectively. We raise our target price to Rp4,700 from Rp3,700.
Price catalyst
12-month price target: Rp4,700 based on a DCF methodology.
Catalyst: Reduced capex spending, regional acquisition, government infrastructure projects.
Action and recommendation
We reiterate our Outperform rating and raise our target price to Rp4,700 . However, our sector preference is INTP, which has spare capacity and low capex requirements going forward.
Macquarie INTP Shining on despite parent’s problems
Event
We reiterate our Outperform rating on Indocement (INTP) and upgrade our target price to Rp7,200 from Rp6,700 on the back of earnings upgrades. INTP is our top pick in the Indonesian cement sector.
Impact
Main beneficiary of 2010 industry recovery. INTP has 20% excess capacity, the highest among the top 3 cement companies. This should enable it to benefit from the expected recovery next year. After a lacklustre 2009, we expect the cement industry to grow 10% and GDP growth to accelerate to 5.5%.
Market leader in Java, where most of the infrastructure spending will be. We believe that Java Island would see the bulk of infrastructure spending post the 2009 parliamentary and presidential elections. With 40% market share in Java, INTP should be the main beneficiary.
Trouble at parent company to benefit minority shareholders regardless of outcome. HeidelbergCement (86% owned by the Merckle Family), which owns 65% of INTP, is in a precarious position given its refinancing needs (€1.8bn maturing debt in 2009 and €6bn in 2010) and the possibility of Merckle Family creditors seizing control of HeidelbergCement. We believe that minority shareholders would benefit as INTP might end up paying a higher dividend or potentially become a takeover target in a bid to help its parent raise cash.
Margins set to expand. We expect margins to expand as costs decline due to lower-priced coal contracts and the rupiah’s appreciation. In addition, the low demand environment allows INTP to use its more efficient plants and shut down high-cost kilns.
Valuations are attractive on a historical basis. INTP is currently trading at around one standard deviation below historical averages on PER and EV/EBITDA. It is trading below historical averages on P/B and EV/tonne.
Earnings and target price revision
We raise our 2009 and 2010 EPS estimates by 15% and 9%, respectively, due to lower costs going forward. Our target price is raised to Rp7,200 (from Rp6,700).
Price catalyst
12-month price target: Rp7,200 based on a DCF methodology.
Catalyst: Government infrastructure spending and potential corporate action by HeidelbergCement.
Action and recommendation
We reiterate our Outperform rating on INTP. It remains our top pick in the Indonesian cement sector. Besides the structural growth story, INTP minority shareholders would also benefit from the problems at HeidelbergCement.
We reiterate our Outperform rating on Indocement (INTP) and upgrade our target price to Rp7,200 from Rp6,700 on the back of earnings upgrades. INTP is our top pick in the Indonesian cement sector.
Impact
Main beneficiary of 2010 industry recovery. INTP has 20% excess capacity, the highest among the top 3 cement companies. This should enable it to benefit from the expected recovery next year. After a lacklustre 2009, we expect the cement industry to grow 10% and GDP growth to accelerate to 5.5%.
Market leader in Java, where most of the infrastructure spending will be. We believe that Java Island would see the bulk of infrastructure spending post the 2009 parliamentary and presidential elections. With 40% market share in Java, INTP should be the main beneficiary.
Trouble at parent company to benefit minority shareholders regardless of outcome. HeidelbergCement (86% owned by the Merckle Family), which owns 65% of INTP, is in a precarious position given its refinancing needs (€1.8bn maturing debt in 2009 and €6bn in 2010) and the possibility of Merckle Family creditors seizing control of HeidelbergCement. We believe that minority shareholders would benefit as INTP might end up paying a higher dividend or potentially become a takeover target in a bid to help its parent raise cash.
Margins set to expand. We expect margins to expand as costs decline due to lower-priced coal contracts and the rupiah’s appreciation. In addition, the low demand environment allows INTP to use its more efficient plants and shut down high-cost kilns.
Valuations are attractive on a historical basis. INTP is currently trading at around one standard deviation below historical averages on PER and EV/EBITDA. It is trading below historical averages on P/B and EV/tonne.
Earnings and target price revision
We raise our 2009 and 2010 EPS estimates by 15% and 9%, respectively, due to lower costs going forward. Our target price is raised to Rp7,200 (from Rp6,700).
Price catalyst
12-month price target: Rp7,200 based on a DCF methodology.
Catalyst: Government infrastructure spending and potential corporate action by HeidelbergCement.
Action and recommendation
We reiterate our Outperform rating on INTP. It remains our top pick in the Indonesian cement sector. Besides the structural growth story, INTP minority shareholders would also benefit from the problems at HeidelbergCement.
Credit Suisse - Asian Equity Strategy
Asian Equity Strategy: Any Cheap Cyclicals Left?– The biggest discounts are in Indonesian coal and palm oil, drybulk shippers
Sakthi Siva / Research Analyst / 65 6212 3027 / sakthi.siva@credit-suisse.com
Kin Nang Chik / Research Analyst / 852 2101 7482 / kinnang.chik@credit-suisse.com
We last updated valuations on cyclicals on 23 April. But with cyclicals continuing to run (materials now +57%, oils +52%, tech +42% from their 27 October lows) and with eight of the nine global leading indicators that we watch bottoming, we once again look at where the biggest discounts are in cyclicals.
On our P/B versus ROE valuation model, the biggest discounts are in Indonesian coal and palm oil, drybulk shippers, regional steels and Chinese oils.
With Indonesian coal, the discount is currently 194% versus 270% at the low. The 194% discount is based on a trailing ROE of 37%. If the discount goes to zero, the implied ROE is 16%. The second biggest discount is in the drybulk shippers at 108%. This compares with 170% in November 2008. The third biggest discount is in Indonesian palm oil at 95%. This is followed by regional steels on 49% and Chinese oil on 44%.
We do note that these sectors look favourable versus Chinese metals, trading at a 64% premium (trailing ROE 5.7%, implied ROE 13%).
Asian Equity Strategy: Consensus EPS Revision Flat in April – Versus downgrades of 10-15% from November to February
Sakthi Siva / Research Analyst / 65 6212 3027 / sakthi.siva@credit-suisse.com
Kin Nang Chik / Research Analyst / 852 2101 7482 / kinnang.chik@credit-suisse.com
We have been highlighting that this rally could be the “real” one as it is the first rally associated with a bottoming in global leading indicators (eight of the nine on our leading indicator checklist, see our report of 4 May) and also the first one associated with a slowing in the rate of consensus EPS downgrades.
While we had already highlighted the slowing in the rate of downgrades in March and early April, the final data for April has been even more encouraging with 2009E consensus EPS being revised by just -0.1%.
Three countries were associated with upgrades to 2009E consensus EPS in April – Taiwan (+17.6%), Korea (+2.8%) and Indonesia (+0.1%).
While Taiwan, Korea and Indonesia were associated with upgrades in April, virtually all other countries and sectors were associated with a slowing in the rate of consensus EPS downgrades.
Asian Equity Strategy: Net Foreign Buying – April - the biggest month since December 2005
Sakthi Siva / Research Analyst / 65 6212 3027 / sakthi.siva@credit-suisse.com
Kin Nang Chik / Research Analyst / 852 2101 7482 / kinnang.chik@credit-suisse.com
In addition to the bottoming in global leading indicators (now eight of the nine appear to have bottomed) and a slowing in the rate of consensus EPS downgrades (April just -0.1%), we believed this rally could have more legs as most investors appeared to be not well positioned for it.
This was particularly as the whole of March was associated with net foreign buying of just US$529 mn.
However, net foreign buying has surged in April to US$8.2bn. This is the biggest month for net foreign buying since we saw US$8.8 bn in December 2005. See Figure 2 below.
Sakthi Siva / Research Analyst / 65 6212 3027 / sakthi.siva@credit-suisse.com
Kin Nang Chik / Research Analyst / 852 2101 7482 / kinnang.chik@credit-suisse.com
We last updated valuations on cyclicals on 23 April. But with cyclicals continuing to run (materials now +57%, oils +52%, tech +42% from their 27 October lows) and with eight of the nine global leading indicators that we watch bottoming, we once again look at where the biggest discounts are in cyclicals.
On our P/B versus ROE valuation model, the biggest discounts are in Indonesian coal and palm oil, drybulk shippers, regional steels and Chinese oils.
With Indonesian coal, the discount is currently 194% versus 270% at the low. The 194% discount is based on a trailing ROE of 37%. If the discount goes to zero, the implied ROE is 16%. The second biggest discount is in the drybulk shippers at 108%. This compares with 170% in November 2008. The third biggest discount is in Indonesian palm oil at 95%. This is followed by regional steels on 49% and Chinese oil on 44%.
We do note that these sectors look favourable versus Chinese metals, trading at a 64% premium (trailing ROE 5.7%, implied ROE 13%).
Asian Equity Strategy: Consensus EPS Revision Flat in April – Versus downgrades of 10-15% from November to February
Sakthi Siva / Research Analyst / 65 6212 3027 / sakthi.siva@credit-suisse.com
Kin Nang Chik / Research Analyst / 852 2101 7482 / kinnang.chik@credit-suisse.com
We have been highlighting that this rally could be the “real” one as it is the first rally associated with a bottoming in global leading indicators (eight of the nine on our leading indicator checklist, see our report of 4 May) and also the first one associated with a slowing in the rate of consensus EPS downgrades.
While we had already highlighted the slowing in the rate of downgrades in March and early April, the final data for April has been even more encouraging with 2009E consensus EPS being revised by just -0.1%.
Three countries were associated with upgrades to 2009E consensus EPS in April – Taiwan (+17.6%), Korea (+2.8%) and Indonesia (+0.1%).
While Taiwan, Korea and Indonesia were associated with upgrades in April, virtually all other countries and sectors were associated with a slowing in the rate of consensus EPS downgrades.
Asian Equity Strategy: Net Foreign Buying – April - the biggest month since December 2005
Sakthi Siva / Research Analyst / 65 6212 3027 / sakthi.siva@credit-suisse.com
Kin Nang Chik / Research Analyst / 852 2101 7482 / kinnang.chik@credit-suisse.com
In addition to the bottoming in global leading indicators (now eight of the nine appear to have bottomed) and a slowing in the rate of consensus EPS downgrades (April just -0.1%), we believed this rally could have more legs as most investors appeared to be not well positioned for it.
This was particularly as the whole of March was associated with net foreign buying of just US$529 mn.
However, net foreign buying has surged in April to US$8.2bn. This is the biggest month for net foreign buying since we saw US$8.8 bn in December 2005. See Figure 2 below.
Credit Suisse Key Ideas
Bumi Resources (BUMI.JK, Rp1,520, N, TP Rp945) – 1Q09 ahead on lower tax rate and legacy contract
Haider Ali / Research Analyst / 65 6212 3064 / haider.ali@credit-suisse.com
At 19% of FY09E volumes, Bumi’s 11 mn tonnes (t) sales in 1Q09 were below expectations due to heavy rains. This now sets up Bumi with a challenging quarterly production target of over 15 mn t, if it is to meet guidance (56 mn t) or our estimates (58 mn t) for FY09.
Net income was ahead of our estimate (37% of FY08) on two counts. Reported FOB ASP in 1Q09 was 23% above FY09E on inclusion of legacy 2008 priced contracts. Without a pick-up in coal spot, we would expect a declining trend in quarterly ASP.
Second, Bumi’s reported tax rate in 1Q09 was 14% against 30% FY09E based on the management guidance. Profit before tax for 1Q09 was much closer at 30% of our FY09 forecast.
Positive earnings surprise of 1Q may be overstated by low tax rate and legacy contracts, while weaker volumes are concerning. Unit production cost appears to be stabilising and in line with FY09E.
Bumi’s stock price has almost tripled over the last three months, closing its valuation gap with peers. We are reviewing our estimates, pending which our NEUTRAL rating is maintained.
Perusahaan Gas Negara (PGAS.JK, Rp2,500, O, TP Rp3,000) – Strong cash flow, higher distribution volumes
Ami Tantri / Research Analyst / 62 21 255 37917 / ami.tantri@credit-suisse.com
Perusahaan Gas Negara (PGAS) reported below-market FY08 earnings due to foreign exchange translation losses, but strong 1Q09 earnings from higher distribution volumes. Cash flow remained strong from the increases in distribution volumes and the expansion of distribution margin on lower gas costs.
Distribution and transmission volumes continue to increase and distribution margin has been maintained. Despite translation losses, the company should have strong cash flow. We believe PGAS is one of the few Indonesian companies that should see revenue growth and strong cash flow this year, despite the slowdown in the economy.
We have retained our OUTPERFORM rating on the stock and Rp3,000 target price. The stock is now trading at a P/E of 9.2x 2010E and EV/EBITDA of 5.3x 2010E, which are at a discount to the regional average. We believe PGAS will be one of the few Indonesian stocks to have growth and strong cash flow this year.
Bakrieland Development (ELTY.JK, Rp169, O, TP Rp257) – 1Q09 results soft but FY09E may be skewed to 2H09E + highly undervalued
Teddy Oetomo / Research Analyst / 62 21 2553 7911 / teddy.oetomo@credit-suisse.com
ELTY reported Rp26.3 bn 1Q09A net income, -12.6%YoY and -81% QoQ, 9.2% of our FY09 and 16% of consensus’ forecasts. We expect stronger revenue in 2H09, given the handover of Bakrie Tower, Lifestyle Centre and Bali Legian Nirwana in July 2009 and the commencement of the Kanci Pejagan toll road in Aug./Sept. 2009.
ELTY is deeply undervalued, in our view, at a 64% discount to 2009E RNAV (versus the regional average of a 25% discount to RNAV) and at low end of its historical trading range, due to market sentiment on its sponsor. We believe the market’s negative sentiment towards ELTY’s sponsor may be abating, signified by the strong outperformance of other counters under ELTY’s sponsor (see our Indonesia property sector report, Take a closer look, 21 Jan. 2009).
As such, we revise our valuation from a trough 85% discount to our base-case scenario (target price of Rp70) to a base case of a 45% discount to 2009E RNAV (target price of Rp257). We upgrade our rating from Neutral to OUTPERFORM.
Kalbe Farma (KLBF.JK, Rp880, U, TP Rp765) – 1Q09 results in line but share price has rallied
Teddy Oetomo / Research Analyst / 62 21 2553 7911 / teddy.oetomo@credit-suisse.com
KLBF reported Rp213 bn in 1Q09E net income, up 24% YoY, 4.9% QoQ, and 30% of our FY09E and 29% of consensus’ FY09E. We believe that the results remain in line with our forecasts with KLBF’s 1Q historically contributes 24-32% of FY earnings, typically due to larger operating expenses in 4Q.
We believe that KLBF’s valuations are demanding, trading at the second highest 2009E and 2010E P/E among the Indonesian consumer-related counters under our coverage. KLBF is currently trading at the lower end of its historical trading range (excluding the 2005-07 period due to merger premium).
We downgrade KLBF to UNDERPERFORM, from Neutral due to its demanding valuations. We increase our target price from Rp660 to Rp765. Our new target price is based on 11x 2009E P/E, in line with the current market implied 2009E P/E for MSCI Indonesia.
Haider Ali / Research Analyst / 65 6212 3064 / haider.ali@credit-suisse.com
At 19% of FY09E volumes, Bumi’s 11 mn tonnes (t) sales in 1Q09 were below expectations due to heavy rains. This now sets up Bumi with a challenging quarterly production target of over 15 mn t, if it is to meet guidance (56 mn t) or our estimates (58 mn t) for FY09.
Net income was ahead of our estimate (37% of FY08) on two counts. Reported FOB ASP in 1Q09 was 23% above FY09E on inclusion of legacy 2008 priced contracts. Without a pick-up in coal spot, we would expect a declining trend in quarterly ASP.
Second, Bumi’s reported tax rate in 1Q09 was 14% against 30% FY09E based on the management guidance. Profit before tax for 1Q09 was much closer at 30% of our FY09 forecast.
Positive earnings surprise of 1Q may be overstated by low tax rate and legacy contracts, while weaker volumes are concerning. Unit production cost appears to be stabilising and in line with FY09E.
Bumi’s stock price has almost tripled over the last three months, closing its valuation gap with peers. We are reviewing our estimates, pending which our NEUTRAL rating is maintained.
Perusahaan Gas Negara (PGAS.JK, Rp2,500, O, TP Rp3,000) – Strong cash flow, higher distribution volumes
Ami Tantri / Research Analyst / 62 21 255 37917 / ami.tantri@credit-suisse.com
Perusahaan Gas Negara (PGAS) reported below-market FY08 earnings due to foreign exchange translation losses, but strong 1Q09 earnings from higher distribution volumes. Cash flow remained strong from the increases in distribution volumes and the expansion of distribution margin on lower gas costs.
Distribution and transmission volumes continue to increase and distribution margin has been maintained. Despite translation losses, the company should have strong cash flow. We believe PGAS is one of the few Indonesian companies that should see revenue growth and strong cash flow this year, despite the slowdown in the economy.
We have retained our OUTPERFORM rating on the stock and Rp3,000 target price. The stock is now trading at a P/E of 9.2x 2010E and EV/EBITDA of 5.3x 2010E, which are at a discount to the regional average. We believe PGAS will be one of the few Indonesian stocks to have growth and strong cash flow this year.
Bakrieland Development (ELTY.JK, Rp169, O, TP Rp257) – 1Q09 results soft but FY09E may be skewed to 2H09E + highly undervalued
Teddy Oetomo / Research Analyst / 62 21 2553 7911 / teddy.oetomo@credit-suisse.com
ELTY reported Rp26.3 bn 1Q09A net income, -12.6%YoY and -81% QoQ, 9.2% of our FY09 and 16% of consensus’ forecasts. We expect stronger revenue in 2H09, given the handover of Bakrie Tower, Lifestyle Centre and Bali Legian Nirwana in July 2009 and the commencement of the Kanci Pejagan toll road in Aug./Sept. 2009.
ELTY is deeply undervalued, in our view, at a 64% discount to 2009E RNAV (versus the regional average of a 25% discount to RNAV) and at low end of its historical trading range, due to market sentiment on its sponsor. We believe the market’s negative sentiment towards ELTY’s sponsor may be abating, signified by the strong outperformance of other counters under ELTY’s sponsor (see our Indonesia property sector report, Take a closer look, 21 Jan. 2009).
As such, we revise our valuation from a trough 85% discount to our base-case scenario (target price of Rp70) to a base case of a 45% discount to 2009E RNAV (target price of Rp257). We upgrade our rating from Neutral to OUTPERFORM.
Kalbe Farma (KLBF.JK, Rp880, U, TP Rp765) – 1Q09 results in line but share price has rallied
Teddy Oetomo / Research Analyst / 62 21 2553 7911 / teddy.oetomo@credit-suisse.com
KLBF reported Rp213 bn in 1Q09E net income, up 24% YoY, 4.9% QoQ, and 30% of our FY09E and 29% of consensus’ FY09E. We believe that the results remain in line with our forecasts with KLBF’s 1Q historically contributes 24-32% of FY earnings, typically due to larger operating expenses in 4Q.
We believe that KLBF’s valuations are demanding, trading at the second highest 2009E and 2010E P/E among the Indonesian consumer-related counters under our coverage. KLBF is currently trading at the lower end of its historical trading range (excluding the 2005-07 period due to merger premium).
We downgrade KLBF to UNDERPERFORM, from Neutral due to its demanding valuations. We increase our target price from Rp660 to Rp765. Our new target price is based on 11x 2009E P/E, in line with the current market implied 2009E P/E for MSCI Indonesia.
Macquarie - salesdesk Indofood a high conviction idea
What am I missing? In the analyst meeting last Friday (which I attended), INDF management showed a “clean” net income of Rp368bn for 1Q09, after FX adjustments. Multiply this figure by four, we would arrive at an annualized figure of Rp1,472bn, or an FY09 P/E of 7.5x (market cap Rp10,975bn). Market consensus presents INDF as a stock that trades on 10x FY09 P/E, with a consensus net income forecast of Rp1,150bn. Highest estimate was Rp1,387bn, with fresh estimates as low as Rp847bn. In my mind, INDF could later proof to be one of the most mis-priced stock within Indo equity market universe today, trading below 7x “clean” FY09 earnings. If we add-back non-cash amortization cost for Indolakto of around Rp180bn, the P/E should be even lower. Cheap as chips. Not Rated by Macquarie .
All the ingredients for the stock to perform are there: (1) Big and liquid enough: US$1.0bn market cap trades US$4.8mn daily, (2) Positive earnings momentum: consensus overly conservative, 1Q09 results the first trigger for upgrades, (3) Under-owned: stock has sold-off on Indolakto acquisition, management promised a net gearing target of 80% or no more acquisitions, (4) P/E re-rating potential: under 7x FY09 while domestic peers have re-rated significantly, (5) Beta: a play on stronger Rp, lower interest rate, stable commodity prices.
I am inclined to think that INDF’s “clean” net profit should trend up in 2Q, 3Q, and 4Q of 2009, compared to 1Q09 achievement. The reasons are as follows:
1. Higher CPO price should benefit INDF. Average CPO price was US$523/ton in 1Q09. Average price for the month of April was US$657/ton. Futures price today is 40% higher at US$729/ton.
2. Stronger Rp should benefit INDF, higher margins for consumer branded products. Average exchange rate was Rp11,623/US$1 in 1Q09. Average FX for the month of April was Rp11,050/US$1. Spot FX today is 10% stronger at Rp10,600/US$1.
3. Dairy milk margins should trend upward. The newly purchased business, Indolakto, is showing a gross margin of 6.2% in 1Q09 for its dairy products. The price of its main raw material, skim milk, has been on the downtrend since late 2008. INDF management said the margin was artificially low due to inventory clearing, the normalized margin should be “double digits”.
4. Cost of borrowings should trend down. INDF is continuing with its debt refinancing exercise. Late 1Q09, the company had refinanced US$ debt that used to cost 8-9% with a cheaper loan at 5-6%.
Changing profit mix à higher P/E target
I should also highlight the favourable change in profit mix for INDF, which argues for a P/E re-rating. Commodity-based earnings account for a smaller proportion of 1Q09 (and 2009) earnings. Meanwhile, the consumer branded products (noodle and dairy milk) generate bigger pre-tax profit and EBIT, in both absolute and proportion to total.
All the ingredients for the stock to perform are there: (1) Big and liquid enough: US$1.0bn market cap trades US$4.8mn daily, (2) Positive earnings momentum: consensus overly conservative, 1Q09 results the first trigger for upgrades, (3) Under-owned: stock has sold-off on Indolakto acquisition, management promised a net gearing target of 80% or no more acquisitions, (4) P/E re-rating potential: under 7x FY09 while domestic peers have re-rated significantly, (5) Beta: a play on stronger Rp, lower interest rate, stable commodity prices.
I am inclined to think that INDF’s “clean” net profit should trend up in 2Q, 3Q, and 4Q of 2009, compared to 1Q09 achievement. The reasons are as follows:
1. Higher CPO price should benefit INDF. Average CPO price was US$523/ton in 1Q09. Average price for the month of April was US$657/ton. Futures price today is 40% higher at US$729/ton.
2. Stronger Rp should benefit INDF, higher margins for consumer branded products. Average exchange rate was Rp11,623/US$1 in 1Q09. Average FX for the month of April was Rp11,050/US$1. Spot FX today is 10% stronger at Rp10,600/US$1.
3. Dairy milk margins should trend upward. The newly purchased business, Indolakto, is showing a gross margin of 6.2% in 1Q09 for its dairy products. The price of its main raw material, skim milk, has been on the downtrend since late 2008. INDF management said the margin was artificially low due to inventory clearing, the normalized margin should be “double digits”.
4. Cost of borrowings should trend down. INDF is continuing with its debt refinancing exercise. Late 1Q09, the company had refinanced US$ debt that used to cost 8-9% with a cheaper loan at 5-6%.
Changing profit mix à higher P/E target
I should also highlight the favourable change in profit mix for INDF, which argues for a P/E re-rating. Commodity-based earnings account for a smaller proportion of 1Q09 (and 2009) earnings. Meanwhile, the consumer branded products (noodle and dairy milk) generate bigger pre-tax profit and EBIT, in both absolute and proportion to total.
DBS Indonesia Result Snapshot Adaro Energy
At a Glance
• 1Q09 net earning within expectation
• Strong revenue growth driven by higher ASP
• Balance sheet position improved
• Maintain TP but downgrade to HOLD
Comment on Results
Adaro Energy (ADRO)’s 1Q09 net profit surged 470% q-o-q to Rp1,145bn, in line with expectations. Group revenue grew 15% qo-q while production cost fell 5%, which resulted in gross profit growing 58% q-o-q to Rp2,829bn. Revenue growth was driven by
41% higher average selling price (ASP) to US$61/ton. Coal production increased 8% q-o-q to 9.0 mil tons while coal sales volume edged down 2% q-o-q to 8.6 mil tons.
ADRO’s net gearing as at March 2009 improved to 0.46x from 0.54x in December 2008 following an improvement in cash and equity balance. Total cash as at March 2009 was Rp3,587bn, while total cash flow from operations was Rp1,352bn..
Recommendation
ADRO’s healthy growth in 1Q09 further cements our optimism that the company will register robust growth this year, driven by sharp improvement in ASP and sales volume. We are retaining our forecasts for ADRO, but downgrade our recommendation to HOLD because the recent share price appreciation has limited upside
potential to our target price.
• 1Q09 net earning within expectation
• Strong revenue growth driven by higher ASP
• Balance sheet position improved
• Maintain TP but downgrade to HOLD
Comment on Results
Adaro Energy (ADRO)’s 1Q09 net profit surged 470% q-o-q to Rp1,145bn, in line with expectations. Group revenue grew 15% qo-q while production cost fell 5%, which resulted in gross profit growing 58% q-o-q to Rp2,829bn. Revenue growth was driven by
41% higher average selling price (ASP) to US$61/ton. Coal production increased 8% q-o-q to 9.0 mil tons while coal sales volume edged down 2% q-o-q to 8.6 mil tons.
ADRO’s net gearing as at March 2009 improved to 0.46x from 0.54x in December 2008 following an improvement in cash and equity balance. Total cash as at March 2009 was Rp3,587bn, while total cash flow from operations was Rp1,352bn..
Recommendation
ADRO’s healthy growth in 1Q09 further cements our optimism that the company will register robust growth this year, driven by sharp improvement in ASP and sales volume. We are retaining our forecasts for ADRO, but downgrade our recommendation to HOLD because the recent share price appreciation has limited upside
potential to our target price.
Mandiri Sekuritas FOCUS (05-May-2009) PGAS: Strong volume growth
Strong volume growth
PGAS enjoyed a strong 1Q09, boosted by 36.8% growth in the volume of gas distributed and 25.4% depreciation of the Rp/US$ as it prices gas in US$. This resulted in 77.6% yoy rise in operating profits. Gas volume is expected to continue rising. The rupiah, however, is appreciating; hence we expect the company to see flat operating performance, while the bottom-line will be improved by the expected forex gains arising from its US$ 881.0mn loan. We upgraded our forecasts on PGAS’s earnings on better-than-expected volume sales. Consequently, we increased its target price. However, because its share price is currently trading close to our new target price, we downgraded our recommendation to Neutral.
Better-than-expected volume sales. PGAS managed to distribute 721 mmscfd of gas in 1Q09, higher than our FY09F estimates of 717 mmscfd. This has contributed to PGAS’s outperformance over ours and consensus estimates. As the rupiah weakened 5.6% in 1Q09 to 11,750/US$ by 31 March 2009, forex loss was manageable, resulting in Rp1,220bn net income, 26.0 % of our FY09F estimate.
With potential additions in coming quarters. PGAS expected to deliver 30 mmscfd each to PLN power plants in Tanjung Priok, and Cilegon in 4Q09, and 8 mmscfd for the Talang Duku power plant. It could also potentially supply an addition of 30 mmscfd for the Muara Karang power plant and 80-100 mmscfd interruptible for the Muara Tawar power plant. PGAS has around 922mmscfd supply.
Closing all US$ derivative transactions. PGAS in February 2009 has ended its US$ interest rate swaps, and maintains its yen cross currency swaps. PGAS has a yen loan of JPY41.4bn, with no corresponding income in the Japanese currency.
Upgrade volume, and target price. We upgraded our volume sales from 717mmscfd to 749 mmscfd for FY09F and from 812mmscfd 2010F onwards to 847 mmscfd. The upgrade resulted in higher DCF valuation from Rp3,240/share to Rp 3,350/share. Our new target price of Rp2,570 (vs Rp2,070 previously) was based on 20% premium to our target market PE of 10x. As the current share price has reached our target price, we downgraded our recommendation to Neutral
PGAS enjoyed a strong 1Q09, boosted by 36.8% growth in the volume of gas distributed and 25.4% depreciation of the Rp/US$ as it prices gas in US$. This resulted in 77.6% yoy rise in operating profits. Gas volume is expected to continue rising. The rupiah, however, is appreciating; hence we expect the company to see flat operating performance, while the bottom-line will be improved by the expected forex gains arising from its US$ 881.0mn loan. We upgraded our forecasts on PGAS’s earnings on better-than-expected volume sales. Consequently, we increased its target price. However, because its share price is currently trading close to our new target price, we downgraded our recommendation to Neutral.
Better-than-expected volume sales. PGAS managed to distribute 721 mmscfd of gas in 1Q09, higher than our FY09F estimates of 717 mmscfd. This has contributed to PGAS’s outperformance over ours and consensus estimates. As the rupiah weakened 5.6% in 1Q09 to 11,750/US$ by 31 March 2009, forex loss was manageable, resulting in Rp1,220bn net income, 26.0 % of our FY09F estimate.
With potential additions in coming quarters. PGAS expected to deliver 30 mmscfd each to PLN power plants in Tanjung Priok, and Cilegon in 4Q09, and 8 mmscfd for the Talang Duku power plant. It could also potentially supply an addition of 30 mmscfd for the Muara Karang power plant and 80-100 mmscfd interruptible for the Muara Tawar power plant. PGAS has around 922mmscfd supply.
Closing all US$ derivative transactions. PGAS in February 2009 has ended its US$ interest rate swaps, and maintains its yen cross currency swaps. PGAS has a yen loan of JPY41.4bn, with no corresponding income in the Japanese currency.
Upgrade volume, and target price. We upgraded our volume sales from 717mmscfd to 749 mmscfd for FY09F and from 812mmscfd 2010F onwards to 847 mmscfd. The upgrade resulted in higher DCF valuation from Rp3,240/share to Rp 3,350/share. Our new target price of Rp2,570 (vs Rp2,070 previously) was based on 20% premium to our target market PE of 10x. As the current share price has reached our target price, we downgraded our recommendation to Neutral
Macquarie Regional plantations
Not as rosy as it seems
Our strategy for the sector
CPO fundamentals to deteriorate from May: In the near term (read 2009), we believe CPO fundamentals are likely to deteriorate from May. We expect the excitement over low inventories in Malaysia to wane with a pick-up in production from May onwards and export demand to slow down compared to 1Q09, due to inventory build-up in consuming countries such as India.
More positive on the 2010 outlook: For 2010, we turn more positive on CPO but a lot will depend on actual soybean plantings in the US for the current season. We think it is likely that actual soybean acreage in the US will be higher than what is stated in the recent USDA planting intentions report. However, with low soybean stocks in the US, soybean reserve-building in China and poor bean production in South America this year, this means the weather will be a critical factor in determining the supply of oilseeds next year.
Hence, we believe the risk to prices will be on the upside.
A defined trading strategy: We outline potential events that we believe will define a clear trading strategy for CPO stocks over the next 18 months.
Raising our CPO price forecast
Our new CPO price assumptions are US$520/t for 2009, US$625/t for 2010, US$725/t for 2011 and US$690/t for the long term.
Although we have turned positive on CPO prices for 2010 and 2011, we believe the demand-supply fundamentals of edible oils remain fairly balanced and do not foresee a situation that could result in a huge spike in CPO prices to US$800–1,000 levels.
Stock recommendations
Low visibility to the supply situation of oilseeds next year, coupled with expensive valuations for some of the plantation stocks, prevents us from recommending an all-out Overweight for the sector.
Most Malaysian plantation companies trade at 15–17x FY10E on our revised earnings estimates, which are still above their historical trading averages of 13–15x. We believe the market is building a CPO price of US$750–800/t into the valuations of most of these companies. As a result, we maintain our Underperform recommendations on IOI Corp, Sime Darby and Asiatic. On a relative basis, we prefer Kuala Lumpur Kepong (which we upgrade to Neutral) due to higher production growth and better quality earnings.
Among the Indonesian plantation companies, we rate Singapore-listed Indofood Agri Resources as Outperform since, based on at 6.5x 1-year forward earnings, it is the cheapest plantation stock in our coverage universe. We maintain Underperform on Astra Agro Lestari, which trades at 12x 1-year forward PER, slightly above its average of 11x.
Our strategy for the sector
CPO fundamentals to deteriorate from May: In the near term (read 2009), we believe CPO fundamentals are likely to deteriorate from May. We expect the excitement over low inventories in Malaysia to wane with a pick-up in production from May onwards and export demand to slow down compared to 1Q09, due to inventory build-up in consuming countries such as India.
More positive on the 2010 outlook: For 2010, we turn more positive on CPO but a lot will depend on actual soybean plantings in the US for the current season. We think it is likely that actual soybean acreage in the US will be higher than what is stated in the recent USDA planting intentions report. However, with low soybean stocks in the US, soybean reserve-building in China and poor bean production in South America this year, this means the weather will be a critical factor in determining the supply of oilseeds next year.
Hence, we believe the risk to prices will be on the upside.
A defined trading strategy: We outline potential events that we believe will define a clear trading strategy for CPO stocks over the next 18 months.
Raising our CPO price forecast
Our new CPO price assumptions are US$520/t for 2009, US$625/t for 2010, US$725/t for 2011 and US$690/t for the long term.
Although we have turned positive on CPO prices for 2010 and 2011, we believe the demand-supply fundamentals of edible oils remain fairly balanced and do not foresee a situation that could result in a huge spike in CPO prices to US$800–1,000 levels.
Stock recommendations
Low visibility to the supply situation of oilseeds next year, coupled with expensive valuations for some of the plantation stocks, prevents us from recommending an all-out Overweight for the sector.
Most Malaysian plantation companies trade at 15–17x FY10E on our revised earnings estimates, which are still above their historical trading averages of 13–15x. We believe the market is building a CPO price of US$750–800/t into the valuations of most of these companies. As a result, we maintain our Underperform recommendations on IOI Corp, Sime Darby and Asiatic. On a relative basis, we prefer Kuala Lumpur Kepong (which we upgrade to Neutral) due to higher production growth and better quality earnings.
Among the Indonesian plantation companies, we rate Singapore-listed Indofood Agri Resources as Outperform since, based on at 6.5x 1-year forward earnings, it is the cheapest plantation stock in our coverage universe. We maintain Underperform on Astra Agro Lestari, which trades at 12x 1-year forward PER, slightly above its average of 11x.
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