Stocks rose for the fifth time in six days Thursday after analysts raised their ratings on banks and oil prices rose again, making energy firms look increasingly attractive. Investors were also willing to take more chances on stocks after the government reported that the number of workers continuing to receive unemployment benefits unexpectedly fell for the first time in 20 weeks.
Most Southeast Asian indices rose on Thursday, tracking a late rebound in Hong Kong shares and U.S. futures. Thailand's stock index .SETI climbed 2 percent to its highest level since October 3, after Wednesday's 1.4 percent rise. Indonesia JKSE rose 1.1 percent.
Oil prices on Thursday set a new high for the year, buoyed by a weaker dollar and the first drop in unemployment since January. Benchmark crude for July delivery was up $2.69 to settle at $68.81 a barrel. Nickel for three-month delivery advanced $320, or 2.3 percent, to $14,525 a metric ton.
US$ debasement risks + rising oil prices + slow soybean planting in the US + rising El Nino chances = tailwinds to CPO prices.
As we see that latest data showing improvement in all regions so we think we will upgrade our target for year end. After better than expectation on our inflation data we believe our economic will have a better growth. JCI closing at 2032.72 above psychologist 2000 point index and than we will see 2187.5 soon as our medium target. Liquidity is still strong and Indonesian rupiah strengthen to 10.000 levels, Core Private Equity Fund Eye Asia Bets.
Continue to positive outlook for our market and our focus still on Commodity sector as we are more bullish. Top Pick for the day is Miners, CPO and Energy again like ANTM, INCO, TINS, ADRO, BUMI, INDY, UNTR and SGRO. And for financial sector we choose BBNI and BBRI. Don’t forget property and shipping.
“JUST BELIEVE WHAT YOU SEE”
{ YUHUUU IT'S FRIDAY !!!! }
[Personal Opinion ]
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DISCLAIMER: This report is issued by [BRIGHT INFO]. Although the contents of this document may represent the opinion of [BRIGHT INFO]. We cannot guarantee its accuracy and completeness.
Jumat, 05 Juni 2009
Reuters Wall Street jumps on financials, commodity boost
NEW YORK (Reuters) - Stocks rose on Thursday as a brokerage's upbeat view on U.S. banks drove a run-up in financials, while soaring prices of oil and other commodities lifted natural resource companies on bets the economic slump is waning.RBC Capital Markets upgraded the banking sector, saying it is poised for a multiyear bull market.
The KBW bank index .BKX added 4.8 percent.
A surge in crude oil prices underpinned the broader market after Goldman Sachs raised its year-end oil price forecast to $85 a barrel, saying economic stabilization and tight supplies should bode well for prices.
U.S. crude settled up 4 percent at $68.81 a barrel on the New York Mercantile Exchange.
"The bigger gain in oil, not just today, is encouraging on the macro level. It's indicative of demand," said Cleveland Rueckert, market analyst at Birinyi Associates Inc, in Stamford, Connecticut.
But Rueckert said he preferred for oil to hold around $60 barrel. "You don't want to have the same thing that happened last year when it ... becomes a burden to a lot of the consumers who are supposed to drive economic growth."
The Dow Jones industrial average .DJI gained 74.96 points, or 0.86 percent, to 8,750.24. The Standard & Poor's 500 Index .SPX climbed 10.70 points, or 1.15 percent, to 942.46. The Nasdaq Composite Index .IXIC rose 24.10 points, or 1.32 percent, to 1,850.02. more...
Bloomberg U.S. Economy: Jobless Claims Fall, Productivity Rises
June 4 (Bloomberg) -- Fewer American workers filed claims for jobless benefits last week, signaling that the worst phase of the employment slump has passed.
Initial applications for unemployment insurance fell by 4,000 to 621,000 in the week ended May 30, in line with forecasts, figures from the Labor Department showed today in Washington. Another Labor report showed worker productivity rose more in the first quarter than previously estimated.
Greater efficiency is contributing to an improvement in profits that will likely lead to fewer job cuts in coming months, analysts said. Companies such as United Technologies Corp. are among those that have slashed payrolls to control labor costs and boost earnings, a step that may help get the economy out of the worst recession in half a century.
“Employers are far advanced in the pace of job cuts,” said John Herrmann, president of Herrmann Forecasting in Summit, New Jersey. Firings “should slow materially” in coming months, he said.
The claims report also showed the number of people collecting unemployment insurance fell to 6.74 million in the week ended May 23 from 6.75 million the prior week. It was the first decrease in almost five months, breaking a string of 17 consecutive records. more...
Initial applications for unemployment insurance fell by 4,000 to 621,000 in the week ended May 30, in line with forecasts, figures from the Labor Department showed today in Washington. Another Labor report showed worker productivity rose more in the first quarter than previously estimated.
Greater efficiency is contributing to an improvement in profits that will likely lead to fewer job cuts in coming months, analysts said. Companies such as United Technologies Corp. are among those that have slashed payrolls to control labor costs and boost earnings, a step that may help get the economy out of the worst recession in half a century.
“Employers are far advanced in the pace of job cuts,” said John Herrmann, president of Herrmann Forecasting in Summit, New Jersey. Firings “should slow materially” in coming months, he said.
The claims report also showed the number of people collecting unemployment insurance fell to 6.74 million in the week ended May 23 from 6.75 million the prior week. It was the first decrease in almost five months, breaking a string of 17 consecutive records. more...
Bloomberg Nickel, Copper Advance in London Trade After U.S. Jobs Report
June 4 (Bloomberg) -- Nickel and copper advanced in London, reversing earlier declines, after a report showed fewer Americans filed claims for unemployment benefits last week, signaling the worst in job losses may be over.
Initial jobless claims fell by 4,000 to 621,000 in the week ended May 30, the Labor Department said today in Washington. The number of people collecting unemployment insurance fell for the first time in almost five months.
“The whole metal complex has been driven by U.S. macro data,” said David Barclay, an analyst at Standard Chartered Plc in London.
Nickel for three-month delivery advanced $320, or 2.3 percent, to $14,525 a metric ton as of 4:39 p.m. on the London Metal Exchange, after falling as much as 2.7 percent. Copper advanced $85, or 1.7 percent, to $5,005 a ton.
Among other LME metals, aluminum increased $49, or 3.3 percent, to $1,533 a ton, lead gained $32, or 2 percent, to $1,642 a ton, and zinc rose $45, or 2.9 percent to $1,580 a ton.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
Initial jobless claims fell by 4,000 to 621,000 in the week ended May 30, the Labor Department said today in Washington. The number of people collecting unemployment insurance fell for the first time in almost five months.
“The whole metal complex has been driven by U.S. macro data,” said David Barclay, an analyst at Standard Chartered Plc in London.
Nickel for three-month delivery advanced $320, or 2.3 percent, to $14,525 a metric ton as of 4:39 p.m. on the London Metal Exchange, after falling as much as 2.7 percent. Copper advanced $85, or 1.7 percent, to $5,005 a ton.
Among other LME metals, aluminum increased $49, or 3.3 percent, to $1,533 a ton, lead gained $32, or 2 percent, to $1,642 a ton, and zinc rose $45, or 2.9 percent to $1,580 a ton.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
Bloomberg Oil Rises to 7-Month High, Gasoline Surges, on Goldman Forecast
June 4 (Bloomberg) -- Crude oil rose to a seven-month high and gasoline surged after Goldman Sachs Group Inc. said prices may reach $85 a barrel by the end of the year as demand recovers and supplies shrink.
Oil climbed more than 4 percent after the bank increased its year-end forecast from $65 and withdrew a prediction that prices will dip prior to a rally. The advance accelerated after a report showed that fewer Americans filed claims for unemployment benefits last week.
“There seems to be a growing realization that oil will end the year in the $80 area, and this is spurring some buying,” said John Kilduff, senior vice president of energy at MF Global in New York. “The market is taking a little bit of solace from today’s unemployment numbers.”
Crude oil for July delivery rose $2.69, or 4.1 percent, to $68.81 a barrel at 2:51 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 4. It was the biggest gain since May 18. Prices are up 54 percent this year.
Gasoline for July delivery rose 6.05 cents, or 3.2 percent, to end the session at $1.9621 a gallon in New York. It was the highest settlement since Oct. 9. more...
Oil climbed more than 4 percent after the bank increased its year-end forecast from $65 and withdrew a prediction that prices will dip prior to a rally. The advance accelerated after a report showed that fewer Americans filed claims for unemployment benefits last week.
“There seems to be a growing realization that oil will end the year in the $80 area, and this is spurring some buying,” said John Kilduff, senior vice president of energy at MF Global in New York. “The market is taking a little bit of solace from today’s unemployment numbers.”
Crude oil for July delivery rose $2.69, or 4.1 percent, to $68.81 a barrel at 2:51 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 4. It was the biggest gain since May 18. Prices are up 54 percent this year.
Gasoline for July delivery rose 6.05 cents, or 3.2 percent, to end the session at $1.9621 a gallon in New York. It was the highest settlement since Oct. 9. more...
Palmoil HQ Crude palm oil futures ease further on profit-taking
Malaysian palm oil futures dropped for a second day on yesterday as investors, spooked by worries over higher production, continued to lock in profits from the recent crude oil-driven rally, traders said.
“The market is now back to its fundamentals. People are now talking about good supply, meaning that stock may go up. So they are just liquidating their positions,” said a trader at a Kuala Lumpur-based brokerage.
The trader said as palm tress now enter higher production season, the market is going to be very sensitive to demand.
The benchmark August contract on the Bursa Malaysia’s Derivatives Exchange settled down RM23 to RM2,575 per tonne.
Overall volume was 9,830 lots of 25 tonnes each, less than the usual 10,000 lots.
As crude oil prices rise, prices for vegetable oils which are used for biofuel — including palm oil, soybean and rapeseed — tend to track those gains.
The oil markets’ seven-day rally dipped yesterday ahead of weekly US inventory data and as investors grew more cautious ahead of the US$70 mark.
US light, sweet crude was down 34 cents at US$68.19 a barrel by 1042 GMT, off an earlier peak of US68.72. US soyoil for July contract was down 0.99 per cent in Asian trade.
J.P.Morgan - Russia - Relative attractiveness should not be overlooked
Russia’s outperformance begs the obvious question: will it last? The MSCI Russia Index has doubled in the last three months, beating the main peers (other BRICs and SA) as well as emerging markets in general. This makes a switch trade look appealing. However, we argue that underweighting Russia may backfire.
More comprehensive comps reveal Russia’s relative attractiveness. Those arguing that Russia’s outperformance means inevitable reversion should look at the 12M comparisons where Russia is still a visible laggard. Nor are Russia’s valuations demanding, as the aggregate 2010 PE is still at a 34% discount to that of the MSCI Emerging Markets Index owing to the relative cheapness of the key Oil and Gas sector (some 65% of MSCI Russia).
Strong oil means upside to consensus earnings. Comparisons of oil futures (WTI) and the sell side consensus suggest earnings estimates should move higher, rally or not. We highlight that notwithstanding the heavy taxation of oil companies, earnings’ sensitivity to the oil price is high (>15% ’10 JPMe EPS for 10% higher oil price). Oil, the most widely-traded commodity, provides the sector with a uniquely loud indicator of earnings changes particularly as consensus has been slow to reflect the price increase.
Economy a concern but... with commodity stocks accounting for near three quarters of the MSCI Russia Index capitalization, global factors remain key. We also highlight that stocks have a well-established record of being a leading macro-indicator. All in all, for investors seeking exposure to high beta and commodities (the winning themes in our view) Russia should still look attractive. We believe a correction, not surprising after such a large rally, should be used as an entry point.
More comprehensive comps reveal Russia’s relative attractiveness. Those arguing that Russia’s outperformance means inevitable reversion should look at the 12M comparisons where Russia is still a visible laggard. Nor are Russia’s valuations demanding, as the aggregate 2010 PE is still at a 34% discount to that of the MSCI Emerging Markets Index owing to the relative cheapness of the key Oil and Gas sector (some 65% of MSCI Russia).
Strong oil means upside to consensus earnings. Comparisons of oil futures (WTI) and the sell side consensus suggest earnings estimates should move higher, rally or not. We highlight that notwithstanding the heavy taxation of oil companies, earnings’ sensitivity to the oil price is high (>15% ’10 JPMe EPS for 10% higher oil price). Oil, the most widely-traded commodity, provides the sector with a uniquely loud indicator of earnings changes particularly as consensus has been slow to reflect the price increase.
Economy a concern but... with commodity stocks accounting for near three quarters of the MSCI Russia Index capitalization, global factors remain key. We also highlight that stocks have a well-established record of being a leading macro-indicator. All in all, for investors seeking exposure to high beta and commodities (the winning themes in our view) Russia should still look attractive. We believe a correction, not surprising after such a large rally, should be used as an entry point.
Goldman Sachs - Upgrading Australia's Economic Growth Outlook
Event:
Following the stronger-than-expected March quarter GDP print of +0.4%qoq, we have upgraded our economic forecasts. We now expect that the Australian economy will expand 0.25% in calendar 2009 (-0.2% previously) and 2.75% in 2010 (2.2% previously).
Key Points:
There is some cause for celebration in that Australia had managed to avoid 2 consecutive quarters of economic contraction and it is now likely that economic forecasters will have to upgrade their views on the Australian economy significantly. Indeed, Australia appears to be the only developed nation not to experience a contraction in GDP in the March quarter and the best placed to deliver a sustained recovery!
However, without doubt the March quarter overstates the strength of the domestic economy. In attempting to separate the signal from the noise in this data release the message remains pretty clear, the Australian economy is still in recession and it is a very mild one in the historical context.
Treasury and RBA GDP forecasts now require consecutive negative 0.5%qoq GDP prints for the remaining quarters of 2009 to return GDP growth to their -1.0%yoy growth forecast by calendar year end-2009. While this is possible we believe it is unlikely. Financial conditions remain high conducive to a reacceleration in economic growth in 2H09, the record fiscal stimulus is heavily skewed to mid-09, Australia remains at the pointy end of the rebuilding in global inventories and there is already sufficient evidence in the interest rate sensitive sectors of the economy that a recovery has commenced.
Investment View:
We believe that the monetary and fiscal stimulus is too large, the rebound in global production indicators too strong and the 'green shoots' evident in the Australian economy already sufficiently encouraging to support a sustainable recovery into 2010.
Not only has Australia avoided a 'technical' recession, the narrative of how it can return to respectable rates of economic growth within a reasonable timeframe is far more compelling than the developed nations in the Northern hemisphere. When viewed in this light it is remarkable that the Australian equity market declined in tandem with the US and European equity markets and why it continues to lag the same markets during the equity market rally since March.
We expect that the RBA will have to upgrade its economic growth views. Indeed, it is increasingly likely that the RBA will leave interest rates unchanged in 2009. Nevertheless, the RBA will likely retain its easing bias since it is acutely aware of the need to continue to support the rise in consumer confidence amid a rising unemployment trend and to limit the A$'s near-term appreciation. At this stage we have chosen to leave our forecast 25bp rate reductions in September and October in our forecasts. As long as consumer and business confidence continue to rise and as long as asset prices reverse part of the excessive declines of 2008, the RBA will revert to thinking less about short term support strategies for economic growth and more about setting interest rates on the path to 'neutral' through the course of 2010.
Following the stronger-than-expected March quarter GDP print of +0.4%qoq, we have upgraded our economic forecasts. We now expect that the Australian economy will expand 0.25% in calendar 2009 (-0.2% previously) and 2.75% in 2010 (2.2% previously).
Key Points:There is some cause for celebration in that Australia had managed to avoid 2 consecutive quarters of economic contraction and it is now likely that economic forecasters will have to upgrade their views on the Australian economy significantly. Indeed, Australia appears to be the only developed nation not to experience a contraction in GDP in the March quarter and the best placed to deliver a sustained recovery!
However, without doubt the March quarter overstates the strength of the domestic economy. In attempting to separate the signal from the noise in this data release the message remains pretty clear, the Australian economy is still in recession and it is a very mild one in the historical context.
Treasury and RBA GDP forecasts now require consecutive negative 0.5%qoq GDP prints for the remaining quarters of 2009 to return GDP growth to their -1.0%yoy growth forecast by calendar year end-2009. While this is possible we believe it is unlikely. Financial conditions remain high conducive to a reacceleration in economic growth in 2H09, the record fiscal stimulus is heavily skewed to mid-09, Australia remains at the pointy end of the rebuilding in global inventories and there is already sufficient evidence in the interest rate sensitive sectors of the economy that a recovery has commenced.
Investment View:
We believe that the monetary and fiscal stimulus is too large, the rebound in global production indicators too strong and the 'green shoots' evident in the Australian economy already sufficiently encouraging to support a sustainable recovery into 2010.
Not only has Australia avoided a 'technical' recession, the narrative of how it can return to respectable rates of economic growth within a reasonable timeframe is far more compelling than the developed nations in the Northern hemisphere. When viewed in this light it is remarkable that the Australian equity market declined in tandem with the US and European equity markets and why it continues to lag the same markets during the equity market rally since March.
We expect that the RBA will have to upgrade its economic growth views. Indeed, it is increasingly likely that the RBA will leave interest rates unchanged in 2009. Nevertheless, the RBA will likely retain its easing bias since it is acutely aware of the need to continue to support the rise in consumer confidence amid a rising unemployment trend and to limit the A$'s near-term appreciation. At this stage we have chosen to leave our forecast 25bp rate reductions in September and October in our forecasts. As long as consumer and business confidence continue to rise and as long as asset prices reverse part of the excessive declines of 2008, the RBA will revert to thinking less about short term support strategies for economic growth and more about setting interest rates on the path to 'neutral' through the course of 2010.
CLSA The little boy is back? Tailwinds to CPO prices
Our CPO analyst Wilianto maintains his bullish view on CPO. Top picks in Indonesia are London Sumatra (LSIP IJ), Bakrie Sumatra (UNSP IJ), and Sampoerna Agro (SGRO IJ).
Is the “little boy” back? Well, El Nino is Spanish for little boy. And Wili highlights today that the chances for it to happen are raised from 25% to over 50% by the Australian weather bureau, and increased to 45% by IRI.
US$ debasement risks + rising oil prices + slow soybean planting in the US + rising El Nino chances = tailwinds to CPO prices.
The negative impact of El Nino to palm oil production normally appears six to twelve months after El Nino as drought reduces quality of next harvest up to 30%. This applies to all edible oils crops including palm oil, soybean, sunflower, and rapeseed, and cause a globally tight supply situation in edible oils.
Key takeaways from the report:
· El Nino is looming.
· Soybean planting in US still behind schedule. 66% completed as of 1Jun09 vs. five years average of 79%.
· Plantation will benefit from US$ debasement and rising oil price (the return of oil trade to the upside?) .
· Valuations remain attractive compared to respective market. Mid cap plantation at 8-10x PE 10CL, large cap at 12-15x PE.
· Stay overweight on plantations. Top pick KL Kepong, IOI Corp, Lonsum, Sampoerna Agro, Bakrie Sumatra Plantation.
related link : http://www.bom.gov.au/climate/enso/ http://iri.columbia.edu/climate/ENSO/currentinfo/QuickLook.html
Is the “little boy” back? Well, El Nino is Spanish for little boy. And Wili highlights today that the chances for it to happen are raised from 25% to over 50% by the Australian weather bureau, and increased to 45% by IRI.
US$ debasement risks + rising oil prices + slow soybean planting in the US + rising El Nino chances = tailwinds to CPO prices.
The negative impact of El Nino to palm oil production normally appears six to twelve months after El Nino as drought reduces quality of next harvest up to 30%. This applies to all edible oils crops including palm oil, soybean, sunflower, and rapeseed, and cause a globally tight supply situation in edible oils.
Key takeaways from the report:
· El Nino is looming.
· Soybean planting in US still behind schedule. 66% completed as of 1Jun09 vs. five years average of 79%.
· Plantation will benefit from US$ debasement and rising oil price (the return of oil trade to the upside?) .
· Valuations remain attractive compared to respective market. Mid cap plantation at 8-10x PE 10CL, large cap at 12-15x PE.
· Stay overweight on plantations. Top pick KL Kepong, IOI Corp, Lonsum, Sampoerna Agro, Bakrie Sumatra Plantation.
related link : http://www.bom.gov.au/climate/enso/ http://iri.columbia.edu/climate/ENSO/currentinfo/QuickLook.html
Danareksa Commodity vs Consumer - KLBF upgraded to Rp1,050
Here’s a shot from the new Terminator film, the battle rages.
The latest consumer confidence data is out. And Indonesia is still on top of the world. Consumer Confidence increased again in May to 105 from 102 in April. We are setting up for part 2 of an interesting battle between consumer and commodities as the later rallies again.
In Recent years, until last year, commodities were the winners, over the longer term as our chart comparing UNVR & INCO shows, consumer stocks are still ahead. We have seen an improvement for consumer stocks in the first quarter of 2009 as margins improved on higher prices, good volume, and lower (commodity costs).
What will happen now with higher commodity prices?
Well we do like commodities, as we have said before, we are bullish on demand, as emerging counties like Indonesia grow, and on supply which we see form Indonesia is tight. So the momentum still lies with INCO vs UNVR. Within the consumer sector there is good opportunity for stocks which have done less well to catch up.
One is KLBF, which a couple of years ago was one of investors favorite stocks. After a difficult couple of years, it looks set to become more popular again especially with its large buyback programme. One things which could help consumer stocks when commodity prices rise this time is a stronger rupiah. And this is one reason we raise KLBF earnings forecasts by 40% this year and 20% next. We also see better cost control, and lower tax. And raise our target price to Rp1,050, BUY,
So on balance while the battle still looks in favor of commodities, consumer stocks which have suffered the worst margin falls are fighting back (INDF, GGRM), and those with large $ costs like pharmaceuticals (KLBF), will be helped by a stronger rupiah.
A more fair fight this time
The latest consumer confidence data is out. And Indonesia is still on top of the world. Consumer Confidence increased again in May to 105 from 102 in April. We are setting up for part 2 of an interesting battle between consumer and commodities as the later rallies again.
In Recent years, until last year, commodities were the winners, over the longer term as our chart comparing UNVR & INCO shows, consumer stocks are still ahead. We have seen an improvement for consumer stocks in the first quarter of 2009 as margins improved on higher prices, good volume, and lower (commodity costs).
What will happen now with higher commodity prices?
Well we do like commodities, as we have said before, we are bullish on demand, as emerging counties like Indonesia grow, and on supply which we see form Indonesia is tight. So the momentum still lies with INCO vs UNVR. Within the consumer sector there is good opportunity for stocks which have done less well to catch up.
One is KLBF, which a couple of years ago was one of investors favorite stocks. After a difficult couple of years, it looks set to become more popular again especially with its large buyback programme. One things which could help consumer stocks when commodity prices rise this time is a stronger rupiah. And this is one reason we raise KLBF earnings forecasts by 40% this year and 20% next. We also see better cost control, and lower tax. And raise our target price to Rp1,050, BUY,
So on balance while the battle still looks in favor of commodities, consumer stocks which have suffered the worst margin falls are fighting back (INDF, GGRM), and those with large $ costs like pharmaceuticals (KLBF), will be helped by a stronger rupiah.
A more fair fight this time
Danareksa Bank Negara Indonesia (BBNI IJ, Rp1,630 BUY) Attractively valued
TP upped to Rp2,300, implying 2.1x FY09 PBV
The stock is cheap, trading at a 26-46% discount to its regional and local peers. Its operations have been turned around and the bank has made greater cost efficiencies. In time, this should lead to lower provisions and sustainable loans growth post the balance sheet clean-up. Our TP, which is based on a blended valuation of P/E multiples and DDM, implies 2.1-1.9x FY09-10E PBV and 16.1x-11.6x FY09-10E PER. While our FY09E EPS estimate is unchanged, BBNI’s robust loans growth will likely lead to slightly higher provisioning next year, yet significantly lower than 2009’s. This and a higher tax rate reduce our FY10E EPS estimate by 17%. All in all, we expect EPS to grow 43% 3-yr CAGR on 17% loans growth while efficiencies will keep costs down to 50-52% of income.
Loans poised for growth
With the bank still in a consolidation phase, the new management is focusing on assets quality. This strategy has worked so far and NPLs have come down dramatically from 8.5% to 5.0% in just a year. Cleaning up bad debts shall remain a priority, we believe. Loans written-off reached Rp4.2trn last year but we are confident the amount will be much lower this year. Although plans to lend to PLN may not materialize, loans should still grow a respectable 10% in 2009, or above the management’s guideline of 6-7%. Crucially, its low LDR of 68% means there is plenty of potential for further lending. Corporate and consumer lending shall remain the focus - the former mostly focused on SOEs with good credit ratings. Admittedly, margins on corporate lending are low, but strong growth in consumer lending should help push up the bank’s overall NIM to at least 6.1%. NPLs, meanwhile, are expected to rise to 5.5% by end-2009 but remain under control. As for 2010E, we expect loans to grow a brisk 20% as the economy picks up. Provisioning is expected to be capped at Rp3.0trn in 2010, or less than the estimated Rp3.8trn in 2009. NPLs are expected to ease to 5.2% from 2009E’s 5.5%.
The loan restructuring continues
The bank has given more responsibility to individual branches, allowing them to set pricing for loans. The effect has been dramatic and the cost-to-income ratio (CIR) has come down from a peak of 66% in 2007 to only 40% in 1Q09. While we do not expect opex to fall further – especially since the bank will be focused on expansion – higher productivity is expected to lead to an 11% increase in pre-provisioning operating profit (PPOP) over the next 3 years. For FY09, we assume that the CIR will stay at 52% since the company shall likely book early pension costs. Loans restructuring, however, shall take center stage this year, and the bank aims for recovery of around Rp900bn-1trn. Any recovery will be credited to provisioning and therefore, the bank’s coverage will remain above 100%. Restructuring aside, we expect the bank to adopt better lending practices. This should mean lower provisioning in the future.
Sufficient FY09 CAR at 10% loans growth
Our FY09E estimated CAR of 13.7% assumes 10% loans growth. Even if we assume aggressive loans growth next year and a 50% dividend payout, the CAR still reaches 12.5%. While this is higher than BI’s minimum requirement, we believe that an issuance of sub-debt would be inevitable in order to sustain the loans growth long-term. Under our stress test, the CAR would stay above 12% assuming an additional 5% NPLs with coverage of 120% (in the extreme case) and 100% (in the normal case). Should BBNI plan to increase its CAR to 15%, the bank’s loans would have to grow a negative 5-8% or the bank would have to issue sub-debts of around Rp2.6-3.3trn. For now, we do not assume any issuance of sub-debt or capital loans.
The stock is cheap, trading at a 26-46% discount to its regional and local peers. Its operations have been turned around and the bank has made greater cost efficiencies. In time, this should lead to lower provisions and sustainable loans growth post the balance sheet clean-up. Our TP, which is based on a blended valuation of P/E multiples and DDM, implies 2.1-1.9x FY09-10E PBV and 16.1x-11.6x FY09-10E PER. While our FY09E EPS estimate is unchanged, BBNI’s robust loans growth will likely lead to slightly higher provisioning next year, yet significantly lower than 2009’s. This and a higher tax rate reduce our FY10E EPS estimate by 17%. All in all, we expect EPS to grow 43% 3-yr CAGR on 17% loans growth while efficiencies will keep costs down to 50-52% of income.
Loans poised for growth
With the bank still in a consolidation phase, the new management is focusing on assets quality. This strategy has worked so far and NPLs have come down dramatically from 8.5% to 5.0% in just a year. Cleaning up bad debts shall remain a priority, we believe. Loans written-off reached Rp4.2trn last year but we are confident the amount will be much lower this year. Although plans to lend to PLN may not materialize, loans should still grow a respectable 10% in 2009, or above the management’s guideline of 6-7%. Crucially, its low LDR of 68% means there is plenty of potential for further lending. Corporate and consumer lending shall remain the focus - the former mostly focused on SOEs with good credit ratings. Admittedly, margins on corporate lending are low, but strong growth in consumer lending should help push up the bank’s overall NIM to at least 6.1%. NPLs, meanwhile, are expected to rise to 5.5% by end-2009 but remain under control. As for 2010E, we expect loans to grow a brisk 20% as the economy picks up. Provisioning is expected to be capped at Rp3.0trn in 2010, or less than the estimated Rp3.8trn in 2009. NPLs are expected to ease to 5.2% from 2009E’s 5.5%.
The loan restructuring continues
The bank has given more responsibility to individual branches, allowing them to set pricing for loans. The effect has been dramatic and the cost-to-income ratio (CIR) has come down from a peak of 66% in 2007 to only 40% in 1Q09. While we do not expect opex to fall further – especially since the bank will be focused on expansion – higher productivity is expected to lead to an 11% increase in pre-provisioning operating profit (PPOP) over the next 3 years. For FY09, we assume that the CIR will stay at 52% since the company shall likely book early pension costs. Loans restructuring, however, shall take center stage this year, and the bank aims for recovery of around Rp900bn-1trn. Any recovery will be credited to provisioning and therefore, the bank’s coverage will remain above 100%. Restructuring aside, we expect the bank to adopt better lending practices. This should mean lower provisioning in the future.
Sufficient FY09 CAR at 10% loans growth
Our FY09E estimated CAR of 13.7% assumes 10% loans growth. Even if we assume aggressive loans growth next year and a 50% dividend payout, the CAR still reaches 12.5%. While this is higher than BI’s minimum requirement, we believe that an issuance of sub-debt would be inevitable in order to sustain the loans growth long-term. Under our stress test, the CAR would stay above 12% assuming an additional 5% NPLs with coverage of 120% (in the extreme case) and 100% (in the normal case). Should BBNI plan to increase its CAR to 15%, the bank’s loans would have to grow a negative 5-8% or the bank would have to issue sub-debts of around Rp2.6-3.3trn. For now, we do not assume any issuance of sub-debt or capital loans.
CIMB Bank Rakyat Indonesia Company update - A lesser worry
(BBRI IJ / BBRI.JK, OUTPERFORM - Maintained, Rp6,650 - Tgt. Rp7,000, Financial Services)
BRI has slowed down its KUR loan disbursements, especially in areas where its KUR NPL ratios have hit the threshold. Concurrently, the bank has migrated 106,000 eligible KUR borrowers to its normal unsubsidised micro product, Kupedes. The KUR programme is being used by BRI as a tool to filter out quality borrowers from the riskier part of the micro segment. BRI's recent restraint in KUR loans signifies intact risk management. We maintain our Outperform rating and DDM-based target price of Rp7,000.
BRI has slowed down its KUR loan disbursements, especially in areas where its KUR NPL ratios have hit the threshold. Concurrently, the bank has migrated 106,000 eligible KUR borrowers to its normal unsubsidised micro product, Kupedes. The KUR programme is being used by BRI as a tool to filter out quality borrowers from the riskier part of the micro segment. BRI's recent restraint in KUR loans signifies intact risk management. We maintain our Outperform rating and DDM-based target price of Rp7,000.
CIMB Economic Update Rate cuts coming to an end?
In a widely expected move, Bank Indonesia yesterday cut its policy rate (BI) by 25bp to 7.00%, the lowest since the rate was introduced in 2005. This meets our prediction as well as market expectations. BI sees signs of the global economy stabilising and has maintained its economic growth estimate of 3-4% for Indonesia this year, in line with our estimate of 3.5%. However, BI cautions that higher commodity prices could reignite inflationary pressure in 2010. While there is potential for further rate easing given fast-receding inflation, we believe BI is likely to end its cuts for now, allowing it to assess the impact of previous rate reductions on the real economy. As such, we continue to believe that 7% would be the optimal rate this year.
Citigroup - Indonesian Coal; Takeaways from the Coaltrans Asia Conference
Long-term positive — Industry players’ general view on the coal market is positive for medium/long-term. Key themes are: 1) Sharp contangos and under-investment point to market price rebounds. 2) China to reduce exports (e.g. net importer of 10-20mt in 2009), while India grows imports. 3) Australia should fuel seaborne market supply growth, while Indonesia and Russia should see stable growth.
Demand outlook — In general, industry players project import to grow at 2-3% CAGR over with China and India to drive the growth, as North Asian importers are expected to see flat growth. On China, Wood Mackenzie predicts China to remain a net importer in 2009; going forward export is expected to gradually decline, flattening at c.30mt level in 2015. On India, production vs. consumption shortfall projected to grow to 160mt by 2011-12, from 62mt in 2007-08.
Themes on Indonesian coal industry — 1) Domestic consumption is projected to increase to 50% by 2020 (from 75% at present); by volume, however, export should remain stable. 2) As a result, government’s policy on domestic supply security (i.e. DMO) should become even more critical. 3) Indonesian low-CV (subbituminous) coal has gained competitiveness in the market (export market to Korea, Taiwan, India, SEA, Europe, and in trial-stage to Japan).
More on Domestic Market Obligation — The government affirms the plan to implement DMO. It is encouraging that the government sees pricing policy for domestic market as an integral part of DMO implementation and expects prices to reflect the quality of the coal. Other provisions discussed are: possibility for producers to buy/sell volume to meet the DMO, penalties for producers failing to meet the requirement.
Implication to sector view — The liquidity-driven rally of late has further re-rated the valuation for Indonesian coal stocks to 10x ’09 PE, although the discount to Chinese players remained at 25-30%. Albeit not a major surprise, the positive long-term market view from the conference is encouraging and if materializes sooner, it may translate into an upside in our price expectation (Citi’s current forecast of US$70/t in 2010-2011E and long-term price of US$60/t).
Demand outlook — In general, industry players project import to grow at 2-3% CAGR over with China and India to drive the growth, as North Asian importers are expected to see flat growth. On China, Wood Mackenzie predicts China to remain a net importer in 2009; going forward export is expected to gradually decline, flattening at c.30mt level in 2015. On India, production vs. consumption shortfall projected to grow to 160mt by 2011-12, from 62mt in 2007-08.
Themes on Indonesian coal industry — 1) Domestic consumption is projected to increase to 50% by 2020 (from 75% at present); by volume, however, export should remain stable. 2) As a result, government’s policy on domestic supply security (i.e. DMO) should become even more critical. 3) Indonesian low-CV (subbituminous) coal has gained competitiveness in the market (export market to Korea, Taiwan, India, SEA, Europe, and in trial-stage to Japan).
More on Domestic Market Obligation — The government affirms the plan to implement DMO. It is encouraging that the government sees pricing policy for domestic market as an integral part of DMO implementation and expects prices to reflect the quality of the coal. Other provisions discussed are: possibility for producers to buy/sell volume to meet the DMO, penalties for producers failing to meet the requirement.
Implication to sector view — The liquidity-driven rally of late has further re-rated the valuation for Indonesian coal stocks to 10x ’09 PE, although the discount to Chinese players remained at 25-30%. Albeit not a major surprise, the positive long-term market view from the conference is encouraging and if materializes sooner, it may translate into an upside in our price expectation (Citi’s current forecast of US$70/t in 2010-2011E and long-term price of US$60/t).
Mandiri Sekuritas FOCUS (04-Jun-2009) ELSA: Selling the golden goose
ELSA’s share price went up more than 130% in just two months, following rumors that several parties are bidding for Tridaya Esta’s 37.1% ownership in ELSA for around Rp300-450/share, falling within our fair price of Rp350/share, which is also our upgraded price target from Rp145/share previously. Our new TP implies PER09F of 12.6x, a 10% discount to our JCI target of 14.0x. As current price is already within 10% range from our price target, we downgraded our recommendation to Neutral from Buy. Additionally, we view that ELSA’s plan to sell Infomedia Nusantara (IMN) will reduce future earnings if it fails to find a revenue-generating replacement.
Tridaya Esta to divest its ownership. Although not officially confirmed, the party who is helping the transaction has indirectly mentioned that Tridaya Esta will sell its 37% ownership in ELSA. Rumors have it that there are several investors interested in buying the shares at a price range of around Rp300-450/share, reflecting PER09F of 10.8x-16.2x. We view that such transaction would not affect ELSA’s fundamentals, but the offer price could very much as well reflect its ! fair pric e..
To sell its IMN’s ownership to TLKM. ELSA plans to sell its 49% ownership in IMN to Telkom’s subsidiary, Multimedia Nusantara (MN) since it has the right of first refusal. The acquisition cost is Rp598bn, reflecting PER08 of 11.0x, which is lower than ELSA’s PER09 of 14.0x at the current price. As IMN has been provided steady income to ELSA we prefer it as a keeper. Note that IMN contributed around 31% to ELSA’s EBT in FY08. Thus, the divestment of the subsidiary means that ELSA will lose a significant chunk of ea! rnings so urce in the future (taking out 17.5% from FY10F net profit). We therefore believe that ELSA should re-invest the proceeds in assets which could generate similar yields.
Contracts obtained so far. Up to now, the company has obtained several new contracts for its integrated upstream business worth US$87.5mn, or around 54.6% from its FY09F target of US$160mn. Some will be translated into FY09F revenues of around US$186mn, including carried-over contracts, which are still on track with our estimate.
Downgrade our recommendation to Neutral. We derived ELSA’s fair price by applying PER09F multiplier of 12.6x, a 10% discount from our target JCI. Our new price target for ELSA is Rp350/share from Rp145/share previously. As the current price is already within 10% range from our price target, we downgraded our recommendation to Neutral from Buy.
Tridaya Esta to divest its ownership. Although not officially confirmed, the party who is helping the transaction has indirectly mentioned that Tridaya Esta will sell its 37% ownership in ELSA. Rumors have it that there are several investors interested in buying the shares at a price range of around Rp300-450/share, reflecting PER09F of 10.8x-16.2x. We view that such transaction would not affect ELSA’s fundamentals, but the offer price could very much as well reflect its ! fair pric e..
To sell its IMN’s ownership to TLKM. ELSA plans to sell its 49% ownership in IMN to Telkom’s subsidiary, Multimedia Nusantara (MN) since it has the right of first refusal. The acquisition cost is Rp598bn, reflecting PER08 of 11.0x, which is lower than ELSA’s PER09 of 14.0x at the current price. As IMN has been provided steady income to ELSA we prefer it as a keeper. Note that IMN contributed around 31% to ELSA’s EBT in FY08. Thus, the divestment of the subsidiary means that ELSA will lose a significant chunk of ea! rnings so urce in the future (taking out 17.5% from FY10F net profit). We therefore believe that ELSA should re-invest the proceeds in assets which could generate similar yields.
Contracts obtained so far. Up to now, the company has obtained several new contracts for its integrated upstream business worth US$87.5mn, or around 54.6% from its FY09F target of US$160mn. Some will be translated into FY09F revenues of around US$186mn, including carried-over contracts, which are still on track with our estimate.
Downgrade our recommendation to Neutral. We derived ELSA’s fair price by applying PER09F multiplier of 12.6x, a 10% discount from our target JCI. Our new price target for ELSA is Rp350/share from Rp145/share previously. As the current price is already within 10% range from our price target, we downgraded our recommendation to Neutral from Buy.
Kamis, 04 Juni 2009
[BRIGHT INFO] "Just a Note"
Good day to you. U.S. stocks fell for the first time in five days, extending a global drop, as a report showed the nation lost more jobs than forecast, commodities slid and the Standard & Poor’s 500 Index traded at the most expensive in eight months.
Asian stocks rose for a fourth day, led by banks and energy companies, as faster-than-expected Australian economic growth and U.S. home sales fueled optimism the global recession is easing. Indonesia's index JCI rose 0.6 percent after its central bank cut interest rates by 25 basis points to 7 percent and pointed to more reductions to come.
Global Recovery
Bernanke sounded more confident that the U.S. recession would end this year than he had just one month ago, and he said the risk of a dangerous downward spiral in prices had receded.
Chinese purchasing manager’s index this week showed the country’s manufacturing industry expanded for a third month. Japan’s government last week raised its assessment of the economy for the first time in three years.
Real-estate companies in Hong Kong climbed after the Land Registry said the city’s homes sales jumped 42 percent by volume in May, the biggest increase since February 2008. Investors bought construction-related firms on Thailand.
Crude oil for July delivery fell to settle at $66.12 a barrel. Nickel slid 2.8 percent to $14,205 a ton, tin was unchanged at $14,500 a ton.
Maintain our positive outlook. For today’s I think we must look PGAS, TINS, INCO, ANTM, ADRO, INDY, UNTR and SGRO. We are more positive on commodity sector for better economic outlook. But don’t forget to accumulate property sector as ELTY and Ciputra Group especially on CTRP.
Liquidity still strong and Indonesian Rupiah strengthen to 10120 and it is very positive to our market.
“CORRECTION IS AN OPPORTUNITY’
[from a song “When you say Yes and I say No” {Jokes} “When you say Sell and I say Buy”]
[Personal Opinion ]
=====================================================================================
DISCLAIMER: This report is issued by [BRIGHT INFO]. Although the contents of this document may represent the opinion of [BRIGHT INFO]. We cannot guarantee its accuracy and completeness.
Reuters UPDATE 1-Indonesia's Adaro wins India, Thai coal contracts
JAKARTA, June 3 (Reuters) - Indonesia's largest coal producer by market value, PT Adaro Energy Tbk (ADRO.JK), said on Wednesday it has won contracts to sell up to a total of 6 million tonnes of coal per year to firms in India, Thailand and Indonesia.Adaro, which has a market capitalisation of $4.28 billion, sells to 48 customers in 18 countries worldwide, including power utilities Thai Power and Indonesian state electricity firm Perusahaan Listrik Negara (PLN).
Exports account for 70-72 percent of its sales.
"These are new coal-fired power plants actually starting up. One's in India, one's in Thailand, one's in Indonesia...Those contracts are from 1.5 millions to 2 million tonnes on each of those three contracts, so the maximum is 6 million tonnes," Adaro's marketing director, Alastair Grant, told reporters.
He said the first delivery for the contracts was expected in December and due to confidentiality agreements could not name the customers.
Adaro aims to produce 42-45 million tonnes of coal this year, up from 38.5 million tonnes in 2008, and aims to crank up production to 80 million tonnes per year in the next five years.
Grant said on Tuesday the firm was expecting to increase sales to China to about 3.5 million tonnes in 2009, compared with about 2 million tonnes last year.
With higher sales volume, Adaro has forecast double-digit growth in revenue and net profit this year. (Reporting by Tyagitya Silka; Writing by Andreas Ismar; Editing by Ed Davies)
Bloomberg U.S. Stocks Drop on Concern Over Job Losses, Earnings Valuation
June 3 (Bloomberg) -- U.S. stocks fell for the first time in five days, extending a global drop, as a report showed the nation lost more jobs than forecast, commodities slid and the Standard & Poor’s 500 Index traded at the most expensive in eight months.
“We’ve had a very strong move in a very short period of time and the economy certainly isn’t green-shooting in a way that justifies a lot of optimism,” said Michael Holland, chairman of New York-based Holland & Co. LLC, which oversees about $4 billion.
The S&P 500, which closed at a seven-month high yesterday, slid 1.4 percent to 931.76 at 4:12 p.m. in New York, paring a tumble of as much as 2.2 percent in the last half hour as bond yields extending their retreat. The Dow Jones Industrial Average lost 65.63 points, or 0.8 percent, to 8,675.24. The Dow yesterday briefly erased its 2009 loss for the first time since January. Seven stocks fell for every two rising on the New York Stock Exchange.
Jobs Concern
Economic data today showing deeper U.S. job losses and a worse-than-estimated contraction in service industries dragged shares lower. Companies in the U.S. cut an estimated 532,000 workers in May, according to a private report. A government release showed factory orders grew less than expected, while the Institute for Supply Management’s index of service industries was 44 last month, missing economists’ estimates.
The Labor Department’s monthly jobs report, scheduled for June 5, may show payrolls at companies and government agencies shrank by 520,000 in May and unemployment rose to a 25-year high of 9.2 percent, based on a Bloomberg survey of economists. more...
“We’ve had a very strong move in a very short period of time and the economy certainly isn’t green-shooting in a way that justifies a lot of optimism,” said Michael Holland, chairman of New York-based Holland & Co. LLC, which oversees about $4 billion.
The S&P 500, which closed at a seven-month high yesterday, slid 1.4 percent to 931.76 at 4:12 p.m. in New York, paring a tumble of as much as 2.2 percent in the last half hour as bond yields extending their retreat. The Dow Jones Industrial Average lost 65.63 points, or 0.8 percent, to 8,675.24. The Dow yesterday briefly erased its 2009 loss for the first time since January. Seven stocks fell for every two rising on the New York Stock Exchange.
Jobs Concern
Economic data today showing deeper U.S. job losses and a worse-than-estimated contraction in service industries dragged shares lower. Companies in the U.S. cut an estimated 532,000 workers in May, according to a private report. A government release showed factory orders grew less than expected, while the Institute for Supply Management’s index of service industries was 44 last month, missing economists’ estimates.
The Labor Department’s monthly jobs report, scheduled for June 5, may show payrolls at companies and government agencies shrank by 520,000 in May and unemployment rose to a 25-year high of 9.2 percent, based on a Bloomberg survey of economists. more...
Reuters Bernanke sees recession ending soon; warns on debt
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke sounded a cautiously upbeat note on the U.S. economy on Wednesday but warned that corralling government debt was vital to ensuring the nation's long-term health.In testimony to Congress, Bernanke sounded more confident that the U.S. recession would end this year than he had just one month ago, and he said the risk of a dangerous downward spiral in prices had receded.
Delivering a message that appeared aimed at soothing jittery financial markets and reassuring foreign investors that the United States would get a grip on its budget once the economic crisis has passed, Bernanke said rising deficits posed a significant long-term threat.
"Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke told the House of Representatives' Budget Committee.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."
He said rising debt was contributing to a jump in longer-term interest rates. However, he gave no clue as to whether the U.S. central bank would step up its purchases of government and mortgage-related debt to keep rates low, something investors have been watching for.
Financial markets largely shrugged off Bernanke's testimony, with weaker-than-expected economic data driving prices for U.S. stocks down and Treasury debt up.
Bloomberg Oil Tumbles as Supplies Gain, Fuel Demand Drops to 10-Year Low
June 3 (Bloomberg) -- Crude oil fell the most in two weeks after a government report showed that U.S. supplies unexpectedly increased as fuel consumption plunged to a 10-year low.
Inventories climbed 2.9 million barrels to 366 million in the week ended May 29, according to the Energy Department. The gain occurred as imports surged 9.9 percent and refineries increased operating rates to the highest level in six months. Fuel demand fell to the lowest since May 1999.
“The high inventories and weak demand we’re seeing don’t justify prices in the $60s,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “The fundamentals are catching up with the market. Prices have gotten ahead of where they should be.”
Crude oil for July delivery fell $2.43, or 3.5 percent, to settle at $66.12 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the biggest decline since May 15. Futures are up 48 percent this year.
Prices jumped $7.53 between May 21 and June 1, the longest rally in a year, as the weakening dollar bolstered the appeal of energy and metals futures as an alternative investment and equities rose. Oil fell 3 cents yesterday.
“While there are some positive signs in the economy, there’s not enough to justify $70 crude,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, a division of MF Global Ltd. “The key is tomorrow. If we can get another negative move, then you’ll start to see the liquidation taking hold.”
The Energy Department report was forecast to show that crude-oil stockpiles fell 1.5 million barrels, according to the median of 15 estimates by analysts surveyed by Bloomberg News. more...
Inventories climbed 2.9 million barrels to 366 million in the week ended May 29, according to the Energy Department. The gain occurred as imports surged 9.9 percent and refineries increased operating rates to the highest level in six months. Fuel demand fell to the lowest since May 1999.
“The high inventories and weak demand we’re seeing don’t justify prices in the $60s,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “The fundamentals are catching up with the market. Prices have gotten ahead of where they should be.”
Crude oil for July delivery fell $2.43, or 3.5 percent, to settle at $66.12 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the biggest decline since May 15. Futures are up 48 percent this year.
Prices jumped $7.53 between May 21 and June 1, the longest rally in a year, as the weakening dollar bolstered the appeal of energy and metals futures as an alternative investment and equities rose. Oil fell 3 cents yesterday.
“While there are some positive signs in the economy, there’s not enough to justify $70 crude,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, a division of MF Global Ltd. “The key is tomorrow. If we can get another negative move, then you’ll start to see the liquidation taking hold.”
The Energy Department report was forecast to show that crude-oil stockpiles fell 1.5 million barrels, according to the median of 15 estimates by analysts surveyed by Bloomberg News. more...
Palmoil HQ Profit-taking weighs down crude palm oil futures
Crude palm oil (CPO) futures prices on Bursa Malaysia Derivatives closed lower yesterday as traders took profit after a four-day run-up, a dealer said.He said the prices, which were generally firmer in the early period of trading, retreated at the close as players continued to trim their positions.
At close yesterday, June 2009 declined RM35 to RM2,645 per tonne, July 2009 dipped RM32 to RM2,627, August 2009 dropped RM27 to RM2,598 and September 2009 decreased RM29 to RM2,591.
Total volume fell to 9,386 lots from 12,801 lots Monday and open interests decreased to 77,317 contracts from 79,041 contracts previously.
On the physical market, June South was lower by RM50 to RM2,650 a tonne.
Indopremier Cement Industry
Domestic and export sales in April raised by 6.8% MoM and 7.7% MoM
Indonesia cement sales in April 2009, either for domestic or export, managed to book higher volume MoM. Domestic sales booked 6.8% hike in April 2009 reaching 2.85 million tones, higher than March 2009 sales (+1.2% MoM). Export sales in the same period escalated 7.7% MoM attaining to 306k tones, lower than March growth of 24.9% MoM.
Domestic cement sales dropped 5.8% YoY in 1Q09
The falling trend of cement sales has started in the first quarter this year due to global crisis. Based on data from Indonesia Cement Association (ICA), cement domestic volume in 1Q09 has fallen by 5.8% YoY and 12.9% QoQ reaching 39.2 million tones.
Export sales also decreased by 37.3% YoYin 1Q09
In line with domestic market trend, export volume also decreased by 37.3% YoY and 43.1% QoQ, accounted to 711k tones in 1Q09 compared to 1Q08 reaching 1.1 million tones.
SMGR still controlled national market share
In the first three months this year, SMGR still dominated domestic cement industry by having market share at 45.7%, improved 180 bps compared to 43.9% market share in the same period last year. Second place was taken by INTP with 29.8% market share which improved by 80 bps but remain below 30% compared to 1Q08-3Q08 period while SMCB only booked 12.7% market share.
Cement sector is projected to slowdown in 2009
This year, cement sector is projected to slowdown and would expand in range 0% YoY - 3% YoY, attaining to 38.01 million tones – 39.3 million tones. We view that Government stimulus in infrastructure sector worth of Rp 12.2 trillion would be a catalyst to prop up cement domestic purchasing power.
Focused on cost efficiency and ASP
The cope with the slow down this year, cement producers focus on two strategies, i.e., cost efficiency and maintaining average selling price (ASP), so that profitability level remains sound while sales volume declines. It has been reflected in the 1Q09 financial performance of cement players in the IDX. INTP during this quarter managed to book higher profitability compared to competitors. Higher ASP hike and cost efficiency, through energy diversification has resulted in 1.5% YoY COGS decline (COGS/ton was at Rp 451k/ton, the lowest among its peers). The gross margin and operating margin jumped to 46% and 34% respectively.
Healthy balance sheet and lower gearing ratio were an added value amidst crisis
This year, we valued more cement producer with healthy balance sheet, lower gearing ratio and have net cash position, which would facilitate funding for expansion.
Neutral Recommendation with SMGR as our Top Pick
We put our Neutral recommendation for cement sector, on the back of remain weaker cement demand this year, delay in infrastructure project such as due to prolong rainy season and festive season, rising energy price and higher raw materials price.
Indonesia cement sales in April 2009, either for domestic or export, managed to book higher volume MoM. Domestic sales booked 6.8% hike in April 2009 reaching 2.85 million tones, higher than March 2009 sales (+1.2% MoM). Export sales in the same period escalated 7.7% MoM attaining to 306k tones, lower than March growth of 24.9% MoM.
Domestic cement sales dropped 5.8% YoY in 1Q09
The falling trend of cement sales has started in the first quarter this year due to global crisis. Based on data from Indonesia Cement Association (ICA), cement domestic volume in 1Q09 has fallen by 5.8% YoY and 12.9% QoQ reaching 39.2 million tones.
Export sales also decreased by 37.3% YoYin 1Q09
In line with domestic market trend, export volume also decreased by 37.3% YoY and 43.1% QoQ, accounted to 711k tones in 1Q09 compared to 1Q08 reaching 1.1 million tones.
SMGR still controlled national market share
In the first three months this year, SMGR still dominated domestic cement industry by having market share at 45.7%, improved 180 bps compared to 43.9% market share in the same period last year. Second place was taken by INTP with 29.8% market share which improved by 80 bps but remain below 30% compared to 1Q08-3Q08 period while SMCB only booked 12.7% market share.
Cement sector is projected to slowdown in 2009
This year, cement sector is projected to slowdown and would expand in range 0% YoY - 3% YoY, attaining to 38.01 million tones – 39.3 million tones. We view that Government stimulus in infrastructure sector worth of Rp 12.2 trillion would be a catalyst to prop up cement domestic purchasing power.
Focused on cost efficiency and ASP
The cope with the slow down this year, cement producers focus on two strategies, i.e., cost efficiency and maintaining average selling price (ASP), so that profitability level remains sound while sales volume declines. It has been reflected in the 1Q09 financial performance of cement players in the IDX. INTP during this quarter managed to book higher profitability compared to competitors. Higher ASP hike and cost efficiency, through energy diversification has resulted in 1.5% YoY COGS decline (COGS/ton was at Rp 451k/ton, the lowest among its peers). The gross margin and operating margin jumped to 46% and 34% respectively.
Healthy balance sheet and lower gearing ratio were an added value amidst crisis
This year, we valued more cement producer with healthy balance sheet, lower gearing ratio and have net cash position, which would facilitate funding for expansion.
Neutral Recommendation with SMGR as our Top Pick
We put our Neutral recommendation for cement sector, on the back of remain weaker cement demand this year, delay in infrastructure project such as due to prolong rainy season and festive season, rising energy price and higher raw materials price.
Danareksa Upgrade Target Price Gudang Garam Analis: Naya Tirambintang TP Rp13.500, BUY
Harga saham Gudang Garam rally sebesar 48% dalam sebulan terakhir, namun masih ter-diskon terhadap market Kami menggunakan metode valuasi baru yaitu blended valuation yang menghasilkan TP baru di Rp13.500, atau meningkat dari TP sebelumnya Rp9.000:valuasi dengan DCF menghasilkan fair value yang meningkat menjadi Rp12.000/saham dikarenakan improvisasi di working capital management perusahaan
valuasi berdasarkan PE 11,8x yaitu dengan memakai data historis forward PE GGRM selama 11 tahun TP mengimplikasikan PE09-10F 10,7-10,1x, masih terlihat lebih atraktif dibanding peers-nya. Untuk itu kami masih mempertahankan rating BUY.
JP Morgan - Perusahaan Gas Negara; Raise PT to Rp 4400/sh
Model revisited: We revisit our model and incorporate the following new assumptions into it: (1) Raise FY09E volume from 705MMScfd to 750MMscfd and change LT volume forecast. (2) Adjust the long-term gas selling price upwards. (3) Adjust the long-term cost of gas to incorporate the gas from LNG facilities. (4) Extend the PT time horizon from Dec-09 to Jun-10. (5) Adjust beta for the valuation from 1.118 to 1.102.
Gas supply is likely to be adequate: One concern among investors is that PGAS gas supply could potentially run out by FY12E. However, we view that there is potential that PGAS could secure new gas contracts in the form of Lematang (50MMScfd), Jambi Merang (85-100MMScfd), and Suban phase 3 of Conoco Phillips (300MMScfd). In the worst scenario that PGAS failed to secure the large supply such as Suban phase 3, its LNG receiving terminal projects could provide 300MMScfd of gas which could replace supply from Suban.
Ability to cover rising gas cost: One could argue that the cost of gas could rise as the new contracts are signed and the LNG gas will be priced at international level. Historically (since FY00) selling price has risen by 9.2% CAGR while cost of gas has risen by 3.7%CAGR. With this, we believe PGAS should be able to pass on higher cost of gas to its customers. Our channel check has indicated that there is a high likelihood that PGAS will be able to pass on the high purchase price of LNG to PLN. Note: Only LNG & diesel can be used to supply peak hour grid, and LNG is cheaper than diesel despite commanding higher price than that of pipe gas.
Raise PT to Rp4,400 and maintain OW: We continue to be bullish on PGAS on the back of 31.9% CAGR in profit growth from FY08-FY13E; we have extended and raised of June-10 DCF based PT from Rp3,000 to Rp4,400. (Risk free rate =11.5%, risk premium = 5.5% and terminal growth rate = 7.0%) Risks to our view and PT: (1) Lower than expected distribution volume, distribution margin and transmission fee. (2) Higher
than expected cost of gas.
Gas supply is likely to be adequate: One concern among investors is that PGAS gas supply could potentially run out by FY12E. However, we view that there is potential that PGAS could secure new gas contracts in the form of Lematang (50MMScfd), Jambi Merang (85-100MMScfd), and Suban phase 3 of Conoco Phillips (300MMScfd). In the worst scenario that PGAS failed to secure the large supply such as Suban phase 3, its LNG receiving terminal projects could provide 300MMScfd of gas which could replace supply from Suban.
Ability to cover rising gas cost: One could argue that the cost of gas could rise as the new contracts are signed and the LNG gas will be priced at international level. Historically (since FY00) selling price has risen by 9.2% CAGR while cost of gas has risen by 3.7%CAGR. With this, we believe PGAS should be able to pass on higher cost of gas to its customers. Our channel check has indicated that there is a high likelihood that PGAS will be able to pass on the high purchase price of LNG to PLN. Note: Only LNG & diesel can be used to supply peak hour grid, and LNG is cheaper than diesel despite commanding higher price than that of pipe gas.
Raise PT to Rp4,400 and maintain OW: We continue to be bullish on PGAS on the back of 31.9% CAGR in profit growth from FY08-FY13E; we have extended and raised of June-10 DCF based PT from Rp3,000 to Rp4,400. (Risk free rate =11.5%, risk premium = 5.5% and terminal growth rate = 7.0%) Risks to our view and PT: (1) Lower than expected distribution volume, distribution margin and transmission fee. (2) Higher
than expected cost of gas.
Model revisited: We revisit our model and incorporate the following new assumptions into it: (1) Raise FY09E volume from 705MMScfd to 750MMscfd and change LT volume forecast. (2) Adjust the long-term gas selling price upwards. (3) Adjust the long-term cost of gas to incorporate the gas from LNG facilities. (4) Extend the PT time horizon from Dec-09 to Jun-10. (5) Adjust beta for the valuation from 1.118 to 1.102.
Gas supply is likely to be adequate: One concern among investors is that PGAS gas supply could potentially run out by FY12E. However, we view that there is potential that PGAS could secure new gas contracts in the form of Lematang (50MMScfd), Jambi Merang (85-100MMScfd), and Suban phase 3 of Conoco Phillips (300MMScfd). In the worst scenario that PGAS failed to secure the large supply such as Suban phase 3, its LNG receiving terminal projects could provide 300MMScfd of gas which could replace supply from Suban.
Ability to cover rising gas cost: One could argue that the cost of gas could rise as the new contracts are signed and the LNG gas will be priced at international level. Historically (since FY00) selling price has risen by 9.2% CAGR while cost of gas has risen by 3.7%CAGR. With this, we believe PGAS should be able to pass on higher cost of gas to its customers. Our channel check has indicated that there is a high likelihood that PGAS will be able to pass on the high purchase price of LNG to PLN. Note: Only LNG & diesel can be used to supply peak hour grid, and LNG is cheaper than diesel despite commanding higher price than that of pipe gas.
Raise PT to Rp4,400 and maintain OW: We continue to be bullish on PGAS on the back of 31.9% CAGR in profit growth from FY08-FY13E; we have extended and raised of June-10 DCF based PT from Rp3,000 to Rp4,400. (Risk free rate =11.5%, risk premium = 5.5% and terminal growth rate = 7.0%) Risks to our view and PT: (1) Lower than expected distribution volume, distribution margin and transmission fee. (2) Higher
than expected cost of gas.
Gas supply is likely to be adequate: One concern among investors is that PGAS gas supply could potentially run out by FY12E. However, we view that there is potential that PGAS could secure new gas contracts in the form of Lematang (50MMScfd), Jambi Merang (85-100MMScfd), and Suban phase 3 of Conoco Phillips (300MMScfd). In the worst scenario that PGAS failed to secure the large supply such as Suban phase 3, its LNG receiving terminal projects could provide 300MMScfd of gas which could replace supply from Suban.
Ability to cover rising gas cost: One could argue that the cost of gas could rise as the new contracts are signed and the LNG gas will be priced at international level. Historically (since FY00) selling price has risen by 9.2% CAGR while cost of gas has risen by 3.7%CAGR. With this, we believe PGAS should be able to pass on higher cost of gas to its customers. Our channel check has indicated that there is a high likelihood that PGAS will be able to pass on the high purchase price of LNG to PLN. Note: Only LNG & diesel can be used to supply peak hour grid, and LNG is cheaper than diesel despite commanding higher price than that of pipe gas.
Raise PT to Rp4,400 and maintain OW: We continue to be bullish on PGAS on the back of 31.9% CAGR in profit growth from FY08-FY13E; we have extended and raised of June-10 DCF based PT from Rp3,000 to Rp4,400. (Risk free rate =11.5%, risk premium = 5.5% and terminal growth rate = 7.0%) Risks to our view and PT: (1) Lower than expected distribution volume, distribution margin and transmission fee. (2) Higher
than expected cost of gas.
Danareksa Gudang Garam (GGRM IJ, Rp11,350 BUY) Still attractive
TP raised to Rp13,500
Following the excellent performance in the first quarter of the year and buoyed by upbeat market sentiment, Gudang Garam’s shares have rallied 48% in the last one month. This prompts us to use a PE based approach besides DCF to value the stock. Our PE based approach uses a PE of 11.8x. This comes from an 11-year average historical forward PE, and is similar to the current forward market PE of 11.6x. Our new DCF valuation values the stock at Rp12,000/share, reflecting our assumption of improving working capital. Based on the blended valuation, we arrive at a higher target price of Rp13,500, implying 10.7-10.1x PE09-10F. The stock is still relatively attractive compared to its peers. BUY recommendation maintained.
More ambitious plans
The company has more ambitious plans. This year it hopes to launch some new brands besides rejuvenating its existing brands. In addition, it also hopes to invest more in an integrated computer system as well as improve its human resources in order to ensure efficiency and achieve further market penetration. Despite the higher investment costs required, we believe these efforts shall help to strengthen Gudang Garam’s position in the market in the longer term.
Consolidation of distribution
The company is still consolidating its distribution under its fully owned distributor, Surya Madistrindo. This shall provide solid support for its marketing initiatives. These plans are already well advanced and the management is confident that it will make 80% of its sales through its own channels by the end of this year despite its internal target to have the consolidation completed by the end of 2010. If all goes well, sales may surprise on the upside. On the operating side, the consolidation should improve the company’s working capital management due to faster receivables turnover as well as ensure margins enhancement.
Positive trend in the production numbers
The latest GAPPRI cigarette production volume numbers - which are based on the purchase of excise tax ribbons – continue to show a positive trend. On a monthly basis, the industry buying pattern is already back to normal with 20.7 bn sticks recorded in April 2009. Cumulatively, domestic excise tax ribbons purchased rose 7.9% YoY in 4M09, led by Gudang Garam which recorded astounding growth of 21% YoY (across the board). Despite the lack of any direct correlation with Gudang Garam’s actual cigarette sales, this bodes well for the company’s future sales we believe.
Following the excellent performance in the first quarter of the year and buoyed by upbeat market sentiment, Gudang Garam’s shares have rallied 48% in the last one month. This prompts us to use a PE based approach besides DCF to value the stock. Our PE based approach uses a PE of 11.8x. This comes from an 11-year average historical forward PE, and is similar to the current forward market PE of 11.6x. Our new DCF valuation values the stock at Rp12,000/share, reflecting our assumption of improving working capital. Based on the blended valuation, we arrive at a higher target price of Rp13,500, implying 10.7-10.1x PE09-10F. The stock is still relatively attractive compared to its peers. BUY recommendation maintained.
More ambitious plans
The company has more ambitious plans. This year it hopes to launch some new brands besides rejuvenating its existing brands. In addition, it also hopes to invest more in an integrated computer system as well as improve its human resources in order to ensure efficiency and achieve further market penetration. Despite the higher investment costs required, we believe these efforts shall help to strengthen Gudang Garam’s position in the market in the longer term.
Consolidation of distribution
The company is still consolidating its distribution under its fully owned distributor, Surya Madistrindo. This shall provide solid support for its marketing initiatives. These plans are already well advanced and the management is confident that it will make 80% of its sales through its own channels by the end of this year despite its internal target to have the consolidation completed by the end of 2010. If all goes well, sales may surprise on the upside. On the operating side, the consolidation should improve the company’s working capital management due to faster receivables turnover as well as ensure margins enhancement.
Positive trend in the production numbers
The latest GAPPRI cigarette production volume numbers - which are based on the purchase of excise tax ribbons – continue to show a positive trend. On a monthly basis, the industry buying pattern is already back to normal with 20.7 bn sticks recorded in April 2009. Cumulatively, domestic excise tax ribbons purchased rose 7.9% YoY in 4M09, led by Gudang Garam which recorded astounding growth of 21% YoY (across the board). Despite the lack of any direct correlation with Gudang Garam’s actual cigarette sales, this bodes well for the company’s future sales we believe.
Mandiri Sekuritas FOCUS (03-Jun-2009) ELTY: Discount beater
Discount beater
With friendlier interest rates and recovering marketing sales, we are raising our target price to Rp500/share (+69.5% upside), equivalent to our stripped-down NAV09F. During the bull run of 2007-08, we observed that Bakrieland was the only property stock that surpassed its then NAV value of Rp455/share, with share price reaching an all-time high of Rp680/share. As business climate continues to improve, the stock has the potential to outperform anew.
Trading at a premium to NAV is not far-fetched. From July 07 to March 08, the stock was trading at a premium to its NAV while the rest of the property counters performed at a 20-30% discount relative to their respective NAVs. Its growth promise (earnings 07-12F CAGR of 22.8%), appreciating value of its CBD via project development, low mortgage rate environment of between 9.0% to 11.0% and landbank acquisitions at tantalizingly low prices in Bogor (at Rp50k/! sqm) led to the stock trading above its intrinsic value. We think, that history could repeat itself with the company now being armed with a wider array of development projects such as the Kanci - Pejagan toll road and 3 project deliveries in its CBD worth Rp871bn by year-end. Note that its erstwhile NAV of Rp455/share excluded toll projects as well as additional land acquisitions in Bogor in 2008 of about 400ha.
Toll road opening by 3Q09. Given the slowdown in property revenues, ELTY’s recurring sources remained steady with contribution of Rp46bn (+17.9%yoy) in 1Q09 equating to about 29% of total revenues. This will be given a further boost when the 34km-Kanci Pejagan toll road opens in 3Q09, where another Rp46bn of incremental revenues will come on stream. Once fully utilized, this toll section wil! l provide some Rp180bn p.a. worth of revenue, in our view.
Sustainable share price euphoria. YTD, the company’s share price has soared by 310%. Operationally, marketing sales seemed to have bottomed out with March sales for condos and houses recording YTD highs of Rp10.4bn(+67.7%mom) and Rp17.2bn(+4.9%mom). Further boost would come from lower mortgage rates which now are standing between 12.5%-14%, down from as high as 18% three months ago. As such, the possibility of shar! e price s urpassing our stripped-down NAV of Rp500/share is not improbable. Even at our TP, the stock trades at P/BV of 2.0x, while the broader index is at 2.4x.
With friendlier interest rates and recovering marketing sales, we are raising our target price to Rp500/share (+69.5% upside), equivalent to our stripped-down NAV09F. During the bull run of 2007-08, we observed that Bakrieland was the only property stock that surpassed its then NAV value of Rp455/share, with share price reaching an all-time high of Rp680/share. As business climate continues to improve, the stock has the potential to outperform anew.
Trading at a premium to NAV is not far-fetched. From July 07 to March 08, the stock was trading at a premium to its NAV while the rest of the property counters performed at a 20-30% discount relative to their respective NAVs. Its growth promise (earnings 07-12F CAGR of 22.8%), appreciating value of its CBD via project development, low mortgage rate environment of between 9.0% to 11.0% and landbank acquisitions at tantalizingly low prices in Bogor (at Rp50k/! sqm) led to the stock trading above its intrinsic value. We think, that history could repeat itself with the company now being armed with a wider array of development projects such as the Kanci - Pejagan toll road and 3 project deliveries in its CBD worth Rp871bn by year-end. Note that its erstwhile NAV of Rp455/share excluded toll projects as well as additional land acquisitions in Bogor in 2008 of about 400ha.
Toll road opening by 3Q09. Given the slowdown in property revenues, ELTY’s recurring sources remained steady with contribution of Rp46bn (+17.9%yoy) in 1Q09 equating to about 29% of total revenues. This will be given a further boost when the 34km-Kanci Pejagan toll road opens in 3Q09, where another Rp46bn of incremental revenues will come on stream. Once fully utilized, this toll section wil! l provide some Rp180bn p.a. worth of revenue, in our view.
Sustainable share price euphoria. YTD, the company’s share price has soared by 310%. Operationally, marketing sales seemed to have bottomed out with March sales for condos and houses recording YTD highs of Rp10.4bn(+67.7%mom) and Rp17.2bn(+4.9%mom). Further boost would come from lower mortgage rates which now are standing between 12.5%-14%, down from as high as 18% three months ago. As such, the possibility of shar! e price s urpassing our stripped-down NAV of Rp500/share is not improbable. Even at our TP, the stock trades at P/BV of 2.0x, while the broader index is at 2.4x.
CLSA Aneka Kimia Raya (AKRA IJ): Quality Business
Analyst Hadi Susilo lowers his earnings forecasts for Aneka Kimia Raya (AKRA IJ) by 38% and 44% for 2009-10 respectively. These cuts are made merely to account for more conservative assumptions. TP is Rp1,000, or 22% upside.
The company has quality business portfolio: sorbitol manufacturing, petroleum, and chemical distribution + logistic business (contribution to profits: 56%, 33%, and 11% respectively). The key growth drivers are petroleum distribution business. The potential is massive. Total market size for unsubsidized fuel is 25mn KL. And AKRA pretty much has no competitor in this area. We expect AKRA to do 831k KL sales volumes this year. Certainly growth potential is there.
The other interesting business potential is the tank terminal business (to be completed in 4Q09). This is a 40% gross margin business. AKRA has 51% stake in this business (the rest owned by Vopak). Initial installed capacity is 250k KL and total investment is US$86mn. Capacity expansion will be some 40% cheaper, according to our analyst.
The company has quality business portfolio: sorbitol manufacturing, petroleum, and chemical distribution + logistic business (contribution to profits: 56%, 33%, and 11% respectively). The key growth drivers are petroleum distribution business. The potential is massive. Total market size for unsubsidized fuel is 25mn KL. And AKRA pretty much has no competitor in this area. We expect AKRA to do 831k KL sales volumes this year. Certainly growth potential is there.
The other interesting business potential is the tank terminal business (to be completed in 4Q09). This is a 40% gross margin business. AKRA has 51% stake in this business (the rest owned by Vopak). Initial installed capacity is 250k KL and total investment is US$86mn. Capacity expansion will be some 40% cheaper, according to our analyst.
CLSA Indonesia Macro Upgrades
Our economist Tony Nafte revised upwards his forecasts for Indo GDP, rupiah exchange rates, and fiscal deficit.
Following the 1Q09 release, Tony upgrades his GDP forecast for Indonesia from 0.8% previously to 3.7% this year. For 2010, we expect stronger growth at 4%, from our previous 2% forecast.
We had previously forecast a deficit blowout above 4% of GDP but now think that the 2.5% target is achievable.
We now think that the current spot rate at Rp10,250/US$ (previously Rp14k) is a more appropriate forecast both for end-2009 and end-2010.
Following the 1Q09 release, Tony upgrades his GDP forecast for Indonesia from 0.8% previously to 3.7% this year. For 2010, we expect stronger growth at 4%, from our previous 2% forecast.
We had previously forecast a deficit blowout above 4% of GDP but now think that the 2.5% target is achievable.
We now think that the current spot rate at Rp10,250/US$ (previously Rp14k) is a more appropriate forecast both for end-2009 and end-2010.
CLSA From the 15th Coaltrans Asia
Our analyst Olie just came back from the 15th Coaltrans Asia conference in Bali with a more positive feeling (no wonder for someone who just spent 3 days in Bali).
Recovery in 2H09 seems to be the consensus view here with some conference delegates looking beyond 2009 and seeing strong structural story driven by, as termed by Nick Cashmore, Chindonesia.
Most delegates however, feel that the market is well supplied in the near-term, hence most are expecting a moderate recovery in pricing.
· Around 60% of Coaltrans participants view that contract price and spot price would moderately increase toward 2H09, respectively.
· But most also think that market remains well supplied in the near-term.
· Questions remain on DMO.
· Presence of the bulls with thermal coal competitiveness, massive underinvestment, and Chindonesia demand as the main thesis.
· Coal customers are looking at ways to shift away from term contracts, looking more like their European counterparts?
· For leverage to coal price recovery, stick with Indo Tambang (ITMG IJ). Bumi Resources does offer higher leverage to coal price recovery but risk is also much higher.
Recovery in 2H09 seems to be the consensus view here with some conference delegates looking beyond 2009 and seeing strong structural story driven by, as termed by Nick Cashmore, Chindonesia.
Most delegates however, feel that the market is well supplied in the near-term, hence most are expecting a moderate recovery in pricing.
· Around 60% of Coaltrans participants view that contract price and spot price would moderately increase toward 2H09, respectively.
· But most also think that market remains well supplied in the near-term.
· Questions remain on DMO.
· Presence of the bulls with thermal coal competitiveness, massive underinvestment, and Chindonesia demand as the main thesis.
· Coal customers are looking at ways to shift away from term contracts, looking more like their European counterparts?
· For leverage to coal price recovery, stick with Indo Tambang (ITMG IJ). Bumi Resources does offer higher leverage to coal price recovery but risk is also much higher.
UBS Asian Agri-culture sector Jun0209
Time is running out
Bullish drivers becoming history
The current bullish sentiment on CPO is premised on low soybean and palm oil inventories and the poor Argentinean soybean crop. We think these factors will have a diminishing effect on edible oil prices in the coming months. This is because the Argentinean soybean harvest is complete, and inventories should start stabilising, in our view.
Global soybean supply and inventory to improve over the next 12 months
According to Oil World’s latest issue, global soybean production may increase 14% to a record 242m tonnes in the October 2009-September 2010 season. The forecast hinges on two major crop events: 1) the US soybean harvest in September-November 2009 (which is currently in the planting phase); and 2) a recovery of the South American soybean crop in March-May 2010.
Chinese and Indian demand may weaken in H209, in our view
Chinese/Indian demand for oilseeds/edible oils has been strong in H109. However, this may weaken in H2, as we expect Chinese stockpiling activity to end. Indian palm oil import demand may also slow, as we believe the strong imports since end-2008 were due to a change in the import duty for palm oil compared with soybean oil. We believe the momentum cannot be maintained for a prolonged period.
Plantation share prices were up 18% in May; CPO price fell 6%
Driven by the equity markets and crude oil, plantation share prices in May raced ahead of the CPO price. In May, plantation share prices were up 18% MoM versus the 6% decline in the CPO price. Singapore/Indonesia plantation stocks outperformed, whereas the Malaysian plantation share prices rose at a more moderate pace.
Bullish drivers becoming history
The current bullish sentiment on CPO is premised on low soybean and palm oil inventories and the poor Argentinean soybean crop. We think these factors will have a diminishing effect on edible oil prices in the coming months. This is because the Argentinean soybean harvest is complete, and inventories should start stabilising, in our view.
Global soybean supply and inventory to improve over the next 12 months
According to Oil World’s latest issue, global soybean production may increase 14% to a record 242m tonnes in the October 2009-September 2010 season. The forecast hinges on two major crop events: 1) the US soybean harvest in September-November 2009 (which is currently in the planting phase); and 2) a recovery of the South American soybean crop in March-May 2010.
Chinese and Indian demand may weaken in H209, in our view
Chinese/Indian demand for oilseeds/edible oils has been strong in H109. However, this may weaken in H2, as we expect Chinese stockpiling activity to end. Indian palm oil import demand may also slow, as we believe the strong imports since end-2008 were due to a change in the import duty for palm oil compared with soybean oil. We believe the momentum cannot be maintained for a prolonged period.
Plantation share prices were up 18% in May; CPO price fell 6%
Driven by the equity markets and crude oil, plantation share prices in May raced ahead of the CPO price. In May, plantation share prices were up 18% MoM versus the 6% decline in the CPO price. Singapore/Indonesia plantation stocks outperformed, whereas the Malaysian plantation share prices rose at a more moderate pace.
UBS Investment Research - Indofood Sukses Makmur; raise price target to Rp 2,500/sh
Re-rating on improved instant-noodle profit
Instant-noodle profit improving
EBIT margin on instant noodle was 12.2% for Q109, the highest since 2003. The big story, in our view, is easing competitive pressure as Wings Group has reached its target market share of 25%, which should make it a price follower (the 2004 price war between Indofood and Wings is unlikely to be repeated, in our view).
Earnings upside potential from plantation (IndoAgri)
CPO spot price is US$750/ton fob and the YTD average is US$620/ton. This compares favourably with our CPO price assumption of US$550/ton. According to our sensitivity analysis, a CPO price 10% higher than our assumption would cause Indofood’s net profit to rise 8-9%.
Gearing concern alleviated
A stronger rupiah (from Rp12,000/US$ two-three months ago to the current Rp10,300/US$) and the local bond market opening up are big positives for Indofood. This is because it has 170% net gearing and large US$ debt exposure (US$810m—half of its total debt).
Valuation: maintain Buy; raise price target from Rp1,370 to Rp2,500
We raise our sum-of-the-parts-derived price target from Rp1,370 to Rp2,500 because of: 1) our earnings estimate increases (we raise our EPS estimates from Rp 128/158/172 to Rp147/174/199 for 2009/10/11); 2) our lower risk-free rate assumption; 3) the rollover of the valuation cut-off date; 4) lower debt in Rp terms following our stronger FX rate assumption; and 5) change in valuation method for IndoAgri from UBS price target to share price. Our new price target implies 14.4x 2010E PE.
Instant-noodle profit improving
EBIT margin on instant noodle was 12.2% for Q109, the highest since 2003. The big story, in our view, is easing competitive pressure as Wings Group has reached its target market share of 25%, which should make it a price follower (the 2004 price war between Indofood and Wings is unlikely to be repeated, in our view).
Earnings upside potential from plantation (IndoAgri)
CPO spot price is US$750/ton fob and the YTD average is US$620/ton. This compares favourably with our CPO price assumption of US$550/ton. According to our sensitivity analysis, a CPO price 10% higher than our assumption would cause Indofood’s net profit to rise 8-9%.
Gearing concern alleviated
A stronger rupiah (from Rp12,000/US$ two-three months ago to the current Rp10,300/US$) and the local bond market opening up are big positives for Indofood. This is because it has 170% net gearing and large US$ debt exposure (US$810m—half of its total debt).
Valuation: maintain Buy; raise price target from Rp1,370 to Rp2,500
We raise our sum-of-the-parts-derived price target from Rp1,370 to Rp2,500 because of: 1) our earnings estimate increases (we raise our EPS estimates from Rp 128/158/172 to Rp147/174/199 for 2009/10/11); 2) our lower risk-free rate assumption; 3) the rollover of the valuation cut-off date; 4) lower debt in Rp terms following our stronger FX rate assumption; and 5) change in valuation method for IndoAgri from UBS price target to share price. Our new price target implies 14.4x 2010E PE.
CIMB Coal Mining Sector Note - Coaltrans Conference: highlights from Day 2
Day 2 of the Coaltrans Conference reiterated the points from Day 1. There were more details on China and India's coal import growth, end-users' strategies, the demand for low-rank coal and the higher use of indexation. We expect the overhang from DMO and a new reference price to be over soon. We will be reviewing our sector weighting after the conference. We would prefer exporters on the back of the stronger momentum in export prices. Bumi would be our top pick, for its greatest leverage to coal-price movements. We also like Adaro as it should be the biggest beneficiary of consolidation.
CIMB BNBR Company update - The next chapter
(BNBR IJ / BNBR.JK, TRADING BUY - Maintained, Rp89 - Tgt. Rp96, Conglomerates)
Over two quarters, BNBR has slashed its debt by about two-thirds, at the expense of diluting its stakes in subsidiaries, notably in BUMI from 35% to 16.3%. This was, nevertheless, quite an achievement, given volatile capital markets. BNBR needs to address funding sources should it be keen to recover lost assets or add businesses. Near-term share-price catalysts beyond debt restructuring are limited. With its discount to NAV narrowing, BNBR is no longer as compelling a proxy for Bakrie Group assets. BUMI is more attractive. Our revised NAV and target price are now Rp96, up from Rp70, adjusting for lower debt and higher valuation for subsidiaries.
Over two quarters, BNBR has slashed its debt by about two-thirds, at the expense of diluting its stakes in subsidiaries, notably in BUMI from 35% to 16.3%. This was, nevertheless, quite an achievement, given volatile capital markets. BNBR needs to address funding sources should it be keen to recover lost assets or add businesses. Near-term share-price catalysts beyond debt restructuring are limited. With its discount to NAV narrowing, BNBR is no longer as compelling a proxy for Bakrie Group assets. BUMI is more attractive. Our revised NAV and target price are now Rp96, up from Rp70, adjusting for lower debt and higher valuation for subsidiaries.
Rabu, 03 Juni 2009
[BRIGHT INFO] "Just a Note"
Good day to you.DJIA rose for the fourth straight day as an upbeat report on sales of previously owned U.S. homes. The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years (April surged 6.7 percent to 90.3), a sign that sales are finally coming to life after a long and painful slump. After taking a beating for the past two years, real estate investment trusts are regaining popularity with investors looking for bargains and a way to capitalize on an industry rebound.
Crude oil rebounded from the day’s lows, finishing little changed. Gold rose in New York and London as the declining dollar increased the metal’s appeal as an alternative investment. Nickel dropped 0.2 percent to $14,620, and tin eased 1 percent to $14,500.
Stock markets elsewhere in Southeast Asia ended mixed as demand for shares faded along with easing oil prices. The profit taking simply followed the direction of crude oil prices. Indonesia's stock index JCI was nearly unchanged.
Inflation would continue to ebb, particularly in the next two months as the high-base effect of last-year’s fuel price increase to continue to occur. Trade balance held up relatively well, recording a surplus of US$2.07bn in Apr09 vs US$2.06bn in the previous month.
The Indonesian unit of Thai Banpu (BANP.BK) wants to acquire a coal mine in Indonesia to boost production. Indonesia's PT Adaro (ADRO.JK), the country's second-largest coal producer, expects China's demand for overseas coal to stay strong in the second half of this year.
We believe Crude palm oil (CPO) prices are likely to hit RM3.000 per ton later this month on increased demand and less supply of soybean.
Maintain our positive Outlook especially on commodity with Buy on Weakness strategy. SGRO is one of the cheapest stocks on agro sector. “Let’s Back to Metal with Buy on Lower”.
“LOOKING OPPORTUNITY”
[Personal Opinion ]
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DISCLAIMER: This report is issued by [BRIGHT INFO]. Although the contents of this document may represent the opinion of [BRIGHT INFO]. We cannot guarantee its accuracy and completeness.
Bloomberg Emerging Markets Most Costly Since ‘07 on Fund Flood
June 2 (Bloomberg) -- The four-week flood of money into developing-nation stock funds that drove the MSCI Emerging Markets Index to an eight-month high is sending the strongest sell signal since equities peaked in October 2007.
Inflows totaled $12 billion, or 3.5 percent of developing- nation fund assets, the most since the 22-country benchmark hit its record high 19 months ago, said EPFR Global, which tracks $10 trillion in investments worldwide. The only other time since 2001 that funds attracted as much cash, in February 2006, the MSCI gauge lost 8.4 percent in four months.
BlackRock Inc., the biggest publicly traded asset manager in the U.S., and Aberdeen Asset Management Plc, Scotland’s largest independent money manager, also are forecasting a downturn after the MSCI index’s price-to-earnings ratio almost doubled this year. The gauge trades for 15.2 times reported profits, the most expensive level since December 2007, according to weekly data compiled by Bloomberg.
2009 Rebound
More than $12 trillion pledged by the U.S. government to ease the global recession, along with $1 trillion of aid from international organizations to bolster developing economies, prompted investors to reverse their trades this year. The MSCI emerging-market index’s rally the past three months was the biggest since its inception in December 1987 and beat the 29 percent rise in the MSCI World Index of developed-nation shares.
Money-Market Funds
Yesterday’s rally in emerging-market stocks was sparked by a report showing Chinese manufacturing grew for a third month in May, fueling speculation the world’s third-largest economy is recovering.
Bullish money managers say that emerging-market stocks will keep gaining as investors shift some of the $3.8 trillion in money-market funds into equities. The funds, which aim to preserve capital without targeting high returns, hold about 60 percent more assets than the average this decade, according to the Washington-based Investment Company Institute.
“There’s a lot of money looking for decent returns and that’s going to continue driving emerging markets,” said Mahendran, the Singapore-based chief investment strategist for Asia at HSBC Private Bank, which oversaw $352 billion as of the end of last year. “They are the only place on earth where any growth is taking place.”
more...
Inflows totaled $12 billion, or 3.5 percent of developing- nation fund assets, the most since the 22-country benchmark hit its record high 19 months ago, said EPFR Global, which tracks $10 trillion in investments worldwide. The only other time since 2001 that funds attracted as much cash, in February 2006, the MSCI gauge lost 8.4 percent in four months.
BlackRock Inc., the biggest publicly traded asset manager in the U.S., and Aberdeen Asset Management Plc, Scotland’s largest independent money manager, also are forecasting a downturn after the MSCI index’s price-to-earnings ratio almost doubled this year. The gauge trades for 15.2 times reported profits, the most expensive level since December 2007, according to weekly data compiled by Bloomberg.
2009 Rebound
More than $12 trillion pledged by the U.S. government to ease the global recession, along with $1 trillion of aid from international organizations to bolster developing economies, prompted investors to reverse their trades this year. The MSCI emerging-market index’s rally the past three months was the biggest since its inception in December 1987 and beat the 29 percent rise in the MSCI World Index of developed-nation shares.
Money-Market Funds
Yesterday’s rally in emerging-market stocks was sparked by a report showing Chinese manufacturing grew for a third month in May, fueling speculation the world’s third-largest economy is recovering.
Bullish money managers say that emerging-market stocks will keep gaining as investors shift some of the $3.8 trillion in money-market funds into equities. The funds, which aim to preserve capital without targeting high returns, hold about 60 percent more assets than the average this decade, according to the Washington-based Investment Company Institute.
“There’s a lot of money looking for decent returns and that’s going to continue driving emerging markets,” said Mahendran, the Singapore-based chief investment strategist for Asia at HSBC Private Bank, which oversaw $352 billion as of the end of last year. “They are the only place on earth where any growth is taking place.”
more...
Reuters Wall Street rises for 4th day on housing data
NEW YORK (Reuters) - Stocks rose for the fourth straight day on Tuesday as an upbeat report on sales of previously owned U.S. homes bolstered hopes for an economic recovery.
But a sell-off in financials on worries about the dilutive impact of recent stock offerings limited a broad advance.
An index of pending sales of previously owned U.S. homes shot up 6.7 percent in April, the biggest monthly gain in 7-1/2 years, according to the National Association of Realtors.
The data suggested that the recession is easing, and investors snapped up shares of home builders, with Toll Brothers (TOL.N) rising nearly 4 percent to $19.53, while DR Horton (DHI.N) shot up 4.1 percent to $9.63.
The Dow Jones home construction index .DJUSHB was up 3.2 percent.
Shares of big manufacturers also rose, with plane maker Boeing Co (BA.N) gaining 3.1 percent and ranking among the Dow's major advancers. Exxon Mobil Corp (XOM.N), 3M Co MMMM.N, Coca-Cola (KO.N) and Alcoa Inc (AA.N) also bolstered the blue-chip average.
"Some news is starting to come out that says things are stabilizing and slowly starting to look better," said Dan Faretta, senior market strategist at Lind-Waldock, a retail brokerage firm, in Chicago. "We've still got companies going under, filing for bankruptcy, and unemployment is continuing to rise ... but we are starting to finally hit the bottom."
The Dow Jones industrial average .DJI added 19.43 points, or 0.22 percent, to 8,740.87. The Standard & Poor's 500 Index .SPX gained 1.87 points, or 0.20 percent, to 944.74. The Nasdaq Composite Index .IXIC rose 8.12 points, or 0.44 percent, to 1,836.80.
For the S&P 500, the four-day advance represents the index's longest winning streak since early April. more...
But a sell-off in financials on worries about the dilutive impact of recent stock offerings limited a broad advance.
An index of pending sales of previously owned U.S. homes shot up 6.7 percent in April, the biggest monthly gain in 7-1/2 years, according to the National Association of Realtors.
The data suggested that the recession is easing, and investors snapped up shares of home builders, with Toll Brothers (TOL.N) rising nearly 4 percent to $19.53, while DR Horton (DHI.N) shot up 4.1 percent to $9.63.
The Dow Jones home construction index .DJUSHB was up 3.2 percent.
Shares of big manufacturers also rose, with plane maker Boeing Co (BA.N) gaining 3.1 percent and ranking among the Dow's major advancers. Exxon Mobil Corp (XOM.N), 3M Co MMMM.N, Coca-Cola (KO.N) and Alcoa Inc (AA.N) also bolstered the blue-chip average.
"Some news is starting to come out that says things are stabilizing and slowly starting to look better," said Dan Faretta, senior market strategist at Lind-Waldock, a retail brokerage firm, in Chicago. "We've still got companies going under, filing for bankruptcy, and unemployment is continuing to rise ... but we are starting to finally hit the bottom."
The Dow Jones industrial average .DJI added 19.43 points, or 0.22 percent, to 8,740.87. The Standard & Poor's 500 Index .SPX gained 1.87 points, or 0.20 percent, to 944.74. The Nasdaq Composite Index .IXIC rose 8.12 points, or 0.44 percent, to 1,836.80.
For the S&P 500, the four-day advance represents the index's longest winning streak since early April. more...
CNBC After Two-Year Slide, REITs Showing Signs of Recovering
After taking a beating for the past two years, real estate investment trusts are regaining popularity with investors looking for bargains and a way to capitalize on an industry rebound.
More commonly known by their acronym, REITs are funds that provide investors with a broad range of investment opportunities while delivering substantial tax breaks to the corporations that set up the vehicles.
Wildly popular in the earlier part of the decade during the real estate boom, REITs nosedived in 2006 and 2007 as the market fell correspondingly.
But recent developments over the past several weeks have sharp-eyed investors again examining REITs as a way to profit from a looming rebound in the industry.
And contrary to the growing trend of investors to eschew the traditional buy-and-hold stocks strategy, REITs are being looked at as long-term plays that will stand up against expected economic trends. more...
More commonly known by their acronym, REITs are funds that provide investors with a broad range of investment opportunities while delivering substantial tax breaks to the corporations that set up the vehicles.
Wildly popular in the earlier part of the decade during the real estate boom, REITs nosedived in 2006 and 2007 as the market fell correspondingly.
But recent developments over the past several weeks have sharp-eyed investors again examining REITs as a way to profit from a looming rebound in the industry.
And contrary to the growing trend of investors to eschew the traditional buy-and-hold stocks strategy, REITs are being looked at as long-term plays that will stand up against expected economic trends. more...
Bloomberg Grain and Soft Commodity (Update1)
June 2 (Bloomberg)
Soybean
Soybeans declined on speculation that the highest prices in eight months will curb demand for supplies from the U.S., the world’s top grower and exporter.
The price jumped 28 percent in the two months before today on increased imports by China, which may slow purchases once the government makes good on its plan to stockpile the equivalent of half its domestic output. U.S. demand for feed made from the oilseed may drop because hog, cattle and milk producers may be forced to cull herds after months of losses, said Greg Grow at Archer Financial Services in Chicago.
Corn
Corn prices rose on speculation that farmers in the U.S. Midwest will swap the crop for soybeans because rainfall has delayed planting beyond optimal dates for reaching full yield potential with the grain.
About 93 percent of the U.S. corn crop was planted as of May 31, the Department of Agriculture said yesterday in a report. That compares with 94 percent a year earlier and a five- year average of 97 percent. U.S. farmers will plant 1.2 percent fewer acres with corn, the agency said in March, after surveying growers. The USDA will revise its acreage estimate on June 30.
Cocoa
Cocoa prices rose to an eight-week high in New York on speculation that merchants and chocolate makers are boosting purchases in anticipation of a rebound in demand.
Cocoa jumped 9 percent in May. Last month, hedge funds and other large speculators decreased their net-long positions, or bets price will rise, by 47 percent in New York futures, U.S. Commodity Futures Trading Commission data show. Growers, processors and other commercial users cut their net-short positions by 43 percent in the same period.
This “leads us to believe that commercials have been strong buyers, and that demand is probably considerably more bullish than indicated,” Friedberg Mercantile Group Ltd. said yesterday in a report.
Coffee
Coffee futures fell for the first time in four sessions on speculation that supplies of arabica beans from Brazil may be enough to offset a drop in output from Colombia. Orange-juice futures also declined.
Brazil’s coffee crop, the world’s largest, is entering the slow stage of its two-year production cycle, and the harvest may be 18 percent smaller than a year earlier, according to a report yesterday from a U.S. agricultural attache in Sao Paulo. Output will fall less than the 23 percent decline two years ago, when trees rested from a large crop in 2006, the attache said.
Soybean
Soybeans declined on speculation that the highest prices in eight months will curb demand for supplies from the U.S., the world’s top grower and exporter.
The price jumped 28 percent in the two months before today on increased imports by China, which may slow purchases once the government makes good on its plan to stockpile the equivalent of half its domestic output. U.S. demand for feed made from the oilseed may drop because hog, cattle and milk producers may be forced to cull herds after months of losses, said Greg Grow at Archer Financial Services in Chicago.
Corn
Corn prices rose on speculation that farmers in the U.S. Midwest will swap the crop for soybeans because rainfall has delayed planting beyond optimal dates for reaching full yield potential with the grain.
About 93 percent of the U.S. corn crop was planted as of May 31, the Department of Agriculture said yesterday in a report. That compares with 94 percent a year earlier and a five- year average of 97 percent. U.S. farmers will plant 1.2 percent fewer acres with corn, the agency said in March, after surveying growers. The USDA will revise its acreage estimate on June 30.
Cocoa
Cocoa prices rose to an eight-week high in New York on speculation that merchants and chocolate makers are boosting purchases in anticipation of a rebound in demand.
Cocoa jumped 9 percent in May. Last month, hedge funds and other large speculators decreased their net-long positions, or bets price will rise, by 47 percent in New York futures, U.S. Commodity Futures Trading Commission data show. Growers, processors and other commercial users cut their net-short positions by 43 percent in the same period.
This “leads us to believe that commercials have been strong buyers, and that demand is probably considerably more bullish than indicated,” Friedberg Mercantile Group Ltd. said yesterday in a report.
Coffee
Coffee futures fell for the first time in four sessions on speculation that supplies of arabica beans from Brazil may be enough to offset a drop in output from Colombia. Orange-juice futures also declined.
Brazil’s coffee crop, the world’s largest, is entering the slow stage of its two-year production cycle, and the harvest may be 18 percent smaller than a year earlier, according to a report yesterday from a U.S. agricultural attache in Sao Paulo. Output will fall less than the 23 percent decline two years ago, when trees rested from a large crop in 2006, the attache said.
Bloomberg Copper Falls From Seven-Month High as Demand Eases After Rally
June 2 (Bloomberg) -- Copper fell from the highest in seven months on speculation that the price increased too fast, outpacing demand.
Copper has surged 63 percent this year, partly because China, the world’s biggest user of the metal, bought supplies for its national reserves. European and U.S. demand remains slack, analysts said.
“The upward move in prices during the last few days has been phenomenal,” said Alex Heath, the head of industrial metals trading at RBC Capital Markets in London. “People question the speed of the recovery.”
LME Inventories
Stockpiles of copper in warehouses monitored by the London Metal Exchange slid for an 18th straight session to 309,225 metric tons, the lowest since Dec. 12. Inventories have declined 44 percent from a high this year on Feb. 25.
“The price hike has predominantly been driven by China’s reserve purchases and hopes of an imminent economic turnaround,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said in a report.
The rally may stall, “given that demand remains weak,” Weinberg said. There may be “a massive correction of copper prices soon,” he said.
Copper for delivery in three months fell $25, or 0.5 percent, to $5,050 a ton ($2.29 a pound) on the LME.
In London, aluminum was little changed at $1,472 a ton. Nickel dropped 0.2 percent to $14,620, and tin eased 1 percent to $14,500. Lead was steady at $1,659, and zinc declined 1.9 percent to $1,580. more...
Copper has surged 63 percent this year, partly because China, the world’s biggest user of the metal, bought supplies for its national reserves. European and U.S. demand remains slack, analysts said.
“The upward move in prices during the last few days has been phenomenal,” said Alex Heath, the head of industrial metals trading at RBC Capital Markets in London. “People question the speed of the recovery.”
LME Inventories
Stockpiles of copper in warehouses monitored by the London Metal Exchange slid for an 18th straight session to 309,225 metric tons, the lowest since Dec. 12. Inventories have declined 44 percent from a high this year on Feb. 25.
“The price hike has predominantly been driven by China’s reserve purchases and hopes of an imminent economic turnaround,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said in a report.
The rally may stall, “given that demand remains weak,” Weinberg said. There may be “a massive correction of copper prices soon,” he said.
Copper for delivery in three months fell $25, or 0.5 percent, to $5,050 a ton ($2.29 a pound) on the LME.
In London, aluminum was little changed at $1,472 a ton. Nickel dropped 0.2 percent to $14,620, and tin eased 1 percent to $14,500. Lead was steady at $1,659, and zinc declined 1.9 percent to $1,580. more...
Bloomberg Gold Gains on Weaker Dollar; Silver Touches Nine-Month High
June 2 (Bloomberg) -- Gold rose in New York and London as the declining dollar increased the metal’s appeal as an alternative investment. Silver climbed to a nine-month high.
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 1 percent today, heading for a fourth straight drop, on speculation that record U.S. borrowing will further weaken the dollar. Gold, which typically gains when the dollar falls, touched the highest in almost 14 weeks yesterday. Silver reached a nine-month high today.
Investors continue “to track moves in the dollar, the key factor driving gold,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a note. “As optimism grows that the worst of the economic downturn is over,” gold and the dollar have resumed moving in opposite directions, Unni said.
Gold futures for August delivery rose $4.40, or 0.4 percent, to $984.40 an ounce on the New York Mercantile Exchange’s Comex division. Yesterday, the metal reached $990.20, the highest for a most-active contract since Feb. 24.
Bullion for immediate delivery in London jumped $5.97, or 0.6 percent, to $981.24 at 7:12 p.m. local time.
“Precious-metals markets are expected to continue their upward trends this week, with gold approaching $1,000 and silver $16,” Tom Pawlicki, an analyst at MF Global in Chicago, said today in a report. “Support will come from continued investment interest, the possibility of improving physical demand, and from growing tensions with North Korea.” more...
The U.S. Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 1 percent today, heading for a fourth straight drop, on speculation that record U.S. borrowing will further weaken the dollar. Gold, which typically gains when the dollar falls, touched the highest in almost 14 weeks yesterday. Silver reached a nine-month high today.
Investors continue “to track moves in the dollar, the key factor driving gold,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a note. “As optimism grows that the worst of the economic downturn is over,” gold and the dollar have resumed moving in opposite directions, Unni said.
Gold futures for August delivery rose $4.40, or 0.4 percent, to $984.40 an ounce on the New York Mercantile Exchange’s Comex division. Yesterday, the metal reached $990.20, the highest for a most-active contract since Feb. 24.
Bullion for immediate delivery in London jumped $5.97, or 0.6 percent, to $981.24 at 7:12 p.m. local time.
“Precious-metals markets are expected to continue their upward trends this week, with gold approaching $1,000 and silver $16,” Tom Pawlicki, an analyst at MF Global in Chicago, said today in a report. “Support will come from continued investment interest, the possibility of improving physical demand, and from growing tensions with North Korea.” more...
Bloomberg Crude Oil Is Little Changed as Dollar Weakens Against Euro
June 2 (Bloomberg) -- Crude oil rebounded from the day’s lows, finishing little changed, as the dollar weakened against the euro, bolstering the appeal of commodities as an alternative investment.
Prices dropped earlier on reports that the Organization of Petroleum Exporting Countries and Russia raised output in May. A government report tomorrow is forecast to show that crude oil supplies fell last week. Oil gained in the afternoon as the dollar declined on speculation record U.S. borrowing will undermine the currency.
“Investors are scared of inflation and that the Obama administration doesn’t care about the weakening dollar,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “We’re moving on fundamentals, just not the fundamentals of the oil market. OPEC output is up and stockpiles are abnormally high, but it doesn’t matter.”
Crude oil for July delivery fell 3 cents to settle at $68.55 a barrel at 2:57 p.m. on the New York Mercantile Exchange. Futures touched $69.05, the highest intraday price since Nov. 5. Oil is up 54 percent this year. Prices increased the previous six days, the longest stretch since May 2008. more...
Prices dropped earlier on reports that the Organization of Petroleum Exporting Countries and Russia raised output in May. A government report tomorrow is forecast to show that crude oil supplies fell last week. Oil gained in the afternoon as the dollar declined on speculation record U.S. borrowing will undermine the currency.
“Investors are scared of inflation and that the Obama administration doesn’t care about the weakening dollar,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “We’re moving on fundamentals, just not the fundamentals of the oil market. OPEC output is up and stockpiles are abnormally high, but it doesn’t matter.”
Crude oil for July delivery fell 3 cents to settle at $68.55 a barrel at 2:57 p.m. on the New York Mercantile Exchange. Futures touched $69.05, the highest intraday price since Nov. 5. Oil is up 54 percent this year. Prices increased the previous six days, the longest stretch since May 2008. more...
Selasa, 02 Juni 2009
GlobalCoal Thai Banpu Indonesian unit seeks coal mining acquisition
NUSA DUA, Indonesia, June 2 (Reuters) - The Indonesian unit of Thai Banpu (BANP.BK) wants to acquire a coal mine in Indonesia to boost production, a company official said on Tuesday.
Apimuk Taifayongvichit, chief marketing and logistics planner of the unit, PT Indo Tambangraya Megah (ITMG.JK), said it is looking for a mine in Indonesia's Kalimantan region.
Banpu has the capacity on its balance sheet to fund an acquistion, Apimuk told Reuters on the sidelines of Coaltrans conference.
source: Reuters 02 June 2009
Apimuk Taifayongvichit, chief marketing and logistics planner of the unit, PT Indo Tambangraya Megah (ITMG.JK), said it is looking for a mine in Indonesia's Kalimantan region.
Banpu has the capacity on its balance sheet to fund an acquistion, Apimuk told Reuters on the sidelines of Coaltrans conference.
source: Reuters 02 June 2009
GlobalCoal Adaro says expects China coal demand to stay strong
NUSA DUA, Indonesia, June 2 (Reuters) - Indonesia's PT Adaro (ADRO.JK), the country's second-largest coal producer, expects China's demand for overseas coal to stay strong in the second half of this year, a company official said on Tuesday.
"From the signs we've seen, going forward, we can only say it is still looking strong in the second half," Alastair Grant, Adaro Marketing Director, told the Coaltrans conference in Bali.
"Strong domestic pricing in China means overseas coal should stay still competitive."
source: Reuters 02 June 2009
"From the signs we've seen, going forward, we can only say it is still looking strong in the second half," Alastair Grant, Adaro Marketing Director, told the Coaltrans conference in Bali.
"Strong domestic pricing in China means overseas coal should stay still competitive."
source: Reuters 02 June 2009
Associated Press Pending home sales rise 6.7 percent in April
WASHINGTON (AP) -- The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
Economists were encouraged by the report, and stock indexes advanced modestly.
"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales. more...
The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
Economists were encouraged by the report, and stock indexes advanced modestly.
"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales. more...
Mandiri Sekuritas FOCUS (02-Jun-2009) LTLS: Whiplash recovery
Whiplash recovery
LTLS quickly recovered from its 4Q08 trough with 1Q09 operating profit growing by 79.9% qoq. The company’s chemical products are widely used in daily necessity products and are the key reason behind this quick recovery. Management also effectively reduced inventory level, leading to lower working capital financing needs. Despite the stock having risen by 34.4% since we made our Buy call, w! e deem at the current level the stock is still cheap with PER09F is 4.8x, PBV of 0.7x and superior dividend yield of 6.8%. We reiterate a Buy on the stock with TP of Rp1,100/share (31.0% upside potential).
Saved by well diversified products. LTLS is a well diversified 1001 chemical product company with strong market share of around 40%-75% in its products range. Therefore, the company has strong resilience in downturn cycle. Note that 69.0% of products distributed by LTLS are daily necessities-related chemical products such as water treatment, consumer, packaging, food, and agric! ulture pr oducts so that they provide stable demand that supports the company’s quick recovery in 1Q09. We see that the company has bounced from its trough with 1Q09 operating profit growing by 79.9%qoq, compared with 4Q08 operating profit which declined by 66.8%qoq (most of the sales were supported by domestic demand).
Prudent tactical response. Facing tougher economic outlook, the company did portfolio rationalization this year by selling one of its newly established subsidiaries which have not generated revenues. The company chose focus strategy to strengthen its existing operating subsidiaries. In the operational level, the company was able to reduce its inventory by 38.4% (equivalent to Rp402bn), therefore, reducing interest expense due to lower working capital financing ne! eds. Part s of the saving from inventory reduction was used to finance receivables increased to support higher sales level.
Attractive valuation. Our DCF valuation with WACC of 12.1% (10.2% risk- free rate, 5.0% risk premium, and 3.0% TG rate) results in a TP of Rp1,100/share. Besides that, relative valuation methods with PER09F of 4.8x, PBV of 0.7x, and dividend yield of 6.8%, support our belief that the stock is cheap compared with the JCI with PER09F of 1! 3.0x, PBV of 2.4x, and dividend yield of 2.8%.
LTLS quickly recovered from its 4Q08 trough with 1Q09 operating profit growing by 79.9% qoq. The company’s chemical products are widely used in daily necessity products and are the key reason behind this quick recovery. Management also effectively reduced inventory level, leading to lower working capital financing needs. Despite the stock having risen by 34.4% since we made our Buy call, w! e deem at the current level the stock is still cheap with PER09F is 4.8x, PBV of 0.7x and superior dividend yield of 6.8%. We reiterate a Buy on the stock with TP of Rp1,100/share (31.0% upside potential).
Saved by well diversified products. LTLS is a well diversified 1001 chemical product company with strong market share of around 40%-75% in its products range. Therefore, the company has strong resilience in downturn cycle. Note that 69.0% of products distributed by LTLS are daily necessities-related chemical products such as water treatment, consumer, packaging, food, and agric! ulture pr oducts so that they provide stable demand that supports the company’s quick recovery in 1Q09. We see that the company has bounced from its trough with 1Q09 operating profit growing by 79.9%qoq, compared with 4Q08 operating profit which declined by 66.8%qoq (most of the sales were supported by domestic demand).
Prudent tactical response. Facing tougher economic outlook, the company did portfolio rationalization this year by selling one of its newly established subsidiaries which have not generated revenues. The company chose focus strategy to strengthen its existing operating subsidiaries. In the operational level, the company was able to reduce its inventory by 38.4% (equivalent to Rp402bn), therefore, reducing interest expense due to lower working capital financing ne! eds. Part s of the saving from inventory reduction was used to finance receivables increased to support higher sales level.
Attractive valuation. Our DCF valuation with WACC of 12.1% (10.2% risk- free rate, 5.0% risk premium, and 3.0% TG rate) results in a TP of Rp1,100/share. Besides that, relative valuation methods with PER09F of 4.8x, PBV of 0.7x, and dividend yield of 6.8%, support our belief that the stock is cheap compared with the JCI with PER09F of 1! 3.0x, PBV of 2.4x, and dividend yield of 2.8%.
Credit Suisse - Asian Equity Strategy: Net Foreign Buying
Reached US$9.8 bn in May; biggest month ever for net foreign buying
Net foreign buying in Emerging Asia was US$9.77 bn in May. This was the single biggest month ever for net foreign buying since our data started in 1996.
As a result of the strong net foreign buying in April (US$8.2 bn) and May, YTD net foreign buying has reached US$14 bn. This compares with net foreign selling of US$70 bn in 2008.
The biggest market for net foreign buying in May was India, which attracted US$4.15 bn or 42% of all net foreign buying in emerging Asia. After India was Korea, which attracted US$3.2 bn of net foreign buying in May.
While we are surprised at the huge degree of net foreign buying in May, Figure 2 highlights that on a rolling 12-month basis, foreigners are still net sellers to the tune of 1.4% of emerging Asia’s market capitalisation.
On a rolling 12-month basis, the two most under-owned markets in emerging Asia are Thailand (net foreign selling 3.3% of market cap), followed by Korea (at 2.3% of market cap).
Year-to-date net foreign buying reaches US$14 bn versus US$70 bn of selling last year Figure 1 highlights that net foreign buying in emerging Asia was US$9.77 bn in May. This is the single biggest month ever for net foreign buying since our data started in 1996.
As a result of the strong net foreign buying in April (US$8.2 bn) and May, YTD net foreign buying has reached US$14 bn. This compares with net foreign selling of US$70 bn in 2008. While we are surprised at the huge degree of net foreign buying in
May, foreigners are still net sellers to the tune of 1.4% of emerging Asia’s market
capitalisation.
Net foreign buying in Emerging Asia was US$9.77 bn in May. This was the single biggest month ever for net foreign buying since our data started in 1996.
As a result of the strong net foreign buying in April (US$8.2 bn) and May, YTD net foreign buying has reached US$14 bn. This compares with net foreign selling of US$70 bn in 2008.
The biggest market for net foreign buying in May was India, which attracted US$4.15 bn or 42% of all net foreign buying in emerging Asia. After India was Korea, which attracted US$3.2 bn of net foreign buying in May.
While we are surprised at the huge degree of net foreign buying in May, Figure 2 highlights that on a rolling 12-month basis, foreigners are still net sellers to the tune of 1.4% of emerging Asia’s market capitalisation.
On a rolling 12-month basis, the two most under-owned markets in emerging Asia are Thailand (net foreign selling 3.3% of market cap), followed by Korea (at 2.3% of market cap).
Year-to-date net foreign buying reaches US$14 bn versus US$70 bn of selling last year Figure 1 highlights that net foreign buying in emerging Asia was US$9.77 bn in May. This is the single biggest month ever for net foreign buying since our data started in 1996.
As a result of the strong net foreign buying in April (US$8.2 bn) and May, YTD net foreign buying has reached US$14 bn. This compares with net foreign selling of US$70 bn in 2008. While we are surprised at the huge degree of net foreign buying in
May, foreigners are still net sellers to the tune of 1.4% of emerging Asia’s market
capitalisation.
UBS Investment Research - Asian Coal
Supply concerns re-emerges
Domestic priority remains strong
We are attending Asia's leading coal conference, CoalTrans, where Day 1 revealed a recurring theme of last year. That is, supply constraints. It is clear that coal and
power producers are once again feeling the pressure from infrastructure bottlenecks, while regulators reiterate their domestic priority commitments
Supply and demand is tightening
Asian thermal coal prices are once again strengthening on account of distribution bottlenecks. More specifically, the Newcastle vessel queue is once again increasing, while several infrastructure projects are delayed due to lack of financing. Meanwhile, China has returned to net importer status, while India's coal import growth is now the highest in the world. Consequently, coal prices are once again finding momentum.
Indo off take is a priority
Further to the government's intention to allocate more coal to the domestic market (DMO), the Ministry of Mining intend to quantify individual miners’ domestic sales requirements in June. We believe producers will be required to allocate 25-30 pct of volumes domestically at a 10-20 pct discount to the international price.
Another Crash Program is imminent
In order to improve upon Indonesia's 65 pct electricification ratio, the government is implementing another 10,000MW power program to be completed by 2014-15.
State electricity producer, PLN, estimates a 66mt coal off-take by 2012 from c32mt currently (not including other industries)
Domestic priority remains strong
We are attending Asia's leading coal conference, CoalTrans, where Day 1 revealed a recurring theme of last year. That is, supply constraints. It is clear that coal and
power producers are once again feeling the pressure from infrastructure bottlenecks, while regulators reiterate their domestic priority commitments
Supply and demand is tightening
Asian thermal coal prices are once again strengthening on account of distribution bottlenecks. More specifically, the Newcastle vessel queue is once again increasing, while several infrastructure projects are delayed due to lack of financing. Meanwhile, China has returned to net importer status, while India's coal import growth is now the highest in the world. Consequently, coal prices are once again finding momentum.
Indo off take is a priority
Further to the government's intention to allocate more coal to the domestic market (DMO), the Ministry of Mining intend to quantify individual miners’ domestic sales requirements in June. We believe producers will be required to allocate 25-30 pct of volumes domestically at a 10-20 pct discount to the international price.
Another Crash Program is imminent
In order to improve upon Indonesia's 65 pct electricification ratio, the government is implementing another 10,000MW power program to be completed by 2014-15.
State electricity producer, PLN, estimates a 66mt coal off-take by 2012 from c32mt currently (not including other industries)
Mandiri Sekuritas Macroscope (02-Jun-2009) - Economy: Low inflation opens door for futher rate cuts
Low inflation of 0.04% mom was recorded in May09, lower than ours and consensus estimates of 0.2% and 0.24%. Annually, inflation continued to ease to 6.04% yoy from 7.31% yoy in Apr09.
The relatively stable monthly inflation in May09 was mainly triggered by deflation in food (-0.06ppt) and clothing (-0.03ppt) groups. Adequate supply of food, despite the end of harvesting season, and the rupiah’s strengthening, we believe, have helped bring the food prices down.
We still think inflation would continue to ebb, particularly in the next two months as the high-base effect of last-year’s fuel price increase to continue to occur. Thus, we maintain our inflation forecast at 5.0% at year-end, which would provide more room for BI to lower the rate to 6.5%, with 25-bp cut likely to be done in the next governor board’s meeting on Wednesday (6/3) to 7.0%.
Trade balance held up relatively well, recording a surplus of US$2.07bn in Apr09 vs US$2.06bn in the previous month. Exports declined at slower pace of 22.6% yoy in Apr09 amid recovery in global demand and improvement in commodity prices. Whereas imports continued to deteriorate, declining 45.2% yoy in Apr09.
The relatively stable monthly inflation in May09 was mainly triggered by deflation in food (-0.06ppt) and clothing (-0.03ppt) groups. Adequate supply of food, despite the end of harvesting season, and the rupiah’s strengthening, we believe, have helped bring the food prices down.
We still think inflation would continue to ebb, particularly in the next two months as the high-base effect of last-year’s fuel price increase to continue to occur. Thus, we maintain our inflation forecast at 5.0% at year-end, which would provide more room for BI to lower the rate to 6.5%, with 25-bp cut likely to be done in the next governor board’s meeting on Wednesday (6/3) to 7.0%.
Trade balance held up relatively well, recording a surplus of US$2.07bn in Apr09 vs US$2.06bn in the previous month. Exports declined at slower pace of 22.6% yoy in Apr09 amid recovery in global demand and improvement in commodity prices. Whereas imports continued to deteriorate, declining 45.2% yoy in Apr09.
CIMB Sampoerna Agro Company update - Catalysts remain to be seen
(SGRO IJ / SGRO.JK, UNDERPERFORM - Maintained, Rp1,750 - Tgt. Rp1,540, Plantations)
SGRO's April-May 09 FFB production appeared to have exceeded its weak 1Q09 production. Despite a more positive outlook, we remain cautious, awaiting more signs of an improvement. We maintain our UNDERPERFORM rating and would turn more positive if we can see a stronger recovery in production and/or value-enhancement from its proposed acquisition of a sago plantation. Our target price is unchanged at Rp1,540, based on 9x CY10 earnings.
SGRO's April-May 09 FFB production appeared to have exceeded its weak 1Q09 production. Despite a more positive outlook, we remain cautious, awaiting more signs of an improvement. We maintain our UNDERPERFORM rating and would turn more positive if we can see a stronger recovery in production and/or value-enhancement from its proposed acquisition of a sago plantation. Our target price is unchanged at Rp1,540, based on 9x CY10 earnings.
CLSA INDF, re-initiating coverage, conviction BUY, TP Rp2,550
Our consumer analyst Swati has just written a very interesting (non consensus) report on Indofood (INDF IJ) . This is a re-initiation report. Swati has Rp2,550 TP and a conviction BUY call. She arrives at this target price by applying a multiple of 13x 2010 CL PE, which is also the 10 year average P/B of 2.2x. Regional consumer peers trade at 13.5x 2010 PE.
Consumer or plantation play?
Contrary to the popular perception, INDF is not really a plantation play (anymore). Consumer-related operations will contribute 70% to net income this year. While agribusiness will contribute 30% to net profits AFTER eliminating inter-segment sales, interest expense related to acquisition and amortization of goodwill and minority interests. See the charts below:
Noodle recovery and potential, the key driver to group earnings in the years ahead
For the first time in 5 years, INDF’s noodle operations are showing signs of recovery. EBIT margins have recovered from all time lows, no doubt helped by lower CPO and wheat prices.
Despite being the largest market in the world, Indo’s noodle market still has great potential. Euromonitor predicts Indo’s noodle market will grow by 11.2% pa for the next 5 years, second only to Vietnam.
Key points from the report:
· We reinitiate coverage on INDF with a conviction Buy call.
· INDF is one of the world’s largest producers of instant noodles and is a proxy to Indonesia’s growing domestic consumption with a market share of about 72% in instant noodles.
· We see a turnaround in noodle margins this year as market share stabilize, price war subsides and input costs fall.
· We argue that INDF is a consumer related company as consumer related operations will contribute 70% to net income this year.
· INDF’s margins on flour segment will suffer this year as competition increases. Indofood emphasize market share and therefore we conservatively forecast 5% ebit margins this year vs 8-11% historically.
· Indolakto we believe will be earnings accretive from 2013 onwards.
· We derive fair value of Rp2550/sh. A blue sky multiple would lift this higher.
Consumer or plantation play?
Contrary to the popular perception, INDF is not really a plantation play (anymore). Consumer-related operations will contribute 70% to net income this year. While agribusiness will contribute 30% to net profits AFTER eliminating inter-segment sales, interest expense related to acquisition and amortization of goodwill and minority interests. See the charts below:
Noodle recovery and potential, the key driver to group earnings in the years ahead
For the first time in 5 years, INDF’s noodle operations are showing signs of recovery. EBIT margins have recovered from all time lows, no doubt helped by lower CPO and wheat prices.
Despite being the largest market in the world, Indo’s noodle market still has great potential. Euromonitor predicts Indo’s noodle market will grow by 11.2% pa for the next 5 years, second only to Vietnam.
Key points from the report:
· We reinitiate coverage on INDF with a conviction Buy call.
· INDF is one of the world’s largest producers of instant noodles and is a proxy to Indonesia’s growing domestic consumption with a market share of about 72% in instant noodles.
· We see a turnaround in noodle margins this year as market share stabilize, price war subsides and input costs fall.
· We argue that INDF is a consumer related company as consumer related operations will contribute 70% to net income this year.
· INDF’s margins on flour segment will suffer this year as competition increases. Indofood emphasize market share and therefore we conservatively forecast 5% ebit margins this year vs 8-11% historically.
· Indolakto we believe will be earnings accretive from 2013 onwards.
· We derive fair value of Rp2550/sh. A blue sky multiple would lift this higher.
Danareksa Bakrie Telecom (BTEL IJ, Rp139 BUY) Well positioned to grow further
New target price of Rp175
We maintain our BUY recommendation with a new target price of Rp175. The company is doing well in attracting new subscribers and is benefiting from increasing economies of scale. As such, we have greater confidence that BTEL’s business model is the right one. Its pricing policy has also been consistent. The company is now expanding to areas outside Jakarta-Banten-West Java (JBJB). This should provide further growth going forward.
Tariffs are competitive and easy to understand
The three main criteria in selecting a particular telecommunications service are coverage, quality and price. As a budget operator, BTEL’s focus is on price. In this regard, BTEL has devised an easy to understand tariff structure which only differentiates between “on-net” and “off-net” calls - with no time band differentiation as adopted by the larger operators. Having a competitive single tariff coupled with sufficient coverage and quality are the key elements in BTEL’s business model.
Positioning itself well
BTEL has positioned itself as a “complementary” operator rather than as a “substitute” operator to the leading GSM operators. This means that the company can avoid head-to-head competition with the market leaders. Its customer composition of 30% GSM dual users, 30% first time users and 30% switchers tells the story. With such positioning, it is vital that BTEL’s service offers “value for money” and that it adopts an asset light strategy to keep investment costs low.
Positive net additions in 1Q09
BTEL is among the few operators that booked positive net additions in 1Q09. Its net additions reached 725,000 in this period, increasing its total number of subscribers to slightly above 8.0mn. By the end of FY09 we are confident that BTEL will have as many as 10.2mn subscribers. Another positive is that BTEL’s revenues per minute (RPM) has reached Rp175 per minute. Note that this is close to Telkomsel’s Rp200 RPM, and higher than the other GSM operators.
EBITDA revised upward
We have revised our earnings estimates on the back of the 1Q09 results. We have greater confidence in the long term success of the company’s business model. Moreover, BTEL should gain from higher economies of scale arising from strong subscriber growth despite lower ARPU. These items lead to upgrades in our EBITDA estimates of 3.2% for FY09 and 8.4% for FY10. Higher depreciation expenses, however, lead to declines in our net income estimates.
We maintain our BUY recommendation with a new target price of Rp175. The company is doing well in attracting new subscribers and is benefiting from increasing economies of scale. As such, we have greater confidence that BTEL’s business model is the right one. Its pricing policy has also been consistent. The company is now expanding to areas outside Jakarta-Banten-West Java (JBJB). This should provide further growth going forward.
Tariffs are competitive and easy to understand
The three main criteria in selecting a particular telecommunications service are coverage, quality and price. As a budget operator, BTEL’s focus is on price. In this regard, BTEL has devised an easy to understand tariff structure which only differentiates between “on-net” and “off-net” calls - with no time band differentiation as adopted by the larger operators. Having a competitive single tariff coupled with sufficient coverage and quality are the key elements in BTEL’s business model.
Positioning itself well
BTEL has positioned itself as a “complementary” operator rather than as a “substitute” operator to the leading GSM operators. This means that the company can avoid head-to-head competition with the market leaders. Its customer composition of 30% GSM dual users, 30% first time users and 30% switchers tells the story. With such positioning, it is vital that BTEL’s service offers “value for money” and that it adopts an asset light strategy to keep investment costs low.
Positive net additions in 1Q09
BTEL is among the few operators that booked positive net additions in 1Q09. Its net additions reached 725,000 in this period, increasing its total number of subscribers to slightly above 8.0mn. By the end of FY09 we are confident that BTEL will have as many as 10.2mn subscribers. Another positive is that BTEL’s revenues per minute (RPM) has reached Rp175 per minute. Note that this is close to Telkomsel’s Rp200 RPM, and higher than the other GSM operators.
EBITDA revised upward
We have revised our earnings estimates on the back of the 1Q09 results. We have greater confidence in the long term success of the company’s business model. Moreover, BTEL should gain from higher economies of scale arising from strong subscriber growth despite lower ARPU. These items lead to upgrades in our EBITDA estimates of 3.2% for FY09 and 8.4% for FY10. Higher depreciation expenses, however, lead to declines in our net income estimates.
UBS Investment Research - Bumi Resources; The dilemmas; raise PE-derived price target to Rp 2,100
The dilemmas
Owners’ dilemma
Our industry channel check reaffirms our belief that Bumi’s coal assets are among the best in the global coal industry in terms of volume potential and cost advantages. However, corporate governance issues have recently increased investor risk aversion for Bumi, which we believe will likely result in a 20-30% discount to peers.
Our dilemma
Although we, along with the Street, did not downgrade Bumi prior to the share price collapse in H208, we subsequently met with some criticism for maintaining our Buy rating. However, our view was that downgrading Bumi after it had lost 95% in value would be assuming bankruptcy, which we argued was an unlikely scenario given its high asset quality and strong operational outlook.
The Street’s dilemma
We reiterate our view that the Street applied what we believed were arbitrary corporate governance discounts to what we viewed as fundamentals that had once warranted a Buy rating. We believe the valuation should be based on conservative and critical assumptions about debt and overall profitability.
Valuation: downgrade to Neutral, raise PE-derived price target to Rp2,100
We downgrade our rating from Buy to Neutral following the 361% share price rally since 15 January 2009. We raise our 12-month PE target multiple 4% to 7.9x from 7.6x, which is 20% below the sector average, while we roll over our EPS estimate 25% to mid-2010 and raise it to Rp264. We raise our price target from Rp1,600 to Rp2,100.
Owners’ dilemma
Our industry channel check reaffirms our belief that Bumi’s coal assets are among the best in the global coal industry in terms of volume potential and cost advantages. However, corporate governance issues have recently increased investor risk aversion for Bumi, which we believe will likely result in a 20-30% discount to peers.
Our dilemma
Although we, along with the Street, did not downgrade Bumi prior to the share price collapse in H208, we subsequently met with some criticism for maintaining our Buy rating. However, our view was that downgrading Bumi after it had lost 95% in value would be assuming bankruptcy, which we argued was an unlikely scenario given its high asset quality and strong operational outlook.
The Street’s dilemma
We reiterate our view that the Street applied what we believed were arbitrary corporate governance discounts to what we viewed as fundamentals that had once warranted a Buy rating. We believe the valuation should be based on conservative and critical assumptions about debt and overall profitability.
Valuation: downgrade to Neutral, raise PE-derived price target to Rp2,100
We downgrade our rating from Buy to Neutral following the 361% share price rally since 15 January 2009. We raise our 12-month PE target multiple 4% to 7.9x from 7.6x, which is 20% below the sector average, while we roll over our EPS estimate 25% to mid-2010 and raise it to Rp264. We raise our price target from Rp1,600 to Rp2,100.
CLSA - 1st day the 15th Coaltrans Asia
What's going on the 1st day at the 15th Coaltrans Asia?
DMO and domestic coal price, as expected, were the hot topic again Frankly, it remains unclear as government officials have not properly addressed some of the questions. How DMO and domestic coal pricing would actually work remain confusing, not until the government issues implementing regulation and ministerial decree.
. Minister of Energy and Mineral Resources stated the plan to actually set up a government agency to handle domestically-dedicated outputs from producers to be then sold to domestic customers. Should the government decide to go ahead with this scheme, then this could lead potentially lead to higher price for domestic customers.
. As for domestic coal pricing, government officials have repeatedly stated that the government would release monthly price guidance based on various coal indices. However, confusion growing with talks circulating that PLN has asked the government for the domestically sold coal to PLN to be priced on cost plus margin basis. At this juncture, we continue to feel that the government wants to make sure enough incentives for coal mines to grow their outputs.
Thermal coal bulls
There were two thermal coal bull presenting, Rick Navarre of Peabody, the biggest coal producers in the US, and Lars Schernikau of HMS, Coal trader and investor from Germany.
. Mr. Navarre of Peabody believed that sharp contango, with future price currently at much higher level than spot price, and underinvestment in the coal sector, with various coal projects being postponed following the collapse in the commodity price, would lead to a sharp recovery in spot thermal coal price. He believes that over the longer-term, growing urbanization, increasing electrification, and rising energy security issues would lead to a long-term structural increase in thermal coal demand. He sees China (to be slight net importer in years to come), India (100m
tonnes of import demand by 2013), and Indonesia (tripling domestic coal demand
for power from 30m tonnes to 100m tonnes in 10 years) would grow their power generation rapidly hence strong domestic thermal coal demand. He believes that Australia, rather than Indonesia, as potential beneficiaries of the growing seaborne thermal coal demand, largely reflecting Indonesia's growing domestic power needs.
. Meanwhile, Mr. Schernikau views that the relative importance of thermal coal would continue to increase as thermal coal remains the cheapest source of energy even after taking into account carbon emission. He shares Peabody view on China and India as the main growth drivers. He pointed out that top two drivers for thermal coal price are 1) Asian market demand growth, and 2) crude oil price direction. He then pointed out that of the total potential cumulative investment over the next 30 years, coal investment would only reach US$300bn or mere 5% of total investment in
oil and gas sector, signalling a massive potential under investment in coal.
Customers changing?
. Chubu Electric Power (CEP) has recently set up an energy trading company, in a JV with EDF Trading from Europe, named Chubu Energy Trading (CET) to manage procurement and logistics for the entire coal portfolio. Basically, Chubu feels that contract price, set annually with suppliers, has not served the company well during volatile condition. Spot price fluctuates a lot before annual settlement is reached only for the price to collapse thereafter. And if spot price rising post settlement, Chubu is facing shipment delays as suppliers asking for upward price adjustment. There is
also a problem in take-or-pay agreement, especially when Chubu faces collapsing power demand, as it is currently experiencing.
. Chubu is therefore considering European-style procurement, relying on not just term contract, but also spot and futures. At this juncture, we are not sure whether this would lead to an end of Asian-Australian annual pricing negotiation.
DMO and domestic coal price, as expected, were the hot topic again Frankly, it remains unclear as government officials have not properly addressed some of the questions. How DMO and domestic coal pricing would actually work remain confusing, not until the government issues implementing regulation and ministerial decree.
. Minister of Energy and Mineral Resources stated the plan to actually set up a government agency to handle domestically-dedicated outputs from producers to be then sold to domestic customers. Should the government decide to go ahead with this scheme, then this could lead potentially lead to higher price for domestic customers.
. As for domestic coal pricing, government officials have repeatedly stated that the government would release monthly price guidance based on various coal indices. However, confusion growing with talks circulating that PLN has asked the government for the domestically sold coal to PLN to be priced on cost plus margin basis. At this juncture, we continue to feel that the government wants to make sure enough incentives for coal mines to grow their outputs.
Thermal coal bulls
There were two thermal coal bull presenting, Rick Navarre of Peabody, the biggest coal producers in the US, and Lars Schernikau of HMS, Coal trader and investor from Germany.
. Mr. Navarre of Peabody believed that sharp contango, with future price currently at much higher level than spot price, and underinvestment in the coal sector, with various coal projects being postponed following the collapse in the commodity price, would lead to a sharp recovery in spot thermal coal price. He believes that over the longer-term, growing urbanization, increasing electrification, and rising energy security issues would lead to a long-term structural increase in thermal coal demand. He sees China (to be slight net importer in years to come), India (100m
tonnes of import demand by 2013), and Indonesia (tripling domestic coal demand
for power from 30m tonnes to 100m tonnes in 10 years) would grow their power generation rapidly hence strong domestic thermal coal demand. He believes that Australia, rather than Indonesia, as potential beneficiaries of the growing seaborne thermal coal demand, largely reflecting Indonesia's growing domestic power needs.
. Meanwhile, Mr. Schernikau views that the relative importance of thermal coal would continue to increase as thermal coal remains the cheapest source of energy even after taking into account carbon emission. He shares Peabody view on China and India as the main growth drivers. He pointed out that top two drivers for thermal coal price are 1) Asian market demand growth, and 2) crude oil price direction. He then pointed out that of the total potential cumulative investment over the next 30 years, coal investment would only reach US$300bn or mere 5% of total investment in
oil and gas sector, signalling a massive potential under investment in coal.
Customers changing?
. Chubu Electric Power (CEP) has recently set up an energy trading company, in a JV with EDF Trading from Europe, named Chubu Energy Trading (CET) to manage procurement and logistics for the entire coal portfolio. Basically, Chubu feels that contract price, set annually with suppliers, has not served the company well during volatile condition. Spot price fluctuates a lot before annual settlement is reached only for the price to collapse thereafter. And if spot price rising post settlement, Chubu is facing shipment delays as suppliers asking for upward price adjustment. There is
also a problem in take-or-pay agreement, especially when Chubu faces collapsing power demand, as it is currently experiencing.
. Chubu is therefore considering European-style procurement, relying on not just term contract, but also spot and futures. At this juncture, we are not sure whether this would lead to an end of Asian-Australian annual pricing negotiation.
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