KimEng Asahimas Flat Glass (AMFG IJ): BUY - Lowering TP on higher energy costs

Management guided that a recovery in the property (70% of sales) and automotive sectors (20%) will support sales growth of 15% in FY10. Asahimas plans to increase selling price in anticipation of higher energy cost following Perusahaan Gas Negara’s plans to hike gas prices by 45% to US$8 per mmbtu (from US$5.5 per mmbtu) by June. We adjust our gross margin assumption to 27% from 29% and reduce our TP to Rp2,950 (from Rp3,050), which is DCF based (18% WACC and 0% terminal growth). The stock is trading at a low 4.8x 2010F PER; BUY maintained.