Indopremier SMGR (BUY TP Rp 10000)

Beating expectation
Similar to its FY09 competitors result, Semen Gresik also recorded remarkable financial performance, which were mostly boosted by higher blended ASP (+17.3% YoY) and better domestic demand in 2H09. All in all, the FY09 figures were above our estimate and Bloomberg consensus, and resulted in superior profitability.

Recorded QoQ higher profitability
On quarterly basis, Semen Gresik also registered superior performance thanks to the retail demand recovery which started in 2Q09 and its diversification sales area. The company’s domestic demand and ASP surged by 8.9% QoQ and 8.2% QoQ in 4Q09, respectively, has resulted a 9.6% QoQ revenue increase and booked higher profitability. The 4Q09 higher profitability were also backed by the success of the management’s effort in cost efficiency through reducing its high calorie-coal index utilization, coal price re-negotiated, as well as alternative fuel development.

4.8% FY09 dividend yield potential
We lowered FY09 dividend pay out ratio (DPR) compared to the previous year because the company will allocate funds from internal cash to funding the construction of 2 new cement plants and 1 power plant. By assuming a 45% DPR, the dividend will be paid to the investors is Rp 252 per share, including Rp 58 per share interim dividend which has been paid in December 2009. Based on FY09 Semen Gresik average closing price, the company’s dividend yield is lower than previous year and only registered at 4.8%.

Rp 3.5 trillion for funding its long term expansion
This year, Semen Gresik will allocate Rp 3.5 trillion which is mostly used to finance the construction of 2 new cement plants located in Java and Sulawesi with installed capacity of 2.5 million tones p.a. for each plant and 2x35 MW power plants in Sulawesi as well as additional capacity of 500k tones. Supported a healthy balance sheet, we believe that the company will not have difficulty on its expansion funding.

Maintain BUY with higher fair value at Rp 10,000
Our several financial assumption have resulted in a new fair value at Rp 10,000 per share from previous fair value at Rp 9,020 per share which is obtained from DCF calculation using 9.3% risk free rate and 4.84% market risk premium assumption. At yesterday closing price, Semen Gresik is traded at 12.64 times - 3.91 times PE-PBV FY10F valuation. Maintain BUY recommendation since our TP offers 23% upside potential.