A Cup of Tea 6 May'10

General
US Stocks sagged on Wednesday as more signs emerged that the fallout from the Greek debt crisis could spread to bigger European economies. The euro hit a 14-month low as investors shunned the debt of weaker euro zone countries and jumped into safe-havens. Treasury prices and the dollar surged on fears Greece's debt problems could hinder global growth. The DJIA dropped 58.65 points, or 0.54 %, to 10,868.12.

Jakarta led the losers among Southeast Asian stock markets, dropping 3.8 %, its biggest daily fall since December 2008, on news that its reformist finance minister is leaving her post to join the World Bank. Other Southeast Asian markets weakened, with Singapore falling 1.41 %, Malaysia lost just over half a %.

News of Sri Mulyani Indrawati's departure came on a day when heightened fears about Greece's debt woes spread to Asia. The market is down due to uncertainties about who will replace Sri Mulyani Indrawati. Among the biggest losers was Bank Mandiri, the country's top bank, whose Chief Executive Agus Martowardojo has been tipped as a candidate to replace Sri Mulyani.

Indonesian foreign exchange reserves ware increasing up to U.S. $ 78.6 billion until the end of April 2010. This amount increased to U.S. $ 1.6 billion when compared to the third week in April 2010 which amounted to U.S. $ 77 billion.

China’s sweeping changes in home loan rules and a ban on third house purchase have added to the woes of base metals market. Banks in the country raised the amount of money they hold in reserves for a third time this year in a new effort to dampen inflation pressures in the world’s third-largest economy. The measure comes as the government tries to cool a credit boom without raising interest rates, which might slow China’s economic rebound. Economic growth surged to 11.9% in the first quarter of the year and the government is trying to cool a surge in housing and other prices fueled by massive bank lending. Beijing might increase bank reserves as often as once a month for the rest of the year while avoiding interest rate hikes until it sees how well the measure is working. If the regulations hit the realty market, construction boom in China will come to a standstill and demand for steel will come down.

Copper fell to a 12-week low and nickel dropped as much as 16 percent, leading declines in industrial metals in London, on concern Greece’s debt crisis will spread and curb Europe’s economic recovery. There are growing expectations that Greece’s 110 billion- euro ($143 billion) rescue package will need to be repeated in Spain and Portugal. Europe consumes 20 percent of the world’s copper output, and 15 percent to 25 percent of aluminum, zinc, nickel and lead, according to Barclays Capital.

My Comment: The Greek debt crisis could spread to bigger European economies. If The China regulations hit the realty market, construction boom in China will come to a standstill and demand for steel will come down. Bigger picture, I think investors continue to be of the opinion that corrections are to be bought. Technical chart Support JSX at 2752 and 2650 but still put yearend target at 3000 level.

ASII (43450)
Astra’s 1Q10 results were simply robust +61% YoY in-line with market expectations, stronger than expected 1Q10 volume performance and better profitability due to stable pricing strategy. Astra’s main catalysts would continue to be the strong earnings momentum, but earnings upside risk is not going to be significant. The company’s margin decreased slightly during 1Q10 as stronger Rupiah affect several Astra’s subsidiaries. A possible new auto tax system is a negative catalyst but the timing and implementation is uncertain. Possible stumbling blocks; There are three tax issues to be settled by government namely (a) revised registration tax, (b) multi-ownership tax and (c) regional fuel tax, all of which have not been fully outlined and implemented.

My Comment: Earning upside risk was limited and valuation could be peaking, Hold.


JSMR (1970)
Jasa Marga (JSMR) has released its 1Q10 results with net profit jumping by 54.2% YoY. This strong bottom line was also fuelled by solid revenue growth of 21.6% YoY. The revenue growth is driven by traffic growth that was magnified by the toll tariff increase in 3Q09. We see Jasa Marga as an attractive defensive play with strong operational leverage, strong defensive qualities and relatively attractive valuations.

My Comment: Attractive valuations and maintain Buy.

BMRI (5300)
Given soft NPL level going forward, lower provisioning, well capitalized, strong momentum loan growth, we believe Bank Mandiri will continue to deliver improving ROE. Bank Mandiri first-quarter 2010 results was up 43% YoY to Rp2.0 trillion due to growth on operating income (+24% YoY) at Rp1.5 trillion and lower provisioning charge by 50%. Seasonally slow loan and deposit growth, but expected to pick up in coming quarters. Asset quality improved mainly due to a decline in corporate NPLs and upgrades to performing loans in all segments. BMRI’s transaction fee income continued to improve led by enhanced infrastructure and innovative payment solutions. BMRI’s robust fundamentals are well illustrated by its ability to deliver the second highest provision coverage, the second lowest NPL ratio and the third highest ROE of the six Indonesian banks.

My Comment: Fundamental was solid soft NPL level with improving on asset quality, maintain Buy

BBRI (8550)
1Q09 net profit of Rp2.2tr was in line. NIM remained exceptionally strong at 9.4% due to significantly lower cost of funds. However, asset quality disappointed with NPL ratio inching up to 4.1% (from 3.5% in 4Q09). The higher than expected NIM could be the key catalyst. In 1Q10, BBRI’s NIM was at 8.9%, up from 8.3% in FY09.

My Comment: BBRI's prospects remain healthy with strong NIM, maintain Buy

 
UNTR (18000)
UNTR net income grew 12% YoY in 1Q10, Operating profit is +10% QoQ, but -2% YoY (below consensus expectation). The company posted a slightly lower gross profit of Rp1.6tn in 1Q10 as compared to Rp1.7tn, amid stronger Rupiah. Continued appreciation of the rupiah however means gross margins would remain under pressure. UNTR will continue logging robust revenue growth for the rest of the year as mining and plantation companies’ ramp up their capex spending after a sharp cut in 2009.

My Comment: The result managed to satisfy. I believe the company will post faster growth in the next quarters amid higher demand on heavy equipment products and also higher production volume form mining contracting business, maintain Hold.

PGAS (3950)
PGN booked Rp1.77tn net profit in 1Q10 or up by 45.2% YoY in line with consensus estimate. The company’s distribution volume is up by 16.6% YoY to reach 841 mmscfd vs 721 mmscfd. The company booked forex gain about Rp199bn in 1Q10 as most loans are US$ denominated.

My Comment: I Expect stronger 2Q after 15% average gas price hike effective Apr10, maintain Buy.


Bang Juntri
DISCLAIMER: This report is issued by Bang Juntri. Although the contents of this document may represent the personal opinion of Bang Juntri. We cannot guarantee its accuracy and completeness.