JP Morgan - Bumi in for a positive earnings surprise in 2010, MSCI, banks

Newmont Mining up 5% overnight. JPMorgan analyst John Bridges has O/W rating on NEM with an upgraded price target of US$70 (from US$64) on the back of its 1Q10 results. He expects NEM to post a strong year in 2010 based on its long awaited access to the highest grade portion of the Batu Hijau ore body and the ramp up of production at its Boddington mine.

"We believe Newmont is optimistic about 2010 production from its Batu Hijau
project in Indonesia and the ramp up at its new Boddington mine. Like most open
pit mines, the deposit is mined in slices in order to maintain safe slope angles on the pit wall. This means that there are periods when the mine is unavoidably mining
lower grade ore or even waste rock to access the best ore. At Batu Hijau, 2010 is the
year when the mine will access the high grade heat of the ore body and though
mining is also affected by rainfall, we believe the mine is well positioned to deliver positive surprises."

Buy Bumi Resources. Stevanus Juanda expects around US$168mn net profit contribution from Batu Hijau to Bumi, versus a consolidated net profit forecast of US$388mn (consensus) in FY10. Steve's latest net profit forecast for Bumi is US$273mn, which is looking overly conservative in my view. So Batu Hijau's net profit contribution is somewhere between 40% and 60% to Bumi. Given the fact that Bumi's 2009 earnings is depressed by the "change in long term assumption on stripping ratio", I think the market is in for a big positive earnings surprise from Bumi in 2010.

Trading colour on Indonesian banks
The market is watching closely the potential CEO changes in Bank Negara, Bank Mandiri, and Bank Rakyat Indo, that will hold EGMs on 12 May, 17 May, and 20 May, respectively. Share price action on BMRI was unconvincing yesterday (-5%). If Mr. Gatot Suwono not re-elected as BBNI CEO on 12 May, investors may start speculating his move to BMRI.

MSCI weighting changes
Gudang Garam is added to MSCI, while Lippo Karawaci is taken out. Semen Gresik sees a weighting increase. Our MSCI analyst predicts a US$54mn inflow into GGRM, or 23 days trading value. He predicts a US$40mn inflow into SMGR, or 5 days trading value. For LPKR, the estimated outflow is US$19mn, or 3 days trading value.