1H 2010 Net Profit showed domestic-related earnings 75% (car 29%, motorcycle 18%, component 8% and financial services 20%) and resources-related earnings contribution 25% (UNTR 17% and AALI 8%). Sum-of-the Parts also showed domestic-related valuation 69.3% (motorcycle 18.4%, car 33.6%, component 5.2%, BNLI 2.5% and financial services 9.6%) and resources-related valuation 30.7% (UNTR 19.8%, AALI 10.8%, others 0.4%). At Rp50,000- ASII is trading on 16.2x-14.6x 2010F-11F PER and implying 8% upside to SoTP Rp54,000. Given core holding status (diversified domestic/resources earnings, top market cap/trading liquidity, and solid management/balance sheet), I recommend Accumulate for long-term!
· Arief Wana (previous Daily attached & Report available on request): Astra International’s 2Q10 results came in strong (+45% YoY), although at a slower pace compared to 1Q10. The strong auto profit was mitigated by the subdued resource-based sectors. The 1H10 strong results were in line with our forecasts (51% of FY10E).
· We made minor adjustments in earnings to reflect our more upbeat view on autos and less positive views on agribusiness and heavy equipments. Given that 75% of Astra’s value is derived from the auto-related sector, the impact towards our sum-of-the parts valuation is more positive. We have increased our SOTP based target price to Rp54,000 (from Rp52,000 previously).
· We see mixed catalysts ahead. Strong auto volumes and earnings are positive, while the uncertainties over the government’s decision to reduce the fuel subsidy could be negative. Despite our more upbeat view on autos, we maintain our NEUTRAL rating due to valuations, implying only a 2.4% upside, and currently trading at 17.1x FY10E P/E. We believe that Astra is more a long-term core holding for the Indonesia market.
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