CLSA Stock Picking Contest

To continue on to our internal stock picking contest, below is the list of the stocks sales & research picked for 4Q. Interesting to note almost every company picked except TINS and Holcim is the small/mid cap space. Clearly, most feel that the big cap names are richly valued. Seems that many of the names still trading on only high single digit mutiples and value could be unlocked as Indonesia continues to see good fundflows.



4Q10 pick Price 30/9

Lippo Karawachi 560

Mitra Adiperkasa 2,250

Indah Kiat 2,325

Bakrie Telecom 235

Delta Dunia 1,030

Tjiwi Kimia 4,175

Wijaya Karya 670

Bakrieland 154

Timah (my pick) 3,150

Jasa Marga 3,200

Panin Life 183

Bank Tabugan 11,700

Energi Mega 114

Holcim 2,425


Right or wrong but here are the reasons;

Lippo Karawaci (LPKR IJ):
- One of the largest property developers in the country with almost US$1bn market cap. Strong recurrent income from its malls, contributing around 50% of sales. Trades at a large discount to NAV, about 60-65% discount. Sector average around 55%. Also been a big laggard against the sector and JCI.
- There has been a lot positive newsflow of late. Marketing sales in its two mixed development projects (Kemang Village and St Moritz) doing well and setting its sight to be main developer of Eastern Indonesia.

Mitra Adi Perkasa (MAPI IJ):
- Indonesia leading upscale retailer holding exclusive rights for 92 international brands. It has footprints in everything from department stores such as Sogo, Seibu and Debenhams) to specialty stores such as Zara, Planet sports, Golf House, Reebok, food beverages such as star bucks, burger King, dominos Pizza, etc. It currently has 786 outlets in 24 cities throughout Indonesia up from 40 outlets in 1995 and is still adding.
- In our view, the stock is still trading at steep discount to peers and it should re-rate as it continues to deliver. Consensus numbers are way too conservative at Rp650bn EBITDA (company’s guidance Rp700bn). We think Mapi can register Rp850-900bn Ebitda for 2010. Seasonally, 60% of profits are booked in 2H. So can still be trading on high single digit PE

Indah Kiat (INKP IJ):

- Pulp and paper prices are at all time high. 1H10 results are already showing indication of earnings recovery, meaning more to come in 3Q and 4Q10. A laggard against its sister company, Tjiwi Kimia (TKIM IJ). Expecting Bank Exim case to be resolved soon.

Bakrie Telecom (BTEL IJ)
- Telkom Indonesia (TLKM IJ) CDMA division (Flexi) merger should happen by end of the year. Merger of Flexi-Esia this year (est Aug/Sept) will make the combined entity to control over 90%+ of Indonesia’s CDMA market with total ~28m subs overnight.
- Post deal combined entity will have about the same number of sub as EXCL which has a market cap close to US$4bn (EV of US$6bn=) BTEL now US$700m before enlarging capital for the deal). Still tons a value left on table.

Delta Dunia (DOID IJ):
- Its really really cheap! its trading at a significant valuation discount to HEXA and UNTR. Indo's second biggest mining contractor and while temporary rains hamper the industry, this to shall pass. Debt refinancing should bring funding costs lower.

Tjiwi Kimia (TKIM IJ):

- Margin in 1H improved due improving cost efficiency and rising paper price. Production capacity expansion will allow for better economies of scale and help further push down cost. Despite a strong share price performance in the past month, the company still trades at 4.2x annualized 2010 PER!! Perhaps, limited downside?

Jasa Marga (JSMR IJ):
- Resilient trafic growth, better cost managment and automation would lead to higher margin and lower cost. Moreover, the Finance minister is optimistic that the land acquisition bill will be passed in the short term future. This would be additional booster for Jasa Marga.

Timah (TINS IJ):
- Overlooked by both analysts and investment managers. No big house covers the stock at this point in time. Tins is one of the very few commodities trading close to record high. The record high (and the resistance) is around 25,500. The event in Congo (13,600 tonnes in 2009, 4.7% of world's tin ore production) and weather issues in Indonesia helped to push the tins price up. Inventory has been steadily falling. Worries over illegal miners invading their onshore mining areas.The shallow water dredging was still doable during the rain, but not for the deep sea water. If the weather situation improves, TINS can extend the activities to cover deep sea water as well.
- Valuation: TINS trades at high single digit (back of the envelope). Still looks very cheap compared to other metal names like ANTM (21x PER)and INCO (16x PER).

Panin Life (PNLF)
- because this time it has to work! Eventually somebody is going to bid for Panin Bank (PNBN) and the current owner is going to realize that in the long term he needs to sell to realize value. Hopefully it will be this quarter. Panin Life is a deeply undervalued play on Panin Bank and any buyer of the bank will buy PNLF to get control. Underlying value is north of Rp500/share.

PT Bank Tabungan Pensiunan Nastional Tbk (BTPN)
-Niche high NIM market segment (core business: pensioners/low fixed income earners, expansion into higher NIM micro/small enterprise financing) Compelling growth profile (1H 2010 loan growth 64% to Rp 19.7 trillion).
- High credit quality assets (NPL ratio 0.26%). Room to grow (capital adequacy ratio stands at 16.5% vs 8% limit mandated by Bank Indo). Great management team (led by saavy CEO Jerry Ng). Reputable majority shareholders (TPG)

Energi Mega (ENRG IJ):
- Betting on bakrie, laggard of the bakrie stocks. positive newsflows on its developments. If mgmt executes on Kangean block, stock will be trading on 2-3x EV/EBITA 2011.

Holcim (SMCB IJ):
- Beneficiary of rising cement demand as it has space capacity. Largest operational and financial leverage. At 100% capacity, trading at 8x earnings