Danareksa Valuation Guide: Cheap and oversold

We have identified 5 stocks which have a low PER and upside to VWAP
We have searched for stocks within our coverage which have a low 11F PER and upside to the 1 month Volume Weighted Average Price (VWAP). Our search reveals 5 stocks, namely BWPT, PGAS, SGRO, RALS and DILD . At the end of September, these stocks traded at 11F PER of 11.3x, 12.3x, 12.9x, 13.2x, and 14.9x, respectively. And despite the JCI gains in September, these stocks now trade below their 1 month VWAP, providing upside potential of 0.1%, 1.3%, 1.3%, 4.0% and 3.7% respectively.

The JCI climbed 13.6% in September
The JCI rose by 13.6% in September to 3,501.3, outperforming the MSCI Asia excluding Japan Index which only gained 10.9% in the same period. In US$ terms, the JCI rose 15.4% helped by rupiah strengthening relative to the US dollar. The average 1 month interbank rate declined by 10 bps to 6.44% in September, while the average 10 year government bond yield declined by 63 bps to 7.63%. Liquidity increased in September as the daily average traded value and volume increased by 37.4% and 49.5%, respectively.

5 upgrades and 3 downgrades in September
In September, we raised our target prices for BWPT, INDF, MASA, UNTR, and ASII. The biggest target price increase is 29.6% for BWPT. Our current TP for BWPT is based on a 12-mth 13.5x target multiple – which we believe is justified by the company’s savvy management, robust EPS growth and strong 18.2% 3-yr CAGR production growth. In September, we also made target price downgrades for SGRO, ADRO, and AALI. The biggest target price downgrade is 22.5% for AALI. We cut our FY10-11E EPS estimates for AALI by 39-28% - applying a greater discount to AALI’s average realized selling price amid currency strengthening and downgraded our recommendation to HOLD as the lower production hurts earnings.