● BMRI reported FY09 net income of Rp7,155 bn, +35% YoY, 8% above our estimates and 13% ahead of consensus' forecast. The 4Q09 earnings upside of 87% YoY (50% QoQ) was driven largely by lower-than-expected credit costs. BMRI’s PPOP was in line with our estimates of Rp12,430 bn, up 18% YoY, with 4Q09 PPOP up 13% QoQ to Rp3,218 bn.
● On asset quality, BMRI managed to decrease its gross NPL to an astounding 2.6% in FY09 from 4.7% in FY08. Provision coverage reached 231% in FY09 from 139% in FY08. BMRI's robust asset quality and provision position provide yet another evidence on the
bank's successful transformation.
● Despite its strong fundamentals, BMRI is trading at 21% and 52% discounts to MSCI Indonesia and MSCI NJA Banks, respectively. We see further rerating potential when BMRI provides more evidence on its ability to sustain its improved performance. We
maintain our OUTPERFORM rating and target price of Rp5,900.
Jumat, 26 Maret 2010
Rabu, 24 Maret 2010
Delta Dunia Considers Acquisition, Rights Offer: Firmansyah
March 24 (Bloomberg) -- PT Delta Dunia Makmur is considering an acquisition and selling new shares in a rights offer as part of the company's expansion options, President Commissioner Erry Firmansyah said.The company may announce details in the next two weeks, Firmansyah said by telephone today.
CLSA INDOFOOD (INDF IJ): strong FY09 results
Swati looked at INDF results. INDF’s 2009 net income doubled yoy to Rp2.07tn, EBIT up 15% yoy. Numbers broadly in line. We have TP under review since current price is above our target. Possible earnings upgrade. INDF is currently trading at 18.6x 2010 PER and could re-rate further if Indonesian consumers start to match up to Chindia peers. Plus, the stock should command liquidity premium as INDF is the most liquid consumer stock in Indonesia.
INDF plans to list the consumer branded business which contributes 32-33% to EBIT but more than 50% to net income. Expect the stock price to be well supported ahead of the IPO. Appreciating currency and stable commodity prices should also help the stock. 1Q10 results should be good as well.
Key points from the report:
· Dairy business posted double digit EBIT margins in 4Q09, first time since Indolakto was taken over. Volumes grew double digit.
· Higher promotional and ad spend reversed some of the cost savings for noodles and cooking oil. Margins peaked in 3Q09.
· We expect part of Bogasari margin expansion to also reverse next year
· Noodle margins were lower from 13.5% in 3Q09 to 11.6% as INDF passed on some costs saving to consumers inform of higher promotions.
· Possible earnings upgrade of 4-6% and expect strong 1Q10
· Valuation: the stock is trading at 18x 2010CL earnings.
INDF plans to list the consumer branded business which contributes 32-33% to EBIT but more than 50% to net income. Expect the stock price to be well supported ahead of the IPO. Appreciating currency and stable commodity prices should also help the stock. 1Q10 results should be good as well.
Key points from the report:
· Dairy business posted double digit EBIT margins in 4Q09, first time since Indolakto was taken over. Volumes grew double digit.
· Higher promotional and ad spend reversed some of the cost savings for noodles and cooking oil. Margins peaked in 3Q09.
· We expect part of Bogasari margin expansion to also reverse next year
· Noodle margins were lower from 13.5% in 3Q09 to 11.6% as INDF passed on some costs saving to consumers inform of higher promotions.
· Possible earnings upgrade of 4-6% and expect strong 1Q10
· Valuation: the stock is trading at 18x 2010CL earnings.
CLSA ASTRA (ASII IJ), the newly crowned king of Indonesia, by Nick Cashmore
Astra has now overtaken Telkom as Indonesia’s largest stock by market cap @ US$18.1bn. This is only the second time since Telkom listed in 1995 (the other time was one day in 2008 when BUMI was top dog). With a 50% free float, this stock has ample liquidity for investors.
We continue to have firm conviction about group prospects. Sales desk is also of the view that Astra will continue to outperform Telkom. While mobile penetration has reached 75%, motorcycle penetration is very low at 15% in Indonesia. Only about 1% of the urban population bought a car in Indonesia compared to 4% in Thailand, and 5% in China. Still ample room for growth for Astra.
Interestingly, despite the massive outperformance, ASII’s valuation is still in line with the market. Strong management, earnings to grow by an average 17% for the next two years, and 27% ROE should justify premium to the market valuation, in our view. Our near term target price is Rp45k.
ASII has pretty much taken over the mantle of "main proxy to the Indonesian market".
We continue to have firm conviction about group prospects. Sales desk is also of the view that Astra will continue to outperform Telkom. While mobile penetration has reached 75%, motorcycle penetration is very low at 15% in Indonesia. Only about 1% of the urban population bought a car in Indonesia compared to 4% in Thailand, and 5% in China. Still ample room for growth for Astra.
Interestingly, despite the massive outperformance, ASII’s valuation is still in line with the market. Strong management, earnings to grow by an average 17% for the next two years, and 27% ROE should justify premium to the market valuation, in our view. Our near term target price is Rp45k.
ASII has pretty much taken over the mantle of "main proxy to the Indonesian market".
Bahana Securities Indofood – (INDF-HOLD-IDR3,975-TP:IDR3,550) Food for thought
4Q09 gross margin compression = precursor of worse things to come
Indofood’s (INDF) 4Q09 results cement our view that margins for the company had peaked in 3Q09 as gross margin contracted to 26.9% in 4Q09 from 28.6% in 3Q09 on higher commodity prices. At the operating level, margin also fell to 14.3% in 4Q09 from 15% in 3Q09 while net margin dropped to 5.6% from 7.8% over the same period on less FX gain. Going forward, we expect margins to further decline on the back of two factors: 1) we expect cost of goods sold to rise, mainly for packaging (oil-based), CPO and sugar; 2) we believe INDF will have limited room to implement price increases due to tight competition. It is worth pointing out that INDF’s 2009 low noodle volume growth of 1.9% y-y suggests unlikely further price hikes.
Input costs trending up
We highlight that CPO prices have started to climb (exhibit 7), up from an average of USD680/ton in 3Q09 to USD692 in 4Q09 to USD772 in 1Q10 thus far. It is worth noting that CPO accounts for some 20% of the noodle division’s total COGS. Additionally, packaging costs, which tracks oil prices (exhibit 7), account for another 20% of total COGS. We note that oil prices had risen to an average USD76/bbl in 4Q09 from USD68 in 3Q09. Therefore, in 2010, we assume higher input costs causing lower gross margin of 24.6% in 2010 from 27.3% previously.
Flour: Lower prices on tighter competition
Our recent channel check to six local supermarkets and hypermarkets (exhibit 9) reveal that Bogasari’s flour prices have come off by an average of 8% in the past nine months. We believe this is caused by dumping from Turkey as well as the entry of Federal Flour Mill (FFM) of Malaysia into Indonesia. According to the Indonesian Flour Association (Aptindo), there will be at least 10 more new entrants into Indonesia’s flour milling industry in the near term with total investment of IDR2t (USD220m). With competition on the rise, Bogasari has been unable to benefit from wheat prices which decreased 23% q-q to USD208/ton in 3Q09 (exhibit 8). Testimony to this is the flour’s division 4Q09 operating margin of 12.6%, down from 13.6% in 3Q09.
Lower TP to IDR3,550 on less noodle contribution
With 2010 capex of nearly Rp4.3t (exhibit 10), we expect INDF to face tight cash flow. With 2009 net gearing of 126%, the listing of its CBP division would be the most viable cash raising exercise in our view. However, the impact of this on the listed INDF will not be positive given that investors can then buy directly into the CBP business and into LSIP directly for exposure on CPO, leaving only the unattractive and low margin business of the flour division within INDF itself. On valuation, INDF is not cheap on 2010 PE of 18.7x when compared to its regional peers (exhibit 11). We lower our target price based on SOTP (exhibit 12) to IDR3,550 from IDR3,800 on less noodle contribution. With 11% downside, we retain our HOLD rating on INDF.
Indofood’s (INDF) 4Q09 results cement our view that margins for the company had peaked in 3Q09 as gross margin contracted to 26.9% in 4Q09 from 28.6% in 3Q09 on higher commodity prices. At the operating level, margin also fell to 14.3% in 4Q09 from 15% in 3Q09 while net margin dropped to 5.6% from 7.8% over the same period on less FX gain. Going forward, we expect margins to further decline on the back of two factors: 1) we expect cost of goods sold to rise, mainly for packaging (oil-based), CPO and sugar; 2) we believe INDF will have limited room to implement price increases due to tight competition. It is worth pointing out that INDF’s 2009 low noodle volume growth of 1.9% y-y suggests unlikely further price hikes.
Input costs trending up
We highlight that CPO prices have started to climb (exhibit 7), up from an average of USD680/ton in 3Q09 to USD692 in 4Q09 to USD772 in 1Q10 thus far. It is worth noting that CPO accounts for some 20% of the noodle division’s total COGS. Additionally, packaging costs, which tracks oil prices (exhibit 7), account for another 20% of total COGS. We note that oil prices had risen to an average USD76/bbl in 4Q09 from USD68 in 3Q09. Therefore, in 2010, we assume higher input costs causing lower gross margin of 24.6% in 2010 from 27.3% previously.
Flour: Lower prices on tighter competition
Our recent channel check to six local supermarkets and hypermarkets (exhibit 9) reveal that Bogasari’s flour prices have come off by an average of 8% in the past nine months. We believe this is caused by dumping from Turkey as well as the entry of Federal Flour Mill (FFM) of Malaysia into Indonesia. According to the Indonesian Flour Association (Aptindo), there will be at least 10 more new entrants into Indonesia’s flour milling industry in the near term with total investment of IDR2t (USD220m). With competition on the rise, Bogasari has been unable to benefit from wheat prices which decreased 23% q-q to USD208/ton in 3Q09 (exhibit 8). Testimony to this is the flour’s division 4Q09 operating margin of 12.6%, down from 13.6% in 3Q09.
Lower TP to IDR3,550 on less noodle contribution
With 2010 capex of nearly Rp4.3t (exhibit 10), we expect INDF to face tight cash flow. With 2009 net gearing of 126%, the listing of its CBP division would be the most viable cash raising exercise in our view. However, the impact of this on the listed INDF will not be positive given that investors can then buy directly into the CBP business and into LSIP directly for exposure on CPO, leaving only the unattractive and low margin business of the flour division within INDF itself. On valuation, INDF is not cheap on 2010 PE of 18.7x when compared to its regional peers (exhibit 11). We lower our target price based on SOTP (exhibit 12) to IDR3,550 from IDR3,800 on less noodle contribution. With 11% downside, we retain our HOLD rating on INDF.
Bahana Securities Bumi seeks acquisition nationally and overseas
BUMI Resources (BUMI-BUY-IDR2,325-TP:IDR3,200) share price fell 9.7% on Monday because of news on possible cancellation of its Newmont acquisition and also because of Finance Director of BUMI Eddie J. Soebari hs been name as suspect in tax evasion. However, the share price remained unchanged yesterday because BUMI said in a conference in Singapore that it seeks acquisitions nationally and overseas. It also
said that it expects that coal price to gain from current level of USD95/ton to USD100/ton by the end of the year. It further added that it expects double digit sales growth this year because of higher price and production, which is inline with our forecast of 17.8% y-y growth in revenues. It expects production to reach 65m tons which is also inline with our expectation of 65.6m tons. For long term growth, BUMI expects to increase coal production to 100m tons in the next three years.
said that it expects that coal price to gain from current level of USD95/ton to USD100/ton by the end of the year. It further added that it expects double digit sales growth this year because of higher price and production, which is inline with our forecast of 17.8% y-y growth in revenues. It expects production to reach 65m tons which is also inline with our expectation of 65.6m tons. For long term growth, BUMI expects to increase coal production to 100m tons in the next three years.
Deutsche United Tractors Alert - Strong operating performance, though it's just February
United Tractors {Ticker: UNTR.JK, Closing Price: 17,550 IDR, Target Price: 20,400 IDR, Recommendation: Buy}
*February Komatsu sales: 394 units; +77% YoY & +16% MoM
The heavy equipment sales grew stronger in February amid buoyant
demand from all sectors particularly plantation sector (pls refer to
table below). Overall, Komatsu sales in 2M10 reached 733 units (+67%
YoY, avg. 367units/month) and could be easily achieve our full year
target of 4,200 units (some 600 units more or 17% higher than the
company's forecast of 3,600 units).
*Mining Contract registered strong operating performance
Pama Persada's coal delivery and overburden removal rose by 34% YoY to
6.3mn tons and 39% YoY to 53.2m bcm in February 2010. Overall, the
results were inline with our forecasts, which are 5-7% higher than
company's forecasts, accounting for 16% and 14% of our 2010F coal
delivery and overburden removal, respectively.
*Coal sales volumes started to show encouraging improvement
Dasa Eka Jasatama (DEJ) recorded a 6% YoY (+8% MoM) increase in its
coal sales volumes to 251k tons in February 2010. Overall, DEJ coal
sales reached 483k tons (+11% YoY) in 2M10 and were on track to meet
our full year forecast of 4mn tons including Tuah Turangga Agung's 1mn
tons.
*Reiterate Buy rating with TP of Rp20,400
United Tractors has a good corporate governance track record and
exciting earnings prospect supported by buoyant commodity prices
particularly coal palm oil, and Indonesian coal mines' expansion
project . Also, faster infrastructure projects realization and coal
price >US$90/ton provide upside earnings risks. The stock is
attractive trading at 13.5x earnings in 2010F before falling to 11.3x
in 2011F.
*February Komatsu sales: 394 units; +77% YoY & +16% MoM
The heavy equipment sales grew stronger in February amid buoyant
demand from all sectors particularly plantation sector (pls refer to
table below). Overall, Komatsu sales in 2M10 reached 733 units (+67%
YoY, avg. 367units/month) and could be easily achieve our full year
target of 4,200 units (some 600 units more or 17% higher than the
company's forecast of 3,600 units).
*Mining Contract registered strong operating performance
Pama Persada's coal delivery and overburden removal rose by 34% YoY to
6.3mn tons and 39% YoY to 53.2m bcm in February 2010. Overall, the
results were inline with our forecasts, which are 5-7% higher than
company's forecasts, accounting for 16% and 14% of our 2010F coal
delivery and overburden removal, respectively.
*Coal sales volumes started to show encouraging improvement
Dasa Eka Jasatama (DEJ) recorded a 6% YoY (+8% MoM) increase in its
coal sales volumes to 251k tons in February 2010. Overall, DEJ coal
sales reached 483k tons (+11% YoY) in 2M10 and were on track to meet
our full year forecast of 4mn tons including Tuah Turangga Agung's 1mn
tons.
*Reiterate Buy rating with TP of Rp20,400
United Tractors has a good corporate governance track record and
exciting earnings prospect supported by buoyant commodity prices
particularly coal palm oil, and Indonesian coal mines' expansion
project . Also, faster infrastructure projects realization and coal
price >US$90/ton provide upside earnings risks. The stock is
attractive trading at 13.5x earnings in 2010F before falling to 11.3x
in 2011F.
Citigroup SMGR Alert: Weaker Contribution from Outside Java TP 4950
Semen Gresik Group reported its Feb10 sales volume at 1.3m tons, or 9% lower MoM and flat growth YoY. Domestic volume accounts for most of the total, and was 9% lower MoM or 6% higher YoY. YTD to February 2010, Semen Gresik Group’s total volume is at 2.8m tons, or 4% higher YoY. Domestic volume grew by 9% YoY, whilst exports are now only 18K tons, or 85% lower YoY. Based on data from the Indonesia Cement Association,
Semen Gresik Group’s domestic market share declined to 43.4%, from 45.3% in 2M09. This was due to weaker contributions from the subsidiaries, Semen Padang and Semen Tonasa. The company is estimated to be running at an 87% utilization rate, based on 19.1m tpa capacity.
Semen Gresik (parent company) is estimated to be running at full utilization on 8.8m tpa capacity, with 28% higher volume growth YoY to 1.6m tons. This accounts for 56% of the group’s volume. Its domestic market share rose to 24.5% in 2M10, from 21.7% in 2M09, with stronger demand in Java.
Meanwhile subsidiaries Semen Padang and Semen Tonasa recorded lower volumes. Semen Padang posted 16% lower volume YoY to 773K tons in 2M10. Its domestic volume declined by 3% YoY to 771K tons, whilst exports plummeted by 98% YoY. Its domestic market share declined to 12.1% in 2M10, from 14.2% in 2M09. Semen Padang accounts for 28% of the group’s volume. The company is running at a 76% utilization rate on 6.1m tpa capacity.
Semen Tonasa recorded 16% lower volume YoY to 443K tons. It accounts for 16% of the group’s total volume. Its domestic volume plummeted 19% YoY to 427K tons. Its domestic market share fell to 6.7% in 2M10 from 9.4% in 2M09. The company is running at a 63% utilization rate on 4.2m tpa capacity.
Valuation
Our target price of Rp4,950/share is based on 6.3x EV/EBITDA 2010E, derived from
the company's historical average forward EV/EBITDA since July 2006. We use July
2006 as the benchmark as this is the period that Rajawali Group acquired a 25%
stake of the company. Since then, the company has turned around and is managed
more effectively. Its operations have improved with a 38% EBIT CAGR 2006-2008,
and capacity has increased 6.5% to 18m tpa at the end of 2008. Most importantly,
the subsidiaries, namely Semen Padang and Semen Tonasa, have integrated
operations. By having operations in three different locations around the nation, it
has emerged as a strong cement producer. For a sanity check, our target price
implies a 2010E P/E of 8.5x, below the historical average since July 2006 of 10.2x.
Our target price equates to an EV/capacity of US$130/ton, below US$150/ton
replacement cost.
Semen Gresik Group’s domestic market share declined to 43.4%, from 45.3% in 2M09. This was due to weaker contributions from the subsidiaries, Semen Padang and Semen Tonasa. The company is estimated to be running at an 87% utilization rate, based on 19.1m tpa capacity.
Semen Gresik (parent company) is estimated to be running at full utilization on 8.8m tpa capacity, with 28% higher volume growth YoY to 1.6m tons. This accounts for 56% of the group’s volume. Its domestic market share rose to 24.5% in 2M10, from 21.7% in 2M09, with stronger demand in Java.
Meanwhile subsidiaries Semen Padang and Semen Tonasa recorded lower volumes. Semen Padang posted 16% lower volume YoY to 773K tons in 2M10. Its domestic volume declined by 3% YoY to 771K tons, whilst exports plummeted by 98% YoY. Its domestic market share declined to 12.1% in 2M10, from 14.2% in 2M09. Semen Padang accounts for 28% of the group’s volume. The company is running at a 76% utilization rate on 6.1m tpa capacity.
Semen Tonasa recorded 16% lower volume YoY to 443K tons. It accounts for 16% of the group’s total volume. Its domestic volume plummeted 19% YoY to 427K tons. Its domestic market share fell to 6.7% in 2M10 from 9.4% in 2M09. The company is running at a 63% utilization rate on 4.2m tpa capacity.
Valuation
Our target price of Rp4,950/share is based on 6.3x EV/EBITDA 2010E, derived from
the company's historical average forward EV/EBITDA since July 2006. We use July
2006 as the benchmark as this is the period that Rajawali Group acquired a 25%
stake of the company. Since then, the company has turned around and is managed
more effectively. Its operations have improved with a 38% EBIT CAGR 2006-2008,
and capacity has increased 6.5% to 18m tpa at the end of 2008. Most importantly,
the subsidiaries, namely Semen Padang and Semen Tonasa, have integrated
operations. By having operations in three different locations around the nation, it
has emerged as a strong cement producer. For a sanity check, our target price
implies a 2010E P/E of 8.5x, below the historical average since July 2006 of 10.2x.
Our target price equates to an EV/capacity of US$130/ton, below US$150/ton
replacement cost.
KimEng Bank Mandiri (BMRI IJ): BUY - Robust metrics; maintain BUY
Bank Mandiri recorded profit of Rp7.2t in 2009, well above our estimates, driven mainly by strong interest and fee-based income. Management’s 15-18% y/y loan growth target for 2010 remains unchanged. Management expects that the rights issue may happen earliest by end-2010 given the multi-layered approvals required. Mandiri’s main intent is to qualify for the 5% tax cut as the rights will raise free float to 40% vs. the current 33%. Maintain BUY.
CIMB United Tractors Quick takes - Still going strong
(UNTR IJ / UNTR.JK, OUTPERFORM - Maintained, Rp17,400 - Tgt. Rp23,000, Industrial Goods and Services)
Maintain Outperform on UNTR with an unchanged target price of Rp23,000 (15x CY11 P/E). February's operational data reinforces our conviction of strong volume growth ahead, particularly for Komatsu sales. If the momentum continues, Komatsu sales could in fact beat our current expectations, which are already above company and consensus expectations. Pama continues to post very healthy growth, exceeding that of its closest peer, Buma. This is just about to get better as we are entering seasonally strong quarters. Monthly production at its DEJ mine is also improving. All three divisions, in short, are exhibiting solid growth. No change to our earnings forecasts for now. We expect stock catalysts from consensus earnings upgrades typically going into the month of May, after the release of solid 1Q10 operational data and 1Q10 results, which should not disappoint.
Maintain Outperform on UNTR with an unchanged target price of Rp23,000 (15x CY11 P/E). February's operational data reinforces our conviction of strong volume growth ahead, particularly for Komatsu sales. If the momentum continues, Komatsu sales could in fact beat our current expectations, which are already above company and consensus expectations. Pama continues to post very healthy growth, exceeding that of its closest peer, Buma. This is just about to get better as we are entering seasonally strong quarters. Monthly production at its DEJ mine is also improving. All three divisions, in short, are exhibiting solid growth. No change to our earnings forecasts for now. We expect stock catalysts from consensus earnings upgrades typically going into the month of May, after the release of solid 1Q10 operational data and 1Q10 results, which should not disappoint.
AAA PT Bank Central Asia Tbk - Analyst Meeting, Full Year 2009 Results
Please find below Bank Central Asia (Ticker : BBCA IJ) analyst meeting invitation. From previous analyst day, we are quite bullish on bank central asia performance (our recommendation is BUY TP-Rp.5800), since they has proved their performance not only in the good times and in the bad times. We also realize that their aggressiveness to enter consumer finance business (used car and motorcycle financing) also will be benefited them since they have already had plenty of customer base. If you want to join the meeting, please feel free to contact us. We will be very glad to accompany you along the meeting. Thank you.
AAA Company Update_BMRI_
Bank Mandiri held an analyst meeting last Monday to report its FY2009 Result as well as publishing FY2010 management’s target. The bank booked profit by Rp. 7.115 trillion or outpaced our and consensus estimates by 16% and 13% respectively. Its net interest income increased 15% because of 13% loan growth booked by the bank. On the other hand, its provision expense declined by 23.1% YoY because of better assets quality. Bank Mandiri NPLs reduced from 4.73% in FY08 to 2.79% in FY09. In addition, the bank restated its target to be Indonesia ’s most admired and progressive financial institution by become the first market capitalization bank by 2014. The strategy will be implemented by maintaining its dominant presence in corporate banking, be the retail deposit bank of choices, and build number 1 or 2 in key retail financing segment, including mortgages, personal loan & cards, micro and syariah banking.
Tunas Mandiri Finance : A New Loan Generating Machine
After acquired from Tunas Ridean (TURI IJ) in 3Q08 for Rp. 290 billion, Tunas Mandiri Finance (TUFI) has started to generate automotive loan for Mandiri. Their monthly booking has increased almost 75% from Rp. 130 billion per month in 1Q09 to Rp. 226 billion in 4Q09. As the result, their contribution to mandiri consumer loans increased by Rp. 300 billion to Rp. 1.9 trillion. Although their contribution to Bank Mandiri’s loan book is still small, we are sure that TUFI will deliver significant contribution for both Bank Mandiri bottom line and balance sheet, given bank’s mandiri wide network and availability of funds and Tunas Finance expertise.
Non Performing Assets : First time booked provision reversal
Bank Mandiri booked provision reversal in 4Q09 for the first time by Rp. 420 billion because of better than expected asset quality and to anticipate PSAK 50 & 55 implementation. The bank booked 2.79% NPLs in FY09, decline from 3.79% in 3Q09. It makes its provision coverage increased to 200.5% from 155.2% in FY08 despite of NPLs write backed in 4Q09. In addition, Garuda Indonesia’s loan, which had outstanding + Rp. 1.3 trillion in FY2009, has been paid Rp. 50.94 billion (5% of the Mandatory convertible bonds), while the remaining 95% will be converted into shares and be realized at the IPOs which is scheduled in 3Q10.
Conservative Loan Growth Guidance In 2010
Bank Mandiri management has targeted 15 - 18% loan growth, <4% NPLs, NIM 5.35% and > 150% provisioning coverage for FY10. We believe that those targets are too conservative since it set up in 3Q09 when the condition is not as bullish as nowadays. As the result, we increase our loan growth target to 20%, as well as conservative NPL target by 3% and 200% provision coverage
Reduce to HOLD (TP-Rp. 6.100,-)
Given its impressive FY09 result, management intention to shift to higher yield loan, plenty of room for loan growth and better economic condition, we believe that Bank Mandiri will be able to deliver its promise as a dominant multispecialist bank. However, given its stock price increasing too fast lately, we believe that the stock has priced near its intrinsic value. So, we suggested to HOLD with target price Rp.6100,-, implies 2.71-2.42X PBV or 16.38-13.23X PBV FY10-11E.
Tunas Mandiri Finance : A New Loan Generating Machine
After acquired from Tunas Ridean (TURI IJ) in 3Q08 for Rp. 290 billion, Tunas Mandiri Finance (TUFI) has started to generate automotive loan for Mandiri. Their monthly booking has increased almost 75% from Rp. 130 billion per month in 1Q09 to Rp. 226 billion in 4Q09. As the result, their contribution to mandiri consumer loans increased by Rp. 300 billion to Rp. 1.9 trillion. Although their contribution to Bank Mandiri’s loan book is still small, we are sure that TUFI will deliver significant contribution for both Bank Mandiri bottom line and balance sheet, given bank’s mandiri wide network and availability of funds and Tunas Finance expertise.
Non Performing Assets : First time booked provision reversal
Bank Mandiri booked provision reversal in 4Q09 for the first time by Rp. 420 billion because of better than expected asset quality and to anticipate PSAK 50 & 55 implementation. The bank booked 2.79% NPLs in FY09, decline from 3.79% in 3Q09. It makes its provision coverage increased to 200.5% from 155.2% in FY08 despite of NPLs write backed in 4Q09. In addition, Garuda Indonesia’s loan, which had outstanding + Rp. 1.3 trillion in FY2009, has been paid Rp. 50.94 billion (5% of the Mandatory convertible bonds), while the remaining 95% will be converted into shares and be realized at the IPOs which is scheduled in 3Q10.
Conservative Loan Growth Guidance In 2010
Bank Mandiri management has targeted 15 - 18% loan growth, <4% NPLs, NIM 5.35% and > 150% provisioning coverage for FY10. We believe that those targets are too conservative since it set up in 3Q09 when the condition is not as bullish as nowadays. As the result, we increase our loan growth target to 20%, as well as conservative NPL target by 3% and 200% provision coverage
Reduce to HOLD (TP-Rp. 6.100,-)
Given its impressive FY09 result, management intention to shift to higher yield loan, plenty of room for loan growth and better economic condition, we believe that Bank Mandiri will be able to deliver its promise as a dominant multispecialist bank. However, given its stock price increasing too fast lately, we believe that the stock has priced near its intrinsic value. So, we suggested to HOLD with target price Rp.6100,-, implies 2.71-2.42X PBV or 16.38-13.23X PBV FY10-11E.
DBS Indofood Sukses Makmur: Rec - TP under review; Rp3,975; INDF IJ
4Q09 ahead of expectations
At a Glance
• FY09 net profit doubled y-o-y to Rp2,075.9b, ahead of expectations
• Strong growth was led by Rp731.0b FX gain; core net profit grew only 19.2% y-o-y to Rp1,727.1b.
• Net gearing improved to 80.5% from 96.9% in 3Q09
• Recommendation and TP under review
Comment on Result
FY09 net profit of Rp2,075.9b (+100.7% y-o-y) was ahead of our Rp1,902.2b forecast, boosted by Rp731.0b FX gain (vs Rp713.1b FX loss in 2008),. Revenue was 10% below at Rp37,140.8b (-4.3% y-o-y) due to smaller agribusiness contribution on lower CPO prices and smaller Bogasari contribution following a cut in selling prices (despite stronger IDR). But gross profit grew 12.8% due to lower input costs following stronger-than-expected IDR. The group also reported higher-than-expected interest income on higher cash balance than anticipated.
4Q09 net profit fell 35.6% q-o-q to Rp500.0b on lower gross profit, higher ‘other expenses’, and higher taxation (effective rate rose to 30% from 25% in 3Q09). The drop in gross profit was smaller at 16.1% q-o-q, mainly because of a 10.5% q-o-q drop in revenues on lower volumes in most segments (except dairy, snack foods and plantation). Gross margin dipped 1.8ppt to 26.9% in 4Q09. ‘Other expenses’ also rose 74.6% q-o-q to Rp153.9b and FX gain fell 49.6% to Rp129.4b.
Group net gearing (incl. ST Investments and MI) improved to 80.5% (from 96.9% in 3Q09), due to higher cash balance than anticipated, lower debt level, and a stronger equity base.
Recommendation
We are retaining our financial forecasts pending a review of our forecasts for IndoAgri (IFAR). Our recommendation and TP are under review.
At a Glance
• FY09 net profit doubled y-o-y to Rp2,075.9b, ahead of expectations
• Strong growth was led by Rp731.0b FX gain; core net profit grew only 19.2% y-o-y to Rp1,727.1b.
• Net gearing improved to 80.5% from 96.9% in 3Q09
• Recommendation and TP under review
Comment on Result
FY09 net profit of Rp2,075.9b (+100.7% y-o-y) was ahead of our Rp1,902.2b forecast, boosted by Rp731.0b FX gain (vs Rp713.1b FX loss in 2008),. Revenue was 10% below at Rp37,140.8b (-4.3% y-o-y) due to smaller agribusiness contribution on lower CPO prices and smaller Bogasari contribution following a cut in selling prices (despite stronger IDR). But gross profit grew 12.8% due to lower input costs following stronger-than-expected IDR. The group also reported higher-than-expected interest income on higher cash balance than anticipated.
4Q09 net profit fell 35.6% q-o-q to Rp500.0b on lower gross profit, higher ‘other expenses’, and higher taxation (effective rate rose to 30% from 25% in 3Q09). The drop in gross profit was smaller at 16.1% q-o-q, mainly because of a 10.5% q-o-q drop in revenues on lower volumes in most segments (except dairy, snack foods and plantation). Gross margin dipped 1.8ppt to 26.9% in 4Q09. ‘Other expenses’ also rose 74.6% q-o-q to Rp153.9b and FX gain fell 49.6% to Rp129.4b.
Group net gearing (incl. ST Investments and MI) improved to 80.5% (from 96.9% in 3Q09), due to higher cash balance than anticipated, lower debt level, and a stronger equity base.
Recommendation
We are retaining our financial forecasts pending a review of our forecasts for IndoAgri (IFAR). Our recommendation and TP are under review.
Mandiri Sekuritas Indika Energy: FY09 net earnings at seen at Rp725bn, slightly below our targets (INDY, Rp2,250, Buy TP: 2,750)
The company indicated that FY09 net income is expected as some Rp725bn (-33%yoy) which came slightly below our forecast of Rp761bn and consensus of Rp842bn. However, on operating level, the company improved with revenues of Rp2.5tn (+7%yoy) and operating income of Rp191bn (+55%yoy). Likewise, income from associated companies jumped by 44% to Rp1.5tn, primarily due to the contribution from its 46% coal unit Kideco, which generated FY09 net profit of US$288mn, which came in 8% higher than our targets. We suspect higher interest and one-off charges were the main reason for the drop in bottom-line.
We remain a buyer on the company with FY10F net earnings seen at Rp855bn (+18%yoy) on the back of (a) higher coal production (b) better contribution from operating units Petrosea and Tripatra as a result of thicker order book. Currently, the stock trades at PER10F of 13.7x.
We remain a buyer on the company with FY10F net earnings seen at Rp855bn (+18%yoy) on the back of (a) higher coal production (b) better contribution from operating units Petrosea and Tripatra as a result of thicker order book. Currently, the stock trades at PER10F of 13.7x.
Mandiri Sekuritas United Tractors: heavy equipment sales continue to surge up 16%mom in Feb10 (UNTR, Rp17,400, Buy, TP:Rp19,600)
United Tractor reported heavy equipment sales in the month of February of 394 units (+16%mom), thus, the highest posted monthly sales since Sep08. Once again, Feb10 demand was dominated by mining sector which accounted for 54% of unit sales. As of 2M10, heavy equipment sales have totaled 733 units (63%yoy) and are running ahead of our FY10 target of 3,500 (equivalent to about 21% of FY10F targets). We maintain buy for the stock which currently trades at PER10F 14.5x. while posing a 13% upside to our price objective.
JP Morgan - Indofood: FY09 net income is above expectations Overweight
· FY09 net income above expectations: Indofood reported FY09 net income of Rp2.08 trillion, up 100.7% Y/Y. The reported income came in above both our (105.6%) and consensus (116.6%) estimates of Rp1.97 trillion and Rp1.78 trillion, respectively. Operating and core net income were up 15.3% and 19.2%, respectively, indicating a strong performance Y/Y.
· 4Q09 net income above expectations: Subtracting the 9M09 net income, 4Q09 net income was Rp500B, up strongly from the Rp80B loss recorded in 4Q08 but down 35.6% Q/Q due to seasonality after the Moslem New Year and higher tax rate in 4Q09. 4Q09 net income of Rp500B is significantly above both our (128.4%) and consensus (244.5%) estimates of Rp389.3B and Rp205B, respectively.
· Strong contribution from Bogasari and plantation in 4Q09: Analyzing the segmental analysis, we found that Bogasari’s margin recovered from 9.2% in 9M09 to 12.5% in 4Q09. On top of that the contribution from the plantation division in 4Q09 continued to improve as the CPO price rose from M$2,258 in 9M09 to M$2,309 in 4Q09. The noodle EBIT margin was stable, at 11.8% in 9M09 and 11.6% in 4Q09. Other consumer divisions (seasoning, snack, nutrition) recorded a weak performance in 4Q09 due to seasonality following the Moslem New Year. Finally, the dairy division EBIT improved from 7.5% in 9M09 to 10.6% in 4Q09.
· Maintain OW and Dec-10 PT of Rp4,250: In view of the better-than-expected result and the consumer division oil spin-off acting as a catalyst, we maintain our OW rating and our Dec-10 PT of Rp4,250 on Indofood. The key risks to our view and price target include margin pressure on Bogasari and weakness in CPO.
· 4Q09 net income above expectations: Subtracting the 9M09 net income, 4Q09 net income was Rp500B, up strongly from the Rp80B loss recorded in 4Q08 but down 35.6% Q/Q due to seasonality after the Moslem New Year and higher tax rate in 4Q09. 4Q09 net income of Rp500B is significantly above both our (128.4%) and consensus (244.5%) estimates of Rp389.3B and Rp205B, respectively.
· Strong contribution from Bogasari and plantation in 4Q09: Analyzing the segmental analysis, we found that Bogasari’s margin recovered from 9.2% in 9M09 to 12.5% in 4Q09. On top of that the contribution from the plantation division in 4Q09 continued to improve as the CPO price rose from M$2,258 in 9M09 to M$2,309 in 4Q09. The noodle EBIT margin was stable, at 11.8% in 9M09 and 11.6% in 4Q09. Other consumer divisions (seasoning, snack, nutrition) recorded a weak performance in 4Q09 due to seasonality following the Moslem New Year. Finally, the dairy division EBIT improved from 7.5% in 9M09 to 10.6% in 4Q09.
· Maintain OW and Dec-10 PT of Rp4,250: In view of the better-than-expected result and the consumer division oil spin-off acting as a catalyst, we maintain our OW rating and our Dec-10 PT of Rp4,250 on Indofood. The key risks to our view and price target include margin pressure on Bogasari and weakness in CPO.
CLSA INDO: United Tractors - Positive momentum continuing in February - O-PF
United Tractors has just released its Feb10 data, overall look strong. Komatsu unit sales were particularly strong while Pama figures look in line. We have also seen some improvement on coal sales.
Komatsu sales numbers were robust. United Tractors sold 394 Komatsu units in Feb10, up by 77% YoY and 16% MoM. Annualized sales in Feb10 would translate to 4,400 units, 15% higher than assumed. Note that Feb10 sales were also the highest February sales ever.
Sales to agro and forestry sectors were the main drivers in Feb10, up by 415% YoY and 967% YoY while growing by 91% MoM and 52% MoM, respectively. Mining sector demand remained firm as sales to the sector were up by 25% YoY and 1% MoM. These three sectors contributed to around 85% of total unit sales up to Feb10.
Pama coal extraction up to Feb10 reached around 17% of full year target, on track. Coal extraction in Feb10 was running at 6.3m tonnes in Feb10, up by 5% MoM. Overburden removal was 53.2m bcm during the month, translating to stripping ratio of 8.4 bcm/t, up from 7.7bcm/t in Jan10.
Coal sales from own mine is recovering. Coal sales reached 251kt in Jan10, up by 6% MoM and 8% YoY. Note that the tonnage is contracted at around US$80/t and we expect more volume to be sold in the coming months as current spot price is hovering above US$90/t.
We maintain our Outperform rating on United Tractors We think there is some upside risk to our earning forecast as evidenced by strong unit sales and production during the first two months of the year. We still keep our earning forecast and target price of Rp19,200.
Komatsu sales numbers were robust. United Tractors sold 394 Komatsu units in Feb10, up by 77% YoY and 16% MoM. Annualized sales in Feb10 would translate to 4,400 units, 15% higher than assumed. Note that Feb10 sales were also the highest February sales ever.
Sales to agro and forestry sectors were the main drivers in Feb10, up by 415% YoY and 967% YoY while growing by 91% MoM and 52% MoM, respectively. Mining sector demand remained firm as sales to the sector were up by 25% YoY and 1% MoM. These three sectors contributed to around 85% of total unit sales up to Feb10.
Pama coal extraction up to Feb10 reached around 17% of full year target, on track. Coal extraction in Feb10 was running at 6.3m tonnes in Feb10, up by 5% MoM. Overburden removal was 53.2m bcm during the month, translating to stripping ratio of 8.4 bcm/t, up from 7.7bcm/t in Jan10.
Coal sales from own mine is recovering. Coal sales reached 251kt in Jan10, up by 6% MoM and 8% YoY. Note that the tonnage is contracted at around US$80/t and we expect more volume to be sold in the coming months as current spot price is hovering above US$90/t.
We maintain our Outperform rating on United Tractors We think there is some upside risk to our earning forecast as evidenced by strong unit sales and production during the first two months of the year. We still keep our earning forecast and target price of Rp19,200.
Credit Suisse: Bank Mandiri (Persero) (BMRI.IJ) - Transformation reaffirmed, OUTPERFORM
■ Transformation reaffirmed. BMRI’s robust FY09A reaffirms our view that its five-year transformation has given birth to solid fundamentals. BMRI delivered FY09 earnings 13% above consensus (8% above our forecasts), staging 18% YoY PPOP growth and a 35% YoY earnings jump. We tweak our FY10-12 earnings to reflect slightly lower than expected non-interest income and marginally higher than expected operating expenses in FY09A.
■ A force to be reckoned with. BMRI has delivered a strong transformation, cutting its gross NPL ratio from 26.6% in FY05A to 2.62% by FY09A, while provision coverage surged from 44% to 231% and ROE jumped from 2.5% to 21.8% during the same period. To date, BMRI has the second highest asset quality and provision coverage, the third highest profitability and second lowest LDR among the Indonesian banks under our coverage, implying the second highest growth capacity. We foresee BMRI delivering
the second highest five-year CAGR loan growth, ahead of all Indonesian banks under our coverage.
■ More potential for rerating. Despite its past rerating, we believe BMRI’s current share price does not yet adequately reflect the company’s fundamental strength. BMRI is still trading at a 25% and 62% discount to MSCI Indonesia and MSCI NJA Banks, respectively. We believe BMRI is well positioned not only to maintain its improved fundamentals but also deliver further upside, given its recent successful expansion into higheryielding assets and ever-strengthening cash management division.
■ Undemanding valuations. The large discount against MSCI Indonesia and MSCI NJA Banks, despite its fundamentals being stronger than its peers’, implies that BMRI’s share price still offers an attractive entry point. We maintain our OUTPERFORM rating on BMRI and target price of Rp5,900, implying 3.1x FY10E P/B and 13.6x FY10E P/E.
■ A force to be reckoned with. BMRI has delivered a strong transformation, cutting its gross NPL ratio from 26.6% in FY05A to 2.62% by FY09A, while provision coverage surged from 44% to 231% and ROE jumped from 2.5% to 21.8% during the same period. To date, BMRI has the second highest asset quality and provision coverage, the third highest profitability and second lowest LDR among the Indonesian banks under our coverage, implying the second highest growth capacity. We foresee BMRI delivering
the second highest five-year CAGR loan growth, ahead of all Indonesian banks under our coverage.
■ More potential for rerating. Despite its past rerating, we believe BMRI’s current share price does not yet adequately reflect the company’s fundamental strength. BMRI is still trading at a 25% and 62% discount to MSCI Indonesia and MSCI NJA Banks, respectively. We believe BMRI is well positioned not only to maintain its improved fundamentals but also deliver further upside, given its recent successful expansion into higheryielding assets and ever-strengthening cash management division.
■ Undemanding valuations. The large discount against MSCI Indonesia and MSCI NJA Banks, despite its fundamentals being stronger than its peers’, implies that BMRI’s share price still offers an attractive entry point. We maintain our OUTPERFORM rating on BMRI and target price of Rp5,900, implying 3.1x FY10E P/B and 13.6x FY10E P/E.
KimEng Astra Graphia (ASGR IJ): TRADING BUY - A dividend play with growth
Astra Graphia launched a new eco-friendly integrated document solution in Jan. With 40% captive share of the Document Solutions market in Indonesia, this new product is potentially a key earnings catalyst for 2010. Management expects to maintain 39% dividend payout ratio viz. 2009, which translates into an attractive 5.4% dividend yield. Using DDM, we arrive at fair value of Rp590/share (64% upside potential).
Deutsche Bumi Alert - Ongoing update on Bumi tax case
Bumi {Ticker: BUMI.JK, Closing Price: 2,325.00 IDR, Target Price: 2,100.00 IDR, Recommendation: Sell}
It appears the tax issue is not yet entirely resolved. Local news
(Tempo), reported today that the tax office has named a Bumi Resources
Director, Eddie Soebari, as another suspect in the on-going tax probe
on the company, along with a KPC executive. According to the news'
source, however, both executives have actually been named suspects
since the case was first brought forth in 2009, though Soebari has not
responded to any of the summons.
It was reported previously that Bumi & subsidiaries (KPC & Arutmin)
allegedly owed a combined Rp2.1tr (about US$212mn) in taxes on
underpayments in 2007. Bumi has paid the US$212mn at end of 2009, but
not the penalty of about US$848mn (400% of the original underpayment).
The tax office has indicated earlier that further tax investigations
will continue, unless Bumi settles the penalty(about 70% of FY10F
EBITDA).
It appears the tax issue is not yet entirely resolved. Local news
(Tempo), reported today that the tax office has named a Bumi Resources
Director, Eddie Soebari, as another suspect in the on-going tax probe
on the company, along with a KPC executive. According to the news'
source, however, both executives have actually been named suspects
since the case was first brought forth in 2009, though Soebari has not
responded to any of the summons.
It was reported previously that Bumi & subsidiaries (KPC & Arutmin)
allegedly owed a combined Rp2.1tr (about US$212mn) in taxes on
underpayments in 2007. Bumi has paid the US$212mn at end of 2009, but
not the penalty of about US$848mn (400% of the original underpayment).
The tax office has indicated earlier that further tax investigations
will continue, unless Bumi settles the penalty(about 70% of FY10F
EBITDA).
Mandiri Sekuritas PGAS - Supply cut : bad in the short term, good in the long run
On Friday, 19 March 2010, the government came with a short- term solution for PGAS supply shortage. Post solution, PGAS will still face a shortage of 90 MMSCFD from the contracted amount or 10% from our FY09 estimates. PGAS, however, will increase its gas price by 15% starting April 1, 2010, earlier than our estimate of 10% from June 2010. Net impact will be a 6.! 5%, and 1.1% reduction in 2010 and 2011 net income, respectively. The new forecasts are based on 825 MMSCFD and 850 MMSCFD, distributed gas flow in 2010, 2011, respectively. This and a 5% p.a. increase in price from 2012 raises our DCF valuation from Rp4,350/share to Rp4,650 share. However, the upside from the current price is moderate and news flow post tariff increase will be subdued, hence we downgraded our recommendation to Neutral. At Rp4,100/share, PGAS is trading at 19.3x and 18.1x PER2010F, and PER2011F, respectively, a premium to the current market 2010F PER of 13.9x.
Net tally a deficit of 90 MMSCFD, to be partially compensated by 15% price increase. PGAS lost 205 MMSCFD, 65 MMSCFD from ONWJ is lost due to contract expiration, and 140 MMSCFD due to the delivery shortage from Conoco Phillips (CP). Recent mini-cabinet meeting discussing the supply shortage, came with short-term solutions. The solution is the extension of 25 MMSCFD ONWJ until June 2010, and an effort to boost CP delivery to 290 MMCFD (from 390 MMSCFD contracted), plus 50 MMSCFD from the new Medco’s Singa field. Thus total net deficit is 90 MMSCFD. PGAS will also cancel its plan to cut gas for industry by 20% and the stiff penalty for customers’ overuse of gas from the allocated amount, deficit will be burdened by PLN, state electricity company through reduced PGAS’s supply.
No end to shortage until PGAS finds new supply. Without any new supply from new gas fields such as the Suban III from Conoco Phillips, and floating storage regasification terminal (FSRT), the problem will linger. The good thing from the incident is the pressure for the government to focus on domestic gas demand and the understanding from the consumer to adjust prices to levels which will encourage gas producers to invest. These we think are the long term ! benefit f or PGAS.
Limited catalysts prompted a Neutral downgrade recommendation. Post announcement of tariff increase, we see limited catalysts for Perusahaan Gas. Despite improvement in DCF due to tariff adjustments, risk of supply also will increase due to rising demand for other uses, reducing leverage for PGAS to bargain with gas producers. PGAS will need government support to win new supply such as Suban III and complete the FSRT projects.
Net tally a deficit of 90 MMSCFD, to be partially compensated by 15% price increase. PGAS lost 205 MMSCFD, 65 MMSCFD from ONWJ is lost due to contract expiration, and 140 MMSCFD due to the delivery shortage from Conoco Phillips (CP). Recent mini-cabinet meeting discussing the supply shortage, came with short-term solutions. The solution is the extension of 25 MMSCFD ONWJ until June 2010, and an effort to boost CP delivery to 290 MMCFD (from 390 MMSCFD contracted), plus 50 MMSCFD from the new Medco’s Singa field. Thus total net deficit is 90 MMSCFD. PGAS will also cancel its plan to cut gas for industry by 20% and the stiff penalty for customers’ overuse of gas from the allocated amount, deficit will be burdened by PLN, state electricity company through reduced PGAS’s supply.
No end to shortage until PGAS finds new supply. Without any new supply from new gas fields such as the Suban III from Conoco Phillips, and floating storage regasification terminal (FSRT), the problem will linger. The good thing from the incident is the pressure for the government to focus on domestic gas demand and the understanding from the consumer to adjust prices to levels which will encourage gas producers to invest. These we think are the long term ! benefit f or PGAS.
Limited catalysts prompted a Neutral downgrade recommendation. Post announcement of tariff increase, we see limited catalysts for Perusahaan Gas. Despite improvement in DCF due to tariff adjustments, risk of supply also will increase due to rising demand for other uses, reducing leverage for PGAS to bargain with gas producers. PGAS will need government support to win new supply such as Suban III and complete the FSRT projects.
Citigroup Bank Mandiri - Alert: 2009 Profits Well Above Expectations
BMRI profit of Rp7.2Trn (+35% y-o-y) is 16% above our forecast and 13% above
consensus. The Q4 profit of Rp2.5trn is up 50% from Q3 CY09, in an environment
of declining interest rates. The two key drivers of this strong performance in Q4
were 1) higher than expected Gross Interest Income supported by unchanged
asset yield and 2) Reversal of provision of Rp336bn, against guidance of Rp200bn
provision (Citi had assumed Rp400bn).
We maintain our Buy rating based on its potential to improve asset yield, strong
deposit franchise and upside from large written-off loans.
NIMs improved from 4.9% to 5.3%, supported by stable lending rates in Rp loans
and 50bps decline in Cost of Funds to 4.3%. Higher yields on FCY loans cancelled
the impact of lower yield on SBIs. Loan and Deposit growth were 14% and 11%
respectively, with lower deposit growth due to the retirement of expensive FCY
Term Deposits. Saving Deposit growth was 20%, with slight decline in market
share. Management is maintaining its guidance of 15-18% loan growth in 2010
and NIMs of 5.35%. There is room for upward revision in loan growth, though
management will wait till June before revising its guidance. While loan growth may
exceed expectations, in our opinion, there may be pressure on NIMs in 2010 due
to lower asset yields.
Gross NPLs have declined from 3.8% in Sep 2009 to 2.8%, due to a combination
of Upgrades and Write-offs. Credit Cost for the year declined to 1.1%, from 1.9%
in 3Q. Based on first two months of 2010, management expects Credit Cost in
2010 to be even lower, in both percentage and value.
Valuation
Our target price of Rp5,770 is based on a 2011E P/E of 13.5x, derived from a 10%
premium to the 5-year forward P/E average of 12.3x for the 4 banks in the MSCI
Index. We ascribe a premium in recognition of a potential earning surprise, BMRI's
earnings power, and use 2011E as the base year because we expect earnings to
normalize in 2011E after a volatile period in 2008-10E.
consensus. The Q4 profit of Rp2.5trn is up 50% from Q3 CY09, in an environment
of declining interest rates. The two key drivers of this strong performance in Q4
were 1) higher than expected Gross Interest Income supported by unchanged
asset yield and 2) Reversal of provision of Rp336bn, against guidance of Rp200bn
provision (Citi had assumed Rp400bn).
We maintain our Buy rating based on its potential to improve asset yield, strong
deposit franchise and upside from large written-off loans.
NIMs improved from 4.9% to 5.3%, supported by stable lending rates in Rp loans
and 50bps decline in Cost of Funds to 4.3%. Higher yields on FCY loans cancelled
the impact of lower yield on SBIs. Loan and Deposit growth were 14% and 11%
respectively, with lower deposit growth due to the retirement of expensive FCY
Term Deposits. Saving Deposit growth was 20%, with slight decline in market
share. Management is maintaining its guidance of 15-18% loan growth in 2010
and NIMs of 5.35%. There is room for upward revision in loan growth, though
management will wait till June before revising its guidance. While loan growth may
exceed expectations, in our opinion, there may be pressure on NIMs in 2010 due
to lower asset yields.
Gross NPLs have declined from 3.8% in Sep 2009 to 2.8%, due to a combination
of Upgrades and Write-offs. Credit Cost for the year declined to 1.1%, from 1.9%
in 3Q. Based on first two months of 2010, management expects Credit Cost in
2010 to be even lower, in both percentage and value.
Valuation
Our target price of Rp5,770 is based on a 2011E P/E of 13.5x, derived from a 10%
premium to the 5-year forward P/E average of 12.3x for the 4 banks in the MSCI
Index. We ascribe a premium in recognition of a potential earning surprise, BMRI's
earnings power, and use 2011E as the base year because we expect earnings to
normalize in 2011E after a volatile period in 2008-10E.
DBS Astra Agro Lestari: Fully Valued; Rp24,400; TP Rp20,425; AALI IJ
Feb10 CPO sales volume dropped by 27.4% m-o-m
Astra Agro Lestari (AALI) reported a 27.4% m-o-m decline in Feb10 CPO sales volume to 66,060 MT, from 90,954 MT in Jan10. Decline came from lower production, which fell by 20.3% m-o-m to 62,611 MT – on low production season, aggravated by a drop in smallholder yields. Local and export sales volumes accounted for 88.6% and 11.4%, respectively after falling by 25.7% and 38.4% m-o-m, respectively. Average selling prices nevertheless rose by 1.8% m-o-m to Rp6,523/kg, in line with international price movements.
For 2M10, AALI’s CPO sales volume rose by 2.7% y-o-y to 157,014 MT, representing 15% of our full-year forecast of 1,056,235 MT. We expect FY10F CPO production growth to decelerate to 2.5% from 10.3% last year, mainly due to lower plasma contribution and aging tree profile. Our Fully Valued call and Rp20,425 TP are maintained.
Astra Agro Lestari (AALI) reported a 27.4% m-o-m decline in Feb10 CPO sales volume to 66,060 MT, from 90,954 MT in Jan10. Decline came from lower production, which fell by 20.3% m-o-m to 62,611 MT – on low production season, aggravated by a drop in smallholder yields. Local and export sales volumes accounted for 88.6% and 11.4%, respectively after falling by 25.7% and 38.4% m-o-m, respectively. Average selling prices nevertheless rose by 1.8% m-o-m to Rp6,523/kg, in line with international price movements.
For 2M10, AALI’s CPO sales volume rose by 2.7% y-o-y to 157,014 MT, representing 15% of our full-year forecast of 1,056,235 MT. We expect FY10F CPO production growth to decelerate to 2.5% from 10.3% last year, mainly due to lower plasma contribution and aging tree profile. Our Fully Valued call and Rp20,425 TP are maintained.
DBS Sampoerna Agro: Buy; Rp2,650; TP Rp3,300; SGRO IJ
4Q09 results in line with expectations
At a Glance
• 4Q09 net profit of Rp77.6b (-28.8% q-o-q), inline with expectations
• Weak net profit mainly due to flat revenue growth and higher COGS
• No change in forecasts. BUY call reiterated.
Comment on Results
Sampoerna Agro (SGRO) 4Q09 net profit came in line within our expectations at Rp77.6b, (-28.8% q-o-q; +94.2% y-o-y). The q-o-q lower net profit translated down from 22.3% q-o-q drop in gross profit, on account of flat revenue growth (+0.6% q-o-q) and higher COGS (+13.0% q-o-q). 4Q09 operating profit of Rp125.9b (-32.2% q-o-q) was, nevertheless, slightly ahead of expectations, as revenues were 3% higher than forecast – offsetting a 33.3% q-o-q jump in 4Q09 operating expenses (due to higher-than-expected salaries).
For full year, net profit dropped by 35.9% y-o-y to Rp281.8b, translated down from a 20.7% y-o-y drop in revenues, given lower CPO prices. The group has yet to reveal full year production volumes, most likely to exceed our expectations as drop in 4Q09 volumes may not be as severe as anticipated.
The group remains in net cash position with ending balance of Rp387.3b, from Rp304.7b in 3Q09. Its cash conversion cycle also improved to 11 days (from 25 days in 3Q09), mostly accounting for lower inventory days (i.e. to 41 days from 64 days in 3Q09) as a result of post Eid festival sales deliveries.
Recommendation
We are maintaining our forecasts, Buy call, and Rp3,300 TP (based on DCF; WACC: 15.4%; Rf. 9.5%; B:1.23, TG: 3%). SGRO remains our top-pick for Indonesian plantation stocks, underpinned by its strong growth potential going forward. We expect 1Q10 production to be seasonally lower than 4Q09, before rebounding in 2Q onwards.
At a Glance
• 4Q09 net profit of Rp77.6b (-28.8% q-o-q), inline with expectations
• Weak net profit mainly due to flat revenue growth and higher COGS
• No change in forecasts. BUY call reiterated.
Comment on Results
Sampoerna Agro (SGRO) 4Q09 net profit came in line within our expectations at Rp77.6b, (-28.8% q-o-q; +94.2% y-o-y). The q-o-q lower net profit translated down from 22.3% q-o-q drop in gross profit, on account of flat revenue growth (+0.6% q-o-q) and higher COGS (+13.0% q-o-q). 4Q09 operating profit of Rp125.9b (-32.2% q-o-q) was, nevertheless, slightly ahead of expectations, as revenues were 3% higher than forecast – offsetting a 33.3% q-o-q jump in 4Q09 operating expenses (due to higher-than-expected salaries).
For full year, net profit dropped by 35.9% y-o-y to Rp281.8b, translated down from a 20.7% y-o-y drop in revenues, given lower CPO prices. The group has yet to reveal full year production volumes, most likely to exceed our expectations as drop in 4Q09 volumes may not be as severe as anticipated.
The group remains in net cash position with ending balance of Rp387.3b, from Rp304.7b in 3Q09. Its cash conversion cycle also improved to 11 days (from 25 days in 3Q09), mostly accounting for lower inventory days (i.e. to 41 days from 64 days in 3Q09) as a result of post Eid festival sales deliveries.
Recommendation
We are maintaining our forecasts, Buy call, and Rp3,300 TP (based on DCF; WACC: 15.4%; Rf. 9.5%; B:1.23, TG: 3%). SGRO remains our top-pick for Indonesian plantation stocks, underpinned by its strong growth potential going forward. We expect 1Q10 production to be seasonally lower than 4Q09, before rebounding in 2Q onwards.
DBS Bank Mandiri: Buy; Rp5,000; TP Rp6,600 prev Rp6,000; BMRI IJ
All time high profit levels
At a Glance
• Results above expectation due to write backs from NPL upgrades to performing loans and write-offs.
• Raise FY10-11 earnings by 9-10% for lower provisions, lower tax rate (as guided) and stronger transaction fee income.
• Maintain Buy and upgrade TP to Rp6,600 (from Rp 6,000).
Comment on Result
4Q09 net profit of Rp2.5trn brought full year net profit to Rp7.2trn against our Rp6.7trn (cons: Rp6.4trn), driven by write backs during the quarter from NPL upgrades to performing loans and write offs largely from commercial and some corporate loans. This lowered gross NPL ratio to 2.8% while boosted loan loss coverage above 200%, placing BMRI’s asset quality position second best after BBCA. Pre-provision profit was inline. Loans and deposit growth were significantly stronger in 4Q09 bringing full year loan and deposit growth to 13.8% and 10.7% respectively. NIM remained strong at 5.5% for the quarter as cost of funds improved further while asset yield remained at 9.4%. BMRI now has a CASA to total deposits ratio of 59%. BMRI also saw its transaction fee income rise strongly during the year from enhanced infrastructure and innovative payment solutions. Separately, its Rp3.5trn sub-debt issuance in 4Q09 strengthened total CAR further to 15.6%.
Based on guidance on tax rates going forward at 25-27% (we have assumed 27%), lower provisions as well as stronger transactional fee based income, we raise our FY10-11 earnings by 9-10%. Management also indicated a ROE target of 25% to be achieved over the next 3-4 years.
Recommendation
Maintain Buy but raise our TP to Rp6,600 (from Rp6,000) based on the Gordon Growth Model (GGM) with implied 3.3x FY10 P/BV. Our GGM assumptions are 24% sustainable ROE, 10% growth and 14.5% cost of equity. Key catalysts to earnings include further debt resolutions, with Garuda being the clearest case. Other recoveries would be a bonus to BMRI. The addition 5ppt tax benefit from increasing BMRI’s free float to 40% (from 33% currently) could get protracted depending on the time taken for the necessary approvals, but nevertheless, would remain a positive catalyst to earnings when completed. BMRI remains our top pick.
At a Glance
• Results above expectation due to write backs from NPL upgrades to performing loans and write-offs.
• Raise FY10-11 earnings by 9-10% for lower provisions, lower tax rate (as guided) and stronger transaction fee income.
• Maintain Buy and upgrade TP to Rp6,600 (from Rp 6,000).
Comment on Result
4Q09 net profit of Rp2.5trn brought full year net profit to Rp7.2trn against our Rp6.7trn (cons: Rp6.4trn), driven by write backs during the quarter from NPL upgrades to performing loans and write offs largely from commercial and some corporate loans. This lowered gross NPL ratio to 2.8% while boosted loan loss coverage above 200%, placing BMRI’s asset quality position second best after BBCA. Pre-provision profit was inline. Loans and deposit growth were significantly stronger in 4Q09 bringing full year loan and deposit growth to 13.8% and 10.7% respectively. NIM remained strong at 5.5% for the quarter as cost of funds improved further while asset yield remained at 9.4%. BMRI now has a CASA to total deposits ratio of 59%. BMRI also saw its transaction fee income rise strongly during the year from enhanced infrastructure and innovative payment solutions. Separately, its Rp3.5trn sub-debt issuance in 4Q09 strengthened total CAR further to 15.6%.
Based on guidance on tax rates going forward at 25-27% (we have assumed 27%), lower provisions as well as stronger transactional fee based income, we raise our FY10-11 earnings by 9-10%. Management also indicated a ROE target of 25% to be achieved over the next 3-4 years.
Recommendation
Maintain Buy but raise our TP to Rp6,600 (from Rp6,000) based on the Gordon Growth Model (GGM) with implied 3.3x FY10 P/BV. Our GGM assumptions are 24% sustainable ROE, 10% growth and 14.5% cost of equity. Key catalysts to earnings include further debt resolutions, with Garuda being the clearest case. Other recoveries would be a bonus to BMRI. The addition 5ppt tax benefit from increasing BMRI’s free float to 40% (from 33% currently) could get protracted depending on the time taken for the necessary approvals, but nevertheless, would remain a positive catalyst to earnings when completed. BMRI remains our top pick.
CLSA Bank Mandiri (BMRI IJ) FY09 results, from Bret Ginesky
Bank Mandiri posted impressive results this evening for FY2009 with a headline Net profit of Rp7.2tn or 35% higher than FY2008. By our estimates, 2009 core net income of Rp6.8tn increased 40% YoY after adjusting for non core items, and 2% above our estimate and 7% above consensus.
Key takeaways:
1. Higher earnings were fueled by solid fee income growth (+22%) and the banks ability to lower provisions (as gross NPL's decreased to 2.79% from 4.73% YoY). In addition, by releasing provisions at YE09 the bank will see a benefit to its CAR and earnings. This is a positive as provisions would have been lowered under PSAK in 2010. If the bank had been forced to lower its provision under PSAK 55 the benefit would not impact CAR (currently 15.4%) or earnings. We believe taking this writeback was a keen move by management.
2. Solid fee income drove earnings higher, with YoY growth of 22%, as the bank continues to show traction in cross selling products to its customer base. The fee ratio moved to 25% from 23% YoY.
3. The NIM decreased by 23bps YoY mainly due to the yield on the securities portfolio. We expect this portfolio to remain a drag on the NIM while rates remain at historic low levels. Loan growth in 2010 north of 20% should more than offset this impact.
4. Loan book grew by 13.8% as was previously reported. This was below our full year estimate for 2010. Management’s loan growth guidance of 15-18% was compiled in September. This means that it is conservative and too low given the growth Indonesia has seen in the last 6 months on GDP forecast and outlook. We expect loan growth will be north of 20% in 2010.
5. ROE and ROA continue to improve as management adds value to shareholders. The bank is on target to reach our ROE targets north of 20% for 2010.
We are reiterating our Conviction Buy call with a 12-month target price of Rp5800/share. We are not making any revisions to our earnings estimates at this time, and will address this in a follow up note.
Key takeaways:
1. Higher earnings were fueled by solid fee income growth (+22%) and the banks ability to lower provisions (as gross NPL's decreased to 2.79% from 4.73% YoY). In addition, by releasing provisions at YE09 the bank will see a benefit to its CAR and earnings. This is a positive as provisions would have been lowered under PSAK in 2010. If the bank had been forced to lower its provision under PSAK 55 the benefit would not impact CAR (currently 15.4%) or earnings. We believe taking this writeback was a keen move by management.
2. Solid fee income drove earnings higher, with YoY growth of 22%, as the bank continues to show traction in cross selling products to its customer base. The fee ratio moved to 25% from 23% YoY.
3. The NIM decreased by 23bps YoY mainly due to the yield on the securities portfolio. We expect this portfolio to remain a drag on the NIM while rates remain at historic low levels. Loan growth in 2010 north of 20% should more than offset this impact.
4. Loan book grew by 13.8% as was previously reported. This was below our full year estimate for 2010. Management’s loan growth guidance of 15-18% was compiled in September. This means that it is conservative and too low given the growth Indonesia has seen in the last 6 months on GDP forecast and outlook. We expect loan growth will be north of 20% in 2010.
5. ROE and ROA continue to improve as management adds value to shareholders. The bank is on target to reach our ROE targets north of 20% for 2010.
We are reiterating our Conviction Buy call with a 12-month target price of Rp5800/share. We are not making any revisions to our earnings estimates at this time, and will address this in a follow up note.
Bahana Securities Astra Agro's CPO sales volume up 2.7% y-y in 2M10
Astra Agro Lestari (AALI-HOLD-IDR24,400-TP:IDR24,300) booked 2M10 CPO sales volume of 157k tons or up 2.7% y-y, despite 4.7% y-y lower production in the same period. 2M10 CPO sales volume accounting for 14.1% of our FY10 expectations, which still in line in our view since 2M09 volume accounting for 14.5% of FY09. Around 87.5% of total CPO were sold to domestic market, while the rest 12.5% were sold overseas. It is worth noting that AALI's 2M10 average CPO price was up 24.3% y-y to IDR6,456/kg from IDR5,192/kg, translating into sales revenue of IDR1,013b or up 27.6% y-y from IDR793.7b in 2M09. Hence, we believe that AALI's performance up to Feb 2010 still in line with our forecasts. (Company, Bahana, Bisnis Indonesia)
Bahana Securities SGRO FY09 results: 4Q09 bottom line below our and consensus estimates
Sampoerna Agro’s (SGRO-HOLD-IDR2,650-TP:IDR2,700) 4Q09 bottom line came in at IDR78b, down 28.8% q-q but up 94.2% y-y, bringing FY09 bottom line to IDR282b (-35.9% y-y), 13% and 7% lower than our and consensus estimates. Worse than expected 4Q09 bottom line stemmed from COGS which jumped 13% q-q mainly driven by increase in fertilizer application in 4Q09 compared to previous quarter.
This coupled with operating expenses increased of 33.3% q-q has brought operating profit down 32.2% qq, bringing FY09 operating profit to IDR460b, still in line with our and consensus estimates. (Company, Bahana estimates)
This coupled with operating expenses increased of 33.3% q-q has brought operating profit down 32.2% qq, bringing FY09 operating profit to IDR460b, still in line with our and consensus estimates. (Company, Bahana estimates)
CIMB Bank Mandiri Result note - Advancing towards '25'
(BMRI IJ / BMRI.JK, OUTPERFORM - Maintained, Rp5,000 - Tgt. Rp6,700, Financial Services)
Maintain Outperform on Mandiri. FY09 results beat consensus and our forecasts, with net and core profits at 116% and 110% of our forecasts, respectively. The difference came about as gross NPL ratio dropped to 2.8% on the back of NPL upgrades and repayments, much lower than our assumption of 3.8%. Even without the impact of provisioning, Mandiri's fundamentals have been improving, particularly its deposit franchise and fee income. We raise our FY10-11 EPS estimates by 9-11%, on adjusting fee-income assumptions and asset quality (beginning balance), which lifts our DDM-based target price to Rp6,700 from Rp6,200 (discount rate 16.1%). Mandiri remains one of our top banking picks for its excellent FY09 performance, which brings the bank closer to its 25% ROE target by 2014.
Maintain Outperform on Mandiri. FY09 results beat consensus and our forecasts, with net and core profits at 116% and 110% of our forecasts, respectively. The difference came about as gross NPL ratio dropped to 2.8% on the back of NPL upgrades and repayments, much lower than our assumption of 3.8%. Even without the impact of provisioning, Mandiri's fundamentals have been improving, particularly its deposit franchise and fee income. We raise our FY10-11 EPS estimates by 9-11%, on adjusting fee-income assumptions and asset quality (beginning balance), which lifts our DDM-based target price to Rp6,700 from Rp6,200 (discount rate 16.1%). Mandiri remains one of our top banking picks for its excellent FY09 performance, which brings the bank closer to its 25% ROE target by 2014.
JP Morgan - PT Bank Mandiri Tbk.: Better-than-expected results; rerating driver remains in place: buy on dip
· 4Q profit 43% higher than consensus; buy on dip: BMRI’s FY09 net profit was higher than the most optimistic forecast on the street, at Rp7.15T. 4Q FY09 profit was 43% higher than our and consensus estimates. The stock fell 3.8% in trading ahead of results; we see the decline as misplaced and recommend that investors accumulate BMRI.
· 25% ROE target reiterated – re-rating driver remains in place: Management reiterated a medium-term target of a 25% ROE. We see an upward ROE trajectory as a continued re-rating driver, and maintain our OW rating. Our revised Rp5,700 (up from Rp5,425) Dec 2010 PT envisages BMRI trading at an unchanged 2.5x 12M Forward P/BV at the end of FY10, and hence could be exposed to upside risk.
· Forecasts revised 10-13% higher than consensus: Our new FY10-11E EPS numbers are 10-13% higher than consensus, and we expect revisions to exert upward pressure on the stock in the near term.
· 4Q results: Margins and provisions key areas of surprise: 4Q FY09 margins rose 45bp sequentially, with both the rupiah NIM (up 34bp) and forex NIM (up 68bp) improving q/q. Asset quality improved, as NPLs declined to a better-than-expected 2.7% of loans. Loan loss coverage improved to 231%, despite no new net provisioning, and absolute NPLs declined 23% q/q in 4Q FY09. Broad NPLs declined, indicating little pressure from pipeline NPL formation.
· Continuity is a key company-level risk: Mandiri’s Board of Directors’ term expires at the upcoming AGM, and we see management and strategic continuity a potential risk to our PT. Over a period of time, lower interest rates in Indonesia could be a negative factor for margins. New accounting policies on asset quality may be a risk to forecasts, although BMRI management does not expect a detrimental impact.
· 25% ROE target reiterated – re-rating driver remains in place: Management reiterated a medium-term target of a 25% ROE. We see an upward ROE trajectory as a continued re-rating driver, and maintain our OW rating. Our revised Rp5,700 (up from Rp5,425) Dec 2010 PT envisages BMRI trading at an unchanged 2.5x 12M Forward P/BV at the end of FY10, and hence could be exposed to upside risk.
· Forecasts revised 10-13% higher than consensus: Our new FY10-11E EPS numbers are 10-13% higher than consensus, and we expect revisions to exert upward pressure on the stock in the near term.
· 4Q results: Margins and provisions key areas of surprise: 4Q FY09 margins rose 45bp sequentially, with both the rupiah NIM (up 34bp) and forex NIM (up 68bp) improving q/q. Asset quality improved, as NPLs declined to a better-than-expected 2.7% of loans. Loan loss coverage improved to 231%, despite no new net provisioning, and absolute NPLs declined 23% q/q in 4Q FY09. Broad NPLs declined, indicating little pressure from pipeline NPL formation.
· Continuity is a key company-level risk: Mandiri’s Board of Directors’ term expires at the upcoming AGM, and we see management and strategic continuity a potential risk to our PT. Over a period of time, lower interest rates in Indonesia could be a negative factor for margins. New accounting policies on asset quality may be a risk to forecasts, although BMRI management does not expect a detrimental impact.
Mandiri Sekuritas Indofood Sukses Makmur: FY09 earnings above our and consensus estimates (INDF, Rp4,100, Neutral, TP: Rp3,700)
Indofood registered Rp37.1tn sales (-4.3% yoy, -10.5%qoq) and Rp2.1tn earnings (+100.7%yoy, -35.6%qoq) in FY09. We view that sales figure was backed by stronger sales volume growth of its CBP products. CBP division contributed some 43% of sales in FY09, up from 31% in FY08. Noted that this earnings figure is 17-20% above our and consensus estimates largely due to minority interest factor.
As we already mention in our 9M09 report (“Passed its peak”), we think that company’s margin is already peaked in 3Q09. In 4Q09, INDF reported lower gross margin of 26.9%, from 28.6% in the previous quarter, largely due to higher wheat and CPO prices. Wheat and CPO prices have climbed by around 12% and 16% in 4Q09, respectively. For FY09, company booked some forex gain of Rp731bn.
Currently, Indofood is trading at PER10F of 19.8x. Maintain Neutral.
As we already mention in our 9M09 report (“Passed its peak”), we think that company’s margin is already peaked in 3Q09. In 4Q09, INDF reported lower gross margin of 26.9%, from 28.6% in the previous quarter, largely due to higher wheat and CPO prices. Wheat and CPO prices have climbed by around 12% and 16% in 4Q09, respectively. For FY09, company booked some forex gain of Rp731bn.
Currently, Indofood is trading at PER10F of 19.8x. Maintain Neutral.
Mandiri Sekuritas Sampoerna Agro: FY09 earnings of Rp282bn, in line with our estimates (SGRO, Rp2,650, Buy, TP: Rp3,200)
Sampoerna Agro (SGRO) delivered FY09 revenue and earnings of Rp1.8tn and Rp282bn, down by 20.7% and 35.9% respectively. Bottom figure is in line with our and consensus expectations. Production number has yet to be disclosed, but we estimate CPO production in 4Q09 was around 90-95k tons which bring total cumulative production of 270-275k tons, slightly above our estimates.
However, we highlighted that company manage to book lower-than-expected cost and therefore the operating margin decline is relatively small on yearly basis (-5.2% yoy). Noted that lower net margin (15.5% in FY09 vs 19.2% in FY08) was largely due to Rp20bn forex loss.
We maintain our Buy recommendation on the counter with TP of Rp3,200/share.Currently, the stock is trading at PER10F of 11.3x.
However, we highlighted that company manage to book lower-than-expected cost and therefore the operating margin decline is relatively small on yearly basis (-5.2% yoy). Noted that lower net margin (15.5% in FY09 vs 19.2% in FY08) was largely due to Rp20bn forex loss.
We maintain our Buy recommendation on the counter with TP of Rp3,200/share.Currently, the stock is trading at PER10F of 11.3x.
Mandiri Sekuritas Bank Mandiri: FY09 results 18% above our expectation and 12% above consensus estimates (BMRI, Rp5,000, Not Rated)
Bank Mandiri recorded a net profit of Rp7.2tn (+34.7% yoy) in FY09, which was better than our expectation and consensus estimates.
The bank recorded lower than expected provision expenses as the bank managed to reduce its NPL substantially to 2.6% at end 2009. Such decline in NPL was possible due to upgrade and some repayments on the troubled loans. Bank Mandiri recorded Rp1.6tn upgrades in its corporate loans, representing 74% of the total upgrades during the year.
During the analyst meeting yesterday, the bank highlighted its success in strengthening its deposit franchise value. The bank managed to enhance its transaction capabilities as reflected on a significant increase in the transaction volume through its electronic channels as well as an increase in the number of cash management users. In 2010, the bank aims to have 15- 18% yoy loan growth (vs. 13.6% yoy in 2009) and managed its NPL below 4%. The bank also targets its coverage ratio of above 140% (at end 2009, coverage ratio was recorded at 229%).
At present, Bank Mandiri is trading at 2009F P/BV of 2.6x and PER of 14.6x. We have no rating on this bank.
The bank recorded lower than expected provision expenses as the bank managed to reduce its NPL substantially to 2.6% at end 2009. Such decline in NPL was possible due to upgrade and some repayments on the troubled loans. Bank Mandiri recorded Rp1.6tn upgrades in its corporate loans, representing 74% of the total upgrades during the year.
During the analyst meeting yesterday, the bank highlighted its success in strengthening its deposit franchise value. The bank managed to enhance its transaction capabilities as reflected on a significant increase in the transaction volume through its electronic channels as well as an increase in the number of cash management users. In 2010, the bank aims to have 15- 18% yoy loan growth (vs. 13.6% yoy in 2009) and managed its NPL below 4%. The bank also targets its coverage ratio of above 140% (at end 2009, coverage ratio was recorded at 229%).
At present, Bank Mandiri is trading at 2009F P/BV of 2.6x and PER of 14.6x. We have no rating on this bank.
Mandiri Sekuritas Jasa Marga and PP form a joint subsidiary (JSMR, Rp1760, Buy, TP: Rp2100); (PTPP, Rp650, Not-rated)
Jasa Marga and PT Pembangunan Perumahan (PTPP) will work together to form a subsidiary in the property sector and still looking for another private company to join the venture, which scheduled to be formed in semester II- 2010. Both companies have prepared funds of Rp100bn for initial capital.
The new subsidiary will focus in housing and office property and will start the operation in Sidoarjo, East Java, near with JSMR’s toll road. We see that the plan will provide added value for JSMR due to increasing property prices in the region through which the highway. We still maintain BUY on JSMR, currently trades at P/E’10 of 8.9x and PBV10 of 1.5x.
The new subsidiary will focus in housing and office property and will start the operation in Sidoarjo, East Java, near with JSMR’s toll road. We see that the plan will provide added value for JSMR due to increasing property prices in the region through which the highway. We still maintain BUY on JSMR, currently trades at P/E’10 of 8.9x and PBV10 of 1.5x.
Deutsche Growth-driven valuation; target price raised to Rp7,000
Justified by high quality; Buy retained
Despite the recent stock price rally, we reiterate BCA as one of our top picks in
the Indonesian banking space. Our revised target price of Rp7,000 (up from
Rp5,700) implies FY11F PB of 4.6x and PER of 18.6x. Most of the stock's 27%
potential upside, to our Target Price, is being driven more by earnings (given its
ROAE of 26.5%) than a valuation re-rating. We believe the bank's high earnings
quality, in terms of pace and stability of growth, justifies its premium valuations.
Strong pace of growth and low ROAE volatility
Over the last decade, BCA has delivered among the fastest growth in book value,
with average ROAE of over 23%. The high quality of earnings is also reflected by
its low ROAE volatility, which demonstrates BCA’s ability to weather various
business cycles. We believe BCA’s pace and stability of growth to be primary
reasons justifying its premium valuations. On the back of this, our current target
price implies that over 70% of the stock’s potential upside to our TP will be driven
by earnings growth (plus dividend).
Earnings upgrades: 7.7% in 2010F and 8.8% in 2011F
The upgrades are primarily due to lower provision charges. We believe BCA’s
earnings growth will become more visible under the new accounting standards
pertaining to provision charges (see our January 10 report). BCA’s largely undergeared balance sheet (with LDR at 50%) will allow it to gain loan market share and sustain three-year earnings CAGR of 17.5% with implied ROAE over 26.0%.
TP Rp7,000 (from Rp5,700); risks: lower loan growth/asset yields, higher NPL
Our TP is derived from the Gordon growth model, using 2011F book as reference
(from 2010F previously. Risks are lower loan growth and asset yields, higher
funding costs and larger NPL formation increase. (see pages 5 & 6 for more on
valuation & risks
Despite the recent stock price rally, we reiterate BCA as one of our top picks in
the Indonesian banking space. Our revised target price of Rp7,000 (up from
Rp5,700) implies FY11F PB of 4.6x and PER of 18.6x. Most of the stock's 27%
potential upside, to our Target Price, is being driven more by earnings (given its
ROAE of 26.5%) than a valuation re-rating. We believe the bank's high earnings
quality, in terms of pace and stability of growth, justifies its premium valuations.
Strong pace of growth and low ROAE volatility
Over the last decade, BCA has delivered among the fastest growth in book value,
with average ROAE of over 23%. The high quality of earnings is also reflected by
its low ROAE volatility, which demonstrates BCA’s ability to weather various
business cycles. We believe BCA’s pace and stability of growth to be primary
reasons justifying its premium valuations. On the back of this, our current target
price implies that over 70% of the stock’s potential upside to our TP will be driven
by earnings growth (plus dividend).
Earnings upgrades: 7.7% in 2010F and 8.8% in 2011F
The upgrades are primarily due to lower provision charges. We believe BCA’s
earnings growth will become more visible under the new accounting standards
pertaining to provision charges (see our January 10 report). BCA’s largely undergeared balance sheet (with LDR at 50%) will allow it to gain loan market share and sustain three-year earnings CAGR of 17.5% with implied ROAE over 26.0%.
TP Rp7,000 (from Rp5,700); risks: lower loan growth/asset yields, higher NPL
Our TP is derived from the Gordon growth model, using 2011F book as reference
(from 2010F previously. Risks are lower loan growth and asset yields, higher
funding costs and larger NPL formation increase. (see pages 5 & 6 for more on
valuation & risks
Selasa, 23 Maret 2010
A Cup of Tea 23 March'10
The Dow Jones industrial average was up 43.91 points, or 0.41 percent, at 10,785.89. The Standard & Poor's 500 Index .SPX was up 5.91 points, or 0.51 percent, at 1,165.81. Stocks rose on Monday, building on last week's strength, as the passage of a bill overhauling the healthcare system ended much of the uncertainty about the issue for investors. Most Southeast Asian stock markets fell on Monday, hit by worries over Greece's debt, while weaker oil prices squeezed energy and resource shares. Singapore slid 0.9 percent, Malaysia edged down 0.23 percent, Thailand ended 0.3 percent lower, and Indonesia dropped 1.5 percent.
The benchmark MSCI index of Asian shares outside Japan had shed 1.4 percent by 0927 GMT while oil CLc1 fell towards $80 on Monday and extended losses for the third-straight session.
Crude palm oil futures on Malaysia’s derivatives exchange ended mostly lower Monday in volatile trade spurred on by conflicting export estimates. The benchmark June contract on the Bursa Malaysia Derivative exchange ended down MYR7. Intertek estimated exports were up 3.4% on month at 873,931 tons, just a little over market expectations of 873,000 tons. SGS prompted the bears to come out in full force. The surveyor's data showed exports during March 1-20 fell 2.4% on month to 844,474 tons.
On LME Tin ended at $17,550 from $17,650 and nickel at $22,275 from $22,450.
Over all I still thinking positive for our market. It's just a market correction because share prices have rallied too far and too fast. Indonesia underperformed the region, down 1.5 pct contributed by Coal miner Bumi Resources dropped 9.7 percent, P Gas Negara fell nearly 3 percent and Adaro Energy was down 2.1 percent.
Banking, Energy and Metal still my favorite sector. Index had support at 2690 level. I like ANTM for next growth, the result above consensus estimates and both gold and nickel had a good price.
Bang Juntri
BASML PGAS All worked out well
February volume drop not a concern, in our view
Sales volume in February came in at 857mmscfd, down 4.6% MoM. Meanwhile gas contracts not absorbed by customers rose to 1.4% from 0.5% in January and the number of customers who secured gas below the minimum payment rose to 246 from 159 in January. We suspect this was due to a volume drop that led to some customers’ allocation coming in below the minimum payment. We believe this volume drop is temporary and still maintain our FY10E volume guidance at 890mmscfd.
Gas flow from Pertamina and Conoco normalizing
The reason for the volume drop in February was because of a 60mmscfd lower gas inflow from Conoco, down from 380mmscfd in January. After last Thursday’s discussion between the government and PGAS (see 18 March 2010 report) we expect the volume drop to recover in April and PGAS will even get the extension of Pertamina’s ONWJ gas of around 30mmscfd. We understand Conoco has made commitments to recover its gas flow to 330mmscfd immediately before ramping up to around 360mmscfd. Apparently, the government will help Chevron find an alternative energy source (ie, coal). Pertamina was requested by the government to extend its gas contract with PGAS. With additional volumes of 40mmscfd from Conoco (from the February level), resumption of 30mmscfd inflow from Pertamina, and 50mmscfd from Lematang, PGAS continues to maintain its volume forecast of 800-900mmscfd.
No more cut in gas allocation; gas price hike to go ahead
Since PGAS’s gas volume is expected to recover, it will no longer reduce gas allocations to its customers by 20%. With customers’ sales contracts to be signed and effective by 1 April, PGAS is still expected to announce its new gas price within the next two weeks. A price hike of 10-15% and a 50% hike in the surcharge seem imminent with no meaningful push back from both the government and customers so far.
FY09 results to be released end of March
Boosted by a Rp1tn forex gain on a stronger Rupiah, we expect PGAS to book Rp5.6tn in headline net profit, up 794% YoY. EBIT is seen to rise 66% to Rp7.7tn.
Price objective basis & risk Perusahaan Gas N (PPAAF)
Our DCF-based PO of Rp4,300 is based on a WACC of 12% and a terminal growth rate of 4.5%. The key long-term assumption is terminal gas distribution margin of US$3.00/mmbtu and regulated toll fee of US$1.43/mmbtu for the SSWJ network. Risks: Changes in regulatory environment, execution delays and foreign exchange risks against the US dollar.
Sales volume in February came in at 857mmscfd, down 4.6% MoM. Meanwhile gas contracts not absorbed by customers rose to 1.4% from 0.5% in January and the number of customers who secured gas below the minimum payment rose to 246 from 159 in January. We suspect this was due to a volume drop that led to some customers’ allocation coming in below the minimum payment. We believe this volume drop is temporary and still maintain our FY10E volume guidance at 890mmscfd.
Gas flow from Pertamina and Conoco normalizing
The reason for the volume drop in February was because of a 60mmscfd lower gas inflow from Conoco, down from 380mmscfd in January. After last Thursday’s discussion between the government and PGAS (see 18 March 2010 report) we expect the volume drop to recover in April and PGAS will even get the extension of Pertamina’s ONWJ gas of around 30mmscfd. We understand Conoco has made commitments to recover its gas flow to 330mmscfd immediately before ramping up to around 360mmscfd. Apparently, the government will help Chevron find an alternative energy source (ie, coal). Pertamina was requested by the government to extend its gas contract with PGAS. With additional volumes of 40mmscfd from Conoco (from the February level), resumption of 30mmscfd inflow from Pertamina, and 50mmscfd from Lematang, PGAS continues to maintain its volume forecast of 800-900mmscfd.
No more cut in gas allocation; gas price hike to go ahead
Since PGAS’s gas volume is expected to recover, it will no longer reduce gas allocations to its customers by 20%. With customers’ sales contracts to be signed and effective by 1 April, PGAS is still expected to announce its new gas price within the next two weeks. A price hike of 10-15% and a 50% hike in the surcharge seem imminent with no meaningful push back from both the government and customers so far.
FY09 results to be released end of March
Boosted by a Rp1tn forex gain on a stronger Rupiah, we expect PGAS to book Rp5.6tn in headline net profit, up 794% YoY. EBIT is seen to rise 66% to Rp7.7tn.
Price objective basis & risk Perusahaan Gas N (PPAAF)
Our DCF-based PO of Rp4,300 is based on a WACC of 12% and a terminal growth rate of 4.5%. The key long-term assumption is terminal gas distribution margin of US$3.00/mmbtu and regulated toll fee of US$1.43/mmbtu for the SSWJ network. Risks: Changes in regulatory environment, execution delays and foreign exchange risks against the US dollar.
CIMB INTP Result note - Gleaming results
(INTP IJ / INTP.JK, OUTPERFORM - Maintained, Rp14,150 - Tgt. Rp16,600, Construction and Materials)
Maintain Outperform on Indocement. FY09 earnings beat consensus and our forecasts by 7% and 8% respectively due to a smaller-than-expected decline in sales volume. We raise our earnings estimates by 3-4% for FY10-11 on the back of the higher base while maintaining our growth assumptions. We also introduce FY12 forecasts. Following our earnings upgrade, our DCF-based (WACC 13%) target price rises to Rp16,600 from Rp15,500. We see stock catalysts coming from consensus earnings upgrades for FY10-11 and positive surprises in margins.
Maintain Outperform on Indocement. FY09 earnings beat consensus and our forecasts by 7% and 8% respectively due to a smaller-than-expected decline in sales volume. We raise our earnings estimates by 3-4% for FY10-11 on the back of the higher base while maintaining our growth assumptions. We also introduce FY12 forecasts. Following our earnings upgrade, our DCF-based (WACC 13%) target price rises to Rp16,600 from Rp15,500. We see stock catalysts coming from consensus earnings upgrades for FY10-11 and positive surprises in margins.
KimEng Market Highlights ANTM
Aneka Tambang: FY09 net profit dropped 56% y/y
§ Aneka Tambang reported FY09 result today. Sales dropped 9% y/y to Rp8.71t while net profit plunged 56% y/y to Rp604b (Rp63.5/share).
§ On a quarterly basis, Antam booked Rp312b net profit, 352% q/q higher compared to 3Q09 and a reversal from Rp256b loss from corresponding figure a year earlier.
Analyst comment:
§ The result is 9% and 14% above consensus estimate for sales and net profit, respectively.
§ The decline was caused by lower nickel sales volume for both ferronickel (-17% y/y) and nickel ore (-8% y/y) with ASP for nickel in ferronickel plunged 33% y/y to US$6.6/lbs.
§ Gold trading business cushioned the decline as gold sales volume rose 31% y/y to 12.9 tons. However, gold production declined by 7% y/y to 2.6 tons as Pongkor mine aged and Cibaliung has not commenced production.
§ Aneka Tambang reported FY09 result today. Sales dropped 9% y/y to Rp8.71t while net profit plunged 56% y/y to Rp604b (Rp63.5/share).
§ On a quarterly basis, Antam booked Rp312b net profit, 352% q/q higher compared to 3Q09 and a reversal from Rp256b loss from corresponding figure a year earlier.
Analyst comment:
§ The result is 9% and 14% above consensus estimate for sales and net profit, respectively.
§ The decline was caused by lower nickel sales volume for both ferronickel (-17% y/y) and nickel ore (-8% y/y) with ASP for nickel in ferronickel plunged 33% y/y to US$6.6/lbs.
§ Gold trading business cushioned the decline as gold sales volume rose 31% y/y to 12.9 tons. However, gold production declined by 7% y/y to 2.6 tons as Pongkor mine aged and Cibaliung has not commenced production.
Bahana Securities Bumi targets its 1Q10 coal sales volume to reach 16m tons
Bumi Resources (BUMI-BUY-IDR2,575-TP:IDR3,200) targets its 1Q10 coal sales volumes to reach 16m tons, up 23% y-y. This inline with our estimate as it accounts for 24.4% of our full-year forecasts.
Bahana Securities PGAS climbs down from indutry gas-rationing plan
Following the government’s intervention, Perusahaan Gas Negara (PGAS-BUY-IDR4,225-TP:IDR4,800) has backed down from a plan to reduce the amount of natural gas it allocates to domestic industry and to charge them drastically higher prices if they wanted to buy more than their allotted amount. According to director general of agriculture and chemical industries at the Industry Ministry, Benny Wahyudi, PGAS has secured additional supply from Pertamina, so there won’t be any cuts to the supply for local industry.
Bahana Securities Indofood transferred IDR3.9t of assets
Indofood Sukses Makmur (INDF-HOLD-IDR4,150-TP:IDR3,800) has transferred IDR3.9t assets og Indofood Fritolay Makmur and Drayton to Indofood CBP Sukses Makmur. INDF transferred 29.2m of shares at Indofood Fritolay to Indofood CBP worth IDR106.4b and also transferred all Drayton's shares worth IDR2.7t.
Bahana Securities ANTM FYO9 results, above our and consensus estimates
ANTM FYO9 results, above our and consensus estimates Aneka Tambang (ANTM-BUY-IDR2,350-TP:IDR2,100), reported net profit of IDR604b (-55.8% y-y ) coming above our and consensus estimates. Though we and consensus are inline up till the operating
profit level, forming 98% and 101% respectively, we are 48% above consensus at net profit level. This difference is because of other income and taxation. On quarterly basis, the results are extremely good, with sales rising 31% q-q, while COGS at a lower rate of 26%; therefore translating into 58% q-q growth in gross profit. On y-y basis, 4Q09 sales were up 21% y-y while COGS was down 5% y-y, therefore translating into net profit of IDR460b from a loss of IDR73b in the previous year. Strong growth in 4Q09 was backed by higher sales volume of ferronickel, which rose 3% y-y to 4,552 TNi, and also higher sales price of ferronickel which rose 24% to USD7.52 per lb.
profit level, forming 98% and 101% respectively, we are 48% above consensus at net profit level. This difference is because of other income and taxation. On quarterly basis, the results are extremely good, with sales rising 31% q-q, while COGS at a lower rate of 26%; therefore translating into 58% q-q growth in gross profit. On y-y basis, 4Q09 sales were up 21% y-y while COGS was down 5% y-y, therefore translating into net profit of IDR460b from a loss of IDR73b in the previous year. Strong growth in 4Q09 was backed by higher sales volume of ferronickel, which rose 3% y-y to 4,552 TNi, and also higher sales price of ferronickel which rose 24% to USD7.52 per lb.
CIMB PGAS Quick takes - Cracks are showing
(PGAS IJ / PGAS.JK, UNDERPERFORM - Downgraded, Rp4,075 - Tgt. Rp4,000, Utilities)
Downgrade to UNDERPERFORM from Neutral. PGAS's CEO commented yesterday about lower supply from one major supplier and said that no tariff increase was planned. This is contrary to market expectations of a tariff increase, which has helped lift the share price of late. We think this issue about existing supply is likely to persist, adding another risk to the company's operational outlook on top of the lingering uncertainty over tariff increases and future new supply. The lower volumes could also cap the benefit of the planned "lower quota, higher surcharge" scheme. Even in our best-case scenario of a tariff increase effective Jun 10 plus higher surcharge, the EPS impact would be tempered by lower volumes. We are increasing our FY10 EPS by 1.7% but lowering post-FY10 EPS by 6-8%. This reduces our DCF-based target price (WACC 12%, LTG 4.5%) from Rp4,400 to Rp4,000. We believe any share price uptick in reaction to a tariff hike, if any, would be a good opportunity to sell.
Downgrade to UNDERPERFORM from Neutral. PGAS's CEO commented yesterday about lower supply from one major supplier and said that no tariff increase was planned. This is contrary to market expectations of a tariff increase, which has helped lift the share price of late. We think this issue about existing supply is likely to persist, adding another risk to the company's operational outlook on top of the lingering uncertainty over tariff increases and future new supply. The lower volumes could also cap the benefit of the planned "lower quota, higher surcharge" scheme. Even in our best-case scenario of a tariff increase effective Jun 10 plus higher surcharge, the EPS impact would be tempered by lower volumes. We are increasing our FY10 EPS by 1.7% but lowering post-FY10 EPS by 6-8%. This reduces our DCF-based target price (WACC 12%, LTG 4.5%) from Rp4,400 to Rp4,000. We believe any share price uptick in reaction to a tariff hike, if any, would be a good opportunity to sell.
CLSA Coal bed methane development by Swati
The government is planning to introduce a more flexible revenue-splitting mechanism to attract more investment in coal bed methane development. It is proposing to split gross revenue, rather than net income, with investors, and give investors a larger share of that gross revenue in exchange for not allowing them to recover costs incurred during development and operation, which they are currently allowed to do.
A leading player in the coal-bed methane energy sector said that investors should receive at least 82% of the gross revenue from such projects to increase investment in the sector. Currently, investors in such projects receive 45%-49% of the net income, with the government getting the rest.
The proposed scheme had yet to be finalized and no numbers had been agreed on. The coal-bed methane investors would be able to choose between the new system and the old system.
The coal-bed methane projects required greater incentives for investors because it was a relatively new sector in Indonesia. Ephindo is currently working on three domestic coal-bed methane projects. Methane exists naturally in coal deposits.
Indonesia has estimated reserves of 453 trillion cubic feet, the second-largest in the world after China. Since 2008, the government has signed 20 coal-bed methane production-sharing contracts with investors.
Energy Minister Darwin Zahedy Saleh said he expected five such projects, producing a combined 4.2mmscfd of gas a day, to come on stream next year. Coal bed methane can be the new source of supply for PGAS . Reiterate buy on PGas as it remains a structural story of Indonesia’s shift to gas.
A leading player in the coal-bed methane energy sector said that investors should receive at least 82% of the gross revenue from such projects to increase investment in the sector. Currently, investors in such projects receive 45%-49% of the net income, with the government getting the rest.
The proposed scheme had yet to be finalized and no numbers had been agreed on. The coal-bed methane investors would be able to choose between the new system and the old system.
The coal-bed methane projects required greater incentives for investors because it was a relatively new sector in Indonesia. Ephindo is currently working on three domestic coal-bed methane projects. Methane exists naturally in coal deposits.
Indonesia has estimated reserves of 453 trillion cubic feet, the second-largest in the world after China. Since 2008, the government has signed 20 coal-bed methane production-sharing contracts with investors.
Energy Minister Darwin Zahedy Saleh said he expected five such projects, producing a combined 4.2mmscfd of gas a day, to come on stream next year. Coal bed methane can be the new source of supply for PGAS . Reiterate buy on PGas as it remains a structural story of Indonesia’s shift to gas.
CLSA Bakrieland (ELTY IJ) by Sarina
Bakrieland's net profit for 2009 is estimated to decline to Rp125bn, down 54% from net FY08 of Rp272bn (note that a Rp56bn forex gain was booked in FY08). Also, separately, it is rumored that the conversion price of Bakrieland's recent convertible bond issuance is at Rp350 per share (25% conversion premium). The price will be announced tomorrow (23 Mar) according to management.
Analyst comment: While we have expected a softer 2009 numbers (we have estimated Rp132bn for FY09 net profit, hence just slightly higher than the reported estimation), consensus's estimate is a lot higher at Rp157bn. Thus, this might put pressure on the share price in the medium term.
Also for, 9M09, Bakrieland has booked a Rp39bn forex loss. For FY10, we expect a recovery with profit increase 16% YoY. Management expects an additional revenue of Rp150-200bn from the new toll-road Kanci-Pejagan which was operational since Jan2010.
At current share price (Rp255/sh), Bakrieland is trading at 55% discount to its NAV, and below book at 0.9x P/B. Bakrieland just completed the issuance of convertible bond of US$155m, with 8.625% coupon, 5 years tenor. Debt to Equity ratio rose to 90% from 50% previously.
The proceeds will be used mostly for project acceleration capital expenditure. On project delivery, the Epicentrum Walk of mall will open in next few weeks and Bakrie Tower by end of May this year. We maintain a BUY on the stock, with Rp410 target price.
Analyst comment: While we have expected a softer 2009 numbers (we have estimated Rp132bn for FY09 net profit, hence just slightly higher than the reported estimation), consensus's estimate is a lot higher at Rp157bn. Thus, this might put pressure on the share price in the medium term.
Also for, 9M09, Bakrieland has booked a Rp39bn forex loss. For FY10, we expect a recovery with profit increase 16% YoY. Management expects an additional revenue of Rp150-200bn from the new toll-road Kanci-Pejagan which was operational since Jan2010.
At current share price (Rp255/sh), Bakrieland is trading at 55% discount to its NAV, and below book at 0.9x P/B. Bakrieland just completed the issuance of convertible bond of US$155m, with 8.625% coupon, 5 years tenor. Debt to Equity ratio rose to 90% from 50% previously.
The proceeds will be used mostly for project acceleration capital expenditure. On project delivery, the Epicentrum Walk of mall will open in next few weeks and Bakrie Tower by end of May this year. We maintain a BUY on the stock, with Rp410 target price.
CLSA Aneka Tambang (ANTM IJ) – FY09 results in line, retain U-PF
· The company announced a net profit of Rp604bn in FY09, down by 54% YoY, and came in line with our estimate. The figure was slightly better than the unaudited number release in Feb10 of Rp559bn, largely due to higher other income, amounting Rp35bn.
· Revenue was down by 9% YoY to Rp8.7tn in FY09, despite 33% to 39% lower ferronickel and nickel ore prices and 4% to 17% decline in ferronickel and nickel ore sales. Therefore, gold trading and refining business was the main driver for revenue in 2009, contributing to around 55% of total revenue. Note gold trading and refining generates very thin margin.
· Production costs were in line with expectation, but operating expenses, totalling Rp610bn, were 10% higher than estimated, largely driven by both G&A and exploration spending.
· M&A angle is much benign now as the company has lost to Bumi Resources in bidding for stakes in Newmont Nusa Tenggara. Strong Rupiah would also be negative for Antam given its 50% Rupiah based costs. Key catalyst for Antam would therefore be delivering its Cibaliung gold project that could potentially double its gold production to 4.5t in 2 years, with some 0.5t targeted by management this year. We at the moment, have conservatively assumed 0.3t production from Cibaliung and ramping that up to 2.0t in 2013.
· On Antam, the counter does not look cheap on relative basis, trading at 50% premium to historical multiple, and 20% premium to its DCF estimate. We set our target price at Rp2,050 for Antam, based on blended valuation approach, suggesting some 10% downside. We retain our Underperform rating.
· Revenue was down by 9% YoY to Rp8.7tn in FY09, despite 33% to 39% lower ferronickel and nickel ore prices and 4% to 17% decline in ferronickel and nickel ore sales. Therefore, gold trading and refining business was the main driver for revenue in 2009, contributing to around 55% of total revenue. Note gold trading and refining generates very thin margin.
· Production costs were in line with expectation, but operating expenses, totalling Rp610bn, were 10% higher than estimated, largely driven by both G&A and exploration spending.
· M&A angle is much benign now as the company has lost to Bumi Resources in bidding for stakes in Newmont Nusa Tenggara. Strong Rupiah would also be negative for Antam given its 50% Rupiah based costs. Key catalyst for Antam would therefore be delivering its Cibaliung gold project that could potentially double its gold production to 4.5t in 2 years, with some 0.5t targeted by management this year. We at the moment, have conservatively assumed 0.3t production from Cibaliung and ramping that up to 2.0t in 2013.
· On Antam, the counter does not look cheap on relative basis, trading at 50% premium to historical multiple, and 20% premium to its DCF estimate. We set our target price at Rp2,050 for Antam, based on blended valuation approach, suggesting some 10% downside. We retain our Underperform rating.
CLSA INDO: Indocement upgrades, cash machine
Our Head of Research Nick Cashmore spent his weekend … in the office, banging out a bullish piece on Indocement (INTP IJ). He raised the TP to Rp19,000 (from previously Rp17,000). The new TP is based on 17x 2011 earnings. We have revised earnings up by 13% this year and 11% in 2011.
Indocement is an incredible cash machine. The company became net cash last year for the first time in its history. As of December, the company had US$247m in net cash and will generate another US$400m in free cashflow this year after US$60m in planned capex. This FCF yield of 7% could be returned as dividends. We have assumed 40% payout ratio but this could be significantly higher.
The stock does not look cheap from PER standpoint. But assuming 100% output will be sold to higher margin domestic market with 100% capacity utilization, we are talking about PER of 9.4x 2011 for INTP, compared to 11.9x for market.
Indocement has been a fantastic performer over the past 12 months but we continue to recommend the stock as a core conviction holding for Indonesian portfolios. Returns on capital are rising and demand looks ever robust.
Key points from the report:
INTP released stellar financial results for 2009
INTP is well positioned to benefit from the building boom that lies ahead.
Private sector investment will accelerate over the next three years.
Revise our assumptions to 12% volume growth this year and 10% in 2011.
INTP output for 2M10 is already 19% above that of last year.
We have not assumed any price increases, to be conservative.
Supply-demand situation is very attractive. Over the past decade, cement demand has grown by a CAGR of 7.4% and from 1985-1995 demand grew by 10% p.a. But supply growth is forecast at only 4.8% p.a. until 2015.
Alternatively, the group could build a new 2.5m tonne cement plant every year out of cash alone.
Indocement is an incredible cash machine. The company became net cash last year for the first time in its history. As of December, the company had US$247m in net cash and will generate another US$400m in free cashflow this year after US$60m in planned capex. This FCF yield of 7% could be returned as dividends. We have assumed 40% payout ratio but this could be significantly higher.
The stock does not look cheap from PER standpoint. But assuming 100% output will be sold to higher margin domestic market with 100% capacity utilization, we are talking about PER of 9.4x 2011 for INTP, compared to 11.9x for market.
Indocement has been a fantastic performer over the past 12 months but we continue to recommend the stock as a core conviction holding for Indonesian portfolios. Returns on capital are rising and demand looks ever robust.
Key points from the report:
INTP released stellar financial results for 2009
INTP is well positioned to benefit from the building boom that lies ahead.
Private sector investment will accelerate over the next three years.
Revise our assumptions to 12% volume growth this year and 10% in 2011.
INTP output for 2M10 is already 19% above that of last year.
We have not assumed any price increases, to be conservative.
Supply-demand situation is very attractive. Over the past decade, cement demand has grown by a CAGR of 7.4% and from 1985-1995 demand grew by 10% p.a. But supply growth is forecast at only 4.8% p.a. until 2015.
Alternatively, the group could build a new 2.5m tonne cement plant every year out of cash alone.
Mandiri Sekuritas LSIP: Turnaround continues
In FY09, London Sumatra Indonesia (LSIP) achieved strong CPO production growth of 10.5% yoy (the highest among our plantation coverage). CPO production reached 378k tons buoyed by its nucleus plantations’ which grew by 14.9% yoy. However, due to substantial lower CPO price, total revenue and earnings dropped to Rp3.2tn (-16.8% yoy) and Rp707bn (-23.7% yoy) in FY09. We continue to believe in its operation turnaround this year, on the back of: 1) full implementatio! n of in-h ouse transport, and 2) better plasma management. Therefore, we upgraded our earnings estimates by 6.5% and 3.6% in FY10-11F, respectively. Reiterate Buy with TP of Rp10,500/share, implying PER10F of 15.4x.
FY09 earnings of Rp707bn in-line with ours but slightly above consensus estimates. As of FY09, LSIP delivered revenue of Rp3.2tn, fell by 16.8% yoy. In spite of lower CPO price, palm oil contribution still improved to 84.6% from 79.1%. This is on the back of FFB yield improvement (FY09: 19.0tons/ha, FY08: 17.8tons/ha) and additional mature area which boosted CPO production to 378k tons (+10.5% yoy), the highest among plantation companies under our coverage.
75% of capex is for South Sumatra and East Kalimantan. As potential growth in South Sumatera and East Kalimantan areas is larger, the company has targeted some Rp578bn or 75% of FY10F’s capex for the two areas. We therefore raised our CPO production assumption to 415k tons (from 400k tons previously), in line with the company’s guidance of 5-10% growth. This is to take into account: 1) infrastructure improvement mainly in South Sumatra, 2) palm oil mill expansion in North Sumatra ( from 30tons/hr to 40tons/hr), and 3) better plasma management.
Slight earnings upgrade. On the back of higher CPO production assumption, coupled with higher cost efficiency and lower interest expense, we upgraded our earnings estimates by 6.5% and 3.6% for FY10F and FY11F. We expect higher cost efficiency on the back of further implementation of internal FFB transportation system. Note that in FY09, when in-house transport was 50% completed, LSIP’s total cost was reduced by 5.2% (compared with a slight increase of 0.3% for Astra Agro). Moreover, t! he compan y has paid its US$50mn debt in Dec09, while incurred another US$30mn in mid Jan10. Still, interest expense will fall to Rp32bn in FY10F, from Rp53bn last year, according to our calculation.
Buy with TP of Rp10,500/share. We maintain our Buy call for LSIP since the operation turnaround is likely to continue and we should be looking at decent 28.9% earnings growth in FY10F. Our target price of Rp10,500/share implies a 20% upside from the current level, based on DCF-based valuation with 11.5% WACC and 6.0% TG.
FY09 earnings of Rp707bn in-line with ours but slightly above consensus estimates. As of FY09, LSIP delivered revenue of Rp3.2tn, fell by 16.8% yoy. In spite of lower CPO price, palm oil contribution still improved to 84.6% from 79.1%. This is on the back of FFB yield improvement (FY09: 19.0tons/ha, FY08: 17.8tons/ha) and additional mature area which boosted CPO production to 378k tons (+10.5% yoy), the highest among plantation companies under our coverage.
75% of capex is for South Sumatra and East Kalimantan. As potential growth in South Sumatera and East Kalimantan areas is larger, the company has targeted some Rp578bn or 75% of FY10F’s capex for the two areas. We therefore raised our CPO production assumption to 415k tons (from 400k tons previously), in line with the company’s guidance of 5-10% growth. This is to take into account: 1) infrastructure improvement mainly in South Sumatra, 2) palm oil mill expansion in North Sumatra ( from 30tons/hr to 40tons/hr), and 3) better plasma management.
Slight earnings upgrade. On the back of higher CPO production assumption, coupled with higher cost efficiency and lower interest expense, we upgraded our earnings estimates by 6.5% and 3.6% for FY10F and FY11F. We expect higher cost efficiency on the back of further implementation of internal FFB transportation system. Note that in FY09, when in-house transport was 50% completed, LSIP’s total cost was reduced by 5.2% (compared with a slight increase of 0.3% for Astra Agro). Moreover, t! he compan y has paid its US$50mn debt in Dec09, while incurred another US$30mn in mid Jan10. Still, interest expense will fall to Rp32bn in FY10F, from Rp53bn last year, according to our calculation.
Buy with TP of Rp10,500/share. We maintain our Buy call for LSIP since the operation turnaround is likely to continue and we should be looking at decent 28.9% earnings growth in FY10F. Our target price of Rp10,500/share implies a 20% upside from the current level, based on DCF-based valuation with 11.5% WACC and 6.0% TG.
Mandiri Sekuritas Pembangunan Perumahan: March’s new contract bookings to reach Rp3tn (PTPP, Rp650, Not rated)
The company could obtain new contract worth Rp3tn in this first quarter, it equals to 23.1% from its FY10 target of Rp13tn.
Moreover, they are optimist to book half of is new contract target in 1H10. With such target, they are aiming to book revenue and net profit of Rp6.3tn and Rp359bn, respectively. The bottom line level reflects PER10F of 8.8x, which is slightly higher to average construction companies of 8.2x.
Moreover, they are optimist to book half of is new contract target in 1H10. With such target, they are aiming to book revenue and net profit of Rp6.3tn and Rp359bn, respectively. The bottom line level reflects PER10F of 8.8x, which is slightly higher to average construction companies of 8.2x.
Mandiri Sekuritas Timah: Key takeaways from site visit (TINS, Rp2,225/share, Buy, Rp3,000/share)
We visited Timah’s mining sites at Bangka last week. Some of the key takeaways are:
Go offshore, go deeper. The company is not planning to add more onshore mining sites this year, they are intensifying offshore mining. In offshore mining, they will replace old bucket line ships with newer cutter section ships. The new ships have advantages in terms of (1) 40% lower production cost, (2) deeper exploration, and (3) not surrounded by illegal miners’ ships.
So far, smooth transition from subcontracting to outsourcing. With the new regulation, Timah is not renewing expired subcontract, instead, they are going to outsource labor and equipment to the existing subcontractors. Therefore, tin ore cost will switch from variable cost to relatively fixed cost. Based on recent negotiation, it will take 3 years to fully convert subcontracting to outsourcing. If all goes well, it is estimated that this scheme will reduce offshore mining cost
by around 15%.
Illegal mining is getting more difficult. Based on our casual conversation with local people, they told us that illegal mining is getting more difficult. One of the reasons is Timah’s policy to shift to offshore mining. In offshore mining, the number of illegal miners also decreased from around 500 ships to around 300 ships, this is because Timah moved to deeper sea on which illegal miner do not have sufficient mining equipment. Note that either in offshore or onshore, illegal miners are used to mine close to Timah’s site as exploration cost to measure tin ore contents is very costly.
We still maintain our Buy recommendation on TINS which trading at PER10F-11F of 8.9x-5.7x, respectively.
Go offshore, go deeper. The company is not planning to add more onshore mining sites this year, they are intensifying offshore mining. In offshore mining, they will replace old bucket line ships with newer cutter section ships. The new ships have advantages in terms of (1) 40% lower production cost, (2) deeper exploration, and (3) not surrounded by illegal miners’ ships.
So far, smooth transition from subcontracting to outsourcing. With the new regulation, Timah is not renewing expired subcontract, instead, they are going to outsource labor and equipment to the existing subcontractors. Therefore, tin ore cost will switch from variable cost to relatively fixed cost. Based on recent negotiation, it will take 3 years to fully convert subcontracting to outsourcing. If all goes well, it is estimated that this scheme will reduce offshore mining cost
by around 15%.
Illegal mining is getting more difficult. Based on our casual conversation with local people, they told us that illegal mining is getting more difficult. One of the reasons is Timah’s policy to shift to offshore mining. In offshore mining, the number of illegal miners also decreased from around 500 ships to around 300 ships, this is because Timah moved to deeper sea on which illegal miner do not have sufficient mining equipment. Note that either in offshore or onshore, illegal miners are used to mine close to Timah’s site as exploration cost to measure tin ore contents is very costly.
We still maintain our Buy recommendation on TINS which trading at PER10F-11F of 8.9x-5.7x, respectively.
Mandiri Sekuritas Antam: FY09 net income falls 56%yoy, though higher than expected (ANTM, Rp2,200, Neutral, Rp2,350)
As expected, lower FY09 earnings, but above ours and consensus. With lower demand and price of nickel and a focus towards low-margin gold trading, Antam’s FY09 revenues slid by 9% yoy to Rp8.7tn. About 55% sales came from gold production and trading, 44% from ferronickel and nickel ore (25% and 19% respectively), and the balance from bauxite and silver. As a consequence of more emphasis toward gold trading and coupled by a 29%yoy drop in ferronickel production and 33%yoy slide in average price, net income fell to Rp604bn, though beating ours and consensus expectation.
Optimistic on 2010 earnings. As LME price continues to rise as well as better ferronickel production, we see Antam’s FY10F to reach some Rp1tn (+67%yoy). Potential upside could come from the stabilization of LME nickel prices, which is currently trading at 13% premium over our nickel price assumption for 2010 of US$9/lb. We maintain neutral as the stock trades at PER10F of 20.8x.
Optimistic on 2010 earnings. As LME price continues to rise as well as better ferronickel production, we see Antam’s FY10F to reach some Rp1tn (+67%yoy). Potential upside could come from the stabilization of LME nickel prices, which is currently trading at 13% premium over our nickel price assumption for 2010 of US$9/lb. We maintain neutral as the stock trades at PER10F of 20.8x.
Mandiri Sekuritas Perusahaan Gas : Cancels its plan to ration gas among Indonesian industries (PGAS, Rp4,250, Buy, TP:Rp4,350)
Following the government’s intervention, state-owned gas company Perusahaan Gas Negara (PGAS) has backed down from a plan to reduce the amount of natural gas it allocates to domestic industry and to charge them drastically higher prices if they wanted to buy more than their allotted amount. Benny Wahyudi, director general of agriculture and chemical industries at the Industry Ministry, said on Saturday that PGAS would not proceed with a plan to cut the allocation to domestic industry by 20% and to charge industrial buyers three times more than the regular price if they wanted more gas than they were allocated, he said
Domestic industrial buyers are due to sign two-year gas-supply contracts with PGAS today. Late on Thursday, the gas distributor announced it was cutting the allocations and pushing up prices, provoking a widespread outcry from industrial buyers. The reason for PGAS’s announcement is that the gas distributor is itself facing a gas shortfall. Two of its suppliers — PT Pertamina Hulu Energi and ConocoPhillips — are having difficulties securing enough gas to meet their supply contracts with PGN.
PGAS said last week that ConocoPhillips might only be able to deliver 250 MMSCFD this year from its South Sumatra field, well below the 390 MMSCFD it was contracted to provide. PLN primary energy director Nur Pamudji said that Muara Karang power plant gas supply had dropped from 200 million cubic feet per day to 100 million cubic feet per day since March 1.The government has arranged for PGAS to secure additional gas from Pertamina Hulu Energi, a unit of state oil and gas company PT Pertamina, by extending a contract up to June 2010. Pertamina Hulu Energi spokesman
Ali Mundakir told that the contract, originally set to expire this month, was extended until June. (Jakarta Globe & various)
Net tally a deficit of 75MMSCFD, to be compensated by price increase. The supply cut came from the expiration of ONWJ (-45 MMSCFD) and fall in ConocoPhillips supply (-140MMSCFD, contracted 390 MMSCFD, current supply 250MMSCFD). The solutions are ONWJ (+20MMSCFD, extended until June 2010), and Medco Singa field (+50MMSCFD), and ConocoPhillips pledge (+40 MMSCFD, to 290 MMSCF). Net deficit is 75 MMSCFD. Our FY0F distribution flow estimate is 893MMSCFD (deficit is 8.3% of our FY09 estimate).
Deficit of 75 MMSCFD, a 18.5% drop in net profit, and 18.1% in operating profit. Running at 53% EBITDA margin impact on profitability around double the drop in volume assuming everything else remain the same. Our current forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively. Hence therefore we expect minimal changes to our forecast as we only assume a 5% price increase for 2010. At Rp4,250/share, PGAS is trading at 17.9x 2010F PER, and 18.6x 2011F PER.
Domestic industrial buyers are due to sign two-year gas-supply contracts with PGAS today. Late on Thursday, the gas distributor announced it was cutting the allocations and pushing up prices, provoking a widespread outcry from industrial buyers. The reason for PGAS’s announcement is that the gas distributor is itself facing a gas shortfall. Two of its suppliers — PT Pertamina Hulu Energi and ConocoPhillips — are having difficulties securing enough gas to meet their supply contracts with PGN.
PGAS said last week that ConocoPhillips might only be able to deliver 250 MMSCFD this year from its South Sumatra field, well below the 390 MMSCFD it was contracted to provide. PLN primary energy director Nur Pamudji said that Muara Karang power plant gas supply had dropped from 200 million cubic feet per day to 100 million cubic feet per day since March 1.The government has arranged for PGAS to secure additional gas from Pertamina Hulu Energi, a unit of state oil and gas company PT Pertamina, by extending a contract up to June 2010. Pertamina Hulu Energi spokesman
Ali Mundakir told that the contract, originally set to expire this month, was extended until June. (Jakarta Globe & various)
Net tally a deficit of 75MMSCFD, to be compensated by price increase. The supply cut came from the expiration of ONWJ (-45 MMSCFD) and fall in ConocoPhillips supply (-140MMSCFD, contracted 390 MMSCFD, current supply 250MMSCFD). The solutions are ONWJ (+20MMSCFD, extended until June 2010), and Medco Singa field (+50MMSCFD), and ConocoPhillips pledge (+40 MMSCFD, to 290 MMSCF). Net deficit is 75 MMSCFD. Our FY0F distribution flow estimate is 893MMSCFD (deficit is 8.3% of our FY09 estimate).
Deficit of 75 MMSCFD, a 18.5% drop in net profit, and 18.1% in operating profit. Running at 53% EBITDA margin impact on profitability around double the drop in volume assuming everything else remain the same. Our current forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively. Hence therefore we expect minimal changes to our forecast as we only assume a 5% price increase for 2010. At Rp4,250/share, PGAS is trading at 17.9x 2010F PER, and 18.6x 2011F PER.
AAA COMPANY UPDATE Site visit notes from Bangka – tin mining
Unfavourable operational cost, heavy diesel fuel consumption
Shifting to offshore production, target -15 cutter suction dredge by end 2010
Indonesia tin supplies would fall as controls on small scale mining tighten
Positive view confirmation from new mining law
2010F valuation not cheap anymore, but 2011F’s still look favourable.
Earnings and Valuation
With additional 5 CSDs which cost Rp 20 – 25 Bn each, total capex this year for those additional CSDs would be estimated to cost around Rp 100 – 125 bn. While the first BWD would start to operate in mid 2011 would cost around Rp 200 bn. As of 9M09 results, PT Timah generates sales of Rp 5.5 tr, Ebitda Rp 497 bn, and net profit Rp 312 bn. Global crisis in 2009 has cut the operating margin significantly from 23% in 2008 dropped to only 5%. We see that 2009 is an extraordinary year for PT Timah, so we are not using 2009 base year anymore due to its irrelevant valuation.
Based on 2010F and 2011F forward valuation measures, TINS is already traded at 16.2x – 11.8x P/E 2010F-2011F and 8.4x – 6.4 EV/EBITDA 2010-2011F. It looks that TINS based on 2010F valuation wise is already pricing in but still looks favourable based on 2011F valuation by expecting positive outlook on LME tin price onwards. We have recommended BUY with TP at Rp 2,400 implying 12.6 P/E 2011F. But currently TINS has traded near to our TP and has less potential upside. We are still reviewing our new TP and recommendation while waiting for the full year audited 2009 result by end of this month while expecting better performance result on QoQ basis due to spiked on LME price in late 2009.
Shifting to offshore production, target -15 cutter suction dredge by end 2010
Indonesia tin supplies would fall as controls on small scale mining tighten
Positive view confirmation from new mining law
2010F valuation not cheap anymore, but 2011F’s still look favourable.
Earnings and Valuation
With additional 5 CSDs which cost Rp 20 – 25 Bn each, total capex this year for those additional CSDs would be estimated to cost around Rp 100 – 125 bn. While the first BWD would start to operate in mid 2011 would cost around Rp 200 bn. As of 9M09 results, PT Timah generates sales of Rp 5.5 tr, Ebitda Rp 497 bn, and net profit Rp 312 bn. Global crisis in 2009 has cut the operating margin significantly from 23% in 2008 dropped to only 5%. We see that 2009 is an extraordinary year for PT Timah, so we are not using 2009 base year anymore due to its irrelevant valuation.
Based on 2010F and 2011F forward valuation measures, TINS is already traded at 16.2x – 11.8x P/E 2010F-2011F and 8.4x – 6.4 EV/EBITDA 2010-2011F. It looks that TINS based on 2010F valuation wise is already pricing in but still looks favourable based on 2011F valuation by expecting positive outlook on LME tin price onwards. We have recommended BUY with TP at Rp 2,400 implying 12.6 P/E 2011F. But currently TINS has traded near to our TP and has less potential upside. We are still reviewing our new TP and recommendation while waiting for the full year audited 2009 result by end of this month while expecting better performance result on QoQ basis due to spiked on LME price in late 2009.
DBS Indocement Tunggal Prakarsa: Buy; Rp14,150; TP Under review; INTP IJ
Allocates up to US$275m for FY10-12F capex
The media reported that Indocement (INTP) has allocated up to US$275m (or Rp2.59tr) of capital expenditure for the next three years to develop a cement mill and power plant. We previously reported that INTP plans to build one additional cement mill in Citereup with capacity of 1.5m tons p.a., a new cement factory with capacity of 2-3m tons p.a., and 2x50 MW power plants. According to the news article, the capital expenditure allocations are as follow: US$35m for cement mill, US$60-90m for cement factory, and US$100-150m for power plant. The company expects to finance capex needs from internal cash, which as of end-Dec09, amounted to Rp2.6tr.
Plan for the new cement mill construction is in 2H10, while the new cement factory is within the next 3-4 years considering high demand growth for domestic cement. At the same time, INTP has also acquired 100% stakes in PT Bahana Indonor, a sea transportation company, in order to strengthen its distribution network and floating cement terminal.
The media reported that Indocement (INTP) has allocated up to US$275m (or Rp2.59tr) of capital expenditure for the next three years to develop a cement mill and power plant. We previously reported that INTP plans to build one additional cement mill in Citereup with capacity of 1.5m tons p.a., a new cement factory with capacity of 2-3m tons p.a., and 2x50 MW power plants. According to the news article, the capital expenditure allocations are as follow: US$35m for cement mill, US$60-90m for cement factory, and US$100-150m for power plant. The company expects to finance capex needs from internal cash, which as of end-Dec09, amounted to Rp2.6tr.
Plan for the new cement mill construction is in 2H10, while the new cement factory is within the next 3-4 years considering high demand growth for domestic cement. At the same time, INTP has also acquired 100% stakes in PT Bahana Indonor, a sea transportation company, in order to strengthen its distribution network and floating cement terminal.
JPM Indo: US$60bn redemption in US money market
* US$60bn redemption in US money market; where will the money go next?
* Indo economics: budget revision underscores financing flexibility. Sales view: buy Indo banks.
* The JPMorgan view: disinflation, not deflation
Fund flow: US$60bn redemption in US money market, the highest since Oct 2008
During the week to 17th March, there were inflows into all international equity funds, except Developed Europe equity funds. The net flows by mandate were:
· Total EM equity funds US$1.5 billion subscription
· Developed Europe equity funds US$ 1 billion redemption, the highest since June 2009.
· US equity funds US$2.8 billion subscription
· US bond market US$5.2 billion subscription; inflows into bond funds for 53 consecutive weeks.
· US money market US$60 billion redemption, the highest since October 2008.
Net foreign buying/selling activity:
Inflows into all emerging markets except Philippines. Notable flows:
· Korea US$1 billion inflows
· India US$ 740 million inflows
· South Africa US$306 million inflows
· Thailand US$243 million inflows
· Indonesia US$165 million inflows
For countries that do not publish official foreign transactions in their equity markets, we use the monthly data from EPFR Global (they cover 12,000 international, EM and US funds with total net assets greater than US$ 6 trillion). During the month of January, funds were net buyers in Australia and Turkey. Funds were net sellers in Singapore, Hong Kong, China, Malaysia, Mexico, Russia, Chile and Poland.
* Indo economics: budget revision underscores financing flexibility. Sales view: buy Indo banks.
* The JPMorgan view: disinflation, not deflation
Fund flow: US$60bn redemption in US money market, the highest since Oct 2008
During the week to 17th March, there were inflows into all international equity funds, except Developed Europe equity funds. The net flows by mandate were:
· Total EM equity funds US$1.5 billion subscription
· Developed Europe equity funds US$ 1 billion redemption, the highest since June 2009.
· US equity funds US$2.8 billion subscription
· US bond market US$5.2 billion subscription; inflows into bond funds for 53 consecutive weeks.
· US money market US$60 billion redemption, the highest since October 2008.
Net foreign buying/selling activity:
Inflows into all emerging markets except Philippines. Notable flows:
· Korea US$1 billion inflows
· India US$ 740 million inflows
· South Africa US$306 million inflows
· Thailand US$243 million inflows
· Indonesia US$165 million inflows
For countries that do not publish official foreign transactions in their equity markets, we use the monthly data from EPFR Global (they cover 12,000 international, EM and US funds with total net assets greater than US$ 6 trillion). During the month of January, funds were net buyers in Australia and Turkey. Funds were net sellers in Singapore, Hong Kong, China, Malaysia, Mexico, Russia, Chile and Poland.
Minggu, 21 Maret 2010
Mandiri Sekuritas KLBF: Expanding product portfolio
Even though its contribution to overall sales is expected to be insignificant this year, KLBF’s new joint venture in the Phillipines and the introduction of powdered milk product to the market are considered a good move to advance the company’s position in the industry as well as in the region. At our TP of Rp1,900/share, the stock still offers 11.8% potential upside. Maintain buy.
New flagship for powder milk has been launched. KLBF is currently penetrating the powdered-milk market with its flagship brand name Zee. This product is targeted for the middle class segment and has some variants depending on the age groups, starting from 5 years to 19 years. The management estimated the market size for powdered milk for this age group is around Rp4tn (please note that nutritional products used to have high margin at around 50-55%). Even though the contribution to sales ! will be m inimal this year (the management said that it usually needs around 3 years to build brand awareness on the new product), we believe it is a good move given that the company has no presence yet in the middle class market (note that its Morinaga brand is basically targeted to middle-up class segment).
Expanding market share in the Philippines. Through its subsidiary, Kalbe International Pte, Ltd, KLBF is setting up a joint venture company in the Philippines called Asiawide Kalbe Philippines Inc, to market ready-to-drink product, Extra Joss. This is the third JV overseas after Innogene Kalbiotech in Singapore and Orange Drug Ltd in Nigeria. KLBF has been in the Philippines market since 2003 through Extra Joss (sachet) and is now the market leader for energy drink in the country. Sales from the Philippines represented around 15% of total export sales (export accounted for 3.7% of total sales in 9M09). Management expects export sales to grow by 20% yoy this year, higher than the projected total sales of 1! 5-16% yoy.
Maintain a buy. Even though the impact of its venture in the Philippines and the introduction of the new powdered milk product to the company’s perfomance would be insignificant this year, we like the company’s idea to remain innovative to defend its strong position in the market. Management indicated that the first 2 months sales have been moderate (only 11-12% yoy), however we! remain o ptimistic that the company will be able to meet our projected sales of 14.5% yoy this year. We therefore re-iterate our buy recommendation on the counter. At the current price, the stock offers 11.8% upside potential from our target price. Maintain buy.
New flagship for powder milk has been launched. KLBF is currently penetrating the powdered-milk market with its flagship brand name Zee. This product is targeted for the middle class segment and has some variants depending on the age groups, starting from 5 years to 19 years. The management estimated the market size for powdered milk for this age group is around Rp4tn (please note that nutritional products used to have high margin at around 50-55%). Even though the contribution to sales ! will be m inimal this year (the management said that it usually needs around 3 years to build brand awareness on the new product), we believe it is a good move given that the company has no presence yet in the middle class market (note that its Morinaga brand is basically targeted to middle-up class segment).
Expanding market share in the Philippines. Through its subsidiary, Kalbe International Pte, Ltd, KLBF is setting up a joint venture company in the Philippines called Asiawide Kalbe Philippines Inc, to market ready-to-drink product, Extra Joss. This is the third JV overseas after Innogene Kalbiotech in Singapore and Orange Drug Ltd in Nigeria. KLBF has been in the Philippines market since 2003 through Extra Joss (sachet) and is now the market leader for energy drink in the country. Sales from the Philippines represented around 15% of total export sales (export accounted for 3.7% of total sales in 9M09). Management expects export sales to grow by 20% yoy this year, higher than the projected total sales of 1! 5-16% yoy.
Maintain a buy. Even though the impact of its venture in the Philippines and the introduction of the new powdered milk product to the company’s perfomance would be insignificant this year, we like the company’s idea to remain innovative to defend its strong position in the market. Management indicated that the first 2 months sales have been moderate (only 11-12% yoy), however we! remain o ptimistic that the company will be able to meet our projected sales of 14.5% yoy this year. We therefore re-iterate our buy recommendation on the counter. At the current price, the stock offers 11.8% upside potential from our target price. Maintain buy.
Credit Suisse: February auto data was simply robust, despite the low-base effect
● Indonesia’s February auto data was simply robust. Car volumes jumped 61% YoY (+5% MoM) to a 17-month high of 55,656 units and motorcycle volumes rose 29% YoY (+7% MoM). YTD, car volumes were up 64% YoY while motorcyle volumes were up 33% YoY. Although partly due to the low-base effect, the current monthly run rate for cars is around 5% higher than our forecasts, while motorcycles’ run rate is relatively in line.
● We believe the return of financing market, consumer confidence, and lower interest rates continue to be the key reasons behind the strong performance. The expectation of higher auto prices due to the possible new (higher) tax could also be a factor.
● Astra’s car market share stayed dominant at 56% in February 2010, while its motorcycle share recovered slightly MoM to 45%. We expect competition in motorcycle industry to remain tight.
● We maintain our OUTPERFORM rating on Astra and continue to see it as a core holding in the Indonesia market, given its strong domestic position and solid management. TP Rp43,400.
● We believe the return of financing market, consumer confidence, and lower interest rates continue to be the key reasons behind the strong performance. The expectation of higher auto prices due to the possible new (higher) tax could also be a factor.
● Astra’s car market share stayed dominant at 56% in February 2010, while its motorcycle share recovered slightly MoM to 45%. We expect competition in motorcycle industry to remain tight.
● We maintain our OUTPERFORM rating on Astra and continue to see it as a core holding in the Indonesia market, given its strong domestic position and solid management. TP Rp43,400.
KimEng Indocement (BUY): FY09 net profit rose 57% y/y to Rp2.75t
§ Indocement reported its FY09 result today. Sales rose 8% y/y to Rp10.58t, while operating profit and net profit each surged 50% and 57% y/y to Rp3.69t and Rp2.75t, respectively.
§ On a quarterly basis, sales rose 24% q/q to Rp3.15t while operating and net profit rose 70% and 71% q/q to Rp1.15t and Rp878b, respectively.
Analyst comment:
§ Overall result is inline with our estimate.
§ During the period, Indocement’s domestic sales volume was actually declining by 3.8% y/y to 11.59m tons with export (cement and clinker) plunging 30% y/y to 1.58m tons.
§ The company posted much better ASP, which we estimate at around 15% y/y higher due to a number of price increases in 2008 when coal price skyrocketed. The full effect of the increase was felt in 2009.
§ Coal price retreated in 2009 while cement price was kept steady. As a result, Indocement enjoyed far higher margin with EBITDA margin and net margin at 39.9% and 26.0% vis-à-vis 31.3% and 17.8% in 2008.
§ We maintain our BUY recommendation and Rp16,200 TP for the counter.
§ On a quarterly basis, sales rose 24% q/q to Rp3.15t while operating and net profit rose 70% and 71% q/q to Rp1.15t and Rp878b, respectively.
Analyst comment:
§ Overall result is inline with our estimate.
§ During the period, Indocement’s domestic sales volume was actually declining by 3.8% y/y to 11.59m tons with export (cement and clinker) plunging 30% y/y to 1.58m tons.
§ The company posted much better ASP, which we estimate at around 15% y/y higher due to a number of price increases in 2008 when coal price skyrocketed. The full effect of the increase was felt in 2009.
§ Coal price retreated in 2009 while cement price was kept steady. As a result, Indocement enjoyed far higher margin with EBITDA margin and net margin at 39.9% and 26.0% vis-à-vis 31.3% and 17.8% in 2008.
§ We maintain our BUY recommendation and Rp16,200 TP for the counter.
JP Morgan - Asia Consumer - HPC Competition Heats Up in Asia
In the wake of heightened competitive activity in the Household/Personal Care space in India & Indonesia, JPM Consumer Team hosted an investor call to discuss the implications and strategies of the key global players.
Key takeaways:
• Why is P&G getting aggressive? We believe P&G is strategically trying to expand its presence in emerging markets in order to achieve its stated target of acquiring one billion new consumers over the next five years. P&G would need to capture a wider audience in mass segment to do so and hence is trying to introduce low price points (like Tide Naturals detergent in India) and reducing prices across shampoos and skin creams in Indonesia. We believe this is not a short term volume grab strategy for P&G but is more consistent with its long term strategy of gaining share in emerging markets.
• Unilever is more vulnerable in India and Indonesia. While India and Indonesia together account for low single digit share of P&G’s profits, for Unilever these countries account for 12% of EBIT. Hence these markets are much more important to Unilever which will continue to defend its market share in response to any competitive challenge and in the process risk its margins in these markets.
• Emerging modern retailers and urbanization erode distribution advantage: The emergence of modern retailers and rapid urbanization will erode the competitive advantage of Unilever’s distribution. A new product launching will need only be offered to a couple of key retailers to have sizable overnight presence in the market: in Indonesia 35% of the FMCG market is sold through modern channels. A new product will only need to be launched in first and second tier cities as the population of these cities encompasses 50% of the population.
• Unilever guiding for price decline in 1H10; P&G lowers long term EPS growth target. P&G has indicated preference for topline growth over margins and even Unilever in India has mentioned defending market share as a top priority. With consumer opportunity lying in emerging markets, the market is likely to be increasingly competitive.
• Maintain UW on Hindustan Unilever and Unilever Indonesia. We would expect lower price growth (high inflation further hurting price/mix growth), high competitive spends and rising input costs to weigh on margins for Unilever in India and Indonesia in coming quarters.
Key takeaways:
• Why is P&G getting aggressive? We believe P&G is strategically trying to expand its presence in emerging markets in order to achieve its stated target of acquiring one billion new consumers over the next five years. P&G would need to capture a wider audience in mass segment to do so and hence is trying to introduce low price points (like Tide Naturals detergent in India) and reducing prices across shampoos and skin creams in Indonesia. We believe this is not a short term volume grab strategy for P&G but is more consistent with its long term strategy of gaining share in emerging markets.
• Unilever is more vulnerable in India and Indonesia. While India and Indonesia together account for low single digit share of P&G’s profits, for Unilever these countries account for 12% of EBIT. Hence these markets are much more important to Unilever which will continue to defend its market share in response to any competitive challenge and in the process risk its margins in these markets.
• Emerging modern retailers and urbanization erode distribution advantage: The emergence of modern retailers and rapid urbanization will erode the competitive advantage of Unilever’s distribution. A new product launching will need only be offered to a couple of key retailers to have sizable overnight presence in the market: in Indonesia 35% of the FMCG market is sold through modern channels. A new product will only need to be launched in first and second tier cities as the population of these cities encompasses 50% of the population.
• Unilever guiding for price decline in 1H10; P&G lowers long term EPS growth target. P&G has indicated preference for topline growth over margins and even Unilever in India has mentioned defending market share as a top priority. With consumer opportunity lying in emerging markets, the market is likely to be increasingly competitive.
• Maintain UW on Hindustan Unilever and Unilever Indonesia. We would expect lower price growth (high inflation further hurting price/mix growth), high competitive spends and rising input costs to weigh on margins for Unilever in India and Indonesia in coming quarters.
CLSA Indocement (INTP IJ) announced full-year financial results this morning. Key Highlights, from Nick Cashmore
Net earnings of Rp2.7tn which was 19% ahead of our forecast of Rp2.3tn. Significant earnings surprise in 4Q09 earnings.
4Q09 earnings of Rp878bn, were up 26% qoq and 71% yoy - this compares with earnings growth of 4% qoq for 3Q09
Margins improved. Operating margins rose to 36% in 4Q09 from 35% in 3Q09 while net margin rose to 27.9% for 4Q09 from 26.5% in 3Q09
The company's full-year operating margin rose to 35%, the highest since 1996; we forecast operating margins will peak at 38%
The cash build continues to grow. The company had US$280m cash on its balance sheet as of December-2009 and is forecast to generate US$465m in operating cashflow this year with only US$60m in capex - hence the firm has free cash of more than US$650m to allocate this year - 11.5% of its current market cap.
Conclusion
Our current 2010 forecast of Rp3.05tn will need to be revised up as will consensus of Rp3.1tn
A strong start to the year means our volume assumption of 10% growth for 2010 may be light
The company remains a cash machine - there has been no indication as to dividends
Our target price of Rp17,000 still implies 21% upside from current levels; likely to be revised up
Still a conviction holding for any investor wanting domestic Indonesian exposure - BUY
4Q09 earnings of Rp878bn, were up 26% qoq and 71% yoy - this compares with earnings growth of 4% qoq for 3Q09
Margins improved. Operating margins rose to 36% in 4Q09 from 35% in 3Q09 while net margin rose to 27.9% for 4Q09 from 26.5% in 3Q09
The company's full-year operating margin rose to 35%, the highest since 1996; we forecast operating margins will peak at 38%
The cash build continues to grow. The company had US$280m cash on its balance sheet as of December-2009 and is forecast to generate US$465m in operating cashflow this year with only US$60m in capex - hence the firm has free cash of more than US$650m to allocate this year - 11.5% of its current market cap.
Conclusion
Our current 2010 forecast of Rp3.05tn will need to be revised up as will consensus of Rp3.1tn
A strong start to the year means our volume assumption of 10% growth for 2010 may be light
The company remains a cash machine - there has been no indication as to dividends
Our target price of Rp17,000 still implies 21% upside from current levels; likely to be revised up
Still a conviction holding for any investor wanting domestic Indonesian exposure - BUY
CLSA Perusahaan Gas (PGAS IJ) update, maintain BUY, from Swati
We maintain our current distribution volumes of 926mmscfd
PGas is maintaining distribution gas volumes between 800-900mmscfd for 2010. On pricing PGas states that is has communicated their planned pricing adjustments to the industrial customers, nationwide. Based on the feedback from the customers, they'll decide in 2nd quarter of the application these price adjustments. We think price hikes will happen.
On the volumes, we think it is just start of the year and PGas should be able to sign more contracts this year meaning volumes 2H10 will be higher than 1H10 as usually the case. Pgas has allocated US$400m for buying minority stakes in upstream assets.
Last year Conoco Philips delivered 260mmscfd of gas and PGas total distribution volumes reached about 800mmscfd for the full year. This year Conoco is contracted to supply 350mmscfd of gas meaning PGas should reach 890mmscfd + we have 70mmscfd of Medco gas. Therefore our VOLUME forecasts are achievable if things get resolved with Conoco Philips which we believe it should.
Apparently Conoco Phillips has diverted some of gas which was earlier flowing to PGas to Chevron. PGas is not looking at legal action now and thinks that it can be resolved without any legal action since the Government realizes that severe gas shortage will lead to closure of industries etc and have negative ripple effects on the economy.
Maintain Conviction buy and see the weakness as an opportunity to BUY.
PGas is maintaining distribution gas volumes between 800-900mmscfd for 2010. On pricing PGas states that is has communicated their planned pricing adjustments to the industrial customers, nationwide. Based on the feedback from the customers, they'll decide in 2nd quarter of the application these price adjustments. We think price hikes will happen.
On the volumes, we think it is just start of the year and PGas should be able to sign more contracts this year meaning volumes 2H10 will be higher than 1H10 as usually the case. Pgas has allocated US$400m for buying minority stakes in upstream assets.
Last year Conoco Philips delivered 260mmscfd of gas and PGas total distribution volumes reached about 800mmscfd for the full year. This year Conoco is contracted to supply 350mmscfd of gas meaning PGas should reach 890mmscfd + we have 70mmscfd of Medco gas. Therefore our VOLUME forecasts are achievable if things get resolved with Conoco Philips which we believe it should.
Apparently Conoco Phillips has diverted some of gas which was earlier flowing to PGas to Chevron. PGas is not looking at legal action now and thinks that it can be resolved without any legal action since the Government realizes that severe gas shortage will lead to closure of industries etc and have negative ripple effects on the economy.
Maintain Conviction buy and see the weakness as an opportunity to BUY.
CLSA BW Plantation (BWPT IJ) - initiate with a BUY - Tp1100 - 47% upside
Bigger is not always better. In the case of CPO companies, smaller in many cases is actually better cos it is much easier to grow and manage your estate at a faster pace.
This must be one of the top ideas in the small/mid cap space (US$1.5m av daily turnover) where there is almost no research coverage (except local brokerage houses). BW has one of the best managed CPO estate with the highest percentage of their planted area going into maturity over the next few years. Their mechanized harvesting and fertilizing process help lift their FFB yield to 27%+ Vs industry av 21.8% . And yet this stock is among the cheapest (in every metrics) in the industry trading at only $8,500 EV/ha, and 6.8x EV/Ebita 11CL. Our target price of Rp1,100 is based on a conservative $13,000 EV/ha (industry average now at $17k) and 13x PE 11CL. The bigger CPO plays currently already trading well above those numbers. This is a BUY.
Key points from the report:
BW Plantation is a small but extremely fast growing palm oil plantation with the highest FFB yield in the industry at 27.4 tonnes per ha.
As of 2009, 13,000 ha have reached maturity and will double in current size to 26,000 ha within three years. The total planted area will also double in size to 80,000 ha by 2013.
Going forward, the challenge for the company would be to replicate their high yield into relatively much larger new development areas and to maintain this yield as the company grows bigger.
Macro data supports a positive CPO price outlook and BW Plantation is a key beneficiary of this as it is among the most leveraged to CPO price movement. Every US$100/t increase in CPO price will raise the company’s earnings by 23%.
The company generates around 25% of ROAE, while earnings could grow by 30% CAGR until 2012. Despite the stellar operational performance, the market is valuing the company at US$8,300EV/ha, still among the cheapest in the industry.
Our target price of Rp1,100 is based on a blended valuation of US$13,000 EV/ha and 13x 2011 PER.
This must be one of the top ideas in the small/mid cap space (US$1.5m av daily turnover) where there is almost no research coverage (except local brokerage houses). BW has one of the best managed CPO estate with the highest percentage of their planted area going into maturity over the next few years. Their mechanized harvesting and fertilizing process help lift their FFB yield to 27%+ Vs industry av 21.8% . And yet this stock is among the cheapest (in every metrics) in the industry trading at only $8,500 EV/ha, and 6.8x EV/Ebita 11CL. Our target price of Rp1,100 is based on a conservative $13,000 EV/ha (industry average now at $17k) and 13x PE 11CL. The bigger CPO plays currently already trading well above those numbers. This is a BUY.
Key points from the report:
BW Plantation is a small but extremely fast growing palm oil plantation with the highest FFB yield in the industry at 27.4 tonnes per ha.
As of 2009, 13,000 ha have reached maturity and will double in current size to 26,000 ha within three years. The total planted area will also double in size to 80,000 ha by 2013.
Going forward, the challenge for the company would be to replicate their high yield into relatively much larger new development areas and to maintain this yield as the company grows bigger.
Macro data supports a positive CPO price outlook and BW Plantation is a key beneficiary of this as it is among the most leveraged to CPO price movement. Every US$100/t increase in CPO price will raise the company’s earnings by 23%.
The company generates around 25% of ROAE, while earnings could grow by 30% CAGR until 2012. Despite the stellar operational performance, the market is valuing the company at US$8,300EV/ha, still among the cheapest in the industry.
Our target price of Rp1,100 is based on a blended valuation of US$13,000 EV/ha and 13x 2011 PER.
Mandiri Sekuritas Indocement TP: FY09 slightly above consensus expectation (INTP, Rp14,000, Buy, TP Rp15,400)
In 2009, Indocement posted lower domestic sales volume compare with 2008 (-3.8% yoy). Yet price tag was higher (around 15% yoy). That explains why FY09 transportation and selling expense drop 10.7% yoy. Other than that, cash position of some Rp2.6tn (vs Rp790 in 2008) doubled interest income figure to Rp78bn. It resulted into moderate growth in the top line level of 8.1%, while bottom line growth reaches 57.4% yoy. Overall, FY09 result is slightly above consensus estimates, yet inline with ours.
Assessing from February 2010 sales volume data, where domestic consumption shoots up 19.1% yoy, while export continues on declining, we believe that earnings upgrade is possible. This suggests that margins would increase further. Note that consensus estimates only projected 15.3% yoy and 24.5% yoy growth for FY10 top line and bottom line level. Currently INTP is trading at EV/ton and PER10 of US$263 and 18.1x, respectively.
Assessing from February 2010 sales volume data, where domestic consumption shoots up 19.1% yoy, while export continues on declining, we believe that earnings upgrade is possible. This suggests that margins would increase further. Note that consensus estimates only projected 15.3% yoy and 24.5% yoy growth for FY10 top line and bottom line level. Currently INTP is trading at EV/ton and PER10 of US$263 and 18.1x, respectively.
Mandiri Sekuritas Perusahaan Gas : Supply cut, short term bad, long term good (PGAS, Rp4,050, Buy, TP:Rp4,350)
Economic Ministers yesterday and today will continue to discuss the gas supply shortage. PGAS is also discussing with the government on how to maintain the delivery from South Sumatera Gas Fields in the level that they received in January of this year, which was more than 370 MMscfd average for the month. PGAS reported that gas flow from Conoco Philips now averaging 250-260 MMSCFD. PGAS is demanding Conoco Phillips (CoPhi) to supply gas to its agreed amount of 396-412 MMSCFD.
Bisnis Indonesia reported supply from CoPhi is diverted to Chevron for oil lifting. Chevron initially plan to have a supply of 322 MMSCFD in 2010 (2009 Chevron got 402 MMSCFD from CoPhi). Because of this supply to Muara Karang power plant was reduced by 50 MMSCFD. Another story was CoPhi diverting its gas to Singapore, due to lack of gas flow frow CoPhi fields in South Jambi. Total flow diverted to Singapore was 40MMSCFD. However, it was denied by Director General for Oil and Gas, Evita Legowo, According to Evita, the decline was due to under delivery from Pagardewa (Pertamina field) (- 70MMSCFD).
We conclude that the decline could be somewhat in the range of 70-90 MMSCFD or 10% of our distributed 2010 PGAS volume of 890MMSCFD. However on the positive note : (1) this could help PGAS raise prices as Singapore paid US$12.5/MMBTU for South Jambi, (2) pressure to government for approve Suban III for domestic. PGAS has not changed its volume forecast for 2010 (between 800-900MMSCD) but acknowledge there could be an increase in average cost of gas, the amount of which has not been determined.
We currently have a Buy recommendation with Rp4,350 target price. At Rp4050, PGAS 17.0x and 17.7x PER10F and PER11F, respectively. We are maintaining our current forecast of FY10E and FY11E net income of Rp5,393bn and Rp5,198bn, respectively, Our forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively.
Bisnis Indonesia reported supply from CoPhi is diverted to Chevron for oil lifting. Chevron initially plan to have a supply of 322 MMSCFD in 2010 (2009 Chevron got 402 MMSCFD from CoPhi). Because of this supply to Muara Karang power plant was reduced by 50 MMSCFD. Another story was CoPhi diverting its gas to Singapore, due to lack of gas flow frow CoPhi fields in South Jambi. Total flow diverted to Singapore was 40MMSCFD. However, it was denied by Director General for Oil and Gas, Evita Legowo, According to Evita, the decline was due to under delivery from Pagardewa (Pertamina field) (- 70MMSCFD).
We conclude that the decline could be somewhat in the range of 70-90 MMSCFD or 10% of our distributed 2010 PGAS volume of 890MMSCFD. However on the positive note : (1) this could help PGAS raise prices as Singapore paid US$12.5/MMBTU for South Jambi, (2) pressure to government for approve Suban III for domestic. PGAS has not changed its volume forecast for 2010 (between 800-900MMSCD) but acknowledge there could be an increase in average cost of gas, the amount of which has not been determined.
We currently have a Buy recommendation with Rp4,350 target price. At Rp4050, PGAS 17.0x and 17.7x PER10F and PER11F, respectively. We are maintaining our current forecast of FY10E and FY11E net income of Rp5,393bn and Rp5,198bn, respectively, Our forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively.
Mandiri Sekuritas BW Plantation: 2M10 CPO productions fell by 20.3% yoy (BWPT, Rp750, Not rated)
In the first two months 2010, PT BW Plantation (BWPT) delivered CPO production of 10.4k tons, down by 20.3% yoy and 2.3% mom (noted that AALI’s CPO production fell by 4.7% yoy during the same period). Theoretically, they expect FFB yield to sustain around 27-28tons/ha this year, before tapering off in 2011, as new areas mature. But, looking at their current 2 months production, we think the yield could be lower than last year’s achievement of 27tons/ha. Currently, BWPT has around 41k ha planted area as of FY09 with some 5% plasma areas.They aim to add another 22,600ha planted over the next 2 years to help sustaining their yield.
As of current, BWPT is trading at PER10F of 12.1x according to consensus estimates, which is relatively expensive in our
view.
As of current, BWPT is trading at PER10F of 12.1x according to consensus estimates, which is relatively expensive in our
view.
Mandiri Sekuritas BNI: takeaway from a company visit (BBNI, Rp2,025, Buy, TP: Rp2,300)
We met with Yap Tjay Soen, the CFO of BNI, yesterday and found out some
interesting highlights:,
NPL will remain a challenge until the next two years (max). Therefore, the bank will continue building up its provisioning coverage to cover the possibility of higher NPL in the future (coverage ratio = 120% at end Dec09). Such NPL will mainly come from medium segment as around 15% of the medium-sized loans are basically restructured loans (=Rp6.7tn, of which Rp2.7tn belong to NPL).
However, as loans is expected to grow higher this year (+15% yoy vs 8.0% yoy in 2009), the NPL will likely maintain below 5% by end of this year (vs. 4.7% at end Dec09).
BNI’s Cost to Income Ratio will likely maintain at around 50-52% as the bank plans to refurbish its branches in order to keep the loyalty of its customers.
At current price, the stock is trading at 2010F P/BV of 1.5x and PER of 9.0x. Despite concerns over rising NPL, we see the management’s serious efforts to improve the current loan underwriting process (please note that majority of additional NPL are coming from the legacy loans). We therefore maintain our buy recommendation on the counter.
interesting highlights:,
NPL will remain a challenge until the next two years (max). Therefore, the bank will continue building up its provisioning coverage to cover the possibility of higher NPL in the future (coverage ratio = 120% at end Dec09). Such NPL will mainly come from medium segment as around 15% of the medium-sized loans are basically restructured loans (=Rp6.7tn, of which Rp2.7tn belong to NPL).
However, as loans is expected to grow higher this year (+15% yoy vs 8.0% yoy in 2009), the NPL will likely maintain below 5% by end of this year (vs. 4.7% at end Dec09).
BNI’s Cost to Income Ratio will likely maintain at around 50-52% as the bank plans to refurbish its branches in order to keep the loyalty of its customers.
At current price, the stock is trading at 2010F P/BV of 1.5x and PER of 9.0x. Despite concerns over rising NPL, we see the management’s serious efforts to improve the current loan underwriting process (please note that majority of additional NPL are coming from the legacy loans). We therefore maintain our buy recommendation on the counter.
NISP PGAS The Risk of Becoming ‘Middleman’
• It was reported yesterday that Conoco Philips is unable to meet its contracted gas supply volume to PGN. Supply from Conoco Philips’ Coridor Block in South Sumatera during Feb ’10 amounted to only 250-260 mmscfd and even briefly dropping as low as 150 mmscfd within this month. This figure was much lower than the contracted volume of 396 mmscfd and the Jan ’10 average volume of more than 370 mmscfd. PGN suspects the lower gas supply was due to a recent additional 80-100 mmscfd gas supply from Conoco to Chevron in order to lift Chevron’s oil lifting.
• As a result, PGN had to pass the gas supply shortage to its costumers, including cutting gas supply to PLTGU Muara Tawar by 50 mmscfd to only 180 mmscfd in this month. According to PLN’s management, PGN has pledged that gas supply cuts will only occurr until the end of this month.
• PGN’s management has responded to this issue, stating that the company and the government is still discussing how to maintain gas delivery from Conoco’s gas field at levels similar to received in Jan ’10 which was more than 370 mmscfd. In the meantime, PGN is still maintaining its volume guidance in 2010 which is 800-900 mmscfd.
• For now, we are still maintaining our distribution volume assumption at 882 mmscfd for 2010F and keeping an eye on progress of the supply shortage problem. There will be a downward adjustment to our assumption by 4-5% if PGN fails to resolve its supply shortage within the next 2 months, and might be expanded if the lower delivery
problem from Conoco continues longer.
• On another topic, PGN’s CEO, Mr.Hendi Prio Santoso, previously stated to the media that the company have not thought to increase gas price within this year. However later that day, in the company’s formal statement, the CEO altered by saying that the company has communicated their pricing adjustment scheme to their industrial costumer and will decide in 2nd quarter of this year.
• For this issue, we are still confident that PGN still has room and bargaining power to increase its gas selling price this year, backed by current tight supply condition and future higher cash cost for PGN. We also believe that the gas price increase will be well accepted as PGN’s costumers such as PLN and industries are willing to pay higher price to secure the gas supply.
• Overall, we see some downside risk on our distribution volume assumption as PGN is unlikely to solve the lower gas delivery in the near future and the possibility of new gas supply from other gas field is also improbable. On the other hand, this tight supply condition will grant PGN stronger pricing power and we are still confident that gas selling price increase is imminent. Maintain Buy on PGN TP 4450.
• As a result, PGN had to pass the gas supply shortage to its costumers, including cutting gas supply to PLTGU Muara Tawar by 50 mmscfd to only 180 mmscfd in this month. According to PLN’s management, PGN has pledged that gas supply cuts will only occurr until the end of this month.
• PGN’s management has responded to this issue, stating that the company and the government is still discussing how to maintain gas delivery from Conoco’s gas field at levels similar to received in Jan ’10 which was more than 370 mmscfd. In the meantime, PGN is still maintaining its volume guidance in 2010 which is 800-900 mmscfd.
• For now, we are still maintaining our distribution volume assumption at 882 mmscfd for 2010F and keeping an eye on progress of the supply shortage problem. There will be a downward adjustment to our assumption by 4-5% if PGN fails to resolve its supply shortage within the next 2 months, and might be expanded if the lower delivery
problem from Conoco continues longer.
• On another topic, PGN’s CEO, Mr.Hendi Prio Santoso, previously stated to the media that the company have not thought to increase gas price within this year. However later that day, in the company’s formal statement, the CEO altered by saying that the company has communicated their pricing adjustment scheme to their industrial costumer and will decide in 2nd quarter of this year.
• For this issue, we are still confident that PGN still has room and bargaining power to increase its gas selling price this year, backed by current tight supply condition and future higher cash cost for PGN. We also believe that the gas price increase will be well accepted as PGN’s costumers such as PLN and industries are willing to pay higher price to secure the gas supply.
• Overall, we see some downside risk on our distribution volume assumption as PGN is unlikely to solve the lower gas delivery in the near future and the possibility of new gas supply from other gas field is also improbable. On the other hand, this tight supply condition will grant PGN stronger pricing power and we are still confident that gas selling price increase is imminent. Maintain Buy on PGN TP 4450.
JP Morgan - PGAS: unsuspected turn on newsflow
(1) Energy ministry Darwin Zahedy Saleh has instructed ConocoPhillips South Sumatra field to allocate more gas to Chevron (at the expense of PGAS). Per contract, Chevron should get 322mmscfd allocation from Conoco. But as the government wants Chevron to ramp up oil production (Chevron uses natural gas for lifting its oil), the energy ministry wants Chevron to get 50-100mmscfd more. (Source: Tempo Interaktif)
(2) CEO Hendi Prio Santoso told Bloomberg reporter that natural gas sales may drop this year because of supply shortage from ConocoPhillips South Sumatra field. Delivery from that gas field dropped to as low as 150mmscfd this month, and may average at 250 mmscfd, less than the contracted 390mmscfd. (Source: Bloomberg)
(3) PGAS issued a public statement after market close, saying: (i) the company is keeping its volume guidance for 2010, namely 800-900 mmscfd daily average for the year. (ii) the company is discussing with the government on how to maintain the delivery from South Sumatera Gas Fields in the level that we received in January of this year, which was more than 370 mmscfd average for the month. (iii) the company has communicated the plan to hike price to the industrial customers, nationwide. Based on feedback, they will decide on implementation in 2Q10.
The good news: the price hike plan seems intact with potential increase in base price and surcharge fee, along with potential cut in customers' quota (for base price).
The not-so-good news: although overall "volume" guidance for PGAS remains intact, the company could be earning less than US$0.50/mmscf (just transmission toll-fee) for the Conoco gas that is being routed to Chevron (50-100mmscfd out of 855mmscfd forecast for FY10), vs. the forecast US$3.36/mmscf gross margin if the gas were sold to industrial customers. At this point, we do not know (1) whether this is a permanent re-allocation for Conoco gas, (2) if non-permanent, how long will this last, and (3) whether the government (or Chevron) will compensate PGAS for the potential loss in profit, from missing the contractual obligation.
(2) CEO Hendi Prio Santoso told Bloomberg reporter that natural gas sales may drop this year because of supply shortage from ConocoPhillips South Sumatra field. Delivery from that gas field dropped to as low as 150mmscfd this month, and may average at 250 mmscfd, less than the contracted 390mmscfd. (Source: Bloomberg)
(3) PGAS issued a public statement after market close, saying: (i) the company is keeping its volume guidance for 2010, namely 800-900 mmscfd daily average for the year. (ii) the company is discussing with the government on how to maintain the delivery from South Sumatera Gas Fields in the level that we received in January of this year, which was more than 370 mmscfd average for the month. (iii) the company has communicated the plan to hike price to the industrial customers, nationwide. Based on feedback, they will decide on implementation in 2Q10.
The good news: the price hike plan seems intact with potential increase in base price and surcharge fee, along with potential cut in customers' quota (for base price).
The not-so-good news: although overall "volume" guidance for PGAS remains intact, the company could be earning less than US$0.50/mmscf (just transmission toll-fee) for the Conoco gas that is being routed to Chevron (50-100mmscfd out of 855mmscfd forecast for FY10), vs. the forecast US$3.36/mmscf gross margin if the gas were sold to industrial customers. At this point, we do not know (1) whether this is a permanent re-allocation for Conoco gas, (2) if non-permanent, how long will this last, and (3) whether the government (or Chevron) will compensate PGAS for the potential loss in profit, from missing the contractual obligation.
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