Associated Press Stocks climb on earnings, drop in jobless claims

Stocks rise on earnings, drop in jobless claims; European debt problems remain a focus

NEW YORK (AP) -- Stocks surged higher after another series of upbeat earnings reports and a reading on unemployment provided more evidence of an improving economy.

The Dow Jones industrials rose 122 points Thursday after the Labor Department said initial claims for unemployment benefits fell last week. And companies including Motorola, Time Warner Cable and Starwood Hotels & Resorts reported earnings that topped analysts' forecasts.

It was the market's second straight winning day after a plunge Tuesday that took the Dow down 213. Greece's debt problems, one of the triggers for that slide, appeared less dire Wednesday and Thursday, and that allowed investors to focus on the growing signs of healing in the U.S.

The Labor Department said first-time claims dipped to 448,000, slightly above analysts' forecast of 445,000, according to Thomson Reuters. It was the second weekly drop and lifted hopes that layoffs are slowing.

Dealmaking and strong corporate earnings reports added to the growing optimism. more...

Bloomberg Copper, Aluminum Rise as Fed Keeps Rates Low, Equities Climb

April 29 (Bloomberg) -- Copper led a rebound in industrial metals after Federal Reserve officials restated their intention to keep the benchmark interest rate near zero to boost growth, increasing the prospects for a global economic recovery.

Three-month delivery copper on the London Metal Exchange rose from a one-month low, gaining by as much as 1.6 percent to $7,520 a metric ton. It traded at $7,441 at 3:15 p.m. in Shanghai. Aluminum, lead, zinc and nickel all advanced.

The Federal Open Market Committee said yesterday in a statement it would keep the rate near zero for an “extended period” and said the labor market is “beginning to improve.” Officials also said growth in household spending has “picked up recently.” Equities rose and the dollar halted its climb against a basket of six major currencies. The U.S. is the second-largest consumer of copper, used in homes and machinery.

“The reiteration of low U.S. interest rates supported sentiment,” Edward Fang, an analyst at China International Futures (Shanghai) Co. said today. “Technically, we also see a rebound in metals after recent declines,” he said.

Copper in Shanghai gained as much as 1.2 percent to 59,150 yuan ($8,666) a ton and closed at 58,830 yuan.

Still, the “cautious atmosphere isn’t dropping off any time soon with uncertainties in Europe,” Fang said. Prices in London yesterday fell to $7,360, the lowest since March 25 after Standard & Poor’s slashed Greece’s credit rating to junk, and cut Portugal’s by two steps this week.

Debt Woes

S&P also cut its rating on Spanish debt to AA yesterday from AAA as it said Spain is underestimating its fiscal problems and overestimating its ability to grow. Spanish Deputy Finance Minister Jose Manuel Campa said that his country will have no trouble financing a 16.2 billion euro ($21.3 billion) bond redemption in July and won’t need to ask for European Union aid as Greece has.

Aluminum in London climbed 0.2 percent to $2,193.50 a ton and zinc increased 1.1 percent to $2,354.75 a ton.

Aluminum and zinc “should be very sensitive to the real- estate market which China’s government is trying to cool,” Lin Junhua, analyst at Jinpeng Futures Co., said from Beijing.

China won’t back down from measures to cool the nation’s property market because the government’s “credibility” is at stake, Credit Suisse Group AG said.

The government has in the past two weeks raised mortgage rates and down-payment ratios, barred lending for third-home purchases and ordered tighter scrutiny of developers’ financing to restrain property prices that surged a record 11.7 percent in March.

Lead rose 0.9 percent to $2,258 a ton and nickel added 0.4 percent to $25,750 a ton, while tin gained 0.9 percent to $18,166 a ton.

Bloomberg China’s Nickel Pig Iron Output Advances to Record

April 29 (Bloomberg) -- Production of nickel pig iron in China, the world’s largest consumer of nickel, jumped to a record in the first quarter after prices more than doubled in the past year, according to a researcher.

Output of nickel contained in pig iron, a low-cost substitute for the refined metal, more than tripled to 44,000 metric tons in the first three months, said Wang Chongfeng, an analyst at Shanghai Metals Market, a unit of researcher CBI China. March output reached a record 17,400 tons, she said.

“Nickel pig iron producers ramped up output as it has become quite profitable following such a large increase in prices,” Wang said today by phone from Shanghai. “Restocking by stainless steel producers has also driven demand.”

Nickel for three-month delivery on the London Metal Exchange is the best-performing commodity this year, climbing 39 percent as stainless steel producers, the biggest users of the metal, increased output as the global economy recovers. It advanced to a 23-month high of $27,595 a ton on April 16 and last traded at $25,770 at 4:04 p.m. in Singapore.

China’s production of nickel pig iron is expected to exceed 50,000 tons in the second quarter, said Wang, driven by demand from domestic stainless steel mills. Nickel is used to make the alloy more resistant to corrosion. more...

CLSA BBRI 1Q2010 expectations

Bank Rakyat is going to report its 1Q10 financial results on Friday morning April 30, 2010 at 9:00AM. There is an analyst meeting but no dial in is provided.
• We think the numbers will be good. Rakyat experienced 2% loan contraction thru February, and we anticipate 1Q will reflect slightly negative QoQ loan growth fueled by the retail segment. We expect the NIM to show some strength as longer dated time deposits begin repricing lower in 1Q. The big question will be the impact of PSAK 55, as with other banks in the micro lending space we expect fee income to receive a boost at the expense of margin business.
• Our 10CL forecast stands at Rp8.5tn or Rp 696 per share. We are 3% below the street
estimate.
• It is our opinion that credit issues will remain on the docket at BRI (medium size loan NPL's north of 12%) but the headline number will likely outweigh this. We will likely have to revise our earnings higher following the earnings release on Friday.

CLSA BCA 1Q2010 expectations

BCA is going to report its 1Q10 financial results on Thursday evening April 29, 2010 at 5:00PM. There is an analyst meeting but no dial in is provided.
• We think the numbers will be weaker than peer earnings as slow loan growth and NIM
contraction likely. Loan growth through February fell by 3.4%. BCA is similar to Mandiri with its seasonality impact. We note that BMRI reported strong March loan growth of 2%, if BCA could match this it would represent a positive catalyst going into 2Q.
• We believe investors must be aware of the impact of PSAK in the quarter and how it effects the coverage ratio, this could support earnings. Do not be surprised it initial NIM contraction is larger than anticipated, this will likely be attributed to the accounting change for amortization of loan related fees.
• Our 10CL forecast stands at Rp8.8tn or Rp361 per share. We are 10% above the street
estimate.
• Generally speaking we have had to revise higher our bank forecasts, but we are less
confident that this will be the case at BCA. In 3 of the last 5 years BCA has reported lower QoQ profits and in only 1 of those years did profits exceed 23% of FY earnings.

CLSA Telkom contrarian buy?

Good Morning. Despite y'days weakness largely on the back of European woes, there was still some decent buying support noticeable which underlines the recent belief that every sell-off is a buying opportunity. Strong 1Q10 als continue to stream in, underpinning the strong macro outlook in Indonesia.

I have been asked by my regional colleagues what big cap name would I buy here if one don't want to chase say the usual suspects like Astra, BCA, Mandiri, United Tractors etc. I must say Telkom Indonesia is looking increasingly interesting. The stock has underperformed both the JCI and Indosat by 35% in the last 6 months - see chart below. While I admit the industry dynamics is no way as attractive is it used to be with now too many players and perpetual price wars, most of the negative news is already priced in the stock. With mobile penetration still only at 60%, there would still be decent growth but obviously not the 20-30% they enjoyed for the last few years.

As Peter Lych will probably say, Telkom has gone from as fast grower to a Stalwarts (or mid-growers). Stalwart are huge already, but they either buy market share (in Telkom's case, possibly buying a stake of value operator Bakrie Telkom). But they have retail oomph that they can generate 10-12% annual growth in earnings. If you buy Stalwarts at the right time, you can still make 30 or even 50% return in relatively short time.

Investors have been getting tired of holding to Telkom, we started to see capitulation in this massive laggard. 1Q results will likely disappoint because they were late in responding to the recent sms price war. However 2Q onwards will see improvement as Telkom defended their market share. Voice tariffs have bottomed and started to tick up again as player becoming more rationale.

Comps below show Telkom standing out almost in every metrics with the exception of PLDT. Further dips in this stock warrants a BUY.

Everyone hates the stock but I begin to like! Nothing wrong paying 11x for 10-15% growth, 5% divy yield and 30% ROE.

CLSA Bakrieland (ELTY IJ) – weaker than expected by Sarina

Bakrieland (ELTY IJ) reported a weaker than expected 1Q10 result, with Net Profit 1Q10 of Rp28bn, at 19% of our FY10 and consensus expectation.
Sales revenue booked at Rp206bn, a 27% increase YoY, and EBIT at Rp33bn rose 28% YoY.
EBIT margin was 16%, stable from last year, but net profit only grew 7% Yoy mainly due to lower interest income booked.

CLSA Indocement (INTP IJ) – good numbers by analyst Sarina

Result is in-line with net profit of Rp786bn which is 23% of our FY10 expectation and 24% of market consensus. Strong growth in earnings is largely driven by 21% YoY increase in domestic sales volume.
Sales reached Rp2,549bn , rose by 16.6% YoY. This was 22% of our FY expectation.
Net profit reached Rp786bn, rose by 56% YoY. This came at 23% of our FY expectation, and 24% of consensus's expectation
GP margin for 1Q10 was 51.9%, higher than our expectation of 50.8%.
Results were in-line with our assumptions. 1Q quarter are usually seasonally weak for cement industry. In 2008: 1Q08 was 22% of FY08, and in 2009, it was 18% (weaker than expected demand last year)
Reiterate BUY with 26% upside potential to TP of Rp19,000/share

Credit Suisse: Tactical downgrade of equities on Greek contagion risk

The Greek contagion fears continue to occupy centre stage in the global financial markets. Following its downgrade for Greece and Portugal on Tuesday, Standard & Poor's (S&P) yesterday downgraded Spain to AA from AA+ with a negative outlook. S&P warned that a further downgrade was likely if Spain's budgetary position underperformed to a greater extent than the agency's expectation. The Euro Stoxx 50 Index lost another 1.8% last night. The IMF announced that it was considering committing another EUR 10 bn to Greece's rescue package, in addition to its original commitment of EUR 15 bn. This raised some hopes that the rapidly escalating Greek debt crisis may prompt policymakers in the Eurozone to take more decisive actions to stabilize the markets. If Greece manages to reach an agreement with the EU and the IMF in the near term on conditions for a financial rescue package, this should alleviate its immediate liquidity stress before the country faces a critical EUR 8.5 bn bond maturity on 19 May.

However, our Global Fixed Income Research Team cautioned that the recent sharp widening of Greek bond spreads has materially increased the country's default risk as it has now become virtually impossible for the country to finance itself in capital markets. In Germany, the approval for distribution of funds to support Greece's rescue package is complicated by the upcoming regional elections on 9 May. Major uncertainties still exist regarding the sustainability of Greece's overall debt levels, as German opposition Green Party leader Jurgen Trittin quoted his IMF source as suggesting that the rescue package for Greece could total between EUR 100 bn and EUR 120 bn over the next three years. We believe some form of debt restructuring for Greece may still be needed, which could either be announced simultaneously with the support package or at a later stage in case the agreed austerity program does not work out as planned.

In wake of rapid deterioration of the Greek credit crisis, Credit Suisse Investment Committee decided in a special meeting yesterday to reduce the tactical (1-6 months) equity arrow to neutral after global equity markets have fallen through key technical support levels. We believe the outcome of the Greek crisis remains highly uncertain ahead of the 19 May deadline for refinancing substantial amounts of the country's debt. From a strategic (6-12+ months) perspective, the Investment Committee maintains our positive equity arrow due to robust outlook for the global recovery and corporate earnings.

To reflect the intensification of the Greek contagion risk, our Global Equity Research Team has downgraded Europe ex-UK to underweight from neutral due to deteriorated earnings outlook for the region amid the sovereign debt crisis. We believe the positive marginal effects on European exporters of the weak EUR are now peaking. We also downgraded Germany from overweight to neutral and cut Spain to underweight from neutral due to their exposure to the Greek contagion risk. Our top SELL ideas among European stocks are Commerzbank (CBK GY, HOLD, TP: EUR 5.5, -8% downside), Air France (AF FP, HOLD, TP: EUR 10.5, -10% downside), SAB Miller (SA BLN, HOLD, TP: GBp 1780, -11% downside) and EADS (EAD FP, SELL, TP: EUR 12.5, -10% downside). As part of a risk reduction strategy, we have upgraded Switzerland, which is a defensive market, to neutral from underweight. We maintain our overweight position on emerging markets and Asia given their strong domestic fundamentals, robust growth prospects and favourable structural drivers.

UBS Tunas Ridean (TURI Not Rated): Q110 financials

TURI reported Q110 net profit of Rp75 bn (-46% YoY, flat QoQ). Stripping out Q109’s one-off 51% stake divestment in the subsidiary (Rp103 net gain), however, TURI’s Q110 net profit grew by 105% YoY.

TURI Q110 revenue stood at Rp1.8 tn (+73% YoY, +33% QoQ), supported by 70% and 90% YoY increase in cars and motorcycle sales volume to 8,200 units and 32,500 units respectively.

TURI’s Q110 bottom line is 69% contributed by the auto dealership division, the remaining 18% and 14% from rental and finance division.

strong set of Q110 numbers. We heard on the Street that TURI is proposing stock-split in the next AGM.

UBS Automotive Sector: Auto and components import tariff lowered

The Finance Ministry issued Ministerial Decree No. 88/PMK/011/2010 on April 21, 2010, which stipulates lower import tariff rates for incompletely knocked-down auto and components. With the revision, the import tariff ranges 0-7.5% compared to 5-15% previously. The Indonesian Automotive Association states the new regulation will strengthen Indonesia’s auto and components industry’s competitiveness and increase the local content in auto manufacturing.

Overall, the new regulation is positive in further supporting Indonesia’s auto and components industry. The local content of Indonesia’s 4W and 2W stands at 80%-90% already, though. We think the impact of the new regulation will not be too material.

UBS Indocement Tunggal Prakarsa (INTP Buy PT 16,600): Q110 financials in-line

INTP Q110 net profit came-in at Rp789 bn (+56% YoY, 23% of UBSe 2010 forecast).

INTP Q110 revenue stood at Rp2.5 tn (+17% YoY, 22% of UBSe 2010 forecast), while EBIT stood at Rp980 bn (+31% YoY, 22% of UBSe 2010 target).

INTP booked Rp54 bn other income in Q110, as opposed to other expenses of Rp49 bn in Q109, supported by: 1) higher interest income; 2) FX gain (vs. FX loss last year); and 3) lower interest expenses.

Good set of Q110 numbers – slightly ahead (5% above) consensus. With domestic capacity utilization rate of 75% (SMGR at 95% and SMCB at 80%), INTP is best positioned to benefit from increased cement consumption in 2010-2011.

Citigroup BSDE analyzed non-rated snapshot

 Takeaways from our property conference — BSDE participated in the Citi Asia Pacific Property Conference 2010. Below we highlight the takeaways from management. BSDE is a property developer built by a consortium of shareholders in 1984 to develop BSD City as a township in Serpong, Southwest of Jakarta. The current major shareholders are Sinarmas Group (50.7% stake) and Warner Investment (16%). BSD City has the largest landbank among listed property companies with 3,200 hectares.

 1Q10 pre-sales — Marketing sales surged 81% y-y to Rp545bn in 1Q10, underpinned by low mortgage rate and more aggressive launches. The company expects to book the entire 1Q10 pre-sales as FY10 revenue. Pre-sales target for FY10 is Rp2trn, up 50% y-y. Landed housing is expected to still contribute about 60% to total pre-sales as in the past few years.

 Recent development — BSD City’s master plan development has 3 phases. The first (1,500ha) has successfully been developed since 1989 and completed in 2008; now it is home to 100,000 residents. It has begun the second phase on 2,000ha of land in the west part of Cisadane River, sketching on middle-up housings, and CBD. The first stage of 850ha is scheduled to be completed in 5 years (2008-13), and the remaining 1,150ha in 2020. The third phase (2,000ha) will take place in 2020, located further west of the river.

 …Landed Residential… — The company is currently developing two clusters located in the second phase zone, Foresta and The Icon, pricing the land at Rp2.2-2.6m/sqm with land size ranging from 84sqm-670sqm. Fifty percent of the presales used mortgage as buyers take advantage of the historic low rate.

 …Office Park… — Located in the heart of BSD City, Sunburst CBD Office Park (42ha) is planned to be the next prominent CBD development in the Greater Jakarta Area. The district will be equipped with advanced infrastructures, caressed by greenbelt areas which ensure cleaner air & water and preserved nature. The company expects to boost its recurring income in the next several years to 30% of total revenue.

 Supporting Infrastructure — BSD City is accessible through several toll roads, mainly by Serpong-Merak (from West Jakarta) and Jakarta-Serpong (from South Jakarta). Jasa Marga has committed to building two toll-road sections with total length of 26.4km in 2011 (Cengkareng-Kunciran, Kunciran-Serpong) that will connect Serpong to the airport. Upon completion, BSD will be accessible by four toll roads.

Credit Suisse: Telkom - Still a beneficiary of a growing market

● We continue to view the competitive environment in Indonesia as relatively benign. Notwithstanding some increased SMS promotional activity, core voice tariffs continue to be on a flat to upward trend. With net addition momentum picking up we now,
expect Telkomsel to deliver 11.0% revenue growth YoY into FY10, ahead of guidance and our previous forecast of 9.3%.

● While the fixed line business remains under structural pressure, Telkom management’s awareness of this has increased and costs and capex associated with the ex-growth Flexi business are finally being slashed. While fixed line capex overall still looks high, it is at least now being directed into value-creating areas (broadband).

● While the resulting upward revisions to our forecasts are relatively modest, at 1.4%, 0.9% and 1.5%, respectively, for FY10 consolidated revenue, EBITDA and net profit, the upward direction contrasts with recent downward moves in consensus forecasts.

● We raised our DCF-based target price by 2.2% from Rp9,200 to Rp9,400. With 22.9% upside, we upgrade our rating to OUTPERFORM (from Neutral).

CIMB 1QFY10 Results – Indocement Tunggal Prakarsa – Best is yet to come?

Maintain Outperform on Indocement. 1Q10 results met our expectations, forming 23% of our FY10 forecast and 24% of consensus. EBITDA margins of 45% exceeded our forecast of 40.5%, driven by a stronger rupiah (Rp9,261/US$ vs. our Rp9,500/US$ assumption for FY10). Despite the higher margins, we maintain our margin assumptions, earnings estimates and DCF-based target price of Rp16,600 (WACC 12%), assuming 2H contributions will not be typically as strong. We see stock catalysts coming from continuous rupiah strength, a minimum impact from electricity tariff hikes and eventually higher operating margins.

DBS Indocement Tunggal: Rp14,900; recommendation - TP under review; INTP IJ

1Q10 net profit up 56.4%
Indocement posted strong 1Q10 net profit of Rp786.4b (+56.4%yoy) on the back of strong revenue growth and more efficient production. The result was inline with our full year net profit estimates of Rp2.9t. Revenue rose by 16.4%yoy to Rp2.6tn while cost of production only rose by 4%yoy to Rp1.2t, as such gross margin rose to 52% from 46% in the same period last year.
In the meantime, INTP’s balance sheet remains healthy with a net cash position of Rp2.9t. The company plans to spend up to US$275m of capex for the next three years to develop a cement mill with capacity of 1.5mt p.a. a new cement factory with capacity of 2-3m tons p.a., and 2x50 MW power plants.

Commodities rally, Baltic Dry Index still gloomy

The prices of major commodities are strengthening including that of iron ore, copper, crude oil. But, surprisingly, the Baltic Dry Index is showing weakness on weak bulk shipping prices. Growth in global industrial production is rebounding at the strongest rate since 2000 but the freight market is lagging. This is because after decades of minimal new dry bulk carrier supply, fleet additions have picked up strongly and the total bulk carrier fleet is expanding rapidly, according to an analysis by Bank of America-Merrill Lynch (BofAML).

Dry bulk tred is set to strengthen this year with a growth of 7%, compensating for last year's demand destruction. However, dry frieght prices will not spike due to overcapacity of ships. The global iron ore market is tight and seaborne demand is growing rapidly, particularly from China. Moreover, the global coal markets are starting to show signs of tightness with API4 coal prices rebounding to 18-month highs. Therefore, in the medium term, dry freight prices could climb up, once the oversupply of ships is absorbed in 2011, BofAML analysis said.

BofAML said that the term structure of the freight market will remain in backwardation. Implied volatilities on dry freight contracts remain relatively high, particularly at the very front end of the volatility term structure. Hence, overwriting options over a long freight position could generate a stream of income to complement exposure to flat prices. more...

Laba Bersih WIKA Naik 39,95% di Q1-2010

INILAH.COM, Jakarta - PT Wijaya Karya Tbk (WIKA) mencatatkan kenaikan laba bersih sebesar 39,95% di kuartal I-2010 menjadi Rp64,28 miliar dibanding periode yang sama 2009 sebesar Rp45,93 miliar.

Berdasarkan laporan keuangan yang disampaikan Perseroan ke BEI, Rabu (28/4) dijelaskan kenaikan laba bersih ini dipicu kenaikan laba usaha di kuartal I-2010 menjadi Rp99,09 miliar dari periode yang sama 2009 Rp77,46 miliar.

Namun, Perseroan mencatatkan penurunan penjualan bersih di kuartal I-2010 menjadi Rp1,13 triliun dari periode yang sama 2009 sebesar Rp1,3 triliun.

Perseroan mencatatkan kewajiban jangak pendek sebesar Rp3,03 triliun di kuartal I-2010, sedang ekuitasnya mencapai Rp1,59 triliun.

Bloomberg Crude Oil Rises After Fed Pledges to Keep Interest Rates Low

April 28 (Bloomberg) -- Crude oil rose after Federal Reserve officials restated their intention to keep interest rates near zero for an extended period and said the labor market is beginning to improve.

Oil rose 1 percent after the Federal Open Market Committee said that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Prices also increased after a government report showed that U.S. refineries were operating at the highest rate in almost two years.

“The Fed’s comments were a perfectly bullish combination for a number of markets,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “They said that they are seeing signs of improving growth, and promised to keep interest rates low.”

Crude oil for June delivery rose 78 cents to settle at $83.22 a barrel on the New York Mercantile Exchange. Futures are up 67 percent from a year earlier.

The job market is “beginning to improve,” the Federal Open Market Committee said in a statement today in Washington. Last month, the FOMC said the labor market “is stabilizing.” more...

Bloomberg Merkel Vows Faster Greek Aid as Spain Shows Contagion

April 28 (Bloomberg) -- German Chancellor Angela Merkel and the International Monetary Fund pledged to step up efforts to overcome the Greek fiscal crisis as Standard & Poor’s downgraded Spain and investors sold bonds in Europe’s most indebted nations.

“It’s completely clear that the negotiations between the Greek government, the European Commission and the IMF need to be sped up now,” Merkel said in Berlin today. Flanked by IMF Managing Director Dominique Strauss-Kahn, she said the “stability of the euro zone” was at stake if a 45 billion-euro ($59 billion) loan package for Greece can’t be delivered fast.

A failure by policy makers to match such talk with action has fanned concern that the crisis will spread beyond Greece. Merkel has delayed German approval of loans in the face of voters’ opposition and S&P today cut Spain’s credit rating, a day after it dropped Greece to junk status and downgraded Portugal. The euro fell to the lowest in a year.

“The hesitant and haphazard reaction of euro-zone policymakers to Greece’s predicament underscores the dangers of contagion,” said Marco Annunziata, chief economist at UniCredit Group in London. “The euro-zone has taken over six months to react and is allowing uncertainty to persist. This does not bode well for their ability to react quickly should a second flashpoint burst.” more...

JP Morgan - Indonesia Real Estate: Following the drivers: Analyzing Greater Jakarta property

· Jakarta property - medium-term drivers: In the past three years, the number of people employed in the Jakarta areas has been greater than the growth of the population (6.3% CAGR vs. 2.6% CAGR). We also see rising GDP per capita in Jakarta and Greater Jakarta, and are starting to see signs of manufacturing exports recovery. All of these should point to better property demand fundamentals in the capital area.

· Follow the commuters – Bekasi, Depok, Serpong, Bogor and Tangerang are population nodes for the city: The Greater Jakarta market is 1.6x larger than the Jakarta market. The average growth of commute from the five nodes of Bekasi, Depok, Serpong, Bogor and Tangerang within Greater Jakarta is around 11-16% CAGR (grown more than 10x in the last 25 years). Following the trend of urbanization, increase in population, and increase in manufacturing activity, we are positive on residential demand for the Greater Jakarta area, and think companies with a presence in these areas stand to gain over the medium term.

· Who are the beneficiaries? Property companies that we cover (CTRA, LPKR, and ELTY) should benefit from such structural changes in the property market as they have township developments in the Greater Jakarta area. With the recent launch of Summarecon Bekasi, Summarecon Agung has the benefit of catering to both Serpong and Bekasi markets (where industrial properties are mostly located).

· Medium-term catalysts: transportation connections and power plant projects: With expected infrastructure improvements (via the proposal to apply the “eminent domain” principle) and completion of power plant projects, we expect rising demand for industrial/manufacturing in Greater Jakarta areas. We argue that toll road connections would be a critical aspect identifying future residential clusters, which could develop into property opportunities.

Citigroup Kawasan Industri Jababeka - Analyzed Non-Rated Snapshot

 Takeaways — Jababeka participated in the Citi Asia Pacific Property Conference 2010. Below we highlight takeaways from management. Jababeka is a fullyintegrated township developer with a focus on industrial estates. The industrial estates are located in Cikarang and Cilegon. It is also developing residential estates in Cikarang. In bids to boost its recurring revenue, the company has made forays into power plants and dry port operations.

 Dry port — The company will soft-launch the operation of its dry port area by the end of this month in Kota Jababeka, one of the three spokes in Greater Jakarta that the government has designated to alleviate the chronic congestion at Tanjung Priok port. The initial capacity of the dry port is 150k TEUs, rising to 500k TEUs by 2012 and 2m TEUs by 2018. Jababeka also plans to develop supporting facilities to transform the dry port into a logistics hub. The company has allocated a total of 200 hectares of land to be developed as the logistic hub.

 Power plant — In order to resolve the shortage in electricity supply in the industrial estate, Jababeka is building a 130MW gas-fired power plant. The entire construction is expected to be completed in 3Q10. The company is awaiting the issuance of an operational area permit from the Ministry of Energy so it can operate and manage the plant. Currently, the company is supplying 37MW to PLN, a state-owned electricity company, under a temporary contract. However, due to prolonged delays in securing the permit, the company has signed a conditional sale and purchase agreement to sell its entire stake in the power plant so it would be able to repay the power plant’s loans.

 Industrial estate — The company’s presales of industrial lots more than doubled YoY in 1Q10 to Rp45bn. While a low-base comparison was one of the main reasons, higher demand for industrial land from existing tenants’ expansion also ontributed. Unilever Indonesia is seeking to acquire 15 hectares of land to build a super-warehouse.

 Residential estate — As mortgage availability improves and mortgage rates dip to record lows, Jababeka’s residential presales have surged. Presales more than quadrupled YoY in 1Q10 to Rp40b. As land prices in the estate’s vicinity have reached Rp2.5m/sqm vs. just Rp1m/sqm in the company’s estate, there is plenty of room for the company to increase its selling prices.

CLSA Astra Agro (AALI IJ) 1Q2010 results

Astra Agro net profit in 1Q10 up 25% yoy to Rp272bn, but still 34% lower than the strong 4Q09 result. The result is at lower end of our estimate and market consensus. Reported earnings is only 11% of our (and consensus) full year estimate vs. 13% in 2009.

Revenues was up 16% yoy but down 17% qoq. Sales volume down 1.2% yoy. Most importantly, FFB production from its own estates was down 2% yoy and 28% lower qoq. As production costs is fixed on per hectare basis, lower production/yield increases unit production costs.
The selling price of Rp6,544/kg in 1Q10 is 19% higher than 1Q09 and 4% higher than 4Q09. Strong rupiah has mitigated some of the gain in international CPO price.
Production costs is creeping higherwith total Cogs excluding FFB purchase up by 5.8% yoy and G&A costs excluding taxes up 27.6% yoy.
There is Rp19bn FX loss from US$ holding and Rp21bn other charges. Excluding these, net profit will be 13% of full year estimate, similar to last year.
We continue feel Astra Agro (AALI IJ - Rp23,250 - OPF) is pricey and prefers London Sumatra.

CLSA IndoCoal – Bayan force majeur, impact to others

Bayan declared force majeur. Bayan Resources (BYAN IJ) announced force majeur on coal shipment from its Gunung Bayan coal mine in Kalimantan, stating heavy rains causing floods on hauling roads from pit to its coal terminal. Management stated that some shipments to Malaysia and Italy would be delayed.

This would be the second time in the last 24 months. The last one happened in 3Q08 after Bayan's Wahana mine was flooded. Note also that Bayan announced the force majeur only a week after securing bank loan, US$300m, from Standard Chartered, SMBC, and ANZ.

Implication to volume? Gunung bayan is supposed to produce around 4mt this year, from total target of around 14m tonnes. Assuming one month of access closure then that should translate to 300kt to 350kt of volume loss. We heard that this force majeur might affect around 3 to 4 shipments, and hence total volume impacted is likely be less than 350kt or 2.5% of total output.

Net impact to Bayan earnings could be greater than production loss. Note that Gunung Bayan mines produces the company’s best product, very high CV hence much higher price than Bayan's other mines.

Any other mines affected? This time of the year is normally the start of dry season and we have heard a bit of heavier-than-normal rain hitting Kalimantan Island over the past 2-3 weeks. Checking operations of the listed coal names, none seem to be affected much. ITM stated that its Jorong mine operation, which has been prone to wetter than normal season, has been slowed by rains but not stopping. There are some mines, non-listed mines that have been affected by this heavy rain.

Contractors affected? Worth mentioning that Buma, a subsidiary of Delta Dunia, and Petrosea, owned by Indika, are contractors in Gunung Bayan mine. There should be some impact to their business, though floods have affected mostly hauling roads and less on the pit.

CLSA CPO sector - Soybean watch

Wilianto remains positive on the plantation sector. He highlights that record harvest and planting of edible oils are needed to feed the global population thus the structural long term demand for CPO is intact.

The good soybean harvest in Brazil and Argentina this year has put pressure on CPO prices (been moribund and so have the CPO stocks) but Wili argues that this has mostly been priced in now as reflected in soybean/CPO price premium normalizing.

What will affect CPO prices in the S/T?
US Soybean planting next month. USDA survey shows that planting intentions is up only 1% to 74.8m hectares. This is record planting areas but still behind the demand growth of 4.5%
CPO production in 2H. Will seasonally higher production in 2H be able to offset the lower than expected production in 1H? The drought in 1Q2010 will also dampen CPO production in 2H
Top picks in plantation remain London Sumatera (LSIP IJ), Sampoerna Agro (SGRO IJ) and Gozco (GZCO IJ) but the view on the sales desk is that in spite of the good structural long term outlook, on a shorter horizon, CPO stocks are likely to remain under pressure – 1Q2010 results are starting to trickle in and are likely to be on the weaker end - Astra Agro unimpressive weak results yesterday (see below) and is perhaps an indication of what’s to come for the other planters.

UBS Bank Tabungan Negara (BBTN Not rated): Ten-year bond issuance

BTN announces Rp1.5 tn, 10-year bond issue to fund the bank’s credit expansion. The offering period is scheduled on May 31 and July 1, 2010, while the listing date is scheduled on June 7, 2010. Underwriters on this issue are Mandiri Sekuritas, Bahana Securities and Indo Premier Securities.

UBS Media Nusantara Citra (MNCN Not rated): Euro bond issuance

MNCN is planning to issue US$300-400 mn Euro bonds in June 2010 to refinance its US$143 debts due in September 2011. The remaining proceeds from the Euro bond issue will be used to invest in local TV stations.

Morgan Stanley and Standard Chartered are underwriting the five-to-seven-year Euro bond, which will be listed on the Singapore Stock Exchange.

Sales comment: Conference call arranged with management for 10.00 am Jakarta time tomorrow morning.

UBS Gozco Plantation (GZCO Not Rated): 2009 cash dividend payment

GZCO’s is distributing 29% of its 2009 net profit in cash dividend, which amounted to Rp12 per share – to be paid out in May 12, 2010.

GZCO has allocated Rp280 bn for 2010 capex, which will be used for: 1) new palm planting (7,400 ha, Rp90 bn); 2) estate up-keeping (Rp90 bn): and 3) CPO mill development in South Sumatra (90 tph capacity, Rp100 bn).

GZCO is targeting 16% net profit growth in 2010 to Rp204 bn.

Sales comment: Dividend yield of 2.9% at the current price.

UBS Bayan Resources (BYAN Not Rated): Force majeure due to heavy rainfall

BYAN’s subsidiary, Gunungbayan Pratamacoal (GBP) announced force majeure on its coal sales agreement with TNB Fuel Services Sdn. Bhd. and BYAN – which indirectly impact BYAN’s coal sales agreement with Enel Trade SpA.

The force majeure was due to heavy rain level in April, which resulted in the flooding in parts of GBP’s hauling road and Manau jetty facilities. The coal mining operations has been halted since April 19, 2010.

BYAN 2010 coal production target stands at 13.5 mn tons (+42% YoY). GBP’s annual production capacity is 4 mn tons.

Sales comment: Flooding during the dry season? Interesting. The question now is this flooding impacting other coal mines/contractors in Kalimantan? Pama and Buma are major coal contractors in Kalimantan.

UBS Holcim (SMCB Under review PT 2,300): Awaiting approval from Holcim Switzerland

SMCB plans to build 1.6 mn tpa capacity cement factory in Tuban, East Java, with total investment of US$400-500 mn. The new plan will increase SMCB’s annual capacity to 10 mn.

Sales comment: Cement plant development typically takes 2.5 years to complete. The faster SCMB get the approval, the better. We prefer Indocement (INTP Buy PT16,600) in the cement space, due to its strong management and fundamentals.

UBS Bakrieland Development (ELTY Neutral PT 305): Q110 financials in-line

ELTY’s Q110 net profit came-in at Rp28 bn (+7% YoY), supported by higher revenue (Rp206 bn, +27% YoY) and operating income (Rp33 bn, +28% YoY).

ELTY Q110 revenue is 50% contributed by City Property, followed by Hotel & Resort, Landed Residential and Infrastructure with 29%, 17% and 5% contributions.

For 2010, ELTY is targeting Rp1.3 tn in revenue (+25% YoY).

Sales comment: ELTYQ110 results is in-line with UBSe 2010 projections.

UBS Astra Agro Lestari (AALI Buy PT 34,000): Q110 slight disappointment

AALI Q110 net income amounted to Rp272 bn (+25% YoY). Despite Rp19 bn forex loss in Q110 (vs. Rp30 bn forex gain in Q109), AALI’s pre-tax profit grew 21% YoY to Rp403 bn.
During the period, AALI CPO sales volume totaled 223,308 tons (-1.2% YoY), while the average CPO selling price stood at Rp6,554 per kg (+19% YoY). AALI’s Q110 revenue stood at Rp1.63 tn (+16% YoY).
Sales comment: It is not that bad. AALI’s Q110 numbers might be looking challenging relative to the full year projection – Q110 net profit accounts for only 9% of UBSe 2010; but the slack will be filled up in the subsequent quarters. CPO production highly correlates with the wet season (September-March), but with heavy rain level even in April – flooding in Jambi and Kalimantan – CPO production might even surprise in Q210.

UBS Automotive Sector: Luxury tax to be increased to 100%

The Directorate General of Tax is currently discussing with the government to prepare the implementation framework for regulation No 42/2009 on luxury tax and proposing the maximum rate to be hiked to 100%, vs. 75% at present.

The automotive industry proposes that the government maintain sthe maximum luxury tax rate at the current rate to support the auto industry. At present, the 75% luxury tax rate applies to sedan, 4x2 and 4x4 with cylinder capacity above 3,000 cc (gasoline) and 2,500 cc (diesel).

Sales comment: Sedan and big engine cars account for less that 5% of the industry annual sales. We believe the market is more concerned on the potential increase in car registration tax, from 10% to 20% slated over the next 12 months. Then again, if you can afford a car, you can afford to pay the registration of your car.

UBS Unilever Indonesia (UNVR Neutral PT 14,600): Windfall profit H110

Analyst Johannes Salim believes UNVR would benefit from:1) strong consumer consumption; and 2) margin expansion – supported by lagging inventory cost and stronger rupiah.

Meanwhile, the ongoing price war initiated by P&G seems to have had minimal impact to UNVR’s market positioning – suggesting UNVR’s strong brand equity with the consumers.

Johannes raises UNVR 2010-12 EPS forecast by 11-15% to Rp495/572/649 respectively, and upgrades UNVR fair value estimate to Rp14,600. UNVR’s rating, however, is maintained at Neutral given its rich implied valuation at 29.5x and 25.5x 2010 and 2011 PE and a mere 7.4% upside to the current price.

Sales comment: On absolute basis, UNVR stock price will continue to be defensive, in our view. On a relative basis, however, there is a good chance that UNVR will underperform. UNVR has underperformed the JCI index by 5% over the past 12 months.

UBS Lest we forget, Astra International is a conglomerate

Astra Agro Lestari (AALI), the plantations business owned 80% by Astra International (ASII), reported its Q110 result after market yesterday.

The AALI result was a mixed bag: Palm oil price increases gave rise to strong growth in operating profits, but higher than expected COGS and FX losses meant that the bottom line was a disappointment v. consensus.

The result in itself isn’t that significant. However, it is likely to remind investors that have bid ASII to the heady heights at which it now trades that the business is a conglomerate, consisting of a fast growing automotive business (held at the parent level), a 60% owned listed heavy equipment business (UNTR), an 80% stake in a volatile (albeit cash cow) plantations business (AALI) and assorted other assets (office equipment through ASGR, banking through BNLI, car and motorcycle parts through AUTO).

This structure begs two questions:

How is ASII currently trading v. its NAV?
What sort of a conglomerate discount does ASII deserve?
The first question we can answer, thanks to some help from analyst Johannes Salim:

My PT of Rp46,500 is NAV assumes a DCF valuation for the automotive/motorcycles business, then market cap of the listed subsidiaries. .

Adjusting for yesterday's closing price of UT and Astra Agro, it is Rp49,000/share.

In other words, with the stock price currently at Rp45,450, the discounts to our PT and current NAV (adjusted for market prices) are small: 2% and 7% only.

The answer to the second question we’ll leave to Johannes and the market to decide. What do you think? Is 7% sufficient?

KimEng Bank Negara Indonesia (BBNI IJ): BUY - New accounting rule boosts bottom line

We raise our FY10F earnings estimate on Bank Negara Indonesia (BNI) after taking into account the Rp690b reduction on allowance for loan losses. Our adjustments resulted in a 52% y/y jump in FY10F profit to Rp3.8t. Loan growth, however, remains the main risk to our valuation. We raise our target price for BNI to Rp2,900 (FY10F 11.7x PER, 2.0x PBV) to reflect our higher earnings estimate. Accordingly, we upgrade our recommendation to BUY.

Indopremier INDF (BUY TP Rp 4450) The Best Has Yet To Come

INDF reported FY09 results inline with our forecast. This year, persisting low wheat price, stronger Rupiah and higher CPO, should boost the company’s EBIT margin to 15.7% (from 13.5% in FY09). Below the line, we expect INDF to register more than Rp200 bn forex gain and lower interest expense, also due to Rupiah strength. As such, EPS should swell 29% YoY to Rp305/share, in our view. Currently it is trading at 12.6x PE 2010F, a staggering 21% discount to average PE 06-09! BUY.

Noodles and Bogasari to increase margin
In FY09, noodles and Bogasari booked 11.8% and 10% EBIT margin respectively on the back of stable wheat price. Provided bearish wheat price to prevail in FY10F, we expect noodles to book even higher margin, 12%. Bogasari should also continue to post higher profitability, as it registered 13% margin in 2H09, even higher than FY04-08 period!

…and so will plantations
Ever since January, CPO has been hovering between USD700-800 level and this should translate to 35% EBIT margin for FY10F, in our view. In FY09, plantations only booked 9.4% margin. We believe the company should be able to secure our target given bullish CPO outlook this year.

Indolakto is catching up
In 4Q09, dairy registered 10.6% EBIT margin, exactly on management’s target on its acquisition. We expect Indolakto to defend this margin on Rupiah strength and weaker sugar price. Despite dairy only accounts for 5% of total EBIT, it’s contribution still superior than other CBP.

BUY with higher TP
We upgrade our forecast on strong margin and derived new TP at Rp4450/share. Our TP implies 14.6x PE 2010F, offering 17% upside potential. Aside from that, we expect investors to reap 2.1% dividend yield, assuming 30% dividend pay out of FY09 net profit.

Mandiri Sekuritas Economy: Capital Inflow: a global phenomenon

The global financial sector was again shocked by the charges against Goldman Sachs, one of the world’s financial institutions. The U.S.’s Securities and Exchange Commission (SEC) sued Goldman for concealing important disclosure of financial instruments sold to its customers. Many analysts predict that this case will probably drag down other banks as such transaction is commonly done.

The question is now whether Goldman case will have a negative impact on the Indonesian markets after huge capital inflows recently. Reversal risk is a serious concern because Indonesia had once confronted such case back in Q3-2008. Luckily, so far the impact has been limited and short lived. On April 19, the Jakarta Composite Index (JCI) was down by 1.3%, the 10-year government bond yield was up by 12bps, and the rupiah weaken! ed by 32 points before they finally backed on the positive track on the next day.

OSK ASTRA AGRO LESTARI (TP IDR21,820– NEUTRAL) 1QFY10 Results Review: A Temporary Deficit

Astra Agro Lestari (AALI)’s 1Q results were below expectation as production took a breather. However, we are not overly concerned as production should rebound in the subsequent quarters. While we like the company, we do not find its stock valuation compelling. In terms of EV per hectare, AALI is among the most expensive of the upstream-heavy players at USD18.2k per planted hectare compared to USD15.2k for Golden Agri, USD12.7k for Indo Agri, USD11.9k for First Resources and USD9.9k for Kencana Agri, all of which offer better value. AALI’s stock price has been flat since we initiated coverage in February. We do not see any stock price catalyst on the horizon.

CIMB 1QFY10 Results – Astra Agro Lestari

Higher costs
Maintain Outperform on AALI. 1Q10 results were 25-30% below our forecast and consensus estimate largely on higher costs, stemming from higher COGS and G&A. The tax rate, still close to 30% (vs. an expected fall to 25%) was the other culprit. We cut our earnings estimates by 3-7% for FY10-12 to factor in a higher cost base for FY10. Consequently, our target price drops from Rp30,240 to Rp29,200, still based on 18x CY11 earnings. Maintain Outperform as we still see key catalysts from improving production and continuing robust CPO prices.

Indopremier BBNI Sharpening Business Model TP 2800

We change our recommendation from HOLD to BUY given: 1) NPL signaling to dip further 2) right issue is likely implemented in the near-tem 3) strong earnings in 1Q10 above our expectation 4) ROE continues to go north 5) BBNI loan is leveraged to domestic growth. Thus we increase our TP from Rp2,300 to Rp2,800.

1Q10 PPOP Up By 6%
Bank Negara Indonesia seems did a splendid job in the first quarter of 2010, with net profit jumped 62% YoY to Rp1,0 trillion. However pre-provision operating profit only up by lower margin at 6% YoY as net interest income rose slightly by 4% due to growth in interest income was offset by higher growth in interest expense. Low interest rate regime put NIM shrank by 20 bps quarterly and 40 bps yearly.

NPL Continues to Dip
NPL continues to dip lower to 4.6%, lowest level since 4Q07 with no longer due to massive write-off. NCO rate trimmed down to 80 bps compared to 280 bps in 4Q09 meanwhile recovery rate was at 30 bps of total loan. BBNI targeted Rp750 billion to Rp1 trillion loan recovery this year given positive expectation in economic recovery. It is worth noting that most of BBNI NPL debtors engaged in manufacturing industry which is leveraged to domestic economy. With Rp750 billion loan recovery, 3% estimated new NPL and 230 bps NCO rate, we expect NPL ratio in FY10F will be at 4.3%.

A Series of Capital Infusion
Given stringent capital requirement for banks to bet their own money against risky assets, we believe BBNI will conduct a series of capital infusion through subdebt and right issue at least in the first quarter of 2011. We projected CAR by the end of 2010, will be at 15.2% assuming US$300 bn dollar subdebt been executed. Meanwhile right issue is an essential matter for BBNI to increase their Tier-1 CAR ratio (core capital). Based on our preliminary scenario, right issue is positive for BBNI shareholder and for the banks since it gives a less dilutive impact due to: 1) an increase in bottom line due to 5% tax benefit deduction. 2) fund from right issue will be placed on SBI instrument that will yield of about 8%.

Valuation and Recommendation
Currently BBNI is valued at big discount with 1.3x PBV and 7.2x PE FY10F. With ROE is already improving and NPL starts calm down, and right issue is likely been approved and executed in the near term (at least in 1Q11) we change our recommendation from HOLD to BUY to the stocks. Our new TP is based on Gordon Growth methodology using sustainable ROE 20%, 10% long-term growth and 15.1% cost of equity yielding new TP from Rp2,300 to Rp2,800. BUY.

DBS Astra Agro Lestari: Fully Valued; Rp23,250; TP Rp21,200; AALI IJ 1Q10 results below expectations

At a Glance
• AALI’s 1Q10 results were 28% below our estimates on annualized basis and less than half consensus estimates
• Drop in third-party FFB purchases and stronger IDR were mostly to blame
• Forecasts unchanged for now, as we expect third-party FFB to pick up in the following quarters
• Reiterate Fully Valued call

Comment on Results
Astra Agro Lestari (AALI) 1Q10 earnings were about 28% below our expectations on annualized basis. A 34.4% y-o-y drop in 3rd party FFB purchases contributed to 3.2% y-o-y and 1.2% y-o-y decline in CPO production and sales volumes respectively. Stronger IDR (from Rp9,433 at end-2009 to Rp9,115 at end Mar 2010) had also restrained its revenue growth to 16% y-o-y to Rp1,633.1b (full year forecast growth is 3.8% y-o-y to Rp7,710.1b). The group’s 1Q10 CPO ASP was Rp6,544/kg (+19.1% y-o-y) – close to spot ASP of Rp7,060/kg (14.2% y-o-y) – while in USD terms, spot CPO price (FOB Malaysia) had actually grown by 43.4% y-o-y to US$763/MT. With stronger IDR, AALI also incurred Rp19.2b FX loss emanating from its USD cash holdings of U$74m as at March 2010.

The group was debt-free (no drawdown of the US$150m term and revolving loan facilities in 1Q10); and booked a much shorter cash conversion cycle of 16 days (vs 39 days in the previous quarter) mainly due to extended payable days.

Recommendation
Pending further update, we are maintaining our sales volume forecasts for the year, as we expect 3rd party FFB to pick up and ramp up milling capacity utilization in next quarters.

Our FY10F earnings forecast of Rp2,043.3b, TP of Rp21,200 and Fully Valued call on the counter are all maintained.

Mandiri Sekuritas Bakrieland: 1Q10 initial numbers (ELTY, Rp240, Buy, TP: Rp500)

Bakrieland’s Corporate Secretary was quoted by Bisnis Indonesia as saying that the company posted 1Q10 net income of Rp28bn(+6.5%yoy) while revenues and operating income came in at Rp206(+26.6%yoy) and Rp33bn(+27.8%yoy). If this holds true, the numbers are well below consensus (representing 13%, 9% and 15% of FY10F top-line, operating income and net income, respectively). What differentiates us from consensus would be the bottom-line figure as our FY10F fully assumes the full recognition of interest expense (some Rp200bn) from its toll-road (kanci pejagan), thus 1Q10 bottomline represented 77% of our FY10 net income target of Rp36bn. We think we cannot benchmark ELTY’s full year performance based on 1Q10 considering (a) extent of interest expense capitalization (b) revenue realization rate and (c) possible corporate actions. Again, we view ELTY as more of an asset play, with the stock currently trading at a 61% discount to our NAV10F. Maintain buy.

Mandiri Sekuritas Pembangunan Perumahan: 1Q10 net profit jumps 26.2% yoy (PTPP, Rp710, Not rated)

􀂄 PTPP’s 1Q10 top line level dropped 18.9% yoy to Rp561bn. However, net profit grew 26.2%yoy to some Rp15bn, given better margins. 1Q10 financial figures reflects around 8-10% from Bloomberg consensus FY10 target. On the balance sheet level, we noticed that cash position increased to Rp525bn (from Rp75bn in 1Q09), as well as inventory level to Rp1.3tn from Rp269bn in 1Q09. The company targets FY10 revenue and net profit to reach Rp6.5tn (+54.6% yoy) and Rp359bn (+120.2% yoy), respectively. The target reflects PER10F of 9.6x, which is relatively similar with average construction companies.

PTPP 1Q10 Results
Rp bn 1Q10 1Q09 yoy (%)
Total revenue 561 692 -18.9
Gross profit (Loss) 48 55 -12.4
Operating profit (Loss) 44 39 12.9
Pre-tax profit (Loss) 31 22 39.4
Net profit (Loss) 15 12 26.2
Gross margin(%) 8.5 7.9
Operating margin (%) 7.9 5.6
Pre-tax margin (%) 5.6 3.2
Net margin (%) 2.7 1.8

Mandiri Sekuritas Astra Agro Lestari: 1Q10 net income below our estimate and consensus (AALI, Rp23,250, Buy, TP: Rp29,000/share)

􀂄 AALI posted 1Q10 revenues of Rp1.63tn (16.0%yoy, -16.7%qoq). This translates to net income of Rp272bn (+24.9%yoy, -34.1%qoq)

􀂄 Revenues decreased by 34.1%qoq due to a decrease in CPO sales volume by 22.5% qoq from 288,289 ton in 4Q09 to 223,308 ton in 1Q10 and a decrease in kernel sales volume by 32.7% qoq, which partially offset by increase in CPO sales price by 9.3% from Rp5,985/kg in 4Q09 to Rp6,544/kg in 1Q10.

􀂄 1Q10 CPO sales volume of 223,308 ton represents 20.4% of our FY10E CPO sales volume. In the last 3 years, average 1Q sales volume represented 23.1% of full year sales volume.

􀂄 Our concern is on cost pressure which caused profit margin squeeze from 4Q09 to 1Q10 when CPO sales price increased in the same period.

􀂄 Currently the counter trades at PER10-11F of 14.7-13.2x. We are in process of reviewing our assumptions with possible downgrade.

Mandiri Sekuritas Alam Sutera: ASRI 1Q2010 earnings surge (ASRI, Rp215, Not Rated)

􀂄 ASRI reported 743% jump in net profit for its 1Q2010 result of Rp63bn, above the consensus estimate (+12.8%). As resulted from major contribution of the commercial area sales last year (70% of total sales) the company enjoyed better net profit margin this quarter(30% 1Q10 vs 14.6% 1Q09), which led to boost up in bottom line.

􀂄 In 2010, despite its further focus on the development of its commercial area, the company will develop some other more investment properties, including fashion mall and the extension of its current success flavor bliss dining area. As per 1Q10, the company recorded Rp1.2tn marketing sales, thus running above its FY10F target (37% of FY10F).

􀂄 Based on recent revaluation of the landbank (Rp8.3 tn), ASRI is now trading at 51.6% discount to its NAV. We don’t have recommendation on the stock.

Bloomberg Oil Extends Slump After Greece Ratings Cut, Drop in Equities

April 28 (Bloomberg) -- Crude oil declined for a third day as global equities plunged and the dollar advanced after Standard & Poor’s Ratings Services cut its sovereign credit ratings on Greece to junk.

Oil dropped 2.1 percent yesterday as credit downgrades in Greece and Portugal, the euro region’s most indebted nations, escalated Europe’s debt crisis. The Standard & Poor’s 500 Index fell the most since Feb. 4. Crude supplies in the U.S. rose by 5.34 million barrels last week, according to the industry-funded American Petroleum Institute.

“The ongoing Greece bailout situation is only putting more and more pressure on the euro currency to trade lower,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “A drop in the equity markets tends to push the price of oil lower. Oil stocks in the U.S. are at very high levels.”

Crude oil for June delivery fell 74 cents, or 0.9 percent, to $81.70 a barrel, in electronic trading on the New York Mercantile Exchange at 8:37 a.m. Sydney time. Yesterday, the contract dropped $1.76 to $82.44.

Greece’s credit rating was cut by three levels to BB+ from BBB+, the first time a euro member has lost its investment grade since the currency’s 1999 debut. S&P also warned that bondholders could receive as little as 30 percent of their initial investment if Greece restructures its debt. The ratings company also reduced Portugal by two steps to A- from A+. more...

Bloomberg Copper, Aluminum Drop as Dollar Rebounds on Greek Aid Concern

Copper and aluminum declined on concern that an aid package for Greece won’t stop its deficit crisis from spreading, boosting the dollar. Lead, nickel and zinc also dropped.

Three-month delivery copper on the London Metal Exchange dropped as much as 1.4 percent to $7,699 a metric ton, and traded at $7,724 at 3:34 p.m. in Shanghai. Aluminum lost as much as 0.9 percent to $2,295 a ton.

There will be no decision on aid for Greece until the International Monetary Fund works out a plan of cuts with the government in Athens, German Chancellor Angela Merkel said yesterday, boosting the U.S. currency. The dollar also rebounded on speculation that the Federal Reserve is moving closer to withdrawing stimulus as the U.S. economy recovers.

“The uncertainties in the Greek situation may prompt investors to continue seeking refuge in safe-haven assets such as the dollar,” Yan Wei, an analyst at Huazheng Futures Co., said from Shanghai. A stronger dollar can reduce demand for commodities denominated in the U.S. currency.

Speculation that the Fed may change its tone regarding record-low interest rates was boosting prospects for a stronger dollar, Yan said. A two-day meeting of the policy-setting Federal Open Market Committee starts tomorrow.

Lead retreated 1.7 percent to $2,318 a ton, zinc dropped 1.5 percent to $2,403 a ton and nickel declined 1.5 percent to $26,760 a ton. Tin dropped 0.5 percent to $19,051 a ton at 3:36 p.m. in Shanghai. more...

Bloomberg Stocks, Euro Plunge as Treasuries Gain on Greece, Portugal Debt

April 27 (Bloomberg) -- Stocks tumbled, with the Standard & Poor’s 500 Index falling the most since February, and the dollar and Treasuries rose as credit-rating downgrades of Greece and Portugal fueled concern debt-laden nations are moving closer to default. Greek, Portuguese and Irish bonds sank.

The S&P 500 lost 2.3 percent at 4 p.m. in New York. The Stoxx Europe 600 Index slid 3.1 percent, the most since November, and the euro dropped below $1.32 for the first time since April 2009. Yields on 10-year Treasuries tumbled 12 basis points to 3.68 percent. Greek two-year note yields jumped to a record of almost 19 percent and Portugal’s jumped to 5.7 percent as credit-default swaps on Europe debt surged to the highest ever. Oil sank 2.1 percent, while gold rallied 0.7 percent.

S&P lowered Greek debt to junk and Portugal was cut two steps as contagion from Greece’s debt crisis spreads through the euro region. The downgrades come as German officials insist Greece must outline further steps to cut its budget deficit before they will endorse the release of funds from a 45 billion euro ($60 billion) rescue package. Financial shares led U.S. stocks lower as the Senate’s interrogation of Goldman Sachs Group Inc. executives spurred concern of tighter regulation. more...

Reuters Australia thermal coal prices strikes $108/T

Australia thermal coal prices strikes $108/T

PERTH, April 27 (Reuters) - Australia's thermal coal prices, a benchmark for Asia, jumped to an 18-month high of $108 a tonne on Tuesday, supported by tight regional supplies. Thermal coal prices on the globalCOAL Newcastle weekly index jumped $9.28 from a week ago to $108 a tonne free-on-board (FOB) Australia's Newcastle port on Tuesday.108

Mandiri Sekuritas AKRA: Higher growth traction in 2H10 TP 1300

AKR Corporindo reported 1Q10 net income of Rp70bn (+60.9%yoy, -15.2%qoq). QoQ net income contraction was due to rising raw material price, the Rupiah’s appreciation which hurt export revenues, and lower fuel sales volume. We expect raw material price to stabilize in 2H10. Our economist also predicts limited upside in the Rupiah’s exchange rate from the current level. Fuel sales volume is expected to rise due to the company’s aggressive marketing to gain new clients. The opening of the Jakarta Tank Terminal and the upward integration of Sorini into cassava flour mills will be the catalysts going forward. We maintain Buy recommendation on AKRA with TP of Rp1,300/share, providing 25.0% upside potential from the current price.

1Q10 results, below expectations. The company booked 1Q10 revenue and earnings of Rp2.4tn (+32.6% yoy, -8.3%qoq) and Rp70bn (+60.9% yoy, -15.2%qoq). Bottom-line figure represented 21% and 18% of ours and consensus FY10F estimates. YoY growth was mainly due to volume growth in all segments, combined with ASP growth, except for basic chemical trading. QoQ contraction was due to volume contraction from fuel division, rising raw material p! rices (ca ssava) as a result of low replanting in 1H09, and the rupiah’s appreciation that hurt export revenues.

2H10 should be better. Sorini’s sales (AKRA’s subsidiary) actually grew during 1Q10 in US$ terms. However, due to the strengthening of the Rupiah, the company reported lower Rupiah equivalent revenues. Rupiah’s average rate was Rp9,262/US$ in 1Q10, while our economist predicts FY10F rate at Rp9,112/US$, therefore, we see limited translation downside for the rest of FY10. The company’s local sa! les porti on also increased from 44% in 1Q09 to 54% in 1Q10. We expect lower cassava price in 2H10 as farmers did normal replanting in 4Q09. Note that cassava will mature in 9 months. From its fuel division, the company is expanding customer base into Sulawesi area. In terms of ASP, we expect it to be higher along with economic recovery and higher crude oil prices.

Continuous expansion. AKRA commenced Jakarta Tank Terminal (JTT) operation earlier this month. JTT will be a key success factor in this volume- driven business. With current capacity of 250k kl, JTT is the first and largest privately-owned fuel storage in Indonesia. They plan to double JTT capacity in the next couple of years. Sorini is also soon to be a vertically integrated company in 2011 by acquiring 4 cassava flour mills (currently, 15% of raw material is from third party suppliers).

Reiterate Buy. We reiterated our Buy recommendation as the company remains in expansion mode, despite operating in a stable business. It’s operating in a very big Indonesian fuel market with spacious room to grow. We maintain our TP at Rp1,300/share (11.9% WACC). The stock is trading at PER10-11F of 11.7-9.0x.

Mandiri Sekuritas Apr10 CPI preview: Deflation part 2

The Statistics Agency will announce Apr10 inflation figure on Monday (3/5), which we think would remain under the influence of seasonal forces and stronger currency. We expect to see another round of deflation in Apr10 of 0.05% mom, with yoy inflation advancing to 3.70% from 3.43% in March.

Given tame inflation outlook and the rupiah’s appreciation against the US$, we think, there will be no change in Bank Indonesia’s monetary stances. BI rate likely will stay at 6.5% in the next BI’s governor-board meeting on Wednesday (5/5).

The statistics agency will announce Mar10 trade figure on the same day. We expect export growth to have increased by 59.0% yoy in Apr10 from 57.1% yoy a month earlier. Import growth may have accelerated to 63.0% yoy from 59.9% yoy in Feb10 on robust domestic demand. Overall, trade balance may widen to US$3.0bn in Mar10.

CLSA UPDATE - ITMG UP 2.8% - MKT CAP NOW BIGGER THAN BUMI'S

· Coal miner ITMG has steadily increased in price over the last couple of weeks, and now its market cap stands at a little over USD 5bn.

· Widely regarded as one the most professionally run coal miners in Indonesia, it has now surpassed BUMI's market cap, and is 2nd to ADRO (mkt cap USD 7.8bn)

· Boosting sentiment in ITMG, aside from its fundamentals, is the upcoming dividend payment of a decent IDR 1,286/sh (a 3.2% yield) which will trade EX-DIVIDEND on April 30th (payment date May 19).

BRPT vs GJTL

Both stocks are leaders in their respective industry. During the past 3 months, BRPT has massively underperformed GJTL. Possibly because of investor disappointment of the failure of Star Energy deal last year which was rumoured to be injected to Barito. However, we think that BRPT is certainly worth investing in since it subsidiaries (Tri Polyta and Chandra Asri) have dominant market share in the domestic petrochemical sector.

Danareksa Indofood Sukses Makmur (INDF IJ Rp 3,800 BUY) Reasons for optimism

BUY, TP of Rp4,500
We reinitiate coverage on INDF and rate the stock a BUY. Our TP of Rp4,500 - which is based on a SOTP valuation - implies 18.8-16.6x PER10-11F, a 20% discount to regional peers. Our optimism is grounded in a number of factors: 1) de-leveraging following the impending IPO of ICBP, 2) stable margins supported by the firm rupiah, improving purchasing power and lower wheat costs, and 3) a higher CPO price assumption (US$850/ton in FY10F) which suggests better performance of the plantations division and that more than offsets cost increases for noodles. At the current share price, the stock trades at 15.9x PER10F. However, we believe a re-rating is warranted given the visibility of the earnings, the strong CBP margins, and the healthier balance sheet.

De-leveraging post IPO of ICBP
After ICBP’s IPO, INDF’s EPS could be lifted by some 5.2-6.6% in FY10F due to a lower cost of debt, aside a stronger balance sheet. We estimate that ICBP’s listing should yield an equity value of around US$2.2-2.5bn, assuming the current regional valuation of 12.2-13.6x EV/EBITDA 2010F. If this turns out to be the case, it would be major value unlocked since the estimated equity value far exceeds ICBP’s current implied value of US$1.8bn (7.5x EV/EBITDA). But how likely is such a valuation? Well, we think it is quite possible given INDF’s strong brand equity and its competency in operating CBP businesses. Assuming a 20% stake is listed, we estimate that INDF will save around Rp200-250bn of interest costs whilst the net gearing shall fall to 0.5-0.6x from 0.8x currently. Please note that as the IPO of ICBP is likely to materialize in 2H10, we only assume a six months impact on earnings. But due to a lack of guidance from the company, we don’t yet incorporate the ICBP listing into our forecast. That’s upside potential!

Maintaining good margins
INDF’s operating margin shall remain firm at 13.5% in FY10F, supported by: 1) the stronger rupiah, 2) lower wheat costs, and 3) improving purchasing power. Plantations lead the way with a lofty 28.5% margin, followed by noodles and flour (10.9% and 9.6%, respectively). Despite surging crude oil and CPO prices, we are confident that noodle margins will be stable, thanks to lower wheat costs and selling price increases. As for Bogasari, we expect a stable operating margin of 9.6% in FY10F, down slightly from 9.9% in 2009, assuming no selling price increases this year because of lower wheat costs and fairly stiff competition. On the exchange rate, we take a conservative stance and assume an average exchange rate of Rp9,556/US$ compared to the current rate of Rp9,017/US$ and the ytd level of Rp9,212/US$. This offers further upside potential. Note that our sensitivity analysis suggests that for every 10% appreciation in the rupiah/USD exchange rate, earnings will increase by 13%, ceteris paribus.

Plantations – the largest contributor to EBIT
Given our bullishness on the outlook for the CPO price (we forecast a CPO price of US$850/ton in FY10F or up 15.7% in rupiah terms), INDF’s plantations arm is estimated to contribute 40.1% of EBIT in 2010 compared to 35.7% in 2009. However, there are risks since a 10% decline in the CPO price could reduce earnings by 4.3%. Other risks include unexpected rupiah depreciation and higher wheat costs.

CLSA AKRA 1Q10 results

AKRA reported 1Q10 results:
• Net profit 1Q10 reached Rp70.2bn, up 61% YoY but -15% QoQ. This is 19% of our FY10E Rp370bn.
• The company booked forex gain of Rp19bn in 1Q10, vs (-)8.8bn in 1Q09; hence stripping out forex, net profit 1Q10 was Rp56bn, up 12% YoY, and flat QoQ.
• Revenue in 1Q10 reached Rp2.43tn, up 33% YoY, but -8% QoQ. This is 21% of our FY10E Rp11.5tn.
• GP margin expanded to 9.3% in 1Q10, from a low 8.8% in 4Q09, although still not as strong as previous 1Q08 to 3Q09 (average 11.3%). GP margin on AKRA excluding Sorini expanded to 6.6% in 1Q10 from 5.6% in 4Q09.
• Petroleum sales volume was 258,503kL in 1Q10, increased 36% YoY, but declined from previous quarter of 320,070kL. Company said a couple of customers in Kalimantan reduced volume intake in 1Q10, but they will buy more in 2Q10. Company still believe can reach target of 1.3m kL in 2010. (our current estimate is 1.2m kL).
• Sorini reported an expected weak 1Q10 results:
o Revenue 1Q10 of Rp408bn rose 7% YoY, 13% QoQ.
o Although sales vol increased 24% YoY, but price in Rp dropped 14% (mainly caused by rupiah appreciation of 21% in 1Q10 vs 1Q09). Rp appreciation impacted Sorini given they do 46% export. For instance, sorbitol price in 1Q10 was US$555/t (increase by 4% YoY), but in Rp terms, it was a 18% decline YoY.
o Gross profit 1Q10 reached Rp91bn, dropped 28% YoY, and (-)13% QoQ. Higher cost of raw material (starch increased by 19% QoQ) and time-lag in passing the higher cost to buyers caused GP margin to contract further in 1Q10 to 22.3%, from 29% in 4Q09. 22.3% is the lowest margin compared to past 8 quarters.
o Net Profit 1Q10 = Rp30bn, declined by 26% YoY, but flat QoQ.
o In US$ terms, EBITDA 1Q10 rose 5% YoY. (1Q10=US$7.5m, vs 1Q09=US$7.1m)
• Core earnings (excl forex gain/loss and other income/charges):
􀂃 On AKRA, core earnings was flat QoQ and up 4% YoY
􀂃 On SOBI, core earnings (-) 36% QoQ and (-) 49% YoY
􀂃 On AKRA excl SOBI, core earnings up 32% QoQ and 79% YoY

CLSA Bank Mandiri (BMRI IJ) upgrades

Bret Ginesky raised his TP for Bank Mandiri (BMRI IJ) from Rp5,800 to Rp6,600and maintains our BUY rating. We are also increasing our earnings estimates (see the table below). The rerating in BMRI shares has more to go. Our new TP reflects a 2011CL PE and PBV multiple of 13.6x and 2.8x respectively. Given that BMRI is on pace for an ROE of 23% at that time, this reflects a min premium to peer group.

We trust that premium is justified by increasing ROE, improving credit quality, falling cost to income ratio, and BMRI’s rising fee ratio. The charts below support the case for BMRI to trade at premium to the peers.

Bret’s loan growth target for FY10 is 22%. This sounds aggressive, bearing in mind 1Q10 loan growth of 1.6% (with all loan growth in 1Q10 appeared to happen in March). However, the chart below shows Bank Mandiri (BMRI IJ)’s quarterly loan growth and clearly 1Q is seasonally a weak quarter.

AAA Company Update_BBNI Decellerating Corporate Loans

BNI has released its 1Q10 last week by posting loan growth by 62% YoY and outpaced our and consensus estimate by 29.6% and 23% because of higher insurance premium income and lower in provision charges. The banks posted lower NPLs in 1Q10 to 4.6%, because of repayment from their several debtors. However, its loan growth showed decreasing by QoQ by 1,64% because of seasonality and repayment some of corporate customer. We like BN because It is the most beneficial bank from infrastructure project. However, If the bank’s assets continue to deteriorate, it will be the main risk for the bank negara share price. Finally, we still maintain our HOLD recommendation with TP –Rp.2462 implies 2.05-1.71X PBV FY10-11E and 10.89-9.93X

Switching To Capital Market Instrument
As hot money is approaching Indonesia brought to higher government bonds and lower yields, bonds and money market paper issuance became popular among top tier corporate to lock their cost of funds for several years ahead before interest rate going up in the next couple of months. Astra Sedaya Finance (ASDF IJ), ASII automotive financing arms, recently succeed to issue 370 days to 5 years bonds, amounted Rp. 1.5 trillion. The bonds will pay interest rate ranging from 8.47% p.a. the shorter and 10.9% for the longest one. We believe that the rate got by ASDF is very competitive, given the rate that given to the tier 1 corporate nowadays is about 9-10% p.a. The phenomenon is affected several banks, which has bigger proportion in whole sale banking, include BBNI. The management said that their two biggest debtors, Cikarang LIstrindo, a 150 MW power plant in Cikarang and Magma Nusantara Limited, a whole owned company by Star Energy who operate Wayang Windu geothermal project in west java have repaid their loan after issued their bonds. We believe that the bank won’t be able to increase their whole sale business until before 2H10, given a lot of corporate bonds in the pipeline.

Better Assets Quality
Although posted negative QoQ loan growth, Bank Negara booked slightly decrease NPLs ratio from 4.7% in 4Q09 to 4.6% in 1Q10. Repayment from its several corporate debtors is the main reasons that the bank is able to increase its asset quality. As the result, the bank’s NPLs for corporate segment down by 0.99% to 3.71% in 1Q10 in QoQ basis. However, its medium, small, consumer and syariah segment are still facing worsening assets quality. We believe that BBNI will be benefited from better economic condition since the bank has the highest provision expense/total expense among big banks.

Right issue in 2H10
The bank has a plan to increase public shares from 24% currently to 40% in order to get 5% tax benefit. According to Bank Negara management, finance minister as well as state owned enterprise minister have approved orally about BNI plan. Thus, they are confident that the corporate action will be held by this year. Although we haven’t calculated it yet, it will increase the bank’s bottom line by 5 – 7% based on our calculation.

Maintain HOLD (TP-Rp. 2462)
We made several revisions in our model, particularly in the area of NPLs and provision expense. As the result, we increase our target price to Rp. 2462 and maintain our HOLD recommendation because we believe that all the good news has already price in. We believe, the success of right issue will be the upward risk, while further assets deterioration will affect bank negara share price. Our target price implies 2.05-1.71X PBV FY10-11E and 10.89-9.93X.

DBS Bank Mandiri: Seasonally slow quarter (Buy; TP Rp6,600; BMRI IJ)

At a Glance
• 1Q10 profit is 23% of our FY10F estimate; in line with market
• Seasonally slow loan and deposit growth, but expected to pick up in coming quarters; no change to our estimates
• Maintain Buy and Rp6,600 TP

Comment on Result
1Q10 net profit of Rp2.0trn (-20% q-o-q, +43% y-o-y) was supported by a marginally higher net interest income. Pre-provision profit was flat q-o-q. The weaker q-o-q earnings were due to write-backs booked in 4Q09 compared to normalized provision in 1Q10. NPL ratio improved further to 2.6% as loan loss coverage improved to 219%. Asset quality improved mainly due to a decline in corporate NPLs and upgrades to performing loans in all segments. Slower loan growth of 1.7% in 1Q10 and deposit contraction (-2% q-o-q) were due to seasonal factors. CASA to total deposit stood at 57.1% in 1Q10. Loan and deposit growth are expected to pick up in the coming quarters, so we are retaining our loan and deposit growth assumptions of 18% and 9%.
Loan growth is expected to be driven by consumer and small businesses, while micro lending is expected to gain further traction. NIM remained strong at 5.2% with lower cost of funds, but asset yields fell further, pressured by foreign currency loans. Rupiah loan yields remained resilient. BMRI’s transaction fee income continued to improve led by enhanced infrastructure and innovative payment solutions. Credit card fees fell on weaker retail sales possibly due to a seasonally slower 1Q. Operating costs were well contained with cost-to-income ratio at 40%. CAR remained robust at 16.0% after taking into account operating risk (ex-operating risk, CAR would be 17.0%).

Recommendation
Maintain Buy and Rp6,600 TP based on the Gordon Growth Model with implied 3.3x FY10 P/BV. Key earnings catalysts include further debt resolutions, with Garuda the clearest case. The additional 5ppt tax benefit that comes with a larger free float of 40% (from 33% currently) could be delayed, but would be a positive earnings catalyst when approved. BMRI remains our top pick.

Credit Suisse: JSMR IJ u/g TP to 2600 (from 1670)

● After revisiting our earnings for Jasa Marga, we have upgraded our net profit by 22% this year mainly due to: 1) stronger-thanexpected traffic volume and 2) higher tariff increases. In our view, these are the two key defensive qualities for Jasa Marga:

● Traffic volume in 2009 grew 4.2%, which is the highest level since 2006 despite the 2008-09 credit crunch, and we expect volume to grow at a similar rate this year.

● Tariff rate was increased by around 15% in 4Q09, showing the government’s credibility to follow the existing law. We expect this to have full impact this year. We expect EBITDA to grow by 27%.

● Earnings outlook, however, was mitigated by higher net interest expenses due to more investments needed for new toll-roads.

● However, we see Jasa Marga as an attractive defensive play with strong operational leverage, strong defensive qualities and relatively attractive valuations. Our new target price (based on 10% discount to SOTP) implies 24% upside and 16.4x FY10E PER. We maintain our OUTPERFORM rating on the stock.

CLSA SMRA upgrade

Sarina upgrades profit forecasts and RNAV for Summarecon (SMRA IJ) on the back of strong growth opportunity from combining expertise in both residential and investment properties development, supported by its strong brand equity. Maintain BUY with TP Rp1,150/sh, a 39% discount to RNAV of Rp1,508/share.

It is very interesting to find out that SMRA did its first launch of its new Bekasi township project last weekend, 3 months ahead of initial plan. 98% units taken up; total value estimated at Rp392bn. This first launch passes its initial target of Rp300bn for Bekasi this year! Excellent result for first launch.

Bekasi is very important for SMRA because this is one their future growth drivers (along SMRA Serpong). This event shows versatility of the company and once again has proven that their marketing machine is working fine.

Anecdotal evidence suggests that land price is moving up fast in almost all of greater Jakarta area. I guess a bit of sensitivity is warranted here. If we use 25% land price increase for their residential townships, we arrive at Rp1,866/sh NAV (vs. Rp1,508/sh currently). For FY10/11: PER 27.7x and 18.6x (vs. current estimate at 28.5 and 22.5).

Key points from the report:

· Strong marketing sales to continue. After a great 2009 where SMRA’s marketing sales increased by 32% YoY to Rp1.2tn, now it aims to sell Rp1.6tn in 2010, another 32% increase.
· First launch in Bekasi: great success. SMRA did its first launch of its new Bekasi township project last weekend, 3 months ahead of initial plan. 98% units taken up
· Sales from its Serpong and Kelapa Gading townships are also expected to remain robust. The company’s strong brand equity is clearly a major advantage, supported by good macro environment (low mortgage rate environment, booming Greater Jakarta, and growing consumption)
· Ramping up malls. SMRA targets June 2011 for the opening of its phase 2 Serpong mall (SMS), an additional of 45,000sqm NLA to the existing 34,000sqm. This year, average rental rate is increased by 9% for its SMS mall, and 12% for its Kelapa Gading mall.
· Ramping up investment property and office tower. On May 12, Harris Hotel in Kelapa Gading will open, a 300 room 3–star hotel. SMRA also plans to start construction of an office tower in Kelapa Gading of 20,000sqm GFA in 3Q10.
· SMRA’s investment property assets are a cash machine: 35% of total revenue but 48% of total EBIT.
· Still attractive at 39% discount to RNAV. We raised our profit forecasts by 9-10% for FY10-12 on the back of higher sales assumptions.
· Our RNAV forecast is also increased to Rp1,508/sh from Rp1,335 previously. Main changes come from more land bank in Serpong acquired last year, and our change in land price increase assumption for Serpong to 12%, from 10%. We believe this is achievable given prices rose by 15% cagr in past 5 years.

CLSA Rajawali 's railroad deal

Over the weekend, local media reported that Indonesian savvy investor Peter Sondakh from Rajawali Corp has bought an 80% interest in a US$1.3bn Sumatra rail project from Transpacific Group. This feasibility of this railway project has been long written off by most investors as it has remained being a "concept" for literally the past decade. However, this latest development is a major endorsement / game changer to finally materialize this ambitious plan to potentially quadruple Bukit Asam (PTBA IJ) coal production to 50m tonnes in five years. Rajawali would inject US$390mn equity into the project, to be funded by last month’s sale of a 23.7% stake in Semen Gresik (SMGR IJ), worth US$1.1bn.

Key takeaways on the Transpacific deal:
Rajawali group is in talks to take over majority ownership of a US$1.3bn Sumatra railway project from Transpacific Group.
Rajawali, reportedly, is also in talks to become a partner with Bukit Asam at Banko Tengah mine.
We view this positively as Rajawali would bring in capital (The Group just sold its stakes in Semen gresik for US$1.1bn) while it is already partnering with Bukit Asam in IPC mine in Kalimantan, hence we expect less friction. Note that we have doubts that current partner in Transpacific Group has sufficient funding to meet its capital requirements.
While potential entrance of Rajawali into railway project would not make much different to Bukit Asam’s near-term earnings, its long-term production and earnings potential would be clearer and stronger.
We are reviewing our rating and numbers on Bukit Asam.

Implication for PTBA (by Olie)

Our current NPV is Rp17,500, based on existing production plus upside from new railway, to be completed in 2015. Should the railway is completed 1 year ahead of our estimate, there is an additional Rp1,000/share to our estimate. Should we roll our DCF forward to 2012, then Bukit Asam NPV could be Rp23,000, suggesting some 30% upside.
As we have mentioned in our previous report, for investor to invest in Bukit Asam, it is a delicate balance between near-term valuation and long-term potential. Near-term valuation looks expensive to us, as Bukit Asam is trading at 20.0x 2010 earnings (we are about 15% below consensus) and 15x in 2011. Long-term potential is there, nevertheless, as the company could be the fastest growing coal company in Indonesia, quadrupling its output in 5 years. We think Rajawali Group could bring in credibility to this growth potential.

Credit Suisse: Bank Mandiri (BMRI.JK, Rp5350, O, TP Rp6900) - Another sterling quarter

■ Another sterling quarter: BMRI reported 1Q10A net income of Rp2,003 bn, 43% YoY, 22% of our forecasts (versus 1Q09A which contributes 20% of FY09A), and 24% of consensus’ forecasts. BMRI’s 1Q10A PPOP of Rp3,392 bn came 24% of our FY10E expectations.

■ Robust fundamentals: BMRI’s repeat sterling performance provides a very convincing evidence that it is no longer transforming, but rather is a bank with robust fundamentals and growth outlook poised to take the top position in the Indonesian banking sector. BMRI currently exhibits the second lowest LDR with 15.7% 1Q10A CAR, implying significant growth potential ahead. BMRI’s robust fundamentals are well illustrated by its ability to deliver the second highest provision coverage, the second lowest NPL ratio and the third highest ROE of the six 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 24% and 60% discounts to MSCI Indonesia and MSCI NJA banks, respectively.

■ 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 Rp6,900, implying 3.6x 2010E P/B and 15.8x 2010E P/E. We maintain BMRI as our top pick in the Indonesia banks sector.

Citigroup Bank Mandiri - Q1 2010 Results: Yields under

 Meeting Expectations — The Q1 profit of Rp2Trn is c~25% of Citi and consensus FY forecast. The key highlights of Q1 performance are 1) declining asset yields, 2) lower fee income from both subsidiaries and own operations, 3) rising admin costs and 4) sharp decline in credit cost partly offset by other provisions. In our opinion, the 43% growth in profit (y-o-y) is unlikely to excite the market. We maintain our Buy on BMRI as a structural improvement play. Management endeavors to build Consumer/Retail/Micro Finance business will add to cost and are likely to put pressure on earnings, particularly in a low-yield environment.

 Income Trend — Mixed trend with Gross Income up y-o-y but down q-o-q and vice versa for Pre-Provision Income. NII increased by 1% (q-o-q) and 5% (y-o-y) supported by loan growth as NIMs declined in Q1 CY10 to 5.1%. Fee income declined q-o-q but is up y-o-y. Operating expenses are up 24% (y-o-y), down 10% (q-o-q), driven by higher human resource cost and occupancy charges. Preprovision profit shows a 2% decline (y-o-y) and 3% rise (y-o-y). Provision amount of Rp692bn includes loan loss provision of Rp420bn (credit cost of 0.8%). Management guidance is that the loan loss provision will remain at these levels while other provisions are expected to come down.

 Balance Sheet Management — Loan growth of 2% (YTD) was funded by existing liquidity. With the seasonal deposits decline, LDR has gone up to 64%. CAR is at 16%, even with the partial inclusion of operation risk. NPL ratio declined due to write-off, as existing loans had net downgrades. Accounting changes have led to classification of SBIs as securities and management has shifted some variable rate govt bonds from HTM to AFS, to have flexibility to sell/repo for liquidity.

 Management Change and Rights Issue — Not discussed in the Briefing as management stance is that the decision is with the Minister and Parliament.

Mandiri Sekuritas Bank Mandiri: 1Q2010 net profit jumped by 43.1% yoy (BMRI, Rp5,300, Not Rated)

􀂄 Bank Mandiri reported a 43.1%yoy surge in net profits in 1Q10 to reach Rp2tn, in line with consensus estimates.

􀂄 BMRI’s 1Q10 net interest income increased by 5.5% yoy, however, the bank managed to have operating income of Rp6tn (+8.0% yoy), driven by strong increase of Non-Interest Income by 17.4%, as fee based income surged by 30.9% yoy. Although the bank posted a positive NII, NIM ratio declined to 5.2% (vs. 5.5% 1Q09), mainly caused by the drop in FX loan yields, which has given the bank absorbed lower spread.

􀂄 The bank maintained its NPL at low 2.6% (vs 2.6% FY09), despite a sustainable growth of gross loan (+2.4% qoq), which booked as upgrades and write-offs dominated the movements, led to provisioning recorded at moderate Rp692bn (-49.7%yoy). Coverage ratio remained high at 219.1%, while CAR is 17.0%, LDR 64.1% and ROE 30.1% (vs 15.6%, 59,2% and 21.8% FY09, respectively). In reporting its 1Q10, the bank’s management said that about 90% of the newly PSAK 50 – 55 reporting requirement has been met, and any remainder would not give any major impact on the books. At
present, BMRI is trading at P/BV10F of 2.8x and PER10F 13.4x. We do not have a recommendation on the stock.

Mandiri Sekuritas JSMR: 1Q10 revenue may reach Rp1tn (JSMR, Rp2100, Buy, TP: Rp2400)

􀂄 JSMR indicated that 1Q10 revenues could reach Rp1tn (+20.0%yoy) This may be due to: (1) increasing traffic volume, in 1Q10 traffic reached 226.5mn (+3.1%yoy); (2) higher tariffs from Sep-09; and (3) revenue contribution from BORR which operated last Nov09; currently average daily traffic on BORR is about 17,500 vehicles/day.

􀂄 We estimate revenue FY10 could reaches Rp4.3tn, in line with company’s expectations, and traffic may reach 947mn vehicles (+3.4%yoy). Currently, the company operates 528km length of toll road, covering 76% of the country’s total toll road length, which shall be expanded to 750Km by 2014.

􀂄 We have Buy on JSMR, trading at PER10F of 12.1x and P/BV10F of 1.8x.

JP Morgan - BUMI

Attended JPMorgan Indonesia conference last week. Key take-aways: (1) Management targets US$1bn debt reduction by year-end 2010. One plan would be to issue non pre-emptive shares to non existing shareholders, amounting to 10pct of outstanding shares. (2) Conducting limited audit review on 1Q10 results (suggesting that the deal may occur within the next three months). (3) CIC debt repayment will start with US$600mn in 2013. Perhaps US$600mn minimum offer for the 10% new shares (implied share price of around Rp2800) would be a good starting point?

JP Morgan - PTBA

The good news: Rajawali Group took over Suganda's 100% stake in TRI (Transpacific Railway Infrastructure) , which owns an 80% stake in BATR (Bukit Asam Transpacific Railway). Rajawali has a good execution track record. The bad news: corruption allegation over floating crane project, involving two directors: Milawarma (operational director) and Tiendas Mangeka (marketing director). JPMorgan research rates O/W. According to Stevanus Juanda (analyst), the railway project and the Transpacific related coal sale could add around US$1.37bn to PTBA's existing operation NPV of US$3.54bn (versus current market cap of US$4.6bn). The stock trades on 16.3x and 12.7x P/E 2010-11.

Mandiri Sekuritas INCO: Pushing growth with higher selling prices

Price driven growth

Nevermind the absence of a final dividend for FY09, there are other positive elements to look forward in Inco to such as (a) YTD rate of growth of global nickel prices continues to outpace the rise in selling prices of cost components and (b) Margin and earnings enchancements as a result thereof. Thus, we adjusted our FY10F ASP to US$16,400/t. 12.% higher than previous, which resulted in FY10F earning enhancem! ent of 33 % to US$330mn (+94%yoy). At our new TP of Rp5,900/share, the implied PER10F is 20x.

Raising earnings with higher ASP and higher margins. YTD LME nickel prices is now at the US$27,000/t level , a 42% rise since the start of the year. Meanwhile, main cost components such as high speed fuel oil, needed to run its thermal gensets (HSFO) has only gone up by 2.9% YTD based on Bloomberg’s HSFO index. By raising Inco’s nickel in matte price to US$16,400/tn , our revised FY10F net income turns out to be US$330mn, a 33% upgrade from previous. Additionally, gross and operating margins expanded to 44% and 42% from 37% and 35%.

Alternative product now viable. At the current nickel global prices, low margin nickel pig iron is now a viable alternative to temporary fulfill supply global supply issues. China’s iron ore output 1Q10 was up by 7.6%qoq to 150Mt while price accelerated by 18% to US$3,260/t. Notwithstanding the competition from nickel pig iron , we think nickel prices can still improve, though not as far as the US$50k/t in the heydays of 2007.

Retain buy with upgraded TP. As a pure nickel player, Inco will benefit immensely from any further uptick in nickel prices. Our sensivity shows that for every 3% incease in price, EPS would improve by 9%. Under our blue sky scenario for 2010 (FY10F ASP=current market price of about US$26,000/t). earnings would shoot up by 112% with an implied PER10F of 10.4x. However, our assumptions point to a more conservative ASP of U! S$21,000/t which equates to a DCF-derived target price of Rp5,900/share. We also maintain our forecast on the company’s production level at 71.8k tons (6.7%yoy). Our long-term nickel in matte assumption is placed at US$18k/t. (equiv. LME of US$23k/t)

Bumi Resources (BUMI IJ)

Bumi has sold 16 m tons in Q1'10 vs 11.3 m tons in Q1'09 or an increase by a record breaking 41.6% compared with the same period last year.

Q1 in any year is usually the most challenging quarter because of heavy rainfall, we are confident that Bumi is well on pro rata track to meeting its minimum guidance of 64 m tons in FY '10 vs 58 m tons in FY09 and 51.5 m tons in FY08.

Easily, Bumi is easily the highest coal producer and seller in Indonesia by a long distance and gap between the others is expectedly widening between Bumi and any of the others.

We are conducting a limited audit review in Q1'10, hence, our financials for this period will be available now latest by 31 May '10. (Dileep S)

PT Delta Dunia Makmur Tbk (DOID)

Indonesia's second largest coal mining contractor, PT Bukit Makmur Mandiri Utama (BUMA), subsidiary of PT Delta Dunia Makmur Tbk (DOID), is estimated to post Rp151 billion of net profit in the first three months this year, more than double compared to the same period last year of Rp73 billion. BUMA's revenue calculated to reach Rp1.28 trillion.

A source familiar with the matter said BUMA posted Rp73 billion of net profit and 1.6 trillion of revenue in the first three months last year.

Based on BUMA's first quarter 2010, Delta Dunia might book Rp130 billion of net profit in the first quarter this year.

Danareksa Aneka Tambang (ANTM IJ, Rp2,500 BUY Upgrade to 3500 from 2825) Back to nickel

The lucrative nickel business is back!
We have upgraded our TP to Rp3,500 (previously Rp2,825) on account of higher revenues and net profits expectations. This year ANTM will return to its core business, nickel, as nickel demand has returned to normal and the selling price has soared higher to USD21,000/t on a year-to-date average. Revenues from nickel are expected to account for 68% of our FY10 revenues forecast of Rp10,477bn as opposed to 44% last year. Meanwhile, gold sales are estimated to decline due to lower volume as ANTM has decided to put a brake on its gold trading activity to limit the risk resulting from gold price fluctuations. On a positive note, ANTM’s profit margins will improve since the gross margin of gold trading is only 1% and its huge sales in 2009 eroded ANTM’s net margin to 7% from 14% in 2008. By comparison, nickel has a much higher gross margin of 39%. Less gold sales and higher nickel sales will therefore boost the company’s net margin to 26% in 2010.

1Q10 net profits only 7% of FY forecast
Net profits rose 125% yoy to Rp202bn in 1Q10. The net margin improved to 12% from 3% in 1Q09 thanks to a lower volume of gold trading. Nonetheless, the 1Q10 net profit is only 7% of our FY10 forecast. This mainly owes to the lower realization of sales in the quarter which was caused by the slow delivery of 2,514 tons of ferronickel. Consequently, ferronickel sales only reached 1,663 tons in 1Q10. However, the sales should shift to 2Q10; hence we expect a jump in revenues in 2Q10 and a higher net profits figure.

Going back to the big projects
After the lull in the metal business in 2008-2009, ANTM is now ready to kick start some projects. A top priority is the Chemical Grade Alumina (CGA) project in which an alumina plant will be built in Tayan where the company’s current bauxite mine is located. Besides the USD400mn CGA project, other projects which we expect to commence soon are the USD300mn Pomalaa power plant (2010) and the USD1.2bn FeNi IV project in Halmahera (2011). This year alone, ANTM has a USD230mn capex budget, which we think is too much considering that most of these projects are still at a very preliminary stage. We also think that to obtain external financing of the whole USD230mn is unnecessary because ANTM is a cash-rich company. We believe that USD100mn of external financing should be sufficient for ANTM – which it can easily get from banks and financial institutions. As for a possible rights issue, it would be some way off, if it were to take place, and may not be the option favored by investors.

BUY maintained
ANTM’s valuation is attractive as the new TP implies a PE 10F of 12.4x. The shares currently trade at PE 10F/11F of 8.8x/13.4x, or much cheaper than INCO’s shares which trade at a consensus PE 10F/11F of 21.5x/17.5x. BUY recommendation maintained.