PT International Nickel Indonesia Tbk (INCO recorded net earnings of US$218.8 million in the first half of 2010 or rose of 532.74% compared to US$34.58 million. Sales revenues were US$619.2 million for the six months ended June 30, 2010, an increase of 124.3% compared to US$276,359 million.
INCO’s earnings jump driven by higher nickel in matte deliveries and increased average realized selling prices of nickel in matte. In second quarter, INCO continued to focus on increasing the efficiency of its operations in order to pursue structural operating cost reductions. This effort included integrated business planning to identify efficiency improvements in some of our operations area, which resulted in cost savings in 2009.
Production of nickel in matte in 1H 38,031 metric tones of nickel with average prices US$16,281 per metric tones of nickel. In a press release, INCO said, the Karebbe hydroelectric power generating plant project is continuing as planned. All engineering final designs have been completed, major procurement contracts have been awarded and the fabrication of equipment has also been completed.
Overall, the project was 60% completed at the end of the second quarter and is expected to come on line in the second half of 2011. This third hydrogenerating facility will produce enough energy to displace all existing thermal power to feed the electric furnaces at the Sorowako facility and is the main initiative in INCO’s energy cost reduction program.
Sabtu, 31 Juli 2010
Mandiri Sekuritas JSMR: Improving margin
High increase in tariff and traffic growth plus low operating expense boosted JSMR’s 1H10 operating margin to 52%, compared with 40% in the previous year; generating net profit amounting to Rp648bn (+63.7%yoy). The company raised the tariffs on 11 out of its 14 toll roads by around 16% on 28 Sep’09. Traffic volume in 1H10 increased by 3.3%yoy, to 464.7mn. But not all are looking good: JSMR hasn’t been able to meet lands acquisition schedule for the 7 new toll road projects. Hence, the development of the projects could be delayed. We have ! a Buy rec ommendation on JSMR. It trades at PER10F of 13.3x.
Strong revenue growth. JSMR booked revenue of Rp2.1tn (+23.5%yoy) due to high traffic volume and increase in tariffs. Meanwhile, lower salaries elevated operating margin to 52.1% from 40.4% in the previous year. By end 1H10 JSMR’s permanent employee totaled 5,394 persons (-1.3%yoy), with outsourcing workers of 1,347 persons. The company is committed to increase the portion of the outsourcing employees as 80% of its total manpower is on operational level as booth operators. Net income recorded at Rp647.6bn (+63.7%yoy).
Traffic volume up 3.3%yoy to 464.7mn vehicles.. The highest traffic growth occurred in the Cipularang toll road, growing by 10.8%yoy. The JORR section contributed the biggest revenue of around 20.3% of the total amount. Meanwhile, the highest traffic was contributed by the JIRR toll road, accounting for 19.9% of the total vehicles using the company’s highways.
Potentially delayed. Almost all of the 7 new toll road projects are potentially delayed due to slow land clearing process. For example, the Surabaya-Mojokerto (36.3Km) which will consist of 5 sections failed to meet the land clearing scheduled for the 1H10. But the company managed to complete around 52% of the land needed. Meanwhile, no land has been cleared for the Kunciran-Serpong even though the company started the process in the middle of 3Q09. (Exhibit 4).
Maintain Buy. We like JSMR as the company operates around 76% of total toll length in Indonesia, while toll tariffs must be raised every 2 years, and car sales are increasing. We used DCF valuation (WACC 11.4%) to arrive at target price of Rp3,200/share, translating into PER10F-11F of 16.3x and 14.4x, respectively. We maintain Buy recommendation on JSMR.
Strong revenue growth. JSMR booked revenue of Rp2.1tn (+23.5%yoy) due to high traffic volume and increase in tariffs. Meanwhile, lower salaries elevated operating margin to 52.1% from 40.4% in the previous year. By end 1H10 JSMR’s permanent employee totaled 5,394 persons (-1.3%yoy), with outsourcing workers of 1,347 persons. The company is committed to increase the portion of the outsourcing employees as 80% of its total manpower is on operational level as booth operators. Net income recorded at Rp647.6bn (+63.7%yoy).
Traffic volume up 3.3%yoy to 464.7mn vehicles.. The highest traffic growth occurred in the Cipularang toll road, growing by 10.8%yoy. The JORR section contributed the biggest revenue of around 20.3% of the total amount. Meanwhile, the highest traffic was contributed by the JIRR toll road, accounting for 19.9% of the total vehicles using the company’s highways.
Potentially delayed. Almost all of the 7 new toll road projects are potentially delayed due to slow land clearing process. For example, the Surabaya-Mojokerto (36.3Km) which will consist of 5 sections failed to meet the land clearing scheduled for the 1H10. But the company managed to complete around 52% of the land needed. Meanwhile, no land has been cleared for the Kunciran-Serpong even though the company started the process in the middle of 3Q09. (Exhibit 4).
Maintain Buy. We like JSMR as the company operates around 76% of total toll length in Indonesia, while toll tariffs must be raised every 2 years, and car sales are increasing. We used DCF valuation (WACC 11.4%) to arrive at target price of Rp3,200/share, translating into PER10F-11F of 16.3x and 14.4x, respectively. We maintain Buy recommendation on JSMR.
Mandiri Sekuritas Adhi Karya: A slow start, below than expected (ADHI, Rp660, Buy, TP Rp800)
ADHI’s 1H10 revenue dropped by 38.3% yoy, quite a slow start due to lower government projects realization in 1H10. We also note that pretax income fell by 19.8%, as ADHI booked gain on asset sales of Rp44.4bn, whilst there was no additional income in 1H10. Such result is lower than our and consensus estimates. However, we believe project realization to start in 2H10, thus they could meet our and consensus target. The company is currently trading at a relatively low PER10 of 6.8x.
Mandiri Sekuritas Ramayana Lestari: 1H10 results below ours and consensus estimates (RALS, Rp880, Neutral, TP: Rp800)
RALS reported 1H10 net profit of Rp49bn (-38.5% yoy), represented 12.4% of our FY forecast and and 12.1% of consensus estimates.
The company’s 1H10 sales grew by 13.8% yoy and 18.3% qoq, while 1H10 operating margin reached 1.8%, which decreased from 3.1% in 1H09 (vs our target for FY10 of 7.0%)
At current price, RALS is trading at 2010F PER of 15.7x. We maintain our Neutral recommendation on the counter.
The company’s 1H10 sales grew by 13.8% yoy and 18.3% qoq, while 1H10 operating margin reached 1.8%, which decreased from 3.1% in 1H09 (vs our target for FY10 of 7.0%)
At current price, RALS is trading at 2010F PER of 15.7x. We maintain our Neutral recommendation on the counter.
Mandiri Sekuritas Indocement TP: 1H10 net profit grew 39.9% yoy, slightly higher than expected (INTP, Rp16,850, Neutral, TP: Rp16,600)
Domestic sales volume grew 17.3% yoy, which was higher than total revenue of only 11.8% yoy. This shows that average selling price was lower. However, margins improved, thus net profit increased by 39.9% yoy. Overall, FY09 result is inline with our and consensus estimates. Currently INTP is trading at EV/ton and PER10 of US$335 and 18.5x, respectively.
Mandiri Sekuritas Holcim Indonesia: Net profit grew 38.0% yoy, slightly below expectation (SMCB, Rp2,425, Neutral, TP Rp2,500)
Higher domestic sales volume (+19.0% yoy) boost 1H10 revenue to Rp2.8tn (+8.1% yoy). This shows that average selling price was lower compared with 1H09. Nevertheless, margins improved given lower cost/ton. Thus, 1H10 net profit grew 38.0% yoy to Rp386bn. Overall, the figures are inline with ours, yet slightly below consensus’ estimates. SMCB is currently trading at EV/ton of US$259, vs average peers of US$296.
Mandiri Sekuritas ACE Hardware: 1H10 net income was below our and consensus (ACES, Rp1,840, Neutral, TP: Rp1,790)
ACES booked 1H10 revenue of Rp737.3bn (+19.2%yoy), and net income of Rp77.6bn (+15.5%yoy), which is below our estimates and consensus.
We have a Neutral recommendation on ACES, it trades at PER10F of 18.9x.
We have a Neutral recommendation on ACES, it trades at PER10F of 18.9x.
Mandiri Sekuritas Kawasan Jababeka: KIJA reported above estimates 1H10 net income (KIJA, Rp96, Buy, TP: Rp135)
KIJA 1H10 net income increased by 40.9% yoy to Rp47.9bn, which is above ours and consensus estimates. The company booked 1H10 revenue of Rp331.2bn (+71.6% yoy), with GPM 40.9% (vs. 49.3%) and net margin 14.5% (vs. 17.6%). KIJA is currently trading at 78% discount to our NAV10 and PE10 17.1x. We have Buy recommendation on the stock.
Mandiri Sekuritas Bumi Serpong Damai: BSDE reported net profit of Rp182.5bn, in line with ours (BSDE, Rp810, Buy, TP: Rp1,100)
BSDE 1H10 net profit increased by 45.9% yoy to Rp182.5bn, in line with ours and consensus estimates. Company reported improved net margin to 30.1%, compared to 23.2% same period last year, as a result of better GPM 56.4% (vs. 47.9%) following lower COGS from Rp277.0 bn to Rp264.6bn. Based on yesterday’s price, BSDE trades at 48% discount to our NAV10 and PE10 23.4x.
Mandiri Sekuritas Ciputra Development: CTRA 1H10 net profits increased by 48.1% yoy, below our expectation (CTRA, Rp375, Buy, TP: Rp490)
CTRA posted 1H10 net profit of Rp92.7bn or +48.1% yoy, which is below our expectation (42.0% of FY10F) and consensus estimates (38.7% of FY10F). Revenue increased by 10.5% to Rp719.3bn, as realization of company housing sales in 2008 and 2009 which came to delay last year. The company also recorded better net margin to 12.9%, compared to 9.6% last year, yet is below compared to other property basket. As per yesterday’s closing price, CTRA trades at 47% discount to our NAV10, and PE10 23.6x. Buy.
Mandiri Sekuritas Summarecon Agung: SMRA net profit surged by 47.9%, in line with ours (SMRA, Rp880, Buy, TP:Rp1,130)
SMRA reported earnings surge by 47.9% yoy to Rp101.6bn, which is in line with our expectation, but slightly below consensus estimates. This was a result of higher revenue which increased by 26.8% to Rp677.6bn, following company’s sales pick up in 2009 by 31.5%, which up to realization this year. SMRA trades at 46% discount to our NAV10, and PE10 26.3x. We have Buy recommendation on the stock.
Mandiri Sekuritas Lautan Luas: 1H10 results are inline with ours and consensus estimate (LTLS, Rp800, Buy, TP: Rp1,000)
LTLS posted 1H10 net income of Rp45bn (-9%yoy, -17%qoq), which is inline with ours and consensus estimate.
The decline in net profit was mainly due to strengthening Rupiah.
We have Buy recommendation on LTLS which currently is trading at PER10-11F of 6.5-5.3x.
The decline in net profit was mainly due to strengthening Rupiah.
We have Buy recommendation on LTLS which currently is trading at PER10-11F of 6.5-5.3x.
Mandiri Sekuritas Gudang Garam: 1H10 results are inline with ours and consensus estimate (GGRM, Rp35,100, Neutral, TP: Rp35,000)
GGRM posted 1H10 net income of Rp1.8tn (+24%yoy, -8%%qoq), which is inline with ours and consensus estimate.
Net profit decline was due to increase in selling expense (World Cup ads) by 104% qoq and yoy. Excluding it, the company performed well on qoq basis.
We have Neutral recommendation on GGRM which currently is trading at PER10-11F of 16.9-14.8x.
Net profit decline was due to increase in selling expense (World Cup ads) by 104% qoq and yoy. Excluding it, the company performed well on qoq basis.
We have Neutral recommendation on GGRM which currently is trading at PER10-11F of 16.9-14.8x.
Mandiri Sekuritas Unilever: 1H10 results are inline with ours and consensus estimate (UNVR, Rp17,150, Buy, TP: Rp13,000)
UNVR posted 1H10 net income of Rp1.8tn (+18%yoy, -18%qoq), which is inline with ours and consensus estimate.
Net profit qoq decline was mainly due to increase in selling expense by 16%qoq and 28%yoy.
We have Buy recommendation on UNVR which currently is trading at PER10-11F of 38.7-32.9x.
Net profit qoq decline was mainly due to increase in selling expense by 16%qoq and 28%yoy.
We have Buy recommendation on UNVR which currently is trading at PER10-11F of 38.7-32.9x.
Mandiri Sekuritas Mayora: 1H10 results are inline with ours and consensus estimate (MYOR, Rp8,400, Buy, TP: Rp9,000)
MYOR posted 1H10 net income of Rp211bn (+29%yoy, -22%qoq), which is inline with ours and consensus estimate.
The decline in net profit was due to heavy ads expense in 2Q10 that increased by 73%qoq and 75%yoy. Considering seasonality effect, we expect the company will be better in 2H10.
We have Buy recommendation on MYOR which currently is trading at PER10-11F of 13.1-11.3x.
The decline in net profit was due to heavy ads expense in 2Q10 that increased by 73%qoq and 75%yoy. Considering seasonality effect, we expect the company will be better in 2H10.
We have Buy recommendation on MYOR which currently is trading at PER10-11F of 13.1-11.3x.
Mandiri Sekuritas Panin Bank: 1H10 results above our expectations and consensus estimates (PNBN, Rp1,010, Sell, TP: Rp780)
Panin Bank reported net profit of Rp786bn in 1H10 (-+131.4% yoy), which was above our expectation and consensus estimates.
The bank reported higher than expected non interest income as the company recorded higher gain from the selling of marketable securities (Rp345.1bn in 1H10 vs Rp103.3Bn in 1H09).
At present, Bank Panin is trading at 2011F P/BV of 2.1x and PER of 23.6x. We are reviewing our forecast for the bank, yet maintained our sell recommendation for the time being.
The bank reported higher than expected non interest income as the company recorded higher gain from the selling of marketable securities (Rp345.1bn in 1H10 vs Rp103.3Bn in 1H09).
At present, Bank Panin is trading at 2011F P/BV of 2.1x and PER of 23.6x. We are reviewing our forecast for the bank, yet maintained our sell recommendation for the time being.
Mandiri Sekuritas Medco Energi: 1H10 net profit up 26.2% yoy, inline with expectation (MEDC, Rp3,050, Buy, TP: Rp3,500)
MEDC’s 1H10 revenue grew 27.7% yoy to US$397mn, due to the increasing hydrocarbon lifting and sales by 3.6% yoy to 55.49mboepd and strengthening average realized selling price of crude oil by 46.7% yoy (to US$80.5/bbl), as well as gas price by 15.6% yoy (to US$3.6/mmbtu). This also resulted into better margins. 1H10 revenue reflects around 55.7% of our estimates and 40.8% of consensus’, which is inline with our expectation. MEDC is currently trading at EV/2P reserves of US$3.8/boe.
Mandiri Sekuritas Bank Rakyat Indonesia: 1H10 results below our expectation and consensus estimates (BBRI, Rp10,050 Buy, Rp12,000)
Bank Rakyat Indonesia recorded a net profit of Rp4.3tn (+22.8% yoy) in 1H10, which was below our expectation and consensus estimates.
The bank reported higher than expected provisioning/impairment expenses as its NPL increased to 4.3% at end Jun10 from 4.1% at end Mar10.
The bank’s loan growth remained strong at 8.6% qoq or 24.0% yoy to Rp230.5tn, thus bringing its LDR to 88.4% at end Jun10 vs 87.0% at end Mar10.
At present, BRI is trading at 2010F P/BV of 2.8x and PER of 9.4x. We maintained our buy recommendation on the counter.
The bank reported higher than expected provisioning/impairment expenses as its NPL increased to 4.3% at end Jun10 from 4.1% at end Mar10.
The bank’s loan growth remained strong at 8.6% qoq or 24.0% yoy to Rp230.5tn, thus bringing its LDR to 88.4% at end Jun10 vs 87.0% at end Mar10.
At present, BRI is trading at 2010F P/BV of 2.8x and PER of 9.4x. We maintained our buy recommendation on the counter.
Mandiri Sekuritas United Tractor: 1H10 results are below ours and consensus estimate (UNTR, Rp20,050, Buy, TP: Rp21,700)
UNTR posted 1H10 net income of Rp1.9tn (+0.8%yoy, +8.0%qoq), which is below ours and consensus estimate.
Revenue growth mainly came from construction machinery sales (+56%yoy). However, gross margin contracted yoy at machinery division (27% to be 21%), and mining contracting division (22% to be 16%). The decline was due to operational drawback in Pama as a result of heavy rainfall, particulary in Adaro and Jembayan. Second reason was due to rupiah strengthening.
We have Buy recommendation on UNTR which currently trades at PER10-11F of 15.3-14.5x
Revenue growth mainly came from construction machinery sales (+56%yoy). However, gross margin contracted yoy at machinery division (27% to be 21%), and mining contracting division (22% to be 16%). The decline was due to operational drawback in Pama as a result of heavy rainfall, particulary in Adaro and Jembayan. Second reason was due to rupiah strengthening.
We have Buy recommendation on UNTR which currently trades at PER10-11F of 15.3-14.5x
Mandiri Sekuritas Bank Central Asia: 1H10 results below our expectation, yet inline with consensus estimates (BBCA, Rp6,200, Buy, TP: Rp6,800).
BCA reported net income of Rp3.98 bn, below our expectation yet inline with consensus estimates.
The bank recorded lower than expected net interest income as the bank lowered its lending rate (ranging between an average 10 bps to 50 bps) following the decline in SBI rates. We previously expect that the bank would maintain its lending rate given its strong position in the industry.
Meanwhile, loans was quite strong at 8.9% qoq to Rp131.6tn at end Jun10 with consumer loans posted the highest growth of 10.7% qoq to Rp31,4 tn. Mortgage continued to be the largest contributor to total consumer loans, representing 49% at end Jun10. The bank’s average yield on mortgage declined to 10.4% in 2Q10 from 10.6% in 1Q10.
Despite its lower than expected results, we still like BCA for the bank will benefit most from the rising interest rate environment (our economist estimates that SBI rate will likely go up in 4Q10) given its huge excess liquidity (secondary reserves recorded at Rp76.6tn at end Jun10).
At current price, the stock is trading at 2011F at 3.9x and PER of 13.1x. We maintained our buy recommendation on the counter.
The bank recorded lower than expected net interest income as the bank lowered its lending rate (ranging between an average 10 bps to 50 bps) following the decline in SBI rates. We previously expect that the bank would maintain its lending rate given its strong position in the industry.
Meanwhile, loans was quite strong at 8.9% qoq to Rp131.6tn at end Jun10 with consumer loans posted the highest growth of 10.7% qoq to Rp31,4 tn. Mortgage continued to be the largest contributor to total consumer loans, representing 49% at end Jun10. The bank’s average yield on mortgage declined to 10.4% in 2Q10 from 10.6% in 1Q10.
Despite its lower than expected results, we still like BCA for the bank will benefit most from the rising interest rate environment (our economist estimates that SBI rate will likely go up in 4Q10) given its huge excess liquidity (secondary reserves recorded at Rp76.6tn at end Jun10).
At current price, the stock is trading at 2011F at 3.9x and PER of 13.1x. We maintained our buy recommendation on the counter.
Mandiri Sekuritas Astra International: 1H10 results are inline with ours and consensus estimate (ASII, Rp52,750, Buy, TP: Rp50,500)
ASII posted 1H10 net income of Rp6.5tn (+51.8%yoy, +13.7%qoq), which is inline with ours and consensus estimate.
Operating profit growth mainly came from automotives (+46%yoy) and financial services division (+43%yoy), while agribusiness contracted 17%yoy.
We have a Buy recommendation on ASII which currently trades at PER10-11F of 18.2-15.9x.
Operating profit growth mainly came from automotives (+46%yoy) and financial services division (+43%yoy), while agribusiness contracted 17%yoy.
We have a Buy recommendation on ASII which currently trades at PER10-11F of 18.2-15.9x.
Mandiri Sekuritas Hexindo Adiperkasa: 1Q10 net income is in line with ours and consensus (HEXA, Rp5,950, Buy, TP: Rp3,600)
On AGM held yesterday, the company decided to disburse dividend amounting to USD12.2mn (35.8% of FY09 net income) or equal to US$0.0145/share or around Rp130.5 (rate Rp9,000/US$); it reflects dividend yield of 2.2%. HEXA booked FY09 net income of US$34.0mn.
The company booked 1Q10 revenues (Apr-Jun’10) of US$123.5mn (+132.3%yoy), a major portion of which was derived from the sale of heavy machineries amounting US$82mn (66.4% of total sales). Meanwhile net income was at US$9.2mn.
We have a Buy recommendation on HEXA; it trades at PER10F of 14.1x.
The company booked 1Q10 revenues (Apr-Jun’10) of US$123.5mn (+132.3%yoy), a major portion of which was derived from the sale of heavy machineries amounting US$82mn (66.4% of total sales). Meanwhile net income was at US$9.2mn.
We have a Buy recommendation on HEXA; it trades at PER10F of 14.1x.
Mandiri Sekuritas Citra Marga: net income 1H10 above our estimates and consensus (CMNP, Rp890, Neutral, TP: Rp1,100)
The company posted 1H10 revenues of Rp365.7bn (+25.7%yoy), and net income of Rp399.5bn compared with Rp31.0bn in 1H09. The company booked unrealized gain from debt revaluation amounting Rp236.1bn. These results are above our estimates and consensus.
We have a Neutral recommendation on CMNP, due to lack of new project, it trades at PER10F of 3.7x.
We have a Neutral recommendation on CMNP, due to lack of new project, it trades at PER10F of 3.7x.
CLSA Indo Economics
Indonesia exchange rate – 9000 barrier smashed
The rupiah easily broke through the IDR9,000/USD barrier today and is trading close to our 8,950 end- 2010 target. We had correctly argued that it would be impossible for Bank Indonesia to resist a break through 9,000 given the massive net capital inflows.
Bank Indonesia has probably also decided to use appreciation as a monetary policy tool for curbing inflation. Official expectations are for a 1% MoM rise in July inflation (following the electricity price hike) which will lift the annual rate to 5.6% YoY (a doubling of inflation since the end of last year).
While the inflation spike from the electricity price hike will arguably be a one off effect, inflation pressures could be fueled by accommodative monetary conditions (with M2 money supply growing at 15% QoQ annualised in May).
We maintain our forecast for a 75bp increase in interest rates by end-March 2011.
The banks may increase their lending rates by less than this though, yielding to pressure from Bank Indonesia to advertise their prime lending rates and step up
lending. Reserve requirements will be increased for banks that do not exceed a 75% loan to deposit ratio.
The rupiah easily broke through the IDR9,000/USD barrier today and is trading close to our 8,950 end- 2010 target. We had correctly argued that it would be impossible for Bank Indonesia to resist a break through 9,000 given the massive net capital inflows.
Bank Indonesia has probably also decided to use appreciation as a monetary policy tool for curbing inflation. Official expectations are for a 1% MoM rise in July inflation (following the electricity price hike) which will lift the annual rate to 5.6% YoY (a doubling of inflation since the end of last year).
While the inflation spike from the electricity price hike will arguably be a one off effect, inflation pressures could be fueled by accommodative monetary conditions (with M2 money supply growing at 15% QoQ annualised in May).
We maintain our forecast for a 75bp increase in interest rates by end-March 2011.
The banks may increase their lending rates by less than this though, yielding to pressure from Bank Indonesia to advertise their prime lending rates and step up
lending. Reserve requirements will be increased for banks that do not exceed a 75% loan to deposit ratio.
CLSA UNVR 1H10 Result
Unilever reported Rp1.77tn in net profits for 1H10, 50% of full year estimates.
The stock is at 30x 2011CL earnings and we would take profits here as competition is intensifyin in the fourth largest populated country in the world and inflation is also inching up
Unilever Indonesia: Operating profits and net profits in line: 50% of full year estimates
Operating profits are down 19% qoq and up 5% yoy. Operating expenses grew faster at 15% qoq and 23% yoy vs. revenue growth of 0% qoq and 11% yoy.
Competition is intensifying and this will slow Unilever’s growth as it aggressively protects market share
Investment conclusion: Take profits. The stock is at 30x 2011CL P/E and 26x 2012CL P/E
The stock is at 30x 2011CL earnings and we would take profits here as competition is intensifyin in the fourth largest populated country in the world and inflation is also inching up
Unilever Indonesia: Operating profits and net profits in line: 50% of full year estimates
Operating profits are down 19% qoq and up 5% yoy. Operating expenses grew faster at 15% qoq and 23% yoy vs. revenue growth of 0% qoq and 11% yoy.
Competition is intensifying and this will slow Unilever’s growth as it aggressively protects market share
Investment conclusion: Take profits. The stock is at 30x 2011CL P/E and 26x 2012CL P/E
CLSA KIJA reported a weaker than expected result for 1H10
• KIJA reported a weaker than expected result for 1H10 (if stripping out forex gain), with net profit for 1H10 at 31% of our expectation. Excluding forex gain, the result was in-line (54% of our FY10 expectation).
• 2Q10 revenue increased 9% QoQ. GP margin expanded to 45% in 2Q10 from 37% in 1Q10.
• Sales of industrial land plots boosted marketing sales. KIJA said there was an industrial land plot sales of 17ha in 2Q10 at of ~Rp650,000 psm. This resulted in a surge in marketing sales by 150% YoY in 1H10 to Rp289bn.
We had expected only Rp300bn sales for FY10. The company said 9ha is sold to a foreign electronic company, 2ha to a biscuit company.
• Power plant status – still not resolved
• KIJA said it had obtained all required licenses for the power plant operational.
However, whether the divestment will go through or not, it is pending on three things which are in progress:
o Full drawdown of loan syndication so project can be completed (by Apr2011)
o Possible extension of US$35m bridging loan facility (originally due in Apr2010)
o Negotiations with PLN for KSO (long-term joint operations).
This will take some time, so current emergency power purchase from PLN will end this month. Whether it can be converted into another interim contract is unknown.
• The closing date of the CSPA is Sep 13, 2010. condition precedents are: lenders approval and corporate approval (there are 7 lenders in the loan syndication)
• Dry Port: KIJA said pilot phase of 10ha to be operation in August. KIJA confirmed some shipping lines to set sites there. Given the high uncertainty at this moment regarding the fate of the power plant, our view and current forecasted numbers might change substantially in the future.
• 2Q10 revenue increased 9% QoQ. GP margin expanded to 45% in 2Q10 from 37% in 1Q10.
• Sales of industrial land plots boosted marketing sales. KIJA said there was an industrial land plot sales of 17ha in 2Q10 at of ~Rp650,000 psm. This resulted in a surge in marketing sales by 150% YoY in 1H10 to Rp289bn.
We had expected only Rp300bn sales for FY10. The company said 9ha is sold to a foreign electronic company, 2ha to a biscuit company.
• Power plant status – still not resolved
• KIJA said it had obtained all required licenses for the power plant operational.
However, whether the divestment will go through or not, it is pending on three things which are in progress:
o Full drawdown of loan syndication so project can be completed (by Apr2011)
o Possible extension of US$35m bridging loan facility (originally due in Apr2010)
o Negotiations with PLN for KSO (long-term joint operations).
This will take some time, so current emergency power purchase from PLN will end this month. Whether it can be converted into another interim contract is unknown.
• The closing date of the CSPA is Sep 13, 2010. condition precedents are: lenders approval and corporate approval (there are 7 lenders in the loan syndication)
• Dry Port: KIJA said pilot phase of 10ha to be operation in August. KIJA confirmed some shipping lines to set sites there. Given the high uncertainty at this moment regarding the fate of the power plant, our view and current forecasted numbers might change substantially in the future.
CLSA INTP - Another good quarter
• Indocement reported earnings of Rp854bn for the 2Q10, up 27% YoY and Rp1.64tn for 1H10, up 40% YoY.
• Reveue picked up 10% QoQ as we head into peak seasonal demand; 1H10 revenue is up 24% YoY. This represents all volume growth as there have been no price increases for the past 18 months.
• Margins heald setady at 51% for GPM, 38% for OPM and 30% at the net margin level. We forecast these will be sustained at record levels.
• The company has substantial cash on hand with US$440m in the bank versus short term loans, dividends and loan maturities of US$122m. The company's current ratio stands at 3.1x.
• The company's net cash position of US$375m is now one-third of equity and 5.5% of the company's market cap.
• Overall a solid result for Indonesia's leading private sector cement producer; with additional capacity is also has more operational leverage to domestic demand.
• The stock is up 11% over 3M but remains a strong conviction BUY.
• Reveue picked up 10% QoQ as we head into peak seasonal demand; 1H10 revenue is up 24% YoY. This represents all volume growth as there have been no price increases for the past 18 months.
• Margins heald setady at 51% for GPM, 38% for OPM and 30% at the net margin level. We forecast these will be sustained at record levels.
• The company has substantial cash on hand with US$440m in the bank versus short term loans, dividends and loan maturities of US$122m. The company's current ratio stands at 3.1x.
• The company's net cash position of US$375m is now one-third of equity and 5.5% of the company's market cap.
• Overall a solid result for Indonesia's leading private sector cement producer; with additional capacity is also has more operational leverage to domestic demand.
• The stock is up 11% over 3M but remains a strong conviction BUY.
CLSA SMRA 1H result - In-Line
• SMRA reported a good result for 2Q10 – broadly in-line with our expectation, with 1H10 net profit reached Rp102bn, 46% of our FY10 expectation.
• On a QoQ basis, revenue was up 18%, however higher than expected gross profit margin (55% in 2Q10, vs 46% in 1Q10) resulted in expansion of gross profit by 41%. Due to higher tax paid in 2Q10 resulted in a flat net profit growth QoQ.
• Reiterating our BUY on SMRA. Now trading at 43% discount to its NAV. We continue to like the company as a strong property developer. 6M10 sales was ~80% of our FY10E of RP1.6tn. However, the company had revised their target from Rp1.6tn to Rp1.9tn, which means 6M10 sales was 66% of this target. Clearly, there is upside risk to our marketing sales estimate this year, which will translate into higher earnings estimates for FY11/12. On the investment property (e.g. malls), we believe the performance continues to be good. We will analyze the breakdown when the full result is out.
• On a QoQ basis, revenue was up 18%, however higher than expected gross profit margin (55% in 2Q10, vs 46% in 1Q10) resulted in expansion of gross profit by 41%. Due to higher tax paid in 2Q10 resulted in a flat net profit growth QoQ.
• Reiterating our BUY on SMRA. Now trading at 43% discount to its NAV. We continue to like the company as a strong property developer. 6M10 sales was ~80% of our FY10E of RP1.6tn. However, the company had revised their target from Rp1.6tn to Rp1.9tn, which means 6M10 sales was 66% of this target. Clearly, there is upside risk to our marketing sales estimate this year, which will translate into higher earnings estimates for FY11/12. On the investment property (e.g. malls), we believe the performance continues to be good. We will analyze the breakdown when the full result is out.
CLSA Mayora posted strong revenues for 1H10 but…
• Revenues are up 17.3% QoQ and 38% YoY, supported by a strong demand in confectionery foods. Revenues were 54% of our FY forecast, better than expectation as usually 1H only makes up 45% of FY revenue due to the seasonality.
• Gross margins are maintained since the first quarter, reaching the 23% level. As a result, gross profits grew in line with revenue, up 12.5% QoQ and 42.1% YoY. We might see pressure on gross margins in the coming quarters due to the increasing prices of palm oil and wheat flour, both making up 14% of COGS.
• Operating expenses jumped 56.7% QoQ. This might be reflecting the more aggressive advertisement that the company is trying to do, but we are trying to get more confirmation from the company. The supernormal jump in selling expenses are beyond our expectations. Opex/sales ratio went up from 10.4% to 13.8% in 2Q10, causing operating margin to squeeze from 12.5% to 9.1%. Operating profits were down 15% QoQ but still up 25% YoY compared to last year’s number, making up 43% of our FY forecasts.
• Net profits were down 21.7% QoQ but up 29% YoY, making up 42% of our FY expectations. This is weaker than what we expected due to the sudden jump in selling expenses.
• Conclusion: Mayora’s growth in terms of revenue is still very compelling. However the higher than expected selling expenses need further investigation. The stock is trading at 12.7x 2011CL earnings, returning 24.2% ROE. The stock price has exceeded our target price expectations for the year. We are currently revising our earnings and target price expectation.
• Gross margins are maintained since the first quarter, reaching the 23% level. As a result, gross profits grew in line with revenue, up 12.5% QoQ and 42.1% YoY. We might see pressure on gross margins in the coming quarters due to the increasing prices of palm oil and wheat flour, both making up 14% of COGS.
• Operating expenses jumped 56.7% QoQ. This might be reflecting the more aggressive advertisement that the company is trying to do, but we are trying to get more confirmation from the company. The supernormal jump in selling expenses are beyond our expectations. Opex/sales ratio went up from 10.4% to 13.8% in 2Q10, causing operating margin to squeeze from 12.5% to 9.1%. Operating profits were down 15% QoQ but still up 25% YoY compared to last year’s number, making up 43% of our FY forecasts.
• Net profits were down 21.7% QoQ but up 29% YoY, making up 42% of our FY expectations. This is weaker than what we expected due to the sudden jump in selling expenses.
• Conclusion: Mayora’s growth in terms of revenue is still very compelling. However the higher than expected selling expenses need further investigation. The stock is trading at 12.7x 2011CL earnings, returning 24.2% ROE. The stock price has exceeded our target price expectations for the year. We are currently revising our earnings and target price expectation.
CLSA Ramayana: Disastrous 2q10 result
• Ramayana reported disastrous result, much below our and consensus.
• Net income is only 11% of our full year forecasts. Usually 1H makes up 20%-25% of full year forecasts.
• EBIT is only 7% of full year forecasts. And operating profits usually makes up 20-25% of full year profits.
• SSG has been strong like 15% up to May 2010 but margins were lower. This means Ramayana has to discount a lot more to clear inventory.
• We also understand from other consumer companies that during school holidays, families tend to spend less and save more preparing for reopening of schools. This could also possibly impacted Ramayana sales as it customers are super low end.
• That said, we need to drill down further as we had not expected such a poor performance.
• Investment conclusion: We would wait for more details to downgrade the stock as note 3Q10 is always the key as that is when Ramayana can book as much as 50-60% of its full year profits. Additionally, Ramayana remains an M&A play as we understand the company has separated its distribution centers for Department store and super market and also maintaining separate books of account for the two.
• Net income is only 11% of our full year forecasts. Usually 1H makes up 20%-25% of full year forecasts.
• EBIT is only 7% of full year forecasts. And operating profits usually makes up 20-25% of full year profits.
• SSG has been strong like 15% up to May 2010 but margins were lower. This means Ramayana has to discount a lot more to clear inventory.
• We also understand from other consumer companies that during school holidays, families tend to spend less and save more preparing for reopening of schools. This could also possibly impacted Ramayana sales as it customers are super low end.
• That said, we need to drill down further as we had not expected such a poor performance.
• Investment conclusion: We would wait for more details to downgrade the stock as note 3Q10 is always the key as that is when Ramayana can book as much as 50-60% of its full year profits. Additionally, Ramayana remains an M&A play as we understand the company has separated its distribution centers for Department store and super market and also maintaining separate books of account for the two.
CLSA Gudang Garam reported good 2Q10
1H10 makes up 44% of FY10CL net profits and 45% of full year EBIT.
Revenue for 2Q10 was up 27% yoy (something which had been a concern last year). We had
highlighted that last year revenue growth was muted as distributor was being consolidated for the first time.
Opex increased by 116% yoy and 62% yoy due to increased world cup spend. Yet profits grew by 31% yoy even though qoq it declined by 8%
Gudang Garam has had six price increases meaning 2H10 will be much stronger. There is upside risk to our forecasts
Investment conclusion: Reiterate buy on Gudang Garam.
Revenue for 2Q10 was up 27% yoy (something which had been a concern last year). We had
highlighted that last year revenue growth was muted as distributor was being consolidated for the first time.
Opex increased by 116% yoy and 62% yoy due to increased world cup spend. Yet profits grew by 31% yoy even though qoq it declined by 8%
Gudang Garam has had six price increases meaning 2H10 will be much stronger. There is upside risk to our forecasts
Investment conclusion: Reiterate buy on Gudang Garam.
CLSA CTRA 1H10 result
CTRA reported a 2Q10 result that is in-line with our forecast (50% of our FY10 number), with net profit reached Rp93bn in 1H10, an increase of 47% YoY.
Gross margin slightly declined in 2Q10 to 43%, below our expectation of 45%. We will analyze the breakdown once the full result is available.
We maintain our ‘SELL’ call on CTRA with TP: Rp300/sh, on the back of execution risk of the Ciputra World Jakarta’ projects. Construction delay and competition from nearby projects had translated into continuing weak pre-sales of the condominium. Further potential delay of its mall launching from Nov2011 to Jun/July 2012 imposes downside risk on the project returns, and potential further delay of subsequent projects in the
pipeline. Moreover, although current balance sheet can support the capex for the project, there is risk that cost will be higher than initially estimated given the delay. CTRA is now trading at 41% discount to its NAV, still more expensive than the sector’s average at 55%. We see more upsides by investing in other names such as SMRA and BSDE.
Gross margin slightly declined in 2Q10 to 43%, below our expectation of 45%. We will analyze the breakdown once the full result is available.
We maintain our ‘SELL’ call on CTRA with TP: Rp300/sh, on the back of execution risk of the Ciputra World Jakarta’ projects. Construction delay and competition from nearby projects had translated into continuing weak pre-sales of the condominium. Further potential delay of its mall launching from Nov2011 to Jun/July 2012 imposes downside risk on the project returns, and potential further delay of subsequent projects in the
pipeline. Moreover, although current balance sheet can support the capex for the project, there is risk that cost will be higher than initially estimated given the delay. CTRA is now trading at 41% discount to its NAV, still more expensive than the sector’s average at 55%. We see more upsides by investing in other names such as SMRA and BSDE.
CLSA CPIN 1H10 Result
Net profits were slightly better than our expectations, making up 50% of our fullyear forecast. Bottom line is up 10.4% QoQ and 49.1% YoY.
Sales are up 1.1% QoQ and 3.4% YoY, making up 43.4% of our FY forecast. This is broadly in line with our expectations. 1H sales are usually making up 42-45% of the FY.
Gross margins expanded from 20.5% in 1Q10 to 23.1% in 2Q10 due to weak corn prices at the beginning of this year. Up until now, selling prices are maintained, and strong demand from consumers is still providing solid support. Hence, gross profits grew 14.1% QoQ and 26.3% YoY.
Operating profits are up 16.2% QoQ and 37.2% YoY. Operating expenses were down 1.6% YoY following the company’s cost efficiency program.
Conclusion: The stock is trading at 8.6x 2011CL earnings and 6.0x EV/EBITDA while returning 41% ROE. We maintain our BUY recommendation on the stock, with a target price of Rp6,600, implying 28% upside from the current prices.
Sales are up 1.1% QoQ and 3.4% YoY, making up 43.4% of our FY forecast. This is broadly in line with our expectations. 1H sales are usually making up 42-45% of the FY.
Gross margins expanded from 20.5% in 1Q10 to 23.1% in 2Q10 due to weak corn prices at the beginning of this year. Up until now, selling prices are maintained, and strong demand from consumers is still providing solid support. Hence, gross profits grew 14.1% QoQ and 26.3% YoY.
Operating profits are up 16.2% QoQ and 37.2% YoY. Operating expenses were down 1.6% YoY following the company’s cost efficiency program.
Conclusion: The stock is trading at 8.6x 2011CL earnings and 6.0x EV/EBITDA while returning 41% ROE. We maintain our BUY recommendation on the stock, with a target price of Rp6,600, implying 28% upside from the current prices.
CLSA BSDE 2Q10 result
BSDE reported a good 2Q10 result, broadly in-line with our forecast. While revenue booking was down 5% QoQ, the GP margin expanded to 58.6%, hence resulting in a 3% expansion in gross profit.
Net profit expanded 23% QoQ due to lower ‘other expenses’.
1H10 revenue booking was 41% of our FY10 forecast, however as pointed out before, GP margin (56.4% in 1H10) was higher than our expected 50.5%. Net profit for 1H10 was Rp183bn, 50% of our FY10 forecast. Net profit for 1H10 increased 46% YoY.
We remain bullish on BSDE as one of our top picks. BUY, now trading at 48% discount to NAV. Strong property sales, and margin expansion continue to be catalysts for BSDE. Marketing sales reached Rp900bn in 1H10 (up 22% YoY) and we believe it can reach the targeted Rp2tn this year.
Net profit expanded 23% QoQ due to lower ‘other expenses’.
1H10 revenue booking was 41% of our FY10 forecast, however as pointed out before, GP margin (56.4% in 1H10) was higher than our expected 50.5%. Net profit for 1H10 was Rp183bn, 50% of our FY10 forecast. Net profit for 1H10 increased 46% YoY.
We remain bullish on BSDE as one of our top picks. BUY, now trading at 48% discount to NAV. Strong property sales, and margin expansion continue to be catalysts for BSDE. Marketing sales reached Rp900bn in 1H10 (up 22% YoY) and we believe it can reach the targeted Rp2tn this year.
CLSA Bank Central Asia (BBCA IJ – Rp6,200 – BUY(under review))
BCA released 6M10 result last evening after the market close. No change in our earnings, our recommendation and target price are under review and will be addressed in a follow up note..
profit of Rp3.9tn (+21% YoY) accounts for 42% of our full year estimate. These results are in line with our estimates. Net profit increased 6% QoQ driven by lower expenses and strong loan growth even with NIM contracting slightly (5.46%).
Key highlights:
Strong loan growth led by consumer. Our estimated pickup in lending is being realized with annualized 2Q loan growth of 36%. Loan growth in 2Q10 was 9% QoQ and 23% YoY as consumer lending increased to 24% of total loans, and is up 39% YoY. Strong growth in the quarter was reported in commercial and corporate, both increased by nearly 9% QoQ.
Funding cost flexibility. As the charts below indicates, BCA’s asset sensitive balance sheet is experiencing greater impact from earning asset yield (EAY) compression in the lower rate environment. This should change in 2H10 and BCA should begin to experience NIM expansion. In addition, BCA lowered the maximum rate paid for its demand deposit accounts for the first time in six years, impacting transaction accounts that are sticky in nature. We believe BCA could lower these rates by an additional 25-50bps in the coming months to help maintain the margin.
Credit remains pristine. Credit remains solid, with gross NPL’s flat QoQ at 0.8%. The bank released some reserves in the quarter. As we anticipated, PSAK 55 is limiting the banks ability to maintain a high coverage ratio, and we have modelled this into our earnings assumptions. The coverage ratio decreased by 9% to 334% QoQ and we anticipate that this ratio will continue to decrease, as we are forecasting this ratio to be below 300% by YE10.
Positive traction on expenses. BCA lowered operating expenses QoQ by 7% to Rp2.5tn. The decrease is attributed to lower personnel expenses in the period, helping to drive the cost to income ratio (CIR) down by 370bps to 52.9%.
Conclusion: BCA is currently trading at 3.9x and 15.2x our 11CL PBV and PE, respectively.. We believe upside is limited in the shares at this level given the valuation. We will review our recommendation in a full follow up note.
profit of Rp3.9tn (+21% YoY) accounts for 42% of our full year estimate. These results are in line with our estimates. Net profit increased 6% QoQ driven by lower expenses and strong loan growth even with NIM contracting slightly (5.46%).
Key highlights:
Strong loan growth led by consumer. Our estimated pickup in lending is being realized with annualized 2Q loan growth of 36%. Loan growth in 2Q10 was 9% QoQ and 23% YoY as consumer lending increased to 24% of total loans, and is up 39% YoY. Strong growth in the quarter was reported in commercial and corporate, both increased by nearly 9% QoQ.
Funding cost flexibility. As the charts below indicates, BCA’s asset sensitive balance sheet is experiencing greater impact from earning asset yield (EAY) compression in the lower rate environment. This should change in 2H10 and BCA should begin to experience NIM expansion. In addition, BCA lowered the maximum rate paid for its demand deposit accounts for the first time in six years, impacting transaction accounts that are sticky in nature. We believe BCA could lower these rates by an additional 25-50bps in the coming months to help maintain the margin.
Credit remains pristine. Credit remains solid, with gross NPL’s flat QoQ at 0.8%. The bank released some reserves in the quarter. As we anticipated, PSAK 55 is limiting the banks ability to maintain a high coverage ratio, and we have modelled this into our earnings assumptions. The coverage ratio decreased by 9% to 334% QoQ and we anticipate that this ratio will continue to decrease, as we are forecasting this ratio to be below 300% by YE10.
Positive traction on expenses. BCA lowered operating expenses QoQ by 7% to Rp2.5tn. The decrease is attributed to lower personnel expenses in the period, helping to drive the cost to income ratio (CIR) down by 370bps to 52.9%.
Conclusion: BCA is currently trading at 3.9x and 15.2x our 11CL PBV and PE, respectively.. We believe upside is limited in the shares at this level given the valuation. We will review our recommendation in a full follow up note.
CLSA Indonesia – a compelling case for property
What’s new?
The recent price paid for a sqm of land by a developer in HK is equivalent to 120 sqm house in Jakarta.
Indonesia remains a compelling story for the property sector given its young population, urbanisation growth, and rising household income.
We remain “Overweight” the sector, with SMRA and BSDE as top picks.
Indonesia – a compelling case for property
This week, Nan Fung & Wharf paid an equivalent of US$43,000 psm for a developable land area of 3ha on the Peak in Hong Kong, a city with a population of 7m people with 110,000 ha area. This is the first government site on the Peak up for auction and has attracted fierce biddings during the auction. Down south in Jakarta, US$43,000 will buy you a three bedrooms house of 120sqm land area in Serpong, West Jakarta.
Indonesia remains a compelling story for the property sector:
As a country, Indonesia is the fourth most populous nation in the world, with over 240m people growing by 4m a year. 44% are below 24yrs old.
More than half of Indonesians live in Java. It is the on the most populated island in the world with more than 130m people.
Greater Jakarta holds 10% of the total Indonesia population, and the suburbs are still very under-populated compared to the city. The suburbs of Jakarta are 10x larger than the Jakarta city, which is slightly larger than Singapore (664km2).
Greater Jakarta is growing by 2,000 people a day and by 2030, will be the biggest city on this crowded planet.
Indonesian household income has doubled in five years and land values in Jakarta have risen by 20% compound over the same period; as verified by independent third party valuers.
BUY – SMRA, BSDE as top picks which are most leveraged to rising land values and trade at half the NAV.
The recent price paid for a sqm of land by a developer in HK is equivalent to 120 sqm house in Jakarta.
Indonesia remains a compelling story for the property sector given its young population, urbanisation growth, and rising household income.
We remain “Overweight” the sector, with SMRA and BSDE as top picks.
Indonesia – a compelling case for property
This week, Nan Fung & Wharf paid an equivalent of US$43,000 psm for a developable land area of 3ha on the Peak in Hong Kong, a city with a population of 7m people with 110,000 ha area. This is the first government site on the Peak up for auction and has attracted fierce biddings during the auction. Down south in Jakarta, US$43,000 will buy you a three bedrooms house of 120sqm land area in Serpong, West Jakarta.
Indonesia remains a compelling story for the property sector:
As a country, Indonesia is the fourth most populous nation in the world, with over 240m people growing by 4m a year. 44% are below 24yrs old.
More than half of Indonesians live in Java. It is the on the most populated island in the world with more than 130m people.
Greater Jakarta holds 10% of the total Indonesia population, and the suburbs are still very under-populated compared to the city. The suburbs of Jakarta are 10x larger than the Jakarta city, which is slightly larger than Singapore (664km2).
Greater Jakarta is growing by 2,000 people a day and by 2030, will be the biggest city on this crowded planet.
Indonesian household income has doubled in five years and land values in Jakarta have risen by 20% compound over the same period; as verified by independent third party valuers.
BUY – SMRA, BSDE as top picks which are most leveraged to rising land values and trade at half the NAV.
CLSA Astra International Rp52,750 - BUY 1H10 Result
Astra Intl net profit of Rp6.44tn (+53% yoy) is inline with our forecast and accounts for 53% of our full year expectation. Quarter on quarter net profit increase of 14% is driven by high profitability of its affiliates (including Astra Honda) as operating profit of consolidated subsidiaries only up by 5% qoq. No change in our earnings and recommendation. Astra Int is not cheap on valuation basis, either on historical as well as compared to market valuation. However, strong fund flow continue to serve as tailwind as it is a preffered exposure to Indonesia given it operates at the right/growing sector, strong balance sheet, and perceived good corporate governance.
Strong recovery in profitability of Astra Honda
We have argued that Astra Honda profitability will recover despite the market share pressure (Astra International, Less cyclical, 2 March 2010). This has continued to play out in 2Q10 with operating profit per unit increase further from Rp1.27m to Rp1.3m, a five years high. Note that Astra Intl owns 50% stakes in Astra Honda and does not consolidate it in its profit and loss statement (captured in equity in net income account).
Margin pressure in automotive division
Operating margin in automotive division decline from 3.8% in 1Q10 to 3.1% in 2Q10 due to higher promotion and time lag in cost increase as input price rises. Therefore, although car sales were up by 10% qoq and 71% yoy in 2Q10, profit of automotive division down by 4% yoy and down 11% qoq. Total profit of automotive division for the six months of 2010 were up 13% yoy, behind the 71% growth in automotive sales and 43% growth in car sales. Note that the yoy comparison is also distorted by the positive impact of inventory gain last year when car price were raised during the crisis (rupiah weaken sharply) and Astra was still selling down old priced inventory..
Strong momentum in financial services division
Profit of financial services division continue to gain momentum as strong car and motorcycle sales translated into strong loan growth (+29% yoy, +8% qoq). In addition lower costs of fund also helps as selling rate adjustment tend to fall slower than cost of fund. NPL remain very healthy at less than 1% in car financing and less than 2% in motorcycle financing.
United Tractors result is relatively in line, weaker 1H10 is expected due to wet weather that slows down Pama works. UT’s net profit of Rp1.89tn accounts for 47% of our forecast and we remain confident that it will meet our full year forecast.
Astra Agro weak result. Astra Agro reported a net profit of Rp636bn in 1H10 represents 33% of our full year forecast which is 17% below market consensus. The result looks weak on yoy basis (-17% yoy) due to lower production and higher costs, but qoq recovery is substantial (+34% qoq) as production pick up in 2Q10 (albeit at lower pace than last year). Given the seasonally higher production in 2H and our expectation of higher CPO price, Astra Agro should deliver a much higher profit in 2H10.
Strong recovery in profitability of Astra Honda
We have argued that Astra Honda profitability will recover despite the market share pressure (Astra International, Less cyclical, 2 March 2010). This has continued to play out in 2Q10 with operating profit per unit increase further from Rp1.27m to Rp1.3m, a five years high. Note that Astra Intl owns 50% stakes in Astra Honda and does not consolidate it in its profit and loss statement (captured in equity in net income account).
Margin pressure in automotive division
Operating margin in automotive division decline from 3.8% in 1Q10 to 3.1% in 2Q10 due to higher promotion and time lag in cost increase as input price rises. Therefore, although car sales were up by 10% qoq and 71% yoy in 2Q10, profit of automotive division down by 4% yoy and down 11% qoq. Total profit of automotive division for the six months of 2010 were up 13% yoy, behind the 71% growth in automotive sales and 43% growth in car sales. Note that the yoy comparison is also distorted by the positive impact of inventory gain last year when car price were raised during the crisis (rupiah weaken sharply) and Astra was still selling down old priced inventory..
Strong momentum in financial services division
Profit of financial services division continue to gain momentum as strong car and motorcycle sales translated into strong loan growth (+29% yoy, +8% qoq). In addition lower costs of fund also helps as selling rate adjustment tend to fall slower than cost of fund. NPL remain very healthy at less than 1% in car financing and less than 2% in motorcycle financing.
United Tractors result is relatively in line, weaker 1H10 is expected due to wet weather that slows down Pama works. UT’s net profit of Rp1.89tn accounts for 47% of our forecast and we remain confident that it will meet our full year forecast.
Astra Agro weak result. Astra Agro reported a net profit of Rp636bn in 1H10 represents 33% of our full year forecast which is 17% below market consensus. The result looks weak on yoy basis (-17% yoy) due to lower production and higher costs, but qoq recovery is substantial (+34% qoq) as production pick up in 2Q10 (albeit at lower pace than last year). Given the seasonally higher production in 2H and our expectation of higher CPO price, Astra Agro should deliver a much higher profit in 2H10.
CLSA Rupiah strengthening beyond 9000 mark and generally strong 1H10 results
1H reporting is in full swing – see below for comments. In general, most results were good with many beating consensus. The stands out were clearly the domestic consumption plays with Indocement, Gadang Garam, Astra, poultry play Charoen Pokphand, tire maker Gajah Tunnggal and even media company Surya Citra reporting stellar numbers.
Banks and property companies were pretty much in line with consensus. Note that 1H marketing sales of Summarecon and Bumi Serpong have been spectacular but won’t be booked as revenue until next year when full payment has been received. We would need to revise up 2011 earnings in a big way. Commodity and commodity related companies were the obvious expected underperformers
What’s more important to note is the currency. The rupiah easily broke through the IDR9,000/USD resistance today and is now trading close to our 8,950 end-2010 target. We had correctly argued that it would be impossible for Bank Indonesia to resist a break through 9,000 given the massive net capital inflows.
Indonesia saw $11bn of FDI in 1H10, net inflows into government bonds and forex reserves rose $10bn over the same period. Maybe the central bank will tell Gita to stop promoting Indonesia so hard. Given that he is aiming for over $100bn in FDI flow something will have to give here.
Next week's BI meeting will be an interesting one, inflation will be up to 6-6.5% and they are the only major Asian central bank not to have hiked rates yet; the pressure is on the new governor. Tony Nafte thinks Bank Indonesia will not have much choice but use appreciation as a monetary policy tool for curbing inflation. Official expectations are for a 1% MoM rise in July inflation (following the electricity price hike) which will lift the annual rate to 5.6% YoY (a doubling of inflation since the end of last year). We maintain our forecast for a 75bp increase in interest rates by end-March 2011.
Banks and property companies were pretty much in line with consensus. Note that 1H marketing sales of Summarecon and Bumi Serpong have been spectacular but won’t be booked as revenue until next year when full payment has been received. We would need to revise up 2011 earnings in a big way. Commodity and commodity related companies were the obvious expected underperformers
What’s more important to note is the currency. The rupiah easily broke through the IDR9,000/USD resistance today and is now trading close to our 8,950 end-2010 target. We had correctly argued that it would be impossible for Bank Indonesia to resist a break through 9,000 given the massive net capital inflows.
Indonesia saw $11bn of FDI in 1H10, net inflows into government bonds and forex reserves rose $10bn over the same period. Maybe the central bank will tell Gita to stop promoting Indonesia so hard. Given that he is aiming for over $100bn in FDI flow something will have to give here.
Next week's BI meeting will be an interesting one, inflation will be up to 6-6.5% and they are the only major Asian central bank not to have hiked rates yet; the pressure is on the new governor. Tony Nafte thinks Bank Indonesia will not have much choice but use appreciation as a monetary policy tool for curbing inflation. Official expectations are for a 1% MoM rise in July inflation (following the electricity price hike) which will lift the annual rate to 5.6% YoY (a doubling of inflation since the end of last year). We maintain our forecast for a 75bp increase in interest rates by end-March 2011.
Credit Suisse: Positive outlook for commodities and regional mining stocks
Highlights
Global growth momentum has eased, but we see a recovery and not a double dip.
The outlook for commodities is positive on a 12-month plus view.
We prefer copper among industrial metals. Iron ore and coal should also remain strong.
Investors should add exposure to regional stocks exposed to our favorite commodities.
Global recovery is a positive driver for industrial commodities and regional mining stocks
The current slowing in global economic indicators is broadly in line with our expectation. It is normal to temporarily lose momentum at this stage of the cycle, as re-stocking fades, and it is also normal to see a partial reacceleration later as
credit conditions improve and replacement investment grows. While global leading indicators have slowed, they remain in positive territory (Figure 1). While economic growth is slowing from the previous unsustainably high levels, we believe the global economic recovery remains on track. Recently, the International Monetary Fund (IMF) even upgraded its forecast for global growth this year from 4.2% to 4.6%. Our global
economics team sees the US on course for just-above-trend growth of 2.75% next year. With Europe following a broadly similar dynamic, Asia will have to sustain its own demand growth and seems set to do this by tightening slower rather than faster and by structural measures, such as China’s move to higher wages and the great push west.
Commodity prices have suffered somewhat in the first half of 2010, as markets have had concerns about global growth momentum and the European sovereign debt crisis. The more leveraged mining stocks have consequently underperformed during this period. We believe that mining stocks offer value, given our confidence in the global outlook and a more positive environment for commodity prices.
Global growth momentum has eased, but we see a recovery and not a double dip.
The outlook for commodities is positive on a 12-month plus view.
We prefer copper among industrial metals. Iron ore and coal should also remain strong.
Investors should add exposure to regional stocks exposed to our favorite commodities.
Global recovery is a positive driver for industrial commodities and regional mining stocks
The current slowing in global economic indicators is broadly in line with our expectation. It is normal to temporarily lose momentum at this stage of the cycle, as re-stocking fades, and it is also normal to see a partial reacceleration later as
credit conditions improve and replacement investment grows. While global leading indicators have slowed, they remain in positive territory (Figure 1). While economic growth is slowing from the previous unsustainably high levels, we believe the global economic recovery remains on track. Recently, the International Monetary Fund (IMF) even upgraded its forecast for global growth this year from 4.2% to 4.6%. Our global
economics team sees the US on course for just-above-trend growth of 2.75% next year. With Europe following a broadly similar dynamic, Asia will have to sustain its own demand growth and seems set to do this by tightening slower rather than faster and by structural measures, such as China’s move to higher wages and the great push west.
Commodity prices have suffered somewhat in the first half of 2010, as markets have had concerns about global growth momentum and the European sovereign debt crisis. The more leveraged mining stocks have consequently underperformed during this period. We believe that mining stocks offer value, given our confidence in the global outlook and a more positive environment for commodity prices.
Mansek AKRA:Alleviating the cost pressure
AKRA posted 1H10 net income of Rp141bn (+27.5%yoy, +0.4%qoq). Even though this figure is slightly below our forecast, it is not surprising as the big chunk of full-year profit should come in 2H10 on cheaper raw materials, as stated in our previous report. The company performed very well in petroleum and basic chemical businesses with strong volume and pr! ofit marg in growth. However, for manufacturing division, high raw material price hurt profits, despite of 25%yoy volume growth. We share the company’s management believe on cheaper cassava price in 2H10 as a result of normal harvest. Therefore, we maintain our forecast and Buy recommendation on AKRA that currently is trading at PER10-11F of 13.2-10.3x.
1H10 net profit grew 27.5% yoy. AKRAposted 1H10 revenues of Rp 5.2tn (+32.6%yoy and +14.6%qoq), which was inline with our FY10F forecast. Bottom line was at Rp141bn (+27.5%yoy, +0.4%qoq), which represented only 41.9% of our FY10F forecast, due to margin contraction in sorbitol manufacturing business. However, these results are not surprising as we have already noted it in our previous report that the company would slightly suff! er margin shrinkage in 1H10.
Outstanding volume growth across all businesses, but margin contraction for manufacturing business. AKRA’s 1H10 operational performance was outstanding with volume growth in all businesses. Sales volume from petroleum, basic chemicals, and manufacturing businesses grew by 25-27%yoy. Gross profit/unit increased by 46.0%yoy for petroleum and basic chemical businesses. However, gross profit/unit contraction of manufacturing busi! ness (-41 %yoy) eroded the other businesses’ growth as manufacturing represented 49% of operating profit.
2H10 should be better. For AKRA during FY10, main concern is on cost management of manufacturing division, while the other division performed very well. Cassava price in 1H10 increased sharply due to lack of planting 6 months ago. Based on company’s management and cross check with other cassava player, they expect lower cassava price in 2H10 due to normal re-planting in 1H10 that will lead to normal harvest. For other businesses, volume growth should continue in 2H10.
Maintain Buy. We maintain our forecast and Buy recommendation on AKRA due to strong operational performance and our belief on margin improvement in 2H10. Based on DCF method, we arrived at TP of Rp1,300/share (11.9% WACC, 5% TG rate, 20% illiquidity discount). The stock is currently trading at PER10-11F of 13.2-10.3x.
1H10 net profit grew 27.5% yoy. AKRAposted 1H10 revenues of Rp 5.2tn (+32.6%yoy and +14.6%qoq), which was inline with our FY10F forecast. Bottom line was at Rp141bn (+27.5%yoy, +0.4%qoq), which represented only 41.9% of our FY10F forecast, due to margin contraction in sorbitol manufacturing business. However, these results are not surprising as we have already noted it in our previous report that the company would slightly suff! er margin shrinkage in 1H10.
Outstanding volume growth across all businesses, but margin contraction for manufacturing business. AKRA’s 1H10 operational performance was outstanding with volume growth in all businesses. Sales volume from petroleum, basic chemicals, and manufacturing businesses grew by 25-27%yoy. Gross profit/unit increased by 46.0%yoy for petroleum and basic chemical businesses. However, gross profit/unit contraction of manufacturing busi! ness (-41 %yoy) eroded the other businesses’ growth as manufacturing represented 49% of operating profit.
2H10 should be better. For AKRA during FY10, main concern is on cost management of manufacturing division, while the other division performed very well. Cassava price in 1H10 increased sharply due to lack of planting 6 months ago. Based on company’s management and cross check with other cassava player, they expect lower cassava price in 2H10 due to normal re-planting in 1H10 that will lead to normal harvest. For other businesses, volume growth should continue in 2H10.
Maintain Buy. We maintain our forecast and Buy recommendation on AKRA due to strong operational performance and our belief on margin improvement in 2H10. Based on DCF method, we arrived at TP of Rp1,300/share (11.9% WACC, 5% TG rate, 20% illiquidity discount). The stock is currently trading at PER10-11F of 13.2-10.3x.
Kamis, 29 Juli 2010
Credit Suisse Asia Equity Focus Near-term rally expected for Japanese megabanks
Watered-down Basel 3 capital requirements alleviate funding risks for Japanese banks
The new Basel 3 capital requirements are, in our view, likely to spark a relief rally in the share prices of Japanese megabanks. The main reason for this assumption is that some of the key criteria have been watered down and the implementation horizon is more generous than expected. We note one particular positive for Japanese banks, which should lower the pressure to shore up core Tier 1 capital. The restriction pertaining to deferred tax assets (DTA) has been eased. Initially, the Basel Committee had planned to restrict accounting DTA as common equity Tier 1 capital, but now DTA may account for up to 10% of banks' common equity component. Megabanks are likely to have had DTA in excess of the stipulated 10%, but nevertheless we see the changed terms as supportive of megabanks' share prices. In our view, investors' sentiment toward Mizuho Financial Group (8411 JP, BUY) is likely to receive a large boost, as it has the lowest core Tier 1 ratio among the three megabanks. Our TOP PICK within the group is Mitsubishi UFJ Financial Group (8306 JP, BUY); with 6.9% (after adding back DTA), it comes the closest to meeting Basel 3 standards, and if it can generate sufficient retained earnings, it could be capable of achieving 8% without a public offering.
The following aspect shapes the earnings outlook for megabanks. Bank lending has been on a downtrend, which is partly due to the excess cash held by corporates and the conservative lending policies pursued by megabanks, limiting access to the credit markets of riskier borrowers. Instead, banks have been large buyers of Japanese government bonds (JGB), which sent the JGB yield to the current lows. We therefore have low expectations regarding growth in lending income and expect net interest margins to remain tight due to banks' focus on high-quality borrowers.
That said, we expect megabanks to post relatively robust Q1 results due to the buoyancy of the bond market. This phenomenon is unlikely to be repeated in Q2, however. Hence, the key driver of the earnings recovery at megabanks in FY 2010 is the decline in credit costs. Japan's economy has accelerated and with our GDP forecasts for 2010 and 2011 of 3.3% and 1.8% respectively, growth ranges above the Bank of Japan estimated potential GDP growth rate of 1%–1.5%. As corporate profits are also expected to see a brisk recovery in FY 2010, this will likely favor a decline in non-performing loans and boost banks' net income.
In our view, the watered-down Basel 3 capital requirements and positive Q1 earnings surprises are likely to spark a near-term rally in megabanks. Sumitomo Mitsui Financial Group (8316 JP, BUY) has already set the tone, reporting stellar Q1 net income of JPY 211.8 bn, up 200% YoY. Recurring profits of JPY 273.2 bn compare to JPY 665 bn FY 2010 consensus estimate. And exact in line with expectations, trading profits and lower provisions were the drivers.
The new Basel 3 capital requirements are, in our view, likely to spark a relief rally in the share prices of Japanese megabanks. The main reason for this assumption is that some of the key criteria have been watered down and the implementation horizon is more generous than expected. We note one particular positive for Japanese banks, which should lower the pressure to shore up core Tier 1 capital. The restriction pertaining to deferred tax assets (DTA) has been eased. Initially, the Basel Committee had planned to restrict accounting DTA as common equity Tier 1 capital, but now DTA may account for up to 10% of banks' common equity component. Megabanks are likely to have had DTA in excess of the stipulated 10%, but nevertheless we see the changed terms as supportive of megabanks' share prices. In our view, investors' sentiment toward Mizuho Financial Group (8411 JP, BUY) is likely to receive a large boost, as it has the lowest core Tier 1 ratio among the three megabanks. Our TOP PICK within the group is Mitsubishi UFJ Financial Group (8306 JP, BUY); with 6.9% (after adding back DTA), it comes the closest to meeting Basel 3 standards, and if it can generate sufficient retained earnings, it could be capable of achieving 8% without a public offering.
The following aspect shapes the earnings outlook for megabanks. Bank lending has been on a downtrend, which is partly due to the excess cash held by corporates and the conservative lending policies pursued by megabanks, limiting access to the credit markets of riskier borrowers. Instead, banks have been large buyers of Japanese government bonds (JGB), which sent the JGB yield to the current lows. We therefore have low expectations regarding growth in lending income and expect net interest margins to remain tight due to banks' focus on high-quality borrowers.
That said, we expect megabanks to post relatively robust Q1 results due to the buoyancy of the bond market. This phenomenon is unlikely to be repeated in Q2, however. Hence, the key driver of the earnings recovery at megabanks in FY 2010 is the decline in credit costs. Japan's economy has accelerated and with our GDP forecasts for 2010 and 2011 of 3.3% and 1.8% respectively, growth ranges above the Bank of Japan estimated potential GDP growth rate of 1%–1.5%. As corporate profits are also expected to see a brisk recovery in FY 2010, this will likely favor a decline in non-performing loans and boost banks' net income.
In our view, the watered-down Basel 3 capital requirements and positive Q1 earnings surprises are likely to spark a near-term rally in megabanks. Sumitomo Mitsui Financial Group (8316 JP, BUY) has already set the tone, reporting stellar Q1 net income of JPY 211.8 bn, up 200% YoY. Recurring profits of JPY 273.2 bn compare to JPY 665 bn FY 2010 consensus estimate. And exact in line with expectations, trading profits and lower provisions were the drivers.
Credit Suisse Bank Negara Indonesia INCREASE TARGET PRICE: 2Q10 results - charging forward
61% YoY jump in 2Q10 earnings: BBNI’s 2Q10 earnings jumped 61% YoY, but declined by 11% QoQ due to lower write-back recognised in 2Q10 versus 1Q10. 2Q10 PPOP jumped by 21% YoY and 14% QoQ, signifying the bank’s continuously improving fundamentals. 1H10 earnings were up by 61% YoY, 47% of our old FY10E forecast and 52% of consensus estimate.
Continuing transformations: BBNI’s 2Q10 earnings exhibit significant improvements in low-cost deposit franchise, whose contribution to total deposits jumped from 53% in 1Q10 to 60% in 2Q10. While it is still early days of BBNI’s strategic decision to strengthen its low-cost deposit franchise, the initial result has been very promising. BBNI’s improving human capital in the recent past also provides evidence on the bank’s seriousness to continue pursuing fundamental transformations. We foresee potential for BBNI to continue operational improvements ahead, and we increase our FY10E-FY12E earning estimates by 0.4%-8.5%.
Between right issue and asset recovery: Management indicated the likelihood of completing BBNI’s rights issue by end-2010. We believe that prompt completion of the rights issue will benefit BBNI’s share price outlook as it will reduce the overhang period. Though management remains relatively uncertain, it sees the possibility for further asset recovery if it is able to execute haircut on written-off loans.
Undemanding relative to peers: We believe that BBNI’s valuation remains undemanding relative to its peers. BBNI’s P/B re-rating since November 2008 is well justified by its expanding ROE, and BBNI is trading below its historical average P/E. We maintain our OUTPERFORM rating on BBNI and increase our target price from Rp3,000 to Rp3,500 on higher earnings estimates. Our target price for BBNI is based on Gordon’s Growth model, implying 2.25x 2010E P/B, 12.96x 2010E P/E, 1.9x 2011E P/B and 10.6x 2011E P/E.
Continuing transformations: BBNI’s 2Q10 earnings exhibit significant improvements in low-cost deposit franchise, whose contribution to total deposits jumped from 53% in 1Q10 to 60% in 2Q10. While it is still early days of BBNI’s strategic decision to strengthen its low-cost deposit franchise, the initial result has been very promising. BBNI’s improving human capital in the recent past also provides evidence on the bank’s seriousness to continue pursuing fundamental transformations. We foresee potential for BBNI to continue operational improvements ahead, and we increase our FY10E-FY12E earning estimates by 0.4%-8.5%.
Between right issue and asset recovery: Management indicated the likelihood of completing BBNI’s rights issue by end-2010. We believe that prompt completion of the rights issue will benefit BBNI’s share price outlook as it will reduce the overhang period. Though management remains relatively uncertain, it sees the possibility for further asset recovery if it is able to execute haircut on written-off loans.
Undemanding relative to peers: We believe that BBNI’s valuation remains undemanding relative to its peers. BBNI’s P/B re-rating since November 2008 is well justified by its expanding ROE, and BBNI is trading below its historical average P/E. We maintain our OUTPERFORM rating on BBNI and increase our target price from Rp3,000 to Rp3,500 on higher earnings estimates. Our target price for BBNI is based on Gordon’s Growth model, implying 2.25x 2010E P/B, 12.96x 2010E P/E, 1.9x 2011E P/B and 10.6x 2011E P/E.
Danareksa Sorini Agro Asia Corporindo (SOBI IJ, Rp1,920 BUY) 1H10 Results - Below expectation
Highlights:
l 1H10 sales grew 16% YoY, and are 44% of our full year forecast. On a QoQ basis the 2Q10 revenues are up 10%.
l The gross margin was squeezed further to 17.4% in 2Q10 from 22.3% in 1Q10. The 2Q10 gross margin is much lower than our gross margin forecast of 26% for the full year.
l The Thai export cassava starch price rose 39% to US$ 550/MT in 1H10.
The 2Q10 operating expenses to sales ratio was stable at 11.1% on a quarterly comparison.
1H10 net profits were down 46% YoY and were only 28% of our FY10 forecast.
The net gearing rose to 74% at the end of 1H10 from 36% at the end of 2009.
Comments:
The 1H10 gross margin is lower than expected. This is largely due to: 1) the fact that raw material prices rose more rapidly than expected; and 2) the larger-than-expected starch portion of total revenues.
To counter the impact of rapid raw material price increases, the company has started to reduce its usage of cassava based starch raw materials and to increase its usage of cheaper corn-based starch. In our view, this will lead to better gross margins in 3Q10. However, the company is still unlikely to meet our targeted full year gross margin of 26%.
Our 2010 sales volume forecast of 355,000 MT is still attainable. However, a difference in the sales mix from our forecast may result in lower-than-expected gross margins. In conversations with the company we learn that lower margin products (starch) will account for around 30% of total sales volume in 2010, or higher than our estimate of only 26%. Due to the scarcity of cassava starch, the 1H10 starch sales volume rose to around 52,000 MT (65% growth YoY), or higher than our expectations. However, the starch sweeteners 1H10 sales volume of around 120,000 MT is lower than expected due to the lengthy trials taking place at the new maltose and maltodextrine plants.
For the time being we maintain our BUY recommendation with a target price of Rp 2,025. Note that there may be a possible change in the recommendation in the near future given that the current share price is close to our target price.
l 1H10 sales grew 16% YoY, and are 44% of our full year forecast. On a QoQ basis the 2Q10 revenues are up 10%.
l The gross margin was squeezed further to 17.4% in 2Q10 from 22.3% in 1Q10. The 2Q10 gross margin is much lower than our gross margin forecast of 26% for the full year.
l The Thai export cassava starch price rose 39% to US$ 550/MT in 1H10.
The 2Q10 operating expenses to sales ratio was stable at 11.1% on a quarterly comparison.
1H10 net profits were down 46% YoY and were only 28% of our FY10 forecast.
The net gearing rose to 74% at the end of 1H10 from 36% at the end of 2009.
Comments:
The 1H10 gross margin is lower than expected. This is largely due to: 1) the fact that raw material prices rose more rapidly than expected; and 2) the larger-than-expected starch portion of total revenues.
To counter the impact of rapid raw material price increases, the company has started to reduce its usage of cassava based starch raw materials and to increase its usage of cheaper corn-based starch. In our view, this will lead to better gross margins in 3Q10. However, the company is still unlikely to meet our targeted full year gross margin of 26%.
Our 2010 sales volume forecast of 355,000 MT is still attainable. However, a difference in the sales mix from our forecast may result in lower-than-expected gross margins. In conversations with the company we learn that lower margin products (starch) will account for around 30% of total sales volume in 2010, or higher than our estimate of only 26%. Due to the scarcity of cassava starch, the 1H10 starch sales volume rose to around 52,000 MT (65% growth YoY), or higher than our expectations. However, the starch sweeteners 1H10 sales volume of around 120,000 MT is lower than expected due to the lengthy trials taking place at the new maltose and maltodextrine plants.
For the time being we maintain our BUY recommendation with a target price of Rp 2,025. Note that there may be a possible change in the recommendation in the near future given that the current share price is close to our target price.
Credit Suisse GEM Strategy - Indonesia vs BRICs . how high can the premium go?
● Indonesia’s positives – structural ROE and low credit penetration. In our 9 June report, Indonesia – structural growth story, but at what price?, we highlighted two structural positives. One, structural ROE – reflected by ROE troughing at 18.2% in 2008/09’s deep global recession compared with 16% for MSCI China, 15.4% for India, 13.6% for Brazil and 5.5% for Russia. Two, low credit penetration – at 26% of GDP versus 43% for Russia, 59% for Brazil, 64% for India and 131% for China.
● But Indonesia’s P/B versus ROE premium relative to GEM now at 18%. With Indonesia being the best performing GEM market YTD (up 27% in USD), Figure 1 highlights that Indonesia’s P/B versus ROE premium relative to GEM has risen to 18%. This is close to the previous high of 22%. While the highest premiums ever achieved by Brazil was 12% and 24% for Russia, Figures 2 and 3 highlight that premiums versus GEM rose to highs of 38% for India and 36% for MSCI China (we are excluding the high of 68% for MSCI China in late 2007 driven by a special factor – through-train).
● But Indonesia’s P/B versus ROE premium relative to GEM now at 18%. With Indonesia being the best performing GEM market YTD (up 27% in USD), Figure 1 highlights that Indonesia’s P/B versus ROE premium relative to GEM has risen to 18%. This is close to the previous high of 22%. While the highest premiums ever achieved by Brazil was 12% and 24% for Russia, Figures 2 and 3 highlight that premiums versus GEM rose to highs of 38% for India and 36% for MSCI China (we are excluding the high of 68% for MSCI China in late 2007 driven by a special factor – through-train).
Credit Suisse GEM Strategy - Indonesia vs BRICs . how high can the premium go?
● Indonesia’s positives – structural ROE and low credit penetration. In our 9 June report, Indonesia – structural growth story, but at what price?, we highlighted two structural positives. One, structural ROE – reflected by ROE troughing at 18.2% in 2008/09’s deep global recession compared with 16% for MSCI China, 15.4% for India, 13.6% for Brazil and 5.5% for Russia. Two, low credit penetration – at 26% of GDP versus 43% for Russia, 59% for Brazil, 64% for India and 131% for China.
● But Indonesia’s P/B versus ROE premium relative to GEM now at 18%. With Indonesia being the best performing GEM market YTD (up 27% in USD), Figure 1 highlights that Indonesia’s P/B versus ROE premium relative to GEM has risen to 18%. This is close to the previous high of 22%. While the highest premiums ever achieved by Brazil was 12% and 24% for Russia, Figures 2 and 3 highlight that premiums versus GEM rose to highs of 38% for India and 36% for MSCI China (we are excluding the high of 68% for MSCI China in late 2007 driven by a special factor – through-train).
● But Indonesia’s P/B versus ROE premium relative to GEM now at 18%. With Indonesia being the best performing GEM market YTD (up 27% in USD), Figure 1 highlights that Indonesia’s P/B versus ROE premium relative to GEM has risen to 18%. This is close to the previous high of 22%. While the highest premiums ever achieved by Brazil was 12% and 24% for Russia, Figures 2 and 3 highlight that premiums versus GEM rose to highs of 38% for India and 36% for MSCI China (we are excluding the high of 68% for MSCI China in late 2007 driven by a special factor – through-train).
DBS Astra Agro Lestari: Rec - TP under review; Rp19,750; AALI IJ
2Q10 earnings fell below forecast and consensus
Astra Agro Lestari (AALI) 2Q10 net earnings declined by 34% y-o-y to Rp364.5b. On annualized basis, the group's earnings were c.23% below our forecast and c.37% below consensus. The drop translated from 11% y-o-y decline in 2Q10 revenues to Rp1,884.7b. Approximately 14% y-o-y lower FFB yields had caused a 8% y-o-y drop in 2Q10 CPO production to 252,202 MT; while the group's CPO ASP also declined by 7% y-o-y to Rp6,630/kg due to stronger IDR y-o-y.
AALI's gross profit dropped by 33% y-o-y to Rp665.1b, mainly as labour costs increased by 5% y-o-y, keeping pace with inflation. As a consequence, gross margin also shrank to 35% - down from 47% in 2Q09. AALI's operating expenses also increased by 23% y-o-y, mainly due to higher salaries and professional fees in G&A expenses. This resulted in a 41% drop in operating profit to Rp517.3b, representing 27% margin - down from 41% in the same period last year.
Sequentially, AALI's earnings showed a decent 34% improvement, as 1Q10 yields were abnormally low due to small contribution from smallholder estates. The group's 2Q10 revenues rose by 15% q-o-q, reflecting 15% increase in CPO production; while CPO prices were almost flat from previous quarter (1Q10: Rp6,544/kg). Likewise, gross and operating margins improved marginally q-o-q to 35.3% and 27.4%, from 34.4% and
26.7%, respectively.
We understand that the poor performance was due to a combination of lagged impact of the absence in fertilizer application on smallholder estates in 1H09; while lack of sunlight due to rainfall in 1Q10 had resulted in slightly lower number of fronds. Because these were mainly lagged impacts from earlier circumstances, we expect production volumes to improve in 2H10. Notwithstanding this, our current forecasts now look optimistic, as we did not anticipate the severity of rainfall impact on AALI's own production.
We are likely going to cut FY10F and FY11F earnings by over 10% each, which would bring down the stock's fair value by 5-6% below our current TP of Rp21,200. Our call on the stock is now under review, pending analyst briefing on Friday, 30 July.
Astra Agro Lestari (AALI) 2Q10 net earnings declined by 34% y-o-y to Rp364.5b. On annualized basis, the group's earnings were c.23% below our forecast and c.37% below consensus. The drop translated from 11% y-o-y decline in 2Q10 revenues to Rp1,884.7b. Approximately 14% y-o-y lower FFB yields had caused a 8% y-o-y drop in 2Q10 CPO production to 252,202 MT; while the group's CPO ASP also declined by 7% y-o-y to Rp6,630/kg due to stronger IDR y-o-y.
AALI's gross profit dropped by 33% y-o-y to Rp665.1b, mainly as labour costs increased by 5% y-o-y, keeping pace with inflation. As a consequence, gross margin also shrank to 35% - down from 47% in 2Q09. AALI's operating expenses also increased by 23% y-o-y, mainly due to higher salaries and professional fees in G&A expenses. This resulted in a 41% drop in operating profit to Rp517.3b, representing 27% margin - down from 41% in the same period last year.
Sequentially, AALI's earnings showed a decent 34% improvement, as 1Q10 yields were abnormally low due to small contribution from smallholder estates. The group's 2Q10 revenues rose by 15% q-o-q, reflecting 15% increase in CPO production; while CPO prices were almost flat from previous quarter (1Q10: Rp6,544/kg). Likewise, gross and operating margins improved marginally q-o-q to 35.3% and 27.4%, from 34.4% and
26.7%, respectively.
We understand that the poor performance was due to a combination of lagged impact of the absence in fertilizer application on smallholder estates in 1H09; while lack of sunlight due to rainfall in 1Q10 had resulted in slightly lower number of fronds. Because these were mainly lagged impacts from earlier circumstances, we expect production volumes to improve in 2H10. Notwithstanding this, our current forecasts now look optimistic, as we did not anticipate the severity of rainfall impact on AALI's own production.
We are likely going to cut FY10F and FY11F earnings by over 10% each, which would bring down the stock's fair value by 5-6% below our current TP of Rp21,200. Our call on the stock is now under review, pending analyst briefing on Friday, 30 July.
DBS Economy 55.8% growth for FDI
The country's Investment Coordinating Board said yesterday that the realization of foreign and domestic investment rose a strong 55.8% YoY to IDR 50.8trn in 2Q10, up from 24.6% in 1Q. Growth was led by investment from domestic companies particularly in the sectors of food, mining and transportation & telecommunications according to the officialstatement.
Meanwhile, data released earlier this month revealed that domestic consumption growth also held up well in 2Q. Motorcycle sales and motor vehicle sales increased 46.7% YoY and 78.3% respectively in the April-June period (vs. 35.4% and73.6% in 1Q), and consumer confidence index stayed in the expansionary territory for the fifth consecutive quarter (111.4 in June) on the back of upbeat outlook for income and general economic conditions. By contrast, export growth has
eased in 2Q probably due to the slowdown in global commodity prices and the cooling-off in global real economy.
Custom exports decelerated to 39.0% YoY in April-May from 54.3% in 1Q (the MoM growth was slightly negative in both April and May), and will likely slow further to around 35% in June (June trade data is on tap next Monday). Meanwhile, fiscal stimulus in the Indonesian economy has also been reduced. On the back of strong recovery in government revenue and austere government spending, the central government's fiscal balance registered a surplus of IDR 42trn in the Jan-Apr period.
The finance ministry said in a parliament hearing this week that fiscal deficit is likely to be 1.5% of GDP this year, better than the initial official forecast of 2.1% (closer to DBS forecast of 0.9%), and the finance minister expressed that the government may reduce the target for debt auctions this year.
Meanwhile, data released earlier this month revealed that domestic consumption growth also held up well in 2Q. Motorcycle sales and motor vehicle sales increased 46.7% YoY and 78.3% respectively in the April-June period (vs. 35.4% and73.6% in 1Q), and consumer confidence index stayed in the expansionary territory for the fifth consecutive quarter (111.4 in June) on the back of upbeat outlook for income and general economic conditions. By contrast, export growth has
eased in 2Q probably due to the slowdown in global commodity prices and the cooling-off in global real economy.
Custom exports decelerated to 39.0% YoY in April-May from 54.3% in 1Q (the MoM growth was slightly negative in both April and May), and will likely slow further to around 35% in June (June trade data is on tap next Monday). Meanwhile, fiscal stimulus in the Indonesian economy has also been reduced. On the back of strong recovery in government revenue and austere government spending, the central government's fiscal balance registered a surplus of IDR 42trn in the Jan-Apr period.
The finance ministry said in a parliament hearing this week that fiscal deficit is likely to be 1.5% of GDP this year, better than the initial official forecast of 2.1% (closer to DBS forecast of 0.9%), and the finance minister expressed that the government may reduce the target for debt auctions this year.
Detikffinance Proyek Tertunda, Laba Elnusa Anjlok 94,18%
Laba bersih PT Elnusa Tbk (ELSA) anjlok tajam 94,18% di semester I-2010 menjadi sebanyak Rp 27,096 miliar dari tahun sebelumnya sebanyak Rp 465,597 miliar. Penurunan laba ini akibat adanya beberapa proyek yang tertunda.
Menurut Direktur Utama Elnusa Suharyanto, penurunan kinerja laba ini disebabkan oleh penurunan utilisasi alat karena adanya penundaan beberapa proyek dari segmen Geodata Seismic Land (GDL) serta perubahan pola bisnis Geoscience seiring dengan mulai masuknya Perseroan ke segmen offshore (seismic marine-transition zone) yang menggunakan pola Joint Operation.
Meski laba menurun, perseroan membukukan pendapatan usaha sebesar Rp 2,27 Triliun atau naik 40% dibandingkan dengan periode yang sama tahun 2009 yang senilai Rp 1,61 triliun. Peningkatan pendapatan usaha ini didorong oleh pendapatan kontrak baru dan juga proyek carry over yang dikerjakan sampai dengan Juni 2010.
Untuk bisnis inti ini, perolehan kontrak telah mencapai US$ 280,5 juta, dimana kontrak senilai US$ 227,5 juta akan dikerjakan pada 2010, atau telah mencapai 73% dari target pendapatan segmen jasa hulu migas senilai Rp 2,79 triliun.
Sementara, perseroan juga sedang mengikuti tender proyek senilai US$ 78.03 juta Tahun ini Elnusa menargetkan pendapatan usaha Rp 4,4 triliun. Segmen jasa hulu migas terintegrasi ditargetkan akan berkontribusi Rp 2,79 triliun, jasa hilir migas senilai Rp 1,24 triliun, dan jasa penunjang hulu migas senilai Rp 403 miliar. more...
Menurut Direktur Utama Elnusa Suharyanto, penurunan kinerja laba ini disebabkan oleh penurunan utilisasi alat karena adanya penundaan beberapa proyek dari segmen Geodata Seismic Land (GDL) serta perubahan pola bisnis Geoscience seiring dengan mulai masuknya Perseroan ke segmen offshore (seismic marine-transition zone) yang menggunakan pola Joint Operation.
Meski laba menurun, perseroan membukukan pendapatan usaha sebesar Rp 2,27 Triliun atau naik 40% dibandingkan dengan periode yang sama tahun 2009 yang senilai Rp 1,61 triliun. Peningkatan pendapatan usaha ini didorong oleh pendapatan kontrak baru dan juga proyek carry over yang dikerjakan sampai dengan Juni 2010.
Untuk bisnis inti ini, perolehan kontrak telah mencapai US$ 280,5 juta, dimana kontrak senilai US$ 227,5 juta akan dikerjakan pada 2010, atau telah mencapai 73% dari target pendapatan segmen jasa hulu migas senilai Rp 2,79 triliun.
Sementara, perseroan juga sedang mengikuti tender proyek senilai US$ 78.03 juta Tahun ini Elnusa menargetkan pendapatan usaha Rp 4,4 triliun. Segmen jasa hulu migas terintegrasi ditargetkan akan berkontribusi Rp 2,79 triliun, jasa hilir migas senilai Rp 1,24 triliun, dan jasa penunjang hulu migas senilai Rp 403 miliar. more...
CLSA CHAROEN POKPHAND (CPIN IJ), laying golden eggs, BUY TP Rp6,600
We have been bullish on this stock and have written about CPIN when the stock was trading at around Rp1,000. We like the oligopolistic nature of this chicken feed industry. The two biggest players (CPIN and JPFA) controlling more than 60% market share, commanding pricing power and brand loyalty. It appears that easy money has been made with the stock quadrupling.
Still, Jessica is pointing out that there are some upside potentials. At 7.7x PER CL11, valuation is not yet demanding despite the stellar stock price performance. The key risks here are sudden spikes in corn or soybean meal prices (input prices) and CG concerns.
Jessica is now officially covering the stock with a BUY rating and Rp6,600 TP.
The company holds a dominant 39% market share in poultry feed production, comprising 74% of the company’s revenue. DOC makes up another 13% of revenue, in which CP Indo has 37% market share.
Poultry consumption is very low in Indonesia but could double over the next five years driven by rising per capita income, an expanding middle class and a change in consumption taste. Average Indonesians consume only 4.2kg of poultry meat per year versus Malaysia consuming 34.5kg.
The poultry feed industry is oligopolistic in nature, thus CP Indonesia has maintained prices while input costs halved in 2009. The continued weak recovery in soft commodity prices coupled with strong demand for chicken meat, means margins look sustainable.
We believe the stock could re-rate to a higher multiple based on improved investor’s sentiment over Charoen Pokphand name, and the sustainability of its margins.
Our TP of Rp6,600 is set based on 11.0x 2011CL PE, implying a 43% upside to the current level and a 55% discount to the fair value based on DCF valuations. BUY
Still, Jessica is pointing out that there are some upside potentials. At 7.7x PER CL11, valuation is not yet demanding despite the stellar stock price performance. The key risks here are sudden spikes in corn or soybean meal prices (input prices) and CG concerns.
Jessica is now officially covering the stock with a BUY rating and Rp6,600 TP.
The company holds a dominant 39% market share in poultry feed production, comprising 74% of the company’s revenue. DOC makes up another 13% of revenue, in which CP Indo has 37% market share.
Poultry consumption is very low in Indonesia but could double over the next five years driven by rising per capita income, an expanding middle class and a change in consumption taste. Average Indonesians consume only 4.2kg of poultry meat per year versus Malaysia consuming 34.5kg.
The poultry feed industry is oligopolistic in nature, thus CP Indonesia has maintained prices while input costs halved in 2009. The continued weak recovery in soft commodity prices coupled with strong demand for chicken meat, means margins look sustainable.
We believe the stock could re-rate to a higher multiple based on improved investor’s sentiment over Charoen Pokphand name, and the sustainability of its margins.
Our TP of Rp6,600 is set based on 11.0x 2011CL PE, implying a 43% upside to the current level and a 55% discount to the fair value based on DCF valuations. BUY
CLSA JASA MARGA (JSMR IJ), leaner operation, BUY, TP Rp2,950
Sarina has just written a report on Jasa Marga (JSMR IJ), the country’s largest toll road operator in Indonesia. We increase our profit forecasts by ~10-17% for 2010-12, on the back of higher margin assumptions.
The stock is trading at 13.4x PER11CL. Our TP is also increased to Rp2,950/sh, implying 15x PER11CL.
The company has almost a de facto monopoly in the toll road business in the country. With vehicle sales going very strong in Indonesia, we are only going to see more traffic (some toll roads are congested on the daily basis). No issue with the top lines.
As such, the key factors that determine short-medium term margins are (1) cost of capital and (2) overall cost management. And it seems like things are going really well for JSMR on these two fronts. We expect further margin expansion.
(1) Declining cost of capital. JSMR has a bond of Rp650bn expiring Dec2010, which carries a 16.15% coupon. We believe this can be refinanced at a lower cost (we expect single digit rates). If we lower our cost of capital to 11% (from 14.5% previously), the equity value per share of the company (DCF derived) will come to be Rp4,578/sh vs Rp3,071/sh now.
(2) Better than expected cost management as JSMR pushes forward with its cost management, and the e-toll system. EBITDA margin expanded to 65.6% in 2Q10, the highest in their history. Margins have expanded steadily in the past four years. About 20% of JSMR’s workforces are outsourced.
The stock is trading at 13.4x PER11CL. Our TP is also increased to Rp2,950/sh, implying 15x PER11CL.
The company has almost a de facto monopoly in the toll road business in the country. With vehicle sales going very strong in Indonesia, we are only going to see more traffic (some toll roads are congested on the daily basis). No issue with the top lines.
As such, the key factors that determine short-medium term margins are (1) cost of capital and (2) overall cost management. And it seems like things are going really well for JSMR on these two fronts. We expect further margin expansion.
(1) Declining cost of capital. JSMR has a bond of Rp650bn expiring Dec2010, which carries a 16.15% coupon. We believe this can be refinanced at a lower cost (we expect single digit rates). If we lower our cost of capital to 11% (from 14.5% previously), the equity value per share of the company (DCF derived) will come to be Rp4,578/sh vs Rp3,071/sh now.
(2) Better than expected cost management as JSMR pushes forward with its cost management, and the e-toll system. EBITDA margin expanded to 65.6% in 2Q10, the highest in their history. Margins have expanded steadily in the past four years. About 20% of JSMR’s workforces are outsourced.
Mansek Bukopin:1H10 earnings increased by12.9%yoy (BBKP,Rp650,Not Rated)
BBKP reported earnings increased by 12.9%yoy to Rp226.6bn in 1H10,as the bank managed to reduce its interest expense by -22.3%yoy,despite slow down in interest income of -5.0%yoy due to low credit expansion (+5.2%).This brought net interest income to Rp868.3bn (+25.7%yoy).
However,third party fund grew by 21.2%to Rp21.5tn supported by strong growth in demand deposits and savings by 34.1%and 37.6,respectively.As a result,NIM is resided at 4.85%increased from 4.17%from same period last year.
NPL gross was recorded at 2.85%,declined from 3.96%in 1H09,as reduction in bad debt,especially on its commercial portfolio by -25.6%. Meanwhile LDR was at 80.3%(vs 93.7%1H09)and ROE 18.2%(vs.19.7% 1H09)
As per yesterday ’s price,BBKP trades at P/BV 1.5x and trailing-PE10 10x. There is no analyst covering the stock at the moment.
However,third party fund grew by 21.2%to Rp21.5tn supported by strong growth in demand deposits and savings by 34.1%and 37.6,respectively.As a result,NIM is resided at 4.85%increased from 4.17%from same period last year.
NPL gross was recorded at 2.85%,declined from 3.96%in 1H09,as reduction in bad debt,especially on its commercial portfolio by -25.6%. Meanwhile LDR was at 80.3%(vs 93.7%1H09)and ROE 18.2%(vs.19.7% 1H09)
As per yesterday ’s price,BBKP trades at P/BV 1.5x and trailing-PE10 10x. There is no analyst covering the stock at the moment.
UOB SGRO 1H10: Robust net profit, but below expectation, TP IDR 2950
Results
•Robust quarterly net profit, but below expectation. SampoernaAgro’s (SGRO) 2Q10 net profit surged 105.9% qoq to Rp88.2b andrevenue jumped 46.8% qoq to Rp443.5b on the back of higher quarterlyCPO and palm kernel (PK) sales volumes. However, results are belowexpectation as 1H10 net profit only accounted for 30% of our previous2010 earnings forecast due to higher-than-expected CPO productionassumption.
•CPO production jumped 54% qoq in 2Q10. Despite heavy rains in2Q10, SGRO’s CPO production rose 54% qoq and PK production rose49% qoq. On a yearly basis, CPO production recovered to increase22% yoy in 1H10 as a result of: a) low crop production in South Sumatraas well as flooding during 1Q09, and b) improvement on new drainagesystem in Sumatra area.
•CPO ASP remained flat, but PK ASP increased. Although CPO ASPin 2Q10 dipped 0.3% qoq, it was still better than Malaysian Palm OilBoard (MPOB) CPO prices (-1.5% qoq), while PK ASP of SGROincreased 17.7% qoq.
Stock Impact
•Better CPO production growth going forward. We still expect strongCPO production in the remaining quarters.Hence, we target CPOproduction to increase 5% yoy in 2010. For the long term, we believe CPOproduction growth will remain sturdy on the back of extensive amount ofimmature area (about 25.6% of total planted area) as a result of huge newplanting in the past years, and attractive plantation profile with average ageof 11 years old.
• New planting of 2,577ha in 1H10 to sustain growth. SGRO increasednew planting by 2,577ha in 2010, of which 86% are nucleus area andremaining plasma (owned by farmers). In the next five years, the companyexpects to increase new planting by 50,000ha, or about 10,000ha per year.
Earnings Revision/Risk
• Reduce earnings forecasts. We lower our assumptions for CPO and PKproduction volumes and CPO price. After incorporating 1H10 results, wereduce our net profit forecasts by 10.8% to Rp387.6b for 2010, and by7.1% to Rp435.3b for 2011.Valuation/Recommendation
• Maintain BUY with higher target price of Rp2,950. Despite our lowernet profit forecasts, we are still positive on SGRO as we expect sturdyproduction in the next two quarters. As we roll over our target PE into2011, we raise our target price to Rp2,950, based on 13x 2011F PE.SGRO is trading at 10.6x 2011F PE, still undemanding vs sector’s 11.7x2011F PE.
•Robust quarterly net profit, but below expectation. SampoernaAgro’s (SGRO) 2Q10 net profit surged 105.9% qoq to Rp88.2b andrevenue jumped 46.8% qoq to Rp443.5b on the back of higher quarterlyCPO and palm kernel (PK) sales volumes. However, results are belowexpectation as 1H10 net profit only accounted for 30% of our previous2010 earnings forecast due to higher-than-expected CPO productionassumption.
•CPO production jumped 54% qoq in 2Q10. Despite heavy rains in2Q10, SGRO’s CPO production rose 54% qoq and PK production rose49% qoq. On a yearly basis, CPO production recovered to increase22% yoy in 1H10 as a result of: a) low crop production in South Sumatraas well as flooding during 1Q09, and b) improvement on new drainagesystem in Sumatra area.
•CPO ASP remained flat, but PK ASP increased. Although CPO ASPin 2Q10 dipped 0.3% qoq, it was still better than Malaysian Palm OilBoard (MPOB) CPO prices (-1.5% qoq), while PK ASP of SGROincreased 17.7% qoq.
Stock Impact
•Better CPO production growth going forward. We still expect strongCPO production in the remaining quarters.Hence, we target CPOproduction to increase 5% yoy in 2010. For the long term, we believe CPOproduction growth will remain sturdy on the back of extensive amount ofimmature area (about 25.6% of total planted area) as a result of huge newplanting in the past years, and attractive plantation profile with average ageof 11 years old.
• New planting of 2,577ha in 1H10 to sustain growth. SGRO increasednew planting by 2,577ha in 2010, of which 86% are nucleus area andremaining plasma (owned by farmers). In the next five years, the companyexpects to increase new planting by 50,000ha, or about 10,000ha per year.
Earnings Revision/Risk
• Reduce earnings forecasts. We lower our assumptions for CPO and PKproduction volumes and CPO price. After incorporating 1H10 results, wereduce our net profit forecasts by 10.8% to Rp387.6b for 2010, and by7.1% to Rp435.3b for 2011.Valuation/Recommendation
• Maintain BUY with higher target price of Rp2,950. Despite our lowernet profit forecasts, we are still positive on SGRO as we expect sturdyproduction in the next two quarters. As we roll over our target PE into2011, we raise our target price to Rp2,950, based on 13x 2011F PE.SGRO is trading at 10.6x 2011F PE, still undemanding vs sector’s 11.7x2011F PE.
BNPP Bakrie Sumatera UNSP IJ, A mixed bag
INDUSTRY OUTLOOK Ï
ƒDelays on Domba Mas acquisition may limit growth.
ƒGood progress on estate acquisition.
ƒAccounting issue has impacted sentiment recently.
ƒPositive industry outlook but with higher risk. HOLD.
Delays on Domba Mas acquisition
Bakrie Sumatra (BSP) has finally signed the Sales Purchase Agreement on the Domba Mas acquisition. Management expects the whole acquisition process to be completed in the next two months. Initially BSP was targeting to close the acquisition in May and to start production in June-July. With the delay, it would be difficult for the company to achieve its IDR600b revenue target for the oleochemical business this year. There could be more delays during the start-up process given the business is new for the company; the execution risk remains high.
Not all is bad
On a brighter note, BSP has been successful in acquiring several palm oil and rubber companies. The company has acquired PT Monrad Intan and Ciptalaras (both palm-oil companies) and Julang Oca Permana (a rubber company). In total, the acquisition would add a total of 29,000 ha of area, of which 13,126 ha is planted area. Rubber price also remains high, which should support BSP’s bottom line amidst lower productivity on its palm-oil business. BSP’s rubber productivity is still showing growth due to a more favourable age profile. In line with other plantation
companies, BSP believes CPO production will show some recovery in 2Q10, which would further increase in 2H in-line with seasonality pattern.
Negative sentiment on accounting issue
Sentiment has turned negative on BSP, following the recent accounting issue on publishing false information on the amount of its deposits at a local bank. Despite CPO price recovering recently on expectations of stronger demand in 2H on festival days, BSP’s share price dropped 12.7% in the past week, making it the worst performer among the CPO stocks under our coverage.
Despite favourable sector outlook, HOLD maintain
We still maintain our P/E target of 9x to derive our TP for BSP, a 45% discount to Astra Agro Lestari (AALI IJ), which we believe is justified to reflect BSP’s higher risk. Our TP is now IDR330 (vs IDR650), after reflecting lower EPS post the rights issue. Our TP suggests limited upside from current levels. BSP trades at our 2010E P/E of 8.5x, cheap compared to the average of 13.7x for our sector universe. However, with execution risk, BSP might not look attractive even at this level. With
favourable industry outlook but with higher risk than-peers, BSP is a HOLD at best, in our view.
ƒDelays on Domba Mas acquisition may limit growth.
ƒGood progress on estate acquisition.
ƒAccounting issue has impacted sentiment recently.
ƒPositive industry outlook but with higher risk. HOLD.
Delays on Domba Mas acquisition
Bakrie Sumatra (BSP) has finally signed the Sales Purchase Agreement on the Domba Mas acquisition. Management expects the whole acquisition process to be completed in the next two months. Initially BSP was targeting to close the acquisition in May and to start production in June-July. With the delay, it would be difficult for the company to achieve its IDR600b revenue target for the oleochemical business this year. There could be more delays during the start-up process given the business is new for the company; the execution risk remains high.
Not all is bad
On a brighter note, BSP has been successful in acquiring several palm oil and rubber companies. The company has acquired PT Monrad Intan and Ciptalaras (both palm-oil companies) and Julang Oca Permana (a rubber company). In total, the acquisition would add a total of 29,000 ha of area, of which 13,126 ha is planted area. Rubber price also remains high, which should support BSP’s bottom line amidst lower productivity on its palm-oil business. BSP’s rubber productivity is still showing growth due to a more favourable age profile. In line with other plantation
companies, BSP believes CPO production will show some recovery in 2Q10, which would further increase in 2H in-line with seasonality pattern.
Negative sentiment on accounting issue
Sentiment has turned negative on BSP, following the recent accounting issue on publishing false information on the amount of its deposits at a local bank. Despite CPO price recovering recently on expectations of stronger demand in 2H on festival days, BSP’s share price dropped 12.7% in the past week, making it the worst performer among the CPO stocks under our coverage.
Despite favourable sector outlook, HOLD maintain
We still maintain our P/E target of 9x to derive our TP for BSP, a 45% discount to Astra Agro Lestari (AALI IJ), which we believe is justified to reflect BSP’s higher risk. Our TP is now IDR330 (vs IDR650), after reflecting lower EPS post the rights issue. Our TP suggests limited upside from current levels. BSP trades at our 2010E P/E of 8.5x, cheap compared to the average of 13.7x for our sector universe. However, with execution risk, BSP might not look attractive even at this level. With
favourable industry outlook but with higher risk than-peers, BSP is a HOLD at best, in our view.
BNPP INDONESIA/TELECOMS Early signs of easing
INDUSTRY OUTLOOK Ï
No new aggressive offers from all three major operators since May.
Competition eases slightly with some earlier promotions reversed.
Operationally, Telkomsel & XL are likely to perform well in 2Q10.
Maintain POSITIVE. Top pick: Telkom Indonesia.
Telcos remove some previous promos in June-July
In our last report, Market competition stabilising, dated 14 June 2010, we highlighted that market competition remains intense but had started to somewhat stabilise with no new aggressive offers from all three major operators during May. In June and early July, there were again no new aggressive offers. Instead, Telkomsel raised the charging time block for its simPATI prepaid plan to 12 seconds from 10 seconds. Meanwhile, XL (EXCL IJ) terminated its SMS bonus program for new subscribers in end-June and also raised the threshold for free SMS to 12 paid SMS for peak periods (previously: after eight paid SMS). Indosat has also just announced that subscribers will only be getting 100 free SMS after two paid SMS from 1 August, vs after one paid SMS previously. While market competition could re-intensify in the weeks leading to and after the Lebaran festive season (10-11 September), these positive signs reaffirm our view that competition is unlikely to de-generate into a price war similar to 2008.
Telkomsel looks set to record strongest net addition in 2Q10
We expect Telkomsel (65% held by Telkom Indonesia; not listed) to report the strongest mobile net addition of 5m-6m subscribers for 2Q10. This represents a rebound from a weak 306,000 net addition in 1Q10, and comes after the launch of several promotions in February-March. This would bring its market share to above 47%, from 46% in 1Q10. We expect XL to report positive net addition of around 2m subscribers, which is stronger than the 1.1m mobile subscribers added in 1Q10. Its market share could rise closer to 19% from an estimated 18.3% in 1Q10. For Indosat, after recording an exceptionally strong net addition of 4.8m in 1Q10, we expect some subscribers to churn out of the network, which may result in softer net addition for 2Q10. It has also eased its marketing activities following aggressive promotions in the earlier part of this year.
Maintain POSITIVE; Top pick: Telkom
We continue to remain POSITIVE on the Indonesian Telco sector. While competition remains intense, our observations in May-July suggest that the market is stabilising and there are some early signs of easing. Our top pick in the sector is Telkom Indonesia (TLKM IJ; TP: IDR9,100; BUY). The stock trades on our 2010E EV/EBITDA (adjusting for the Telkomsel stake) of 5.7x, which is 8% (42%) below its 5-year average of 6.2x (peak: 9.8x). Its valuation is also below the Asian peer average of 5.9x, based on our own and Thomson One consensus estimates despite a stronger earnings growth profile (2010-12E CAGR: 9.8%). Short-term catalysts are stronger 2Q10 results and receding concerns on the Flexi-Bakrie Telecom deal. Key downside risks to our DCF-based TP for Telkom are: a) aggressive price cutting by competitors may result in loss of market share for Telkomsel or reduced margins; and b) Telkom overpays for acquisitions.
No new aggressive offers from all three major operators since May.
Competition eases slightly with some earlier promotions reversed.
Operationally, Telkomsel & XL are likely to perform well in 2Q10.
Maintain POSITIVE. Top pick: Telkom Indonesia.
Telcos remove some previous promos in June-July
In our last report, Market competition stabilising, dated 14 June 2010, we highlighted that market competition remains intense but had started to somewhat stabilise with no new aggressive offers from all three major operators during May. In June and early July, there were again no new aggressive offers. Instead, Telkomsel raised the charging time block for its simPATI prepaid plan to 12 seconds from 10 seconds. Meanwhile, XL (EXCL IJ) terminated its SMS bonus program for new subscribers in end-June and also raised the threshold for free SMS to 12 paid SMS for peak periods (previously: after eight paid SMS). Indosat has also just announced that subscribers will only be getting 100 free SMS after two paid SMS from 1 August, vs after one paid SMS previously. While market competition could re-intensify in the weeks leading to and after the Lebaran festive season (10-11 September), these positive signs reaffirm our view that competition is unlikely to de-generate into a price war similar to 2008.
Telkomsel looks set to record strongest net addition in 2Q10
We expect Telkomsel (65% held by Telkom Indonesia; not listed) to report the strongest mobile net addition of 5m-6m subscribers for 2Q10. This represents a rebound from a weak 306,000 net addition in 1Q10, and comes after the launch of several promotions in February-March. This would bring its market share to above 47%, from 46% in 1Q10. We expect XL to report positive net addition of around 2m subscribers, which is stronger than the 1.1m mobile subscribers added in 1Q10. Its market share could rise closer to 19% from an estimated 18.3% in 1Q10. For Indosat, after recording an exceptionally strong net addition of 4.8m in 1Q10, we expect some subscribers to churn out of the network, which may result in softer net addition for 2Q10. It has also eased its marketing activities following aggressive promotions in the earlier part of this year.
Maintain POSITIVE; Top pick: Telkom
We continue to remain POSITIVE on the Indonesian Telco sector. While competition remains intense, our observations in May-July suggest that the market is stabilising and there are some early signs of easing. Our top pick in the sector is Telkom Indonesia (TLKM IJ; TP: IDR9,100; BUY). The stock trades on our 2010E EV/EBITDA (adjusting for the Telkomsel stake) of 5.7x, which is 8% (42%) below its 5-year average of 6.2x (peak: 9.8x). Its valuation is also below the Asian peer average of 5.9x, based on our own and Thomson One consensus estimates despite a stronger earnings growth profile (2010-12E CAGR: 9.8%). Short-term catalysts are stronger 2Q10 results and receding concerns on the Flexi-Bakrie Telecom deal. Key downside risks to our DCF-based TP for Telkom are: a) aggressive price cutting by competitors may result in loss of market share for Telkomsel or reduced margins; and b) Telkom overpays for acquisitions.
BNPP Macro and Other News
Economics
§ Foreign investment in Indonesia up 49% in first half (Jakarta Globe) Indonesia experienced a surge in FDI in the first half of the year, creating expectations that the total for the year may exceed earlier forecasts, the Investment Coordinating Board (BKPM) announced on Wednesday. Investors from Singapore, Hong Kong and the US topped the list, with most of the capital coming from expansion of existing operations, according to Gita Wirjawan, chairman of the board. FDI totaled $7.8b during the 1H10, an increase of 48.7% over $5.3b recorded during the same period last year, the BKPM said. Gita said he expected the full-year FDI figure to reach $13.1b in 2010, an increase of 25% from last year’s realized investment of $10.5b.
Corporate-related
§ Bakrie firms admit mistakes, revise financial reports (Jakarta Post) Three Bakrie-affiliated firms and an oil and gas company have acknowledged they made accounting errors. Bakrie and Brothers revised the amount of deposits at Bank Capital to Rp424.3b in consolidated financial statements in the 1Q from previous Rp3.75t, leaving a huge Rp3.33t gap. Bakrie Sumatera Plantations revised the amount of deposits to Rp170b from previous Rp3.5t and Energi Mega Persada revised the size of deposits to Rp130b from Rp1.1t.
§ Inalum’s Japanese owners offering sweetheart deal (Jakarta Post) The Japanese majority shareholders of aluminum smelter PT Indonesia Asahan Aluminum have offered to invest $367m to boost capacity and as much as $500m for a power plant if their contract were extended for 30 more years, an official told lawmakers on Wednesday. However, NAA’s proposal did not include specifics about the size of the stake it would need to retain to make such investments, Effendi said. The government has consistently said it intends to take full ownership in Inalum, or at least a majority stake with NAA retaining a minority share. Inalum president director Kiyoshi Shiomi said shareholders were still discussing all options.
§ Foreign investment in Indonesia up 49% in first half (Jakarta Globe) Indonesia experienced a surge in FDI in the first half of the year, creating expectations that the total for the year may exceed earlier forecasts, the Investment Coordinating Board (BKPM) announced on Wednesday. Investors from Singapore, Hong Kong and the US topped the list, with most of the capital coming from expansion of existing operations, according to Gita Wirjawan, chairman of the board. FDI totaled $7.8b during the 1H10, an increase of 48.7% over $5.3b recorded during the same period last year, the BKPM said. Gita said he expected the full-year FDI figure to reach $13.1b in 2010, an increase of 25% from last year’s realized investment of $10.5b.
Corporate-related
§ Bakrie firms admit mistakes, revise financial reports (Jakarta Post) Three Bakrie-affiliated firms and an oil and gas company have acknowledged they made accounting errors. Bakrie and Brothers revised the amount of deposits at Bank Capital to Rp424.3b in consolidated financial statements in the 1Q from previous Rp3.75t, leaving a huge Rp3.33t gap. Bakrie Sumatera Plantations revised the amount of deposits to Rp170b from previous Rp3.5t and Energi Mega Persada revised the size of deposits to Rp130b from Rp1.1t.
§ Inalum’s Japanese owners offering sweetheart deal (Jakarta Post) The Japanese majority shareholders of aluminum smelter PT Indonesia Asahan Aluminum have offered to invest $367m to boost capacity and as much as $500m for a power plant if their contract were extended for 30 more years, an official told lawmakers on Wednesday. However, NAA’s proposal did not include specifics about the size of the stake it would need to retain to make such investments, Effendi said. The government has consistently said it intends to take full ownership in Inalum, or at least a majority stake with NAA retaining a minority share. Inalum president director Kiyoshi Shiomi said shareholders were still discussing all options.
BNPP Astra Agro Lestari: Improvement in 2Q10 numbers but 1H10 earnings were still below our and consensus.
Price IDR19750, TP IDR28500, Mkt cap $3,448m, Avg t/o $3.2m
2010E: Rec EPS 1771, P/E 11.2, P/B 3.8, ROE 38.7, Yld 2.7
2011E: Rec EPS 1745, P/E 11.3, P/B 3.3, ROE 31.0, Yld 4.5
2012E: Rec EPS 1775, P/E 11.1, P/B 2.8, ROE 27.3, Yld 4.4
· After hitting record low in 1Q10, Astra Agro has seen its production rebounded in 2Q. CPO production in 2Q was up 15.3% q-q to 252k tonnes. Nonetheless, cumulative 1H10 production of 471k tonnes (48% of BNPP forecast) were still 6% lower than last year.
· With higher production in 2Q, top line jumped 16% q-q to IDR1.89t. In 1H10, top line was flat y-y at IDR3.5t, helped by higher ASP of IDR6,590/kg, up 3% y-y. ASP was still 7.9% lower than our full year ASP forecast of IDR7,155/kg as we would expect for stronger CPO price in 2H.
· Margin expanded to 35% in 2Q (vs 34% in 1Q) in spite of flat q-q CPO price, supported by higher productivity. However, margin increase was not as high as we would anticipate. COGS was up 14% q-q in 2Q10 which we believe was mainly due to higher fertilizer spending to improve yield, an initiative that has been taken by management since earlier this year. We expect COGS will trending down in 2H, as rainy season will keep fertilizer usage to remain low. This should support margin going forward.
· Net profit up 34% q-q in 2Q10 to IDR364b. Tax rate started to trend down to 27% in 2Q from 29% in 1Q. We believe that this will further decline in 2H to an average of 25% for 2010.
· Cumulative 1H10 net profit decline 17% y-y to IDR636b, accounts for 23-28% of our and consensus full year forecast. While the results look low, we believe that earnings could potentially catch up in 2H due to: 1) higher CPO price on stronger demand; 2) expected lower fertilizer usage, 3) some pick up in productivity on seasonality, and 4) lower tax rate. However, as we would expect that 1H profit to contribute 30-35% of full year forecast, there’s a potential for earnings downgrade from the market following the results.
· Despite the potential earnings downgrade following the results, Astra Agro remains attractive at this level. Underperforming market by 36% ytd, we believe that most of bad news have been partly priced in. With stronger demand season with Hari Raya, Deepavali and Christmas in 2H, CPO price will be well supported. While we expect for better productivity in 2H, however, production in 2010 will remains flattish compared with 2009, which should keep CPO price buoyant. CPO price has risen 6% in the past 3 weeks to MYR2,530/tonne.. We maintain our positive call on Astra Agro. We like the company for its good corporate governance, strong balance sheet, high ROE and dividend yield.
2010E: Rec EPS 1771, P/E 11.2, P/B 3.8, ROE 38.7, Yld 2.7
2011E: Rec EPS 1745, P/E 11.3, P/B 3.3, ROE 31.0, Yld 4.5
2012E: Rec EPS 1775, P/E 11.1, P/B 2.8, ROE 27.3, Yld 4.4
· After hitting record low in 1Q10, Astra Agro has seen its production rebounded in 2Q. CPO production in 2Q was up 15.3% q-q to 252k tonnes. Nonetheless, cumulative 1H10 production of 471k tonnes (48% of BNPP forecast) were still 6% lower than last year.
· With higher production in 2Q, top line jumped 16% q-q to IDR1.89t. In 1H10, top line was flat y-y at IDR3.5t, helped by higher ASP of IDR6,590/kg, up 3% y-y. ASP was still 7.9% lower than our full year ASP forecast of IDR7,155/kg as we would expect for stronger CPO price in 2H.
· Margin expanded to 35% in 2Q (vs 34% in 1Q) in spite of flat q-q CPO price, supported by higher productivity. However, margin increase was not as high as we would anticipate. COGS was up 14% q-q in 2Q10 which we believe was mainly due to higher fertilizer spending to improve yield, an initiative that has been taken by management since earlier this year. We expect COGS will trending down in 2H, as rainy season will keep fertilizer usage to remain low. This should support margin going forward.
· Net profit up 34% q-q in 2Q10 to IDR364b. Tax rate started to trend down to 27% in 2Q from 29% in 1Q. We believe that this will further decline in 2H to an average of 25% for 2010.
· Cumulative 1H10 net profit decline 17% y-y to IDR636b, accounts for 23-28% of our and consensus full year forecast. While the results look low, we believe that earnings could potentially catch up in 2H due to: 1) higher CPO price on stronger demand; 2) expected lower fertilizer usage, 3) some pick up in productivity on seasonality, and 4) lower tax rate. However, as we would expect that 1H profit to contribute 30-35% of full year forecast, there’s a potential for earnings downgrade from the market following the results.
· Despite the potential earnings downgrade following the results, Astra Agro remains attractive at this level. Underperforming market by 36% ytd, we believe that most of bad news have been partly priced in. With stronger demand season with Hari Raya, Deepavali and Christmas in 2H, CPO price will be well supported. While we expect for better productivity in 2H, however, production in 2010 will remains flattish compared with 2009, which should keep CPO price buoyant. CPO price has risen 6% in the past 3 weeks to MYR2,530/tonne.. We maintain our positive call on Astra Agro. We like the company for its good corporate governance, strong balance sheet, high ROE and dividend yield.
CLSA INDO PREVIEW - THURSDAY 29 JULY
- Another day, another record high. We probably push a bit higher again today, but as the market consolidates we'll have to wait and see if it can hold.
- Sentiment remains bullish on the back of strong earnings, but volumes have not been overwhelming (heard that one
- JSMR: upgraded to BUY with 2950 target (from buy w/ 2520). Margin expansion the big driver on the back of better than expected cost controls.
- CPIN: we initiated coverage with a BUY and a 6600 target. Indonesia's leading animal feed producer and distributor is counting on poultry consumption in Indonesia to double over the next 5 years.
- BBCA: will announce its 1H10 earnings this afternoon. We expect numbers to be in line. Our FY10FC is IDR 8.8tr net, but we are 9% ahead of consensus.
- BAKRIE: media reporting that in the case of the missing deposits (around IDR 8tr, or USD 900m) a number of Bakrie companies have restated their earnings admitting faulty reporting. The Echange has fined 4 Bakrie companies USD 55k each in fines.
- Sentiment remains bullish on the back of strong earnings, but volumes have not been overwhelming (heard that one
- JSMR: upgraded to BUY with 2950 target (from buy w/ 2520). Margin expansion the big driver on the back of better than expected cost controls.
- CPIN: we initiated coverage with a BUY and a 6600 target. Indonesia's leading animal feed producer and distributor is counting on poultry consumption in Indonesia to double over the next 5 years.
- BBCA: will announce its 1H10 earnings this afternoon. We expect numbers to be in line. Our FY10FC is IDR 8.8tr net, but we are 9% ahead of consensus.
- BAKRIE: media reporting that in the case of the missing deposits (around IDR 8tr, or USD 900m) a number of Bakrie companies have restated their earnings admitting faulty reporting. The Echange has fined 4 Bakrie companies USD 55k each in fines.
OkeZone Sierad Produce (SIPD) Digelontori Rp213 Miliar
PT Sierad Produce Tbk (SIPD) meraih fasilitas pinjaman kredit dari PT Bank Bukopin Tbk (BBKP) dan PT Bank Negara Indonesia Tbk (BBKP) dengan keseluruhan total plafon pinjaman sebesar Rp213 miliar.
Hal ini disampaikan Head of Corporate Secretary, Corporate Finance, Investor Relation SIPD, Elies Lestari Setiawan, dalam siaran persnya kepada okezone, di Jakarta, Kamis (29/7/2010).
Adapun pinjaman dari Bank Bukopin berupa Kredit Modal Kerja (KMK). Sementara dari BNI untuk kredit investasi (KI) yang akan digunakan untuk pembangunan breeding farm dan hatchery dengan luas sekira 206 hektare (Ha) di daerah Lebak, Tangerang dan di daerah Parung, Bogor.
Adanya ekspansi usaha di divisi breeding dan hatcery ini diharapkan kapasitas produksi perseroan dapat meningkat sebesar sekira 30 persen dalam kurun waktu kurang lebih dua tahun mendatang. more...
Hal ini disampaikan Head of Corporate Secretary, Corporate Finance, Investor Relation SIPD, Elies Lestari Setiawan, dalam siaran persnya kepada okezone, di Jakarta, Kamis (29/7/2010).
Adapun pinjaman dari Bank Bukopin berupa Kredit Modal Kerja (KMK). Sementara dari BNI untuk kredit investasi (KI) yang akan digunakan untuk pembangunan breeding farm dan hatchery dengan luas sekira 206 hektare (Ha) di daerah Lebak, Tangerang dan di daerah Parung, Bogor.
Adanya ekspansi usaha di divisi breeding dan hatcery ini diharapkan kapasitas produksi perseroan dapat meningkat sebesar sekira 30 persen dalam kurun waktu kurang lebih dua tahun mendatang. more...
CIMB TraderAM Indonesia
Prediksi: JCI kemungkinan akan mengalami koreksi seiring dengan regional yang merespond koreksi Dow karena sejumlah emiten US yang melaporkan result yang negatif serta downgrade outlook oleh Moody’s
Support di 3023 & 3000 akan menguji kesabaran traders hari ini. CDS yang sebelumnya turun 6% kemarin kembali menguat +3%, dan kekhawatiran traders lokal masih pada inflasi Jul10.
CDS +3.36% ke level 149.23 bp, Dow Fut +0.02%, NKI Fut -0.62% sementara bursa Asia dibuka melemah: NKI -0.67%, ASX -0.43%, KLCI -0.09%, FSSTI +0.12%. Dow Jones kemarin ditutup di level 10497.88, -39 poin atau -0.38% dan mengakhiri kenaikan 4 hari berturut turut setelah Fed beige book mengatakan recovery ekonomi melambat di sejumlah negara bagian US serta data manufacturing dan durable goods orders yang melemah. S&P masih mampu bertahan diatas garis support 1100 meskipun Boeing melaporkan profit yang menurun karena rendahnya permintaan defense dan pajak yang tinggi. Moody’s kemarin mendowngrade outlook untuk Bank of America, Citigroup & Wells Fargo menjadi negative dari stable karena regulasi pemerintah yang baru. VIX +4.57%, KBW -1.32%, BDIY +1.7% dan Rupiah pagi ini dibuka melemah ke 9011.
Kondisi terakhir
Indonesia: JCI kemarin ditutup di level 3057.47, +15.79 poin atau +0.52% dengan value Rp 3.9 triliun dan volume 5.0 miliar. Saham-saham yang menguat dipimpin oleh SCMA 1270 (+18.7%), MDLN 140 (+16%), EXCL 5000 (16%), GJTL 1130 (14%). Sedangkan saham-saham yang melemah dipimpin oleh META 126 (-34%), MYRX 64 (-11%), TMPI 157 (-6.5%), VRNA 88 (-5.4%). 7 dari 10 sektor berhasil menguat kemarin dipimpin oleh constr +1.9%, infra +1.9%, misc indu +1.5% sementara 3 sektor yang melemah adalah agri -1.7%, CG -0.8%, finance -0.05%
US: Dow Jones kemarin ditutup di level 10497.88, -39 poin atau -0.38% dan mengakhiri kenaikan 4 hari berturut turut setelah Fed beige book mengatakan recovery ekonomi melambat di sejumlah negara bagian US serta data manufacturing dan durable goods orders yang melemah. S&P masih mampu bertahan diatas garis support 1100 meskipun Boeing melaporkan profit yang menurun karena rendahnya permintaan defense dan pajak yang tinggi. Moody’s kemarin mendowngrade outlook untuk Bank of America, Citigroup & Wells Fargo menjadi negative dari stable karena regulasi pemerintah yang baru. Sprint Nextel dan Comcast melaporkan result yang negatif, sementara RIMM melaporkan penjualan touchscreen blackberry untuk menandingi iPhone.
Oil: Harga minyak per barel (untuk delivery Sep) turun $0.51 ke $76.99 setelah inventory buildup sebanyak 7.31mn barel minggu lalu karena kenaikan import serta durable goods order yang lemah.
Support di 3023 & 3000 akan menguji kesabaran traders hari ini. CDS yang sebelumnya turun 6% kemarin kembali menguat +3%, dan kekhawatiran traders lokal masih pada inflasi Jul10.
CDS +3.36% ke level 149.23 bp, Dow Fut +0.02%, NKI Fut -0.62% sementara bursa Asia dibuka melemah: NKI -0.67%, ASX -0.43%, KLCI -0.09%, FSSTI +0.12%. Dow Jones kemarin ditutup di level 10497.88, -39 poin atau -0.38% dan mengakhiri kenaikan 4 hari berturut turut setelah Fed beige book mengatakan recovery ekonomi melambat di sejumlah negara bagian US serta data manufacturing dan durable goods orders yang melemah. S&P masih mampu bertahan diatas garis support 1100 meskipun Boeing melaporkan profit yang menurun karena rendahnya permintaan defense dan pajak yang tinggi. Moody’s kemarin mendowngrade outlook untuk Bank of America, Citigroup & Wells Fargo menjadi negative dari stable karena regulasi pemerintah yang baru. VIX +4.57%, KBW -1.32%, BDIY +1.7% dan Rupiah pagi ini dibuka melemah ke 9011.
Kondisi terakhir
Indonesia: JCI kemarin ditutup di level 3057.47, +15.79 poin atau +0.52% dengan value Rp 3.9 triliun dan volume 5.0 miliar. Saham-saham yang menguat dipimpin oleh SCMA 1270 (+18.7%), MDLN 140 (+16%), EXCL 5000 (16%), GJTL 1130 (14%). Sedangkan saham-saham yang melemah dipimpin oleh META 126 (-34%), MYRX 64 (-11%), TMPI 157 (-6.5%), VRNA 88 (-5.4%). 7 dari 10 sektor berhasil menguat kemarin dipimpin oleh constr +1.9%, infra +1.9%, misc indu +1.5% sementara 3 sektor yang melemah adalah agri -1.7%, CG -0.8%, finance -0.05%
US: Dow Jones kemarin ditutup di level 10497.88, -39 poin atau -0.38% dan mengakhiri kenaikan 4 hari berturut turut setelah Fed beige book mengatakan recovery ekonomi melambat di sejumlah negara bagian US serta data manufacturing dan durable goods orders yang melemah. S&P masih mampu bertahan diatas garis support 1100 meskipun Boeing melaporkan profit yang menurun karena rendahnya permintaan defense dan pajak yang tinggi. Moody’s kemarin mendowngrade outlook untuk Bank of America, Citigroup & Wells Fargo menjadi negative dari stable karena regulasi pemerintah yang baru. Sprint Nextel dan Comcast melaporkan result yang negatif, sementara RIMM melaporkan penjualan touchscreen blackberry untuk menandingi iPhone.
Oil: Harga minyak per barel (untuk delivery Sep) turun $0.51 ke $76.99 setelah inventory buildup sebanyak 7.31mn barel minggu lalu karena kenaikan import serta durable goods order yang lemah.
Citigroup Bumi Resources - Show Me the Money
Slashing target price by 20% but maintaining Buy/High Risk rating — Bumi’s share price has massively underperformed the market and its best performing local peer (49% and 52% YTD, respectively). A host of negative news flows continued to push valuations lower and share price rallies have been used by foreign investors as selling opportunities. We have cut our target price by 20% to Rp2,650 on earning forecasts cuts but maintain our Buy/High Risk rating on the stock’s depressed valuations.
Deleveraging efforts, if successful, could boost sentiment — Management’s plan to reduce its current huge debts of US$3.7b by US$700m this year, mainly via non pre-emptive share issuance and listing of its non coal assets, could be a substantial positive catalyst, even if only either one is realized. We think the rerating will be elusive until the company’s deleveraging efforts come to fruition and the group’s financial milieu improves considerably.
Other potential cash sources — Aside from the planned two corporate actions, Bumi has up to US$456m receivables from asset sales that could potentially be received by September/October 2010. However, it remains to be seen if the expected timing would be realized. It is worth noting that two of the sale agreements were signed in December 2009.
Firmer coal prices to be subdued by lower volume — As the impact of depressed JPY09 contract prices are expected to disappear in 2Q10, we expect substantial improvement in Bumi’s average selling price (ASP). This is reaffirmed by the company’s recent announcement that its ASP in 2Q10 improved to US$71.6/t from US$62.7/t in 1Q10. However, given lower sales volume in 2Q10 (15m tons vs 16m tons in 1Q10), we expect Bumi’s 2Q10 EBITDA to improve by just 13% QoQ to US$268m.
Deleveraging efforts, if successful, could boost sentiment — Management’s plan to reduce its current huge debts of US$3.7b by US$700m this year, mainly via non pre-emptive share issuance and listing of its non coal assets, could be a substantial positive catalyst, even if only either one is realized. We think the rerating will be elusive until the company’s deleveraging efforts come to fruition and the group’s financial milieu improves considerably.
Other potential cash sources — Aside from the planned two corporate actions, Bumi has up to US$456m receivables from asset sales that could potentially be received by September/October 2010. However, it remains to be seen if the expected timing would be realized. It is worth noting that two of the sale agreements were signed in December 2009.
Firmer coal prices to be subdued by lower volume — As the impact of depressed JPY09 contract prices are expected to disappear in 2Q10, we expect substantial improvement in Bumi’s average selling price (ASP). This is reaffirmed by the company’s recent announcement that its ASP in 2Q10 improved to US$71.6/t from US$62.7/t in 1Q10. However, given lower sales volume in 2Q10 (15m tons vs 16m tons in 1Q10), we expect Bumi’s 2Q10 EBITDA to improve by just 13% QoQ to US$268m.
JPM Asia ex-Japan Economic Research
Indonesia: deficit revised down on lower expenditures
2010/07/27 21:05:57 -0400
Indonesia recently announced its 1H10 fiscal position and also updated the 2010 budget program. In the revisions, the headline fiscal deficit has been revised lower to 1.5% of GDP (IDR95.1 trillion) from 2.1% (133.7 trillion). This decline reflects the shortfall in spending, which is now forecast to reach 17.2% of GDP from 18% of GDP and a small decline in expected revenues to 15.7% of GDP from 15.9%.
The shortfall in expenditures is pretty much par for the course in Indonesia which mainly reflects lower than expected disbursements at the ministerial level. Subsidy costs are expected to be 3.1% of GDP from 3.2% originally.
In response to the lower financing requirement, the fiscal authorities have trimmed the financing requirements for 2010, with the total financing need now expected to be IDR235.5 trillion, down from 275 tril. Of the IDR39.7 trillion reduction in financing needs, IDR22 trillion comes mainly from a reduction in the use of the 2009 cash surplus while the other IDR17.8 trillion stems from a reduction in debt issuance. Of that, IDR2.3 trillion is from a reduction in program loans while the other IDR15.5 trillion reduction is from lower debt issuance.
2010/07/27 21:05:57 -0400
Indonesia recently announced its 1H10 fiscal position and also updated the 2010 budget program. In the revisions, the headline fiscal deficit has been revised lower to 1.5% of GDP (IDR95.1 trillion) from 2.1% (133.7 trillion). This decline reflects the shortfall in spending, which is now forecast to reach 17.2% of GDP from 18% of GDP and a small decline in expected revenues to 15.7% of GDP from 15.9%.
The shortfall in expenditures is pretty much par for the course in Indonesia which mainly reflects lower than expected disbursements at the ministerial level. Subsidy costs are expected to be 3.1% of GDP from 3.2% originally.
In response to the lower financing requirement, the fiscal authorities have trimmed the financing requirements for 2010, with the total financing need now expected to be IDR235.5 trillion, down from 275 tril. Of the IDR39.7 trillion reduction in financing needs, IDR22 trillion comes mainly from a reduction in the use of the 2009 cash surplus while the other IDR17.8 trillion stems from a reduction in debt issuance. Of that, IDR2.3 trillion is from a reduction in program loans while the other IDR15.5 trillion reduction is from lower debt issuance.
Reuters METALS-Copper rises to 3-month high as inventories fall
* Inventories fall as metal continues to leave warehouses
* US durable goods fall unexpectedly in June
* Fed's Beige Book shows US grew unevenly in recent weeks
* Coming Up: US weekly first-time jobless filings on Thur
(Recasts, updates prices and market activity to New York
close; new byline, changes datline previous LONDON)
By Carole Vaporean
NEW Y0RK, July 28 (Reuters) - Copper jumped on Wednesday, matching its May 10 high as global inventory drawdowns and gains in the euro boosted the red metal despite a surprise decline in U.S. orders for long-lasting goods.
Inventory draws in Shanghai indicated strong demand in China, the world's top copper consumer. The Chinese central bank said on Tuesday the country would not have a double-dip recession, even though economic growth would slow from its recent fevered pace.
The dollar fell against the euro as the weaker-than-expected reading on orders for U.S. durable goods added to fears about the U.S. economic outlook. [USD/] The
euro's earlier gains made copper prices more attractive in euro-based markets.
Some analysts pointed out that underlying manufacturing results in the U.S. report were actually positive, boding well for economic growth and demand for copper. more...
For a story on the LME's tie-up with the Singapore
Exchange, click [ID:nSGE66R00Y] [ID:nLDE66Q16K]
Metal Prices at 3:10 EDT (2010 GMT)
Metal Last Change Pct Move End 2009 Ytd Pct
move
COMEX Cu 323.80 -0.75 -0.23 334.65 -3.24
LME Alum 2065.00 9.00 +0.44 2230.00 -7.40
LME Cu 7170.00 111.00 +1.57 7375.00 -2.78
LME Lead 2010.00 33.00 +1.67 2432.00 -17.35
LME Nicke 20400.00 -150.00 -0.73 18525.00 10.12
LME Tin 19450.00 120.00 +0.62 16950.00 14.75
LME Zinc 1950.00 40.00 +2.09 2560.00 -23.83
SHFE Alu 15480.00 180.00 +1.18 17160.00 -9.79
SHFE Cu* 56200.00 1100.00 +2.00 59900.00 -6.18
SHFE Zin 16215.00 330.00 +2.08 21195.00 -23.50
* US durable goods fall unexpectedly in June
* Fed's Beige Book shows US grew unevenly in recent weeks
* Coming Up: US weekly first-time jobless filings on Thur
(Recasts, updates prices and market activity to New York
close; new byline, changes datline previous LONDON)
By Carole Vaporean
NEW Y0RK, July 28 (Reuters) - Copper jumped on Wednesday, matching its May 10 high as global inventory drawdowns and gains in the euro boosted the red metal despite a surprise decline in U.S. orders for long-lasting goods.
Inventory draws in Shanghai indicated strong demand in China, the world's top copper consumer. The Chinese central bank said on Tuesday the country would not have a double-dip recession, even though economic growth would slow from its recent fevered pace.
The dollar fell against the euro as the weaker-than-expected reading on orders for U.S. durable goods added to fears about the U.S. economic outlook. [USD/] The
euro's earlier gains made copper prices more attractive in euro-based markets.
Some analysts pointed out that underlying manufacturing results in the U.S. report were actually positive, boding well for economic growth and demand for copper. more...
For a story on the LME's tie-up with the Singapore
Exchange, click [ID:nSGE66R00Y] [ID:nLDE66Q16K]
Metal Prices at 3:10 EDT (2010 GMT)
Metal Last Change Pct Move End 2009 Ytd Pct
move
COMEX Cu 323.80 -0.75 -0.23 334.65 -3.24
LME Alum 2065.00 9.00 +0.44 2230.00 -7.40
LME Cu 7170.00 111.00 +1.57 7375.00 -2.78
LME Lead 2010.00 33.00 +1.67 2432.00 -17.35
LME Nicke 20400.00 -150.00 -0.73 18525.00 10.12
LME Tin 19450.00 120.00 +0.62 16950.00 14.75
LME Zinc 1950.00 40.00 +2.09 2560.00 -23.83
SHFE Alu 15480.00 180.00 +1.18 17160.00 -9.79
SHFE Cu* 56200.00 1100.00 +2.00 59900.00 -6.18
SHFE Zin 16215.00 330.00 +2.08 21195.00 -23.50
Rabu, 28 Juli 2010
Credit Suisse Asia Equity Focus Positve banking sector news flow tempered by macro concerns
US equities ended almost flat, with the S&P 500 closing 0.1% lower. The stronger performance from financials following better-than-expected results from banking heavyweights Deutsche and UBS, and plans by the Basel Committee on Banking Supervision to allow less strict capital and liquidity requirements for banks by a later implementation date of 2018, were offset by a decline in the Conference Board Consumer Confidence Index for July to 50.4, from 53.4 in June. On a more positive note, US home prices gained more than expected in May by 4.6% year-on-year, according to the S&P/Case Shiller Home Price Index.
In our Global Research Monthly, we reiterate that a double dip is an unlikely event, especially on a global scale. Global economic indicators and data have weakened and are pointing to slower momentum, but we view the decline in momentum as a normal development, following an unsustainably strong pickup in activity for much of 2009. Short-term interest rates in many countries are also likely to stay near zero or very low into 2012 as a stimulus to offset fiscal cuts and reflecting low inflation. With bond yields and deposit rates low, it pays to stay strategically overweight equities, especially given that the valuation, the Cycle Clock and the overall earnings cycle are supportive. However, given the headwinds from weakening macro and earnings momentum through the course of the summer months, we recommend a neutral tactical stance until more decisive catalysts emerge. We would look out for: 1) a pickup in volumes and an upturn in overall risk appetite; and 2) from a bottom-up perspective, management guidance on the level of cash reserves to be deployed and to what extent cost-cutting is slowing at the margin, in order to gauge the nature of the economic recovery.
In terms of sector allocation, our sector scorecard indicators suggest that the rotation towards higher-yielding low-volatility sectors over the past three months may have run its course and that we may now see the beginnings of a move towards riskier, economically sensitive sectors. This explains our recent upgrade of the materials sector to overweight and rating downgrade for the more defensive telecoms and pharmaceuticals sectors.
In our Global Research Monthly, we reiterate that a double dip is an unlikely event, especially on a global scale. Global economic indicators and data have weakened and are pointing to slower momentum, but we view the decline in momentum as a normal development, following an unsustainably strong pickup in activity for much of 2009. Short-term interest rates in many countries are also likely to stay near zero or very low into 2012 as a stimulus to offset fiscal cuts and reflecting low inflation. With bond yields and deposit rates low, it pays to stay strategically overweight equities, especially given that the valuation, the Cycle Clock and the overall earnings cycle are supportive. However, given the headwinds from weakening macro and earnings momentum through the course of the summer months, we recommend a neutral tactical stance until more decisive catalysts emerge. We would look out for: 1) a pickup in volumes and an upturn in overall risk appetite; and 2) from a bottom-up perspective, management guidance on the level of cash reserves to be deployed and to what extent cost-cutting is slowing at the margin, in order to gauge the nature of the economic recovery.
In terms of sector allocation, our sector scorecard indicators suggest that the rotation towards higher-yielding low-volatility sectors over the past three months may have run its course and that we may now see the beginnings of a move towards riskier, economically sensitive sectors. This explains our recent upgrade of the materials sector to overweight and rating downgrade for the more defensive telecoms and pharmaceuticals sectors.
CLSA Astra Agro (AALI IJ) earnings and TP downgrade – Getting Old by analyst Wilianto
Good CPO report from regional guru Wilianto. We have long been concerned with the older maturity profile for AALI for a while. It is now becoming more apparent that their aging will cap volume growth in the next five years. Production yield fell from 10 ton/ha in 6M09 to 8.59 tons in 6M10, sharper than peers. Wili downgrades earnings by 20% to reflect the lower yield, higher costs, and higher FFB purchase price.
For those seeking for more operating leverage, we prefer Lonsum and small cap name like Gozco (cheapest in terms of PE and EV/ha). While AALI's downgrade makes sense fundamentally, the stock remains the proxy of the sector and tends to move in line with CPO prices. In addition, AALI has lower risk profile as it offers more stability with its net cash balance sheet, high ROE and sweet divvy yield.
Key points:
Enters replanting cycle. Nearly half (43%) of Astra Agro’s (AALI IJ - Rp20,500 - U-PF) palm oil trees will enter replanting cycle in the next five years against 25% of new crops coming to maturity. This will limit production growth to 1.2% over the next five years despite higher yield of newly mature crops.
2Q10 earnings preview. Earnings in 2Q10 will be substantially higher than 1Q10 given the 17.6% qoq increase in internal FFB production (nucleus), stable CPO price (+1.3% qoq), and higher kernel price (+18% qoq).
CPO price outlook. The tail winds, demand-supply and oil support, remain key drivers for CPO price. Demand remains strong as high demand in festive seasons are upon us. We continue to look for higher CPO price in 2H10 and watching closely the soybean development in current US planting season. Inventory drawdown continues in both palm oil and soybean, reflecting tight demand supply situation despite good soybean harvest in South America.
CPO price driven upside. Astra Agro is a well run company with strong balance sheet and good corporate governance. However, the lack of production growth means CPO price will be the sole earnings driver while the stock trade at premium to Indo peers.
Target price is lowered from Rp27,500 to Rp20,000 and downgrade to UPF.
For those seeking for more operating leverage, we prefer Lonsum and small cap name like Gozco (cheapest in terms of PE and EV/ha). While AALI's downgrade makes sense fundamentally, the stock remains the proxy of the sector and tends to move in line with CPO prices. In addition, AALI has lower risk profile as it offers more stability with its net cash balance sheet, high ROE and sweet divvy yield.
Key points:
Enters replanting cycle. Nearly half (43%) of Astra Agro’s (AALI IJ - Rp20,500 - U-PF) palm oil trees will enter replanting cycle in the next five years against 25% of new crops coming to maturity. This will limit production growth to 1.2% over the next five years despite higher yield of newly mature crops.
2Q10 earnings preview. Earnings in 2Q10 will be substantially higher than 1Q10 given the 17.6% qoq increase in internal FFB production (nucleus), stable CPO price (+1.3% qoq), and higher kernel price (+18% qoq).
CPO price outlook. The tail winds, demand-supply and oil support, remain key drivers for CPO price. Demand remains strong as high demand in festive seasons are upon us. We continue to look for higher CPO price in 2H10 and watching closely the soybean development in current US planting season. Inventory drawdown continues in both palm oil and soybean, reflecting tight demand supply situation despite good soybean harvest in South America.
CPO price driven upside. Astra Agro is a well run company with strong balance sheet and good corporate governance. However, the lack of production growth means CPO price will be the sole earnings driver while the stock trade at premium to Indo peers.
Target price is lowered from Rp27,500 to Rp20,000 and downgrade to UPF.
Credit Suisse Jasa Marga - Robust 1H10 results (on lower costs) re-affirms our positive view as one of the top defensive plays
● Jasa’s 1H10 results saw a 64% YoY jump on strong top-line growth and improving operating efficiency, and beat ours and consensus’ expectations by 8-12%.
● While the strong top line was expected, we believe that the lowerthan-expected operating expenses was partly attributable to: 1) higher leverage on tariff structure and, more importantly, 2) the usage of electronic tolling system which seems to have improved efficiency on costs and possible traffic leakage.
● We, therefore, adjust our expense assumptions and upgrade our earnings by 7-9%, putting our forecasts about 15% above consensus’. We have also increased our DCF-based target price by 8% to Rp2,800 (from Rp2,600), implying 29% potential upside
from current levels.
● We continue to maintain our view that Jasa Marga is our top pick in the defensive and inflation-hedge play in Indonesia. Its strong earnings momentum, driven by tariff increases (recently again in July on 25% of its sections), is likely to be the key catalyst.
● While the strong top line was expected, we believe that the lowerthan-expected operating expenses was partly attributable to: 1) higher leverage on tariff structure and, more importantly, 2) the usage of electronic tolling system which seems to have improved efficiency on costs and possible traffic leakage.
● We, therefore, adjust our expense assumptions and upgrade our earnings by 7-9%, putting our forecasts about 15% above consensus’. We have also increased our DCF-based target price by 8% to Rp2,800 (from Rp2,600), implying 29% potential upside
from current levels.
● We continue to maintain our view that Jasa Marga is our top pick in the defensive and inflation-hedge play in Indonesia. Its strong earnings momentum, driven by tariff increases (recently again in July on 25% of its sections), is likely to be the key catalyst.
Credit Suisse Asia Palm Oil Sector - Be nimble, be quick
● Palm oil October futures have risen 10% to RM2,480 in three weeks, as the market is building in some risk premium on La Nina. La Nina enhances rainfall in Indonesia, Malaysia and Australia, but results in drier conditions in the Americas.
● The weather has not been ideal around the world, but it is still too early to tell whether La Nina will have a major impact on crop yields. We will keep an eye on the following: 1) If US Midwest is hot and dry in August, soya yields could be affected adversely. 67% of the soybean crop in the US was rated to be in good to excellent condition, as of 25 July, which is a good start. 2) Overall monsoon deficit in India is 14%. 3) Rainfall in Indonesia and Malaysia has been very heavy and has disrupted harvesting.
● For investors looking for short-term momentum plays, plantation companies with beta above 1 and strong trading volumes are IFAR, GGR, IOI and Wilmar. We have an OUTPERFORM rating on IFAR and Wilmar. However, weather-related rallies could disappear as quickly as they had started, and thus investors need to be very nimble and quick to trade on news flows.
● The weather has not been ideal around the world, but it is still too early to tell whether La Nina will have a major impact on crop yields. We will keep an eye on the following: 1) If US Midwest is hot and dry in August, soya yields could be affected adversely. 67% of the soybean crop in the US was rated to be in good to excellent condition, as of 25 July, which is a good start. 2) Overall monsoon deficit in India is 14%. 3) Rainfall in Indonesia and Malaysia has been very heavy and has disrupted harvesting.
● For investors looking for short-term momentum plays, plantation companies with beta above 1 and strong trading volumes are IFAR, GGR, IOI and Wilmar. We have an OUTPERFORM rating on IFAR and Wilmar. However, weather-related rallies could disappear as quickly as they had started, and thus investors need to be very nimble and quick to trade on news flows.
Danareksa Jasa Marga (JSMR IJ, Rp2,300 BUY) Better than expected results
Net profits up significantly
Net profits surged 63.7% yoy to Rp2.1tr in 1H10 thanks to tariff increases effective in September 09. Traffic volume grew by an average 3.3% yoy to 2.6mn cars per day. All in all, the result is above expectations - mainly on lower-than-expected opex, interest expenses and tax rate.
Steady revenues growth
Total revenues rose 8.0% qoq to Rp1.1tr in 2Q10. Average traffic volume grew 3.9% qoq to 2.5mn vehicles per day. Moreover, we suspect Jasa Marga enjoyed better average tariffs - especially from the increasing long-distance travelers. Notably, the airport expressway has experienced an increase in tariffs since the change to an open system. With a recovery in traffic volume, this section saw much higher revenues.
Modest traffic volume growth
The 3.3% yoy increase in daily average traffic volume in 1H10 came from additional traffic from the new toll road sections such as the Jakarta Outer Ring Road and the Bogor Ring Road. The integration of the Jakarta Ring Road has also induced growth in the Jakarta Cikampek section, Purbaleunyi, Jakarta Tangerang. Furthermore, the airport expressway has seen a recovery in traffic volume since the change from a closed system to an open system in September 09.
Flat opex
Surprisingly, Jasa Marga booked flat opex of around Rp500bn in 2Q10. This caused the opex to sales ratio to fall to 47.5% in 2Q10 from 49.5% in 1Q10. There was a sharp increase in opex from joint operations but this was negated by a significant fall in G&A expenses, leaving the total opex relatively flat. As a result, operating income was boosted. Hence, the EBITDA margin expanded from 60% in 1Q10 to 63.3% in 2Q10. However, please note that we need to crosscheck with the company to see whether the flat opex is sustainable or not.
BUY maintained
There is a good chance that we make an upgrade due to the lower than expected tax and opex. However, we still need to make cross checks with the company. For the time being, we maintain our BUY call on the counter.
Net profits surged 63.7% yoy to Rp2.1tr in 1H10 thanks to tariff increases effective in September 09. Traffic volume grew by an average 3.3% yoy to 2.6mn cars per day. All in all, the result is above expectations - mainly on lower-than-expected opex, interest expenses and tax rate.
Steady revenues growth
Total revenues rose 8.0% qoq to Rp1.1tr in 2Q10. Average traffic volume grew 3.9% qoq to 2.5mn vehicles per day. Moreover, we suspect Jasa Marga enjoyed better average tariffs - especially from the increasing long-distance travelers. Notably, the airport expressway has experienced an increase in tariffs since the change to an open system. With a recovery in traffic volume, this section saw much higher revenues.
Modest traffic volume growth
The 3.3% yoy increase in daily average traffic volume in 1H10 came from additional traffic from the new toll road sections such as the Jakarta Outer Ring Road and the Bogor Ring Road. The integration of the Jakarta Ring Road has also induced growth in the Jakarta Cikampek section, Purbaleunyi, Jakarta Tangerang. Furthermore, the airport expressway has seen a recovery in traffic volume since the change from a closed system to an open system in September 09.
Flat opex
Surprisingly, Jasa Marga booked flat opex of around Rp500bn in 2Q10. This caused the opex to sales ratio to fall to 47.5% in 2Q10 from 49.5% in 1Q10. There was a sharp increase in opex from joint operations but this was negated by a significant fall in G&A expenses, leaving the total opex relatively flat. As a result, operating income was boosted. Hence, the EBITDA margin expanded from 60% in 1Q10 to 63.3% in 2Q10. However, please note that we need to crosscheck with the company to see whether the flat opex is sustainable or not.
BUY maintained
There is a good chance that we make an upgrade due to the lower than expected tax and opex. However, we still need to make cross checks with the company. For the time being, we maintain our BUY call on the counter.
Mansek Bank Negara Indonesia:1H10 results in line with our expectation and consensus estimates (BBNI,Rp2,975,Buy,TP: Rp3,500)
BNI reported net profit of Rp1.9 tn for 1H10 (+60.9%yoy),in line with our expectation and consensus estimates.
The bank recorded higher than expected provisioning expenses in 2Q09 despite lower NPL during the quarter.According to the management,the allocation was intended to increase the bank ’s coverage ratio.At end Jun10,coverage ratio recorded at 122.5%in Jun10 from 121.8%in Mar10.
Meanwhile,loans was quite strong at 9.1%qoq in 2Q10 (-4.3%qoq in 1Q10),bringing LDR to increase to 68.2%at end Jun10 from 67.7%at end Mar10.Consumer loans posted the highest growth of 16.9%qoq to Rp20.5tn,representing 16.2%of total loans at end Jun10.
At current price,BNI is trading at 2011F P/BV of 1.8x and PER of 8.2x,respectively..We maintained our buy recommendation.
The bank recorded higher than expected provisioning expenses in 2Q09 despite lower NPL during the quarter.According to the management,the allocation was intended to increase the bank ’s coverage ratio.At end Jun10,coverage ratio recorded at 122.5%in Jun10 from 121.8%in Mar10.
Meanwhile,loans was quite strong at 9.1%qoq in 2Q10 (-4.3%qoq in 1Q10),bringing LDR to increase to 68.2%at end Jun10 from 67.7%at end Mar10.Consumer loans posted the highest growth of 16.9%qoq to Rp20.5tn,representing 16.2%of total loans at end Jun10.
At current price,BNI is trading at 2011F P/BV of 1.8x and PER of 8.2x,respectively..We maintained our buy recommendation.
Mansek Lippo Karawaci:LPKR 1H10 sales result meets 42%of 2010 target (LPKR,Rp490,Not Rated)
LPKR released its 1H10 marketing sales result,which booked Rp849bn,or 42%of their targeted sales this year.Housing sales contributed the majority of the book,covered 64%(Rp545bn),mainly from its Lippo Cikarang (Rp262bn)portfolio, followed by Karawaci (Rp159bn).Condominium portfolio shared Rp304bn of sales,to split the contribution,40.1%and 59.7%,respectively.
In the remaining year,the company plans to launch 2 new apartment towers,each in St Moritz and Kemang Village, which expect to meet their condominium sales target of Rp960 this year.The company set Rp2,030 bn marketing sales target this year,with housing sales will be their main contributor.
As per yesterday ’s closing price,LPKR trades at 66%discount to their internal NAV,with consensus PE10 16.4x.We don ’ t have rating on the stock.
In the remaining year,the company plans to launch 2 new apartment towers,each in St Moritz and Kemang Village, which expect to meet their condominium sales target of Rp960 this year.The company set Rp2,030 bn marketing sales target this year,with housing sales will be their main contributor.
As per yesterday ’s closing price,LPKR trades at 66%discount to their internal NAV,with consensus PE10 16.4x.We don ’ t have rating on the stock.
Mansek Indosat:has issued US$650mn bonds (ISAT, Rp4,950,Buy,TP:Rp5,400)
Indosat Palapa Company BV,a subsidiary of ISAT has issued a 10 years Guaranteed Senior Notes amounting to US$650mn;callable after 5 years and guaranteed by ISAT.The bond got Ba1 rating from Moody ’s,BB from Standard and Poors and BBB-from Fitch rating agency.The bonds priced at 99.478%and provide yield at 7.45%and will be listed in SGX-ST,Singapore.The bond proceed will be used for debt refinancing.
ISAT will allocate capex FY10 totaling US$550-700mn,which around 70%will be used for networking and equipment. The company aims,subscribers to reach 39.1mn by end 1H10,compared with 33.1mn by end 2009.ISAT trades at PER10F of 16.1x,we have a Buy recommendation.
ISAT will allocate capex FY10 totaling US$550-700mn,which around 70%will be used for networking and equipment. The company aims,subscribers to reach 39.1mn by end 1H10,compared with 33.1mn by end 2009.ISAT trades at PER10F of 16.1x,we have a Buy recommendation.
Mansek Economy Government cut bond issuance following lower budget deficit forecast
The government projected realized deficit for APBN 2010 only 1.5%of GDP (Rp95.1tn)from the targeted 2.1%of GDP (Rp133.7tn)by YE10.The lower budget deficit is due to lower projected realized spending at Rp1,089.8tn (96.8%of total spending),while on the other hand projected realized revenue is Rp994.7tn (100.3%of total revenue).
Consequently,the government planned to cut the budget financing through lowering bond issuance by Rp15tn,reducing the usage of last year ’s cash balance (SILPA)by Rp22tn,and cutting foreign financing by around Rp1tn.
We view this development positively,especially for bond market performance since lower bond issuance will reduce supply bonds in the market and therefore would lessen pressures on bond prices.However, from the macro economic perspective,lower budget deficit could also indicate lower fiscal stimulus,thus lowering the government contribution to the economic growth.Using our assumption that YE10 budget deficit at 1.4%of GDP we expect that the pace of Government spending growth in
2010 would be slower at 12.8%yoy compared with 15.7%yoy in 2009.
Consequently,the government planned to cut the budget financing through lowering bond issuance by Rp15tn,reducing the usage of last year ’s cash balance (SILPA)by Rp22tn,and cutting foreign financing by around Rp1tn.
We view this development positively,especially for bond market performance since lower bond issuance will reduce supply bonds in the market and therefore would lessen pressures on bond prices.However, from the macro economic perspective,lower budget deficit could also indicate lower fiscal stimulus,thus lowering the government contribution to the economic growth.Using our assumption that YE10 budget deficit at 1.4%of GDP we expect that the pace of Government spending growth in
2010 would be slower at 12.8%yoy compared with 15.7%yoy in 2009.
DBS Sampoerna Agro: Buy; Rp2,450; TP Rp3,250; SGRO IJ
Accelerating growth
* 2Q10 earnings grew 8% y-o-y on volume recovery, within expectations; volume will accelerate in 3Q/4Q
* Minor adjustments to PKO and rubber prices; FY10F and FY11F EPS cut by 2% and 0.7%
* Reiterate Buy call with revised TP of Rp3,250 on slower
expansion plans
2Q10 within expectations. Sampoerna Agro (SGRO) reported 2Q10 net profit of Rp88.2b, up 106% q-o-q and 8% y-o-y. Growth was driven by 47% q-o-q jump in revenue, mostly reflecting 54% higher CPO production volume during the period. For 1H10, group net profit of Rp131.0b accounts for 34% of our full year forecast. Like last year, we expect 2H10 production to recover faster than peers (i.e. 2H10 earnings represent 65% of our full year forecast). Operating margin improved slightly to 28.9% in 2Q10
from 29.4% in 2Q09, while net margin was flat at 19.9% from 20.4% in 2Q09. Group average CPO ASP was Rp6,521/kg or c.91.6% of the average spot price for the period.
Planting delays this year, but minimal impact on value. The group bought 1,733 ha of planted oil palm land in 2Q10, of which 528 hectares are matured. SGRO's new planting in 1H10 reached 2,213 ha (own estates only) - representing 22% of our initial target of 10k ha, mainly due to heavy rainfall in 1Q10. To reflect this, we now cut the group's planting target to 5k ha this year and 7k ha next year (own estates only) from 10k ha each.
Buy for 33% upside. We continue to recommend SGRO as a play on volume growth, as we expect c.4kha of the group's estates to mature next year. While stock liquidity remains below that of larger peers, we believe SGRO's value still lies in its strong balance sheet (i.e. potential acquisitions and investments) and improving margins going forward. Our revised Rp3,250 target price (imputing slower expansion plans over the next few years) still offers attractive 33% upside. SGRO remains one of
our top picks.
* 2Q10 earnings grew 8% y-o-y on volume recovery, within expectations; volume will accelerate in 3Q/4Q
* Minor adjustments to PKO and rubber prices; FY10F and FY11F EPS cut by 2% and 0.7%
* Reiterate Buy call with revised TP of Rp3,250 on slower
expansion plans
2Q10 within expectations. Sampoerna Agro (SGRO) reported 2Q10 net profit of Rp88.2b, up 106% q-o-q and 8% y-o-y. Growth was driven by 47% q-o-q jump in revenue, mostly reflecting 54% higher CPO production volume during the period. For 1H10, group net profit of Rp131.0b accounts for 34% of our full year forecast. Like last year, we expect 2H10 production to recover faster than peers (i.e. 2H10 earnings represent 65% of our full year forecast). Operating margin improved slightly to 28.9% in 2Q10
from 29.4% in 2Q09, while net margin was flat at 19.9% from 20.4% in 2Q09. Group average CPO ASP was Rp6,521/kg or c.91.6% of the average spot price for the period.
Planting delays this year, but minimal impact on value. The group bought 1,733 ha of planted oil palm land in 2Q10, of which 528 hectares are matured. SGRO's new planting in 1H10 reached 2,213 ha (own estates only) - representing 22% of our initial target of 10k ha, mainly due to heavy rainfall in 1Q10. To reflect this, we now cut the group's planting target to 5k ha this year and 7k ha next year (own estates only) from 10k ha each.
Buy for 33% upside. We continue to recommend SGRO as a play on volume growth, as we expect c.4kha of the group's estates to mature next year. While stock liquidity remains below that of larger peers, we believe SGRO's value still lies in its strong balance sheet (i.e. potential acquisitions and investments) and improving margins going forward. Our revised Rp3,250 target price (imputing slower expansion plans over the next few years) still offers attractive 33% upside. SGRO remains one of
our top picks.
DBS Indosat: Hold; Rp4,950; TP Rp5,500; ISAT IJ
Bond buyback
ISAT confirmed to buyback bonds with maturity in 2010 and 2012 amounting to US$ 344m in this coming July 31, 2010 after majority of bondholders stated their commitment to sell their bonds. The decision is made after ISAT successfully sold its guaranteed senior notes with proceed of US$ 650m, which will be allocated to refinance those matured bonds. ISAT shifted its focus from heavy capex allocation in the last three years to loan restructuring and refinancing. Big capex spending has squeezed the
profitability in the midst of stiff competition among telecom operators.
We maintain Hold for Indosat as we think the company may not be ready yet to monetize its subscriber base and needs better execution on the ground.
ISAT confirmed to buyback bonds with maturity in 2010 and 2012 amounting to US$ 344m in this coming July 31, 2010 after majority of bondholders stated their commitment to sell their bonds. The decision is made after ISAT successfully sold its guaranteed senior notes with proceed of US$ 650m, which will be allocated to refinance those matured bonds. ISAT shifted its focus from heavy capex allocation in the last three years to loan restructuring and refinancing. Big capex spending has squeezed the
profitability in the midst of stiff competition among telecom operators.
We maintain Hold for Indosat as we think the company may not be ready yet to monetize its subscriber base and needs better execution on the ground.
DBS Banking BI may require LDR of 75-95% by 2011
It was reported in Kontan and quoted on Bloomberg that BI plans to require banks to have a loan-to-deposit ratio (LDR) of 75-95%. We believe this new rule is aims to further accelerate the pace of loan growth in the Indonesia banking system. The new rule is likely to be effective in 2011 and banks are likely allowed a six months transition period to comply accordingly. Banks with LDR below or above this range
will be imposed a penalty of 0.5-1.0% of their third party funds.
Official BI banking statistics up to May 10 shows that the banking system's LDR current stands at 75.7%. Some banks have stated their concern about the high probability of rising default loan if credit is disbursed aggressively to meet minimum LDR target.
Of the four banks under our current coverage, only Bank Central Asia (BBCA)'s and Bank Mandiri (BMRI)'s LDR is not within the stated range. Up to 1Q10, BBCA's LDR stood at 51% while Bank Mandiri (BMRI)'s LDR as released in its 2Q10 results stood at 66%. Separately, Bank Rakyat Indonesia (BBRI)'s stood at 87% and Bank Danamon (BDMN)'s at 94% as at 1Q10.
will be imposed a penalty of 0.5-1.0% of their third party funds.
Official BI banking statistics up to May 10 shows that the banking system's LDR current stands at 75.7%. Some banks have stated their concern about the high probability of rising default loan if credit is disbursed aggressively to meet minimum LDR target.
Of the four banks under our current coverage, only Bank Central Asia (BBCA)'s and Bank Mandiri (BMRI)'s LDR is not within the stated range. Up to 1Q10, BBCA's LDR stood at 51% while Bank Mandiri (BMRI)'s LDR as released in its 2Q10 results stood at 66%. Separately, Bank Rakyat Indonesia (BBRI)'s stood at 87% and Bank Danamon (BDMN)'s at 94% as at 1Q10.
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