Reuters S.Africa exported 2.1 mln T coal to India in July

LONDON (Reuters) - South Africa shipped 2.1 million tonnes of thermal coal to India in July, almost double June's 1.2 million tonnes, exporters said.

China's South African coal imports also rose to 1 million tonnes in July from 720,000 tonnes in June.

Asian demand from India, China, South Korea, Malaysia and Japan for South African coal has soared during the past 12 months, more than compensating for weak European buying.

India accounted for 35 per cent of South Africa's total July exports of 5.9 million tonnes and has taken an average of 34 per cent for 2010 so far. LINK

Bloomberg Itochu to Double Coal Shipments to Meet Soaring Demand From China, India

Itochu Corp. said it will double coal shipments in the next five years as new mine investments and marketing agreements help Japan’s fourth-largest trader meet rising demand from China, India and Southeast Asia.

Annual shipments will probably jump to between 22 million metric tons and 24 million tons by the year ending March 2016, Koichi Kawaguchi, general manager at the company’s coal department, said in an interview. Sales to overseas customers will account for half of the total, compared with 10 percent now, he said.

Itochu is seeking to buy at least 20 percent of the Maules Creek coal project in New South Wales, and this year invested in a Mongolian coal trader. China last year imported a record amount of coking coal, used for steelmaking, and India almost doubled purchases of energy coal for its power stations.

“Purchasing the resource is a must,” said Jiro Iokibe, senior analyst at Daiwa Securities Capital Markets Co. in Tokyo. “China will likely rely on imports of coal as it can’t cover its needs from within the country.”

Itochu, behind Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. in market value, rose 1.5 percent to 694 yen as of the 3 p.m. close on the Tokyo Stock Exchange.

Mongolia, Mozambique

The Japanese trader plans to source 15 million tons of coal from mines it has stakes in by March 2016, almost double the 8 million tons in the last fiscal year. The company is seeking to invest in Mongolia and Mozambique, and it expects to secure supplies from Maules Creek and Xstrata Plc’s Wandoan thermal coal project in Queensland, Kawaguchi said.

A development decision on the A$6 billion ($5.3 billion) Wandoan project is due next year, Xstrata, the world’s largest exporter of energy coal, said Aug. 16. Itochu owns 12.5 percent of the project.

Itochu obtained exclusive negotiation rights to buy a stake in Maules Creek last week when it agreed to take a 2.75 percent stake in Aston Resources Ltd., an Australian coal developer. Production is slated to start in 2012 and about 11 million tons of coal annually will be produced in 2014, Kawaguchi said.

“The Japanese market has so far been the center of our business,” Kawaguchi said in Tokyo. “We will need to open up overseas markets.”

Itochu invested in Winsway Coking Coal Holdings Ltd., the largest shipper of Mongolian coal to China, with the purchase of $10 million of convertible debt in April to gain access to steelmaking coal.

Coking coal prices have risen twice this year as demand picked up with the global economic recovery. China became the world’s second-biggest buyer of the steelmaking material after importing a record 34.4 million tons in 2009. India’s thermal coal purchases jumped to about 60 million tons last year from about 30 million tons in 2008, according to Macquarie Group Ltd.

Profit at Itochu’s metals and mineral operations may more than double to 95 billion yen ($1.1 billion) for the year started April 1 because of higher commodity prices and rising sales of iron ore and coal, the company said Aug. 2 in a presentation. LINK

Bloomberg China Shipping Development First-Half Profit Surges 60% as Bulk Rates Jump

China Shipping Development Co., the dry-bulk arm of the nation’s second-biggest shipping group, said first-half profit rose 60 percent as rates for transporting iron ore, coal and grains increased.

Net income rose to 978.8 million yuan ($144 million), or 0.29 yuan a share, from 613.6 million yuan, or 0.18 yuan, a year earlier, the company said in a filing to Hong Kong’s stock exchange today. That compares with the 967 million yuan average of three analyst estimates compiled by Bloomberg. Sales increased 34 percent to 5.53 billion yuan.

China Shipping benefited as economic growth boosted demand for raw materials. The Baltic Dry Index, a measure of commodity- shipping costs, averaged 49 percent higher in the first half than in the year-earlier period, amid gains in imports of commodities including iron ore and coal. China, the world’s biggest buyer of iron ore, boosted imports of the commodity by 4.1 percent in the first half, according to customs data.

“Benefiting from the gradual recovery of global economy and economic stimulus policies in various countries, global trading and shipping market showed signs of recovery,” China Shipping said in the filing.

The company, controlled by China Shipping (Group) Co., rose 1.1 percent to HK$11.52 in Hong Kong trading and today, before the earnings announcement. The stock has fallen 1.2 percent this year, compared with a 3.4 percent decline in the benchmark Hang Seng Index. The stock fell 1 percent to close at 10.12 yuan in Shanghai trading today.

The Shanghai-based company’s full-year cargo volume may rise 14 percent, it said in March.

China Shipping said earlier today it agreed to buy a 50 percent stake in a shipping unit of Guangzhou Development Industry (Holdings) Co. for 327.9 million yuan, according to a statement to Shanghai’s stock exchange. The acquisition will help boost the line’s coal-transportation network in southern China, it said.

“Demand for coal transportation will rise sharply as Guangzhou Development’s new power plants start operations in the next three years,” the statement said.

The Baltic Dry Index averaged 3,165 in the first six months, compared with 2,118 a year earlier. LINK

Indopremier Weekly Economic Update

Global Economy

Moody's Investors Service said the United States, the United Kingdom, France, and Germany are well positioned to maintain their top Aaa ratings.

Gross domestic product in the euro area and European Union grew at the fastest pace in at least three and a half years, fostered by robust expansion in Germany.

Japan's economy unexpectedly expanded at quarter-on-quarter annualized rate of 0.4% in three months to June 2010, much lower than 4.4% in the first quarter.


Indonesia Economy

Indonesian government expects budget deficit to amount Rp 115.68 trillion next year, equivalent to 1.7% of national output.

The government plans to elevate electricity tariffs by 15% in early 2011, allowing total subsidies to decline to Rp 184.82 trillion from Rp 201.26 trillion in 2010.

To finance next year’s budget shortfall, central government will acquire more fund from notes issuance and earn less from foreign creditors than in 2010.

Sensitivity analysis revealed that the state budget has become more susceptible to change of economic growth. Oil price hike will have detrimental effect on 2011 budget, compared to its positive influence on revised 2010 budget.

Banks loan-to-deposit ratio was recorded at 77.34% on 13 August 2010, the highest since global financial crisis began in 2008. Lending and third party deposit respectively enhanced 19.54% and 13.84% annually.

Reuters UPDATE 1-Indonesia's Danamon Q2 net profit jumps 53 pct

* Q2 net profit up 53 pct at 729 bn rph - Reuters calculation

* Reports H1 net profit up 65 pct at 1.43 trln rph

* Loan growth seen above 20 pct in 2010 (Adds figures, quotes)

By Fathiya Dahrul and Janeman Latul

JAKARTA, Aug 20 (Reuters) - Second-quarter net profit at PT Bank Danamon (BDMN.JK), Indonesia's sixth-largest lender, jumped 53 percent thanks to strong loan growth, and the bank said on Friday it sees loan growth exceeding 20 percent this year.

Danamon, which is controlled by a consortium including Singapore's state investor Temasek Holdings [TEM.UL] and Deutsche Bank (DBKGn.DE), made a second-quarter net profit of 729 billion rupiah ($81.36 million), up from 477 billion rupiah a year ago, based on published first quarter and first half numbers.

"The increase in profit was triggered by credit growth, especially in the mass market, and as we managed to stabilise our operating margins," said Vera Eve Lim, finance director.

She said the bank increased its loan growth target up to 21 percent, from 15 to 20 percent previously, and added that net interest margin increased to 11.6 percent from 10 percent.

First-half net profit jumped 65 percent to 1.43 trillion rupiah from 870.2 billion rupiah a year ago, while first-half net interest income rose 8.62 percent to 4.8 trillion rupiah, from 4.419 trillion rupiah.

Danamon's full-year net profit is forecast at 2.866 trillion rupiah, up 89 percent from 1.53 trillion rupiah in 2009, according to Thomson Reuters I/B/E/S.

Shares in Danamon ended down 0.9 percent at 5,350 rupiah, against a 0.4 percent increase in the Indonesia Composite Index .JKSE.

The stock has gained about 19 percent so far this year, underperforming the broader market, up 22.5 percent. LINK

Deutsche banking sector

Couple of updates on Inndonesian banking sector
1. Mandiri - Small but faster growing subsidiaries (this report looks at Mandiri's key subsidiaries, whcih will become increasingly important driver to earnings)
2. Mandiri - Double its rights issue plan to US$1.6bn
3. BNI capturing more cash management businesses
4. Bank Jabar - Civil servant pay rise to drive up consumptions
5. others : Jakarta population exceeds 15-year forecasts - enhancing the case for infr projects


Summary:

1. Mandiri - Small but faster growing subsidiaries
Subsidiaries’ contributions increasing; maintain Buy; target price of Rp6,575 . This report looks at Mandiri’s main subsidiaries, which we believe could increasingly become major growth drivers of the bank’s operating income. Their combined contributions stand at 11% in 2009/1H10. Their three-year net profit CAGR is 60% vs. Mandiri’s 43%. We expect the subsidiaries to continue to deliver faster growth than Mandiri’s traditional commercial banking businesses, partly due to the less-competitive nature of their industries.

Faster growth industries In this report, we focus on Mandiri’s four key subsidiaries: Bank Syariah Mandiri, Bank Sinar Harapan Bali, Mandiri Sekuritas and AXA Mandiri. We will not be focusing on the recently acquired Mandiri Tunas Finance. We expect the four key subsidiaries to deliver more compelling growth profiles than the bank’s traditional commercial banking businesses. On our estimates, their combined three-year net profit CAGR would be 60% vs. the bank’s consolidated CAGR of 43%. Their operating income contribution would be 11.1% in 2009, up from 8.8% in 2006.

Less competitive businesses; (and/or still in infancy). We believe the subsidiaries’ more prolific growth profile may have been due to the less competitive nature of their businesses and/or the fact that their businesses are still in their infancy. For instance, in syariah banking, the industry’s syariah assets are still below 5% of total assets. Mandiri Syariah is the largest syariah bank. In the insurance business, based on the latest data from the Ministry of Finance (MOF), total assets were only Rp78tr in 2002, or 7% of banking assets, or approximately 5% of GDP.

Rp6,575 target price; risks: irrational lending competition, higher NPLs. Our TP is based on a Gordon Growth model (P/B=ROE-g/COE-g) Risks are higher NPL formations and costs and irrational lending competition. (See p.5 for details).

2. Mandiri to double the size of rights issues.
CEO has stated that it will double the amount raised in the bank's planned rights issue from approx Rp7tr to Rp13-14tr. The rights issue is scheduled to be on 11-13 December 2010 subject to parliamentary approval. The proposed new share issuance would be 10.13% of the enlarged capital, we estimate. We believe that the govt will subscribe to RI, and subsequently it will divest its RI portion, bringing public ownership to 40% (from 33%).In our view, RI is value enhancing to Mandiri. In this report, we have provided sensitivity analysis based on different rights issue pricing for a given new share issuance of 2.4bn new shares. Management has indicated that the pricing of the rights issues will not be at significant discount to the market price. Essentially, higher the rights issue price would translate into higher value enhancement. Eg, at right issue price of Rp5,500, the implied fair valuation would be Rp7,925 (refer to table below for details of sensitivity analysis).

3. BNI targets cash management business from corporates for Rp45tr (USD5bn).
The bank targets a +50% YoY growth from the Rp30tr cash they had under management in 2009. Up to Jun-10, cash management service under BNI has reached Rp36tr with 5,000-6,000 customers. A few major companies which have listed as BNI's cash management clients are BP Indonesia, Medco, Garuda Indonesia and Krakatau Steel. From the cash management business, the bank also aims to raise its fee-based income. (Investor) DB: BNI has seen its CASA market share declined to 10.2% in 1H10 (vs 11% in 2008) and cash management business is an alternative way for the bank to increase their portion of low cost funding.

4. Bank Jabar Banten - Civil servant pay rise to drive up consumptions.
West Java civil servants pay may rise up to +30% in 2010 - ahead of national average. The regional governments of West Java and Banten regions ("WJB") have allocated a pay-rise ranging from 10-30% in 2010. And in the government's latest draft state budget has indicated another average increase of 10% pay-rise for civil servants in 2011. These increase should normally include payment increases for pensioners of civil servants. Between 2006-2011F, total compensations to civil servants have risen by a respectable 5-yr Cagr of 16% - see chart below for details.

Rising consumption in WJB regions to propel BJBR loan growth further. Rising salaries of these civil servants (and pensioners of civil servants) will ultimately drive up consumption in West Java and Banten regions; and BJB will be one of the main beneficiaries. The bank has managed to capture 85% of the regions' civil servants as their consumer loans borrowers, where the segment makes up 75% of their loan book. It will also intensify its efforts to offer loans to pensioners of ex civil servants. So far, BJB has grown their overall loan book at +16% YoY; +9% YTD. Indeed the bank has typically seen loan growth acceleration in 2H10 and this latest development will definitely steer up the bank's loan book, making it closer to management's targeted 20-25% growth.

Maintain our BUY rating with a TP of Rp1,500. Looking from a strong set of 1H10 results, the company is ahead to beat our earnings forecasts (assuming no major new NPLs). The proceeds from the IPO in July 2010 of Rp1.4tr should further enhance the bank's earnings.

Mansek Semen Gresik:Thoroughly consider to increase its selling price (SMGR, Rp8,950,Neutral,TP:Rp9,400)

In yesterday ’s analyst meeting,SMGR indicated its attempt to slightly increase selling price in the past several months.Yet,they have to adjust back to its previous level given it lowered their market share.In other way, such upward adjustment was not followed by its competitors,in our view.

In terms of the de-bottlenecking process,the progress was still inline with their schedule.Considerably low sales volume in 1H10 was due to several maintenances activities.In 2H10,they could again increase its production level.Such bottlenecking and maintenances will reduce its cost/ton in near future.Despite the above mentioned condition,we view that selling price could still go up next year,once new electricity tariffs start to have an affect to all cement companies.Even without such increase,we believe margin could still be maintained or slightly increases due to the efficiencies
programs undertaken.The company is currently trading at PER10-11F of 14.2x-12.3x.

CLSA Gudang garam, next leg

Happy Friday. Our tireless and productive consumer analyst Swati upgrades her Gudang Garam (GGRM IJ) earnings forecasts and target price (attached). She raises her earnings forecasts by 5-11% on the back of higher selling prices. The new TP is Rp46,000 (previously Rp40k), based on 16x 2011 PER matching the 1992-96 valuation average. Maintain BUY.

GGRM has been a great call from Swati’s. Since her BUY recommendation in August 2009 (she actually started her unofficial positive call much earlier), the stock price has more than doubled.

It is just so tempting to take profits after the stock has a great run. Equally tempting for a stockbroker like ourselves to tell investors “You can’t go broke taking profits”.

However, we trust that investors hold on to GGRM a bit longer. GGRM’s ROE of the underlying business is still satisfactory (>20% and rising). The new management is competent and competition is easing. Two more important issues are consolidation in the sector and GGRM’s increased pricing power.

First, consolidation in the cigarette industry is a bigger story yet to fully play out. Smaller players (about 27% of total market share) who are currently protected by the government through lower excise taxes will have harder time competing with the big boys going forward. This year delayed tobacco harvest is another push that will accelerate consolidation in the industry. With consolidation comes pricing power, the second point we like to make.

GGRM has increased prices almost every month this year. Total price increases are 11.5% YoY for 1H10. Despite the government regularly increasing the excise tax for cigarette, the domestic cigarette industry is still growing 6% pa0020in the past 2004-2008 years (as a comparison, Indofood instant noodle is growing 2.5% pa during the same period of time). Cigarette is a resilient product with a relatively inelastic demand. It is also important to note that GGRM prices are about 5-7% discount to competitor prices to retailers. This gap will continue to decrease and completely diminish.

GGRM has consolidated its distributors and been trying to rebuild its image (promotion has improved significantly). The company is also making another attempt to penetrate the mild cigarette market.

The company is moving in the right direction. Quoting Warren Buffett “no matter how great the talent or effort, some things just take time: you can’t produce a baby in one month by getting nine women pregnant”.

We believe that investors’ patience will be rewarded. Don’t sell your GGRM stock. Not yet.

Danareksa Bayan Resources (BYAN IJ, Rp 8,550 SELL) Tough Times

FY10-11F core EPS estimates slashed by 32.3-18.9%, SELL recommendation unchanged
We adjust our coal sales forecast, stripping ratio and capex estimates for 2010-12F, to take into account BYAN's weaker-than-expected 1H10 results - although our ASP forecasts are not changed. As a result of these changes, our FY10-11F core EPS estimates are cut by 32.3-18.9% to Rp130-264/share. We also arrive at a new TP of Rp3,650, implying FY11F P/E of 14.2x. From the current share price, downside is a hefty 57.4%. SELL recommendation maintained.

Weak first half of the year
BYAN's 1H10 results came in below expectations. The 1H10 production only reached 5.6Mt (41.9% of our full year forecast) while the 1H10 revenues only reached Rp3,788bn (40% of our full year forecast). What's worse is that higher hauling and barging costs - caused by higher fuel prices - on top of higher interest expenses squeezed the net margin to only 0.9% in 2Q10 from 7.6% in 1Q10. All in all, the 1H10 net margin was 4.3% - yet still better than 1H09's net margin of just 2.9%.

Coal production to remain depressed going forward
We cut our FY10F coal production estimate to 11.9Mt - or 10.7% lower than our previous forecast - to reflect the 1H10 results. We downgrade our targets for the underperforming Wahana, Perkasa and FTB mines, yet upgrade our targets for Gunungbayan and Teguh/Firman. This shift in the production mix will lead to higher ASP and a slightly higher stripping ratio. For the ASP, we believe it will pick up in the remaining quarters of the year and reach USD73.5/t for FY10F as BYAN has already contracted around 10.9Mt of coal sales at an ASP of USD73.9/t.

Higher fuel costs mean higher production costs
We revise our FY10F production cash cost ex. royalty target to USD54.7/t, taking into account the increase in fuel costs in 2Q10. In our view, the higher fuel costs will be sustained in the remaining quarters as BYAN has a high dependency on fuel since the distance from its mines to the port is a lengthy 339km on average. At the same time, we also adjust our capex target to incorporate an additional USD70mn of capex for jetty construction at Perkasa and overland conveyor construction at FTB.

AAA PT Bank Negara Indonesia (Persero) Tbk Between Performance and Dilution

Greenshoe, done
Greenshoe finally executed by the government at prices Rp2,900/share with funds reaped as much as Rp1.3 trillion. 473 million shares greenshoe was oversubscribed up to 3.93x. Some of institutional investors that participated in this event were Jamsostek, DP (Pension Fund) Bank of Indonesia, DP Pertamina, Fidelity Investment Ltd and Invesco Hong Kong. High demand for greenshoe in our view was associated with 3% price discounts from previous day closing price (Wednesday,11/8) and the potential improvement for BBNI post right issue.

…Then Right issue, Double The Size is Probable
As we predicted earlier, Bank Negara Indonesia will be the first runner of rights issue than Bank Mandiri due to the bank’s capital adequacy ratio already in minimum level. BBNI’s CAR as of 2Q10 was 13.8% while BMRI was at 15.3%. Until now, the target proceed from rights issue has not been changed, Rp4-5 trillion. However if we refer the exercise price same with greenshoe, we estimate BBNI will receive total funding of Rp9.6 trillion which will add total CAR by 600 bps from our initial estimate of CAR in FY10F, from13% (without the rights issue) to 19% (with a rights issue).

The Effect
Rights issue will have positive impact on bank performances because with a higher CAR position, BBNI will be able to expand credit of 22% per annum over the next 5-6 years. In addition, with 40% floating BBNI will get a 5% tax reduction rate, which means the tax rate will be 23%. (2009, 28%). Nevertheless, we expect ROE would fall from 21.8% to 19.7% since the increasing total equity, 45% is higher than the 7% increase in net profit, due to tax incentives. It should be noted that historically, BBNI share price tends to follow its ROE level, so the decline in ROE post rights issue could be a negative catalyst.

Valuation, Upgrade TP to Rp3,600 maintain HOLD recommendation
Currently BBNI is trading at 2.3x PBV FY11F, 29% lower than the 3.0x peers PBV. In a glance, it looks cheap but we see the market pricing its share in a quite fair value since BBNI is the bank with minor ROE compared to peers. Since the CAR ratio is limited, going forward to skimp CAR ratio, we see BBNI will retain dividend payout ratio at 35%, or the same level in 2009, previously we estimate the sustainable dividend payout is 50%. The decline in dividend payout in 2011 and beyond increasing our target price for the bank from Rp3,100 to Rp3,600. Our TP implies 1.9x and 10.8x PE FY10F PBV. We still maintain our HOLD recommendation on the potential of declining ROE which could suffer its share performance and our TP provide only 9% upside. Year-to-date, BBNI share price already rose 70% compare to peers 20%.

CIMB Sector update - Banks - New reserve requirement: pacing loans, while quelling inflation

Maintain Overweight on banks. The central bank has indicated that the imminent new statutory reserve requirement (RR) regulation will use 78-102% of banks’ loan-deposit ratios (LDR) as an ideal range, where non-compliant banks could be penalised by an additional RR of 0.5-1.0% pt of deposits, a policy resembling the one in 2005. Although some banks’ earnings could be lowered by 1-2%, the policy is positive, in our opinion, on two counts. First, it could possibly create upside surprises by pacing loan growth; second, it could quell inflation by absorbing excess liquidity, which is a preferred means to raising rates. We maintain our optimism on the sector. We like most Indonesian banks, though placing emphasis on BNI, Danamon, and Mandiri. Manageable inflation should be a prime catalyst for the sector, in our view. There are no changes to our forecasts, ratings or target prices.

Citigroup Indonesia Banks

Inflation Risk is Rising while Recent Data is Positive: Upgrading BBCA/ Downgrading BBRI

 Impact of tightening — We upgrade BBCA to Hold/Low risk (Sell/Medium) and downgrade BBRI to Sell/Medium risk (Hold/High), on their capacity to maintain growth momentum in a rising interest rate environment (impact NIMs and credit costs and marginal on bond portfolio). BBCA and BMRI will benefit from rising rates, followed by BBNI with a negative impact of BBRI and BDMN. We are raising earnings on BBCA and BBNI (lower credit costs) and lowered BDMN (higher credit cost).

 De-rating unlikely — There have been two de-ratings in the past, but only when inflation crossed 8%. BBCA emerged as the best Defensive Stock. BI is citing a seasonal July inflation spike (6.2%) (food prices and electricity tariff hike) not structural and cites no immediate risks of heating up. Weak USD and rising investment (as a percentage of GDP and bank loans) support its arguments.

 June data and regulations — Record loan disbursement (higher share of investment loans), pick up in deposits (mostly CASA) and spreads maintaining (lending rate spread over bond is widening). The Rp LDR has inched up to 80%. Implementing haircut regulation will be difficult, due to possible criticism that it is favoring some borrowers. Higher LDR will aversely impact earnings of BBCA and BMRI by 2-4%.

 2010 profits driven by lower credit cost — The aggregate profit of four large banks is up 29% YoY and 1% QoQ in 2Q10. Pre-Provision profit is up 5% YoY and 2% QoQ. Aggregate loan loss provisions (net of write backs) were Rp5.1trn, down from Rp9Trn in 1H09 and same as 2H09. Surprises were 1) BMRI, higher asset yield; 2) BBCA, loan growth; 3) BBNI, cash write back and demand deposit increase; and 4) BBRI maintaining momentum.

 Valuations — We value the banks using a Dividend Discount Model to better capture declining bond yields. Nominal GDP growth rate of 12.2% and Risk Free Rate of 9.3% (based on 6% inflation + 3.3% real return in line with historic average). Higher growth rates assumed for BMRI, BBCA and BBRI

Credit Suisse Indonesia Banks - Impact of BBNI's and BMRI's rights issues

Citing Indonesia’s minister of state-owned enterprises, Mustafa Abubakar, Bisnis Indonesia, 18 August 2010, reported that the Indonesian government expects BBNI’s rights issue to take place in 2010E and BMRI’s rights issue to be completed after BBNI’s, either in late 2010E or early 2011E.

The rights issue is expected to increase BBNI’s and BMRI’s total number of shares outstanding by 22% and 11.3%, respectively, reducing government’s ownership in the two banks to 60%. Thus, post the rights issues, both BBNI and BMRI will be eligible for 5% tax rate cut for listed companies with over 40% free float.

After accounting for the higher number of shares as well as higher net income (due to 5% tax rate reduction), we believe that BBNI’s EPS post the rights issue will be diluted by 12.5% while BMRI’s EPS post the rights issue will be diluted by 3.5%.

We maintain our OUTPERFORM ratings on BBNI and BMRI. We believe that the proceeds from the rights issues will strengthen both banks’ capital and enhance their growth capacity.

BNPP London Sumatra - Better performer: BUY. (Helmy Kristanto)

LSIP IJ; BUY; CP: IDR9,300; TP: IDR11,275; Mkt cap: USD1,415m; ADV: USD4.86m
2010E: P/E 12.0, P/B 2.7, ROE 25.0, Yld 1.7
2011E: P/E 12.8, P/B 2.4, ROE 19.8, Yld 2.5

The key highlights:
· CPO production and sales down 3-4% y-y in 1H10.
· Higher commodity price and strong seed sales support top line.
· More sales to the group - shows more synergy.
· BUY maintained with 21% upside potential.

JPM Telecommunication – Valuation update

Over the last 3-4 trading days we have seen buying interests picking-up on the telco space. Fundamentally, the turnaround could have been driven by fundamental reasons: (1) PT Telkom’s wireless ARPU rose 1.1% QoQ, voice ARPM up 15.4% YoY. (2) Excelcomindo raised voice tariffs by 31% QoQ to Rp117/min, MOU’s declined 27% QoQ. Top down, the US GDP downward revision could attract incremental bears and defensive interests (while view on potential IDR strengthening, which benefits telcos, should remain firm).

TLKM – trades on 12.9x and 11.3x FY10-11 P/E, PxT of Rp9800 implies 9% upside

ISAT – trades on 18.8x and 13.5x FY10-11 P/E, PxT of Rp4500 implies 3% downside

EXCL – trades on 13.4x and 9.9x FY10-11 P/E, PxT of Rp5600 implies 13% upside

JPM Bank Danamon (BDMN) – 2Q10 preview

Aditya Srinath (analyst) hopes to see robust 2Q10 profit from BDMN, strong enough to address pending concerns on the stock (bad historical financial, employee turn-over, management changes etc). He is hoping to see a tick-up in asset quality, loan coverage moving up from 93% to 100% sequentially, while costs being capped. He expects to see NPAT to come in at around Rp850bn, up 15-20% QoQ and doubling YoY. O/W.

JPM US GDP revised down again

JPMorgan revised down US economic forecast (again) – in March the forecast was US 2010 GDP growth of 3.6%; it is now 2.8%. " Taken at face value, a 500,000 level of claims is consistent with a stall in growth and a contraction in private sector jobs. We recognize that three weeks of rising claims readings do not constitute a trend. But the movement in jobless claims has been sharp enough and sustained enough to warrant a change in our economic forecast. And, of course, the message from the rise in initial jobless claims is being reinforced by other incoming data, including the outright decline in factory orders reported in both August manufacturing surveys in hand."

Are We Still Bullish On CPO?

From A Cup of Tea 11 Aug'10

This will continue?
I don’t think so, now with recent moderate rain in several oil-palm growing regions likely to boost yields in the future. Demand on physical market both from local and foreign will slide before Idul Fitri Festival.

From latest data showed that CPO export for Malaysia down on MoM basis. Surveyor SGS (Malaysia) Bhd. estimated Aug. 1-10 exports at 395,186 tons, down 14% on month, while Intertek Agri Services put the figure at 392,185 tons, down 17% on month. The government-linked Malaysian Palm Oil Board said end-July palm inventory fell 3% to 1.41 million tons vs market expected fell down 4.2%, output rose 7% on month to 1.52 million tons vs market expected rose 2.1%. July exports rose 1.8% from the previous month to 1.47 million tons vs market expected 5.5%.

Prices may fall further amid rising production in August. Palm oil may tumble by as much as 8 percent this month as the commodity is “extremely overbought”. I think the CPO Futures may decline to a range of 2430-2570 RM level after Idul Fitri Festival.



Bang Juntri
DISCLAIMER: This report is issued by Bang Juntri. Although the contents of this document may represent the personal opinion of Bang Juntri. We cannot guarantee its accuracy and completeness.

Reuters Indonesia's Berau Coal shares soar on debut

* Berau trades as high as 550 rph a share vs 400 rph offering

* Berau trades at 10-12 times 2011 earnings

* Institutional investors own 70% of IPO shares, retail 30%

* 2010 FY revenue seen at $1.02bln vs $485 mln in 2009 (Rewrites throughout; adds analyst comment)

By Janeman Latul and Fathiya Dahrul

JAKARTA, Aug 19 (Reuters) - Shares of PT Berau Coal Energy BRAU.JK, Indonesia's No. 5 coal miner by output, rose as much as 38 percent on debut as investors shifted out of riskier coal stocks such as PT Bumi Resources (BUMI.JK), traders and analysts said.

Berau's strong start on Thursday comes as investors have snapped up Indonesian stocks .JKSE and bonds over the past 18 months, attracted by strong economic growth fuelled by domestic demand and commodities exports.

The stock index .JKSE hit a record high last month, prompting several companies to push ahead with plans for share offerings.

Berau raised more than $150 million by selling shares equivalent to 8.8 percent of the enlarged share capital in a heavily-subscribed initial public offering. It scaled back the size of the IPO after it obtained other sources of financing.

The shares rose to a high of 550 rupiah in morning trading, compared with the IPO price of 400 rupiah. It trimmed the gains later to trade at 475 rupiah. About 1.16 billion shares changed hands, making Berau the top traded stock on Thursday by volume and by value.

Shares of politically connected Bumi fell 2.1 percent.

"Berau is not selling as many shares as expected even though it is the last remaining lucrative coal asset opportunity," said Surabhi Chopra, a coal analyst at PT Bahana Securities.

Chopra said that investors are now looking at coal miners like Berau and PT Adaro Energy (ADRO.JK), Indonesia's biggest coal miner by market value, "as they look for companies that are more transparent and better at good governance compared to Bumi."

Bumi, once the biggest coal miner by market value, now trades at 1,400 rupiah, or a price-to-earnings ratio of 5.0, while Adaro trades at a P/E of 11. Berau trades at 10 to 12 times, based on the price range traded by its shares. more...

Bloomberg Wheat Gains Most in Two Weeks on Increased Demand for U.S. Stockpiles

Wheat rose the most in two weeks after a government report showed increased overseas demand for U.S. grain.

Exporters sold 1.41 million metric tons in the week ended Aug. 12, up 4.4 percent from the week before, the U.S. Department of Agriculture said. Wheat has gained 8 percent this month as Russia, which trailed only the U.S. last year as an exporter of the grain, imposed a ban on external shipments.

“Export sales were high,” said Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas. The effects of Russia’s ban “showed up today on the sales report. All of the grains were strong.”

Wheat futures for December delivery advanced 25.5 cents, or 3.7 percent, to close at $7.1425 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest gain for a most-active contract since Aug. 5.

The price has gained 56 percent since the end of May as the worst Russian drought in at least a half-century damaged crops. more...

Bloomberg Jobless Claims in U.S. Rose to Highest Since November

Claims for U.S. jobless benefits jumped to the highest level since November and Philadelphia-area manufacturing shrank for the first time in a year, indicating the economy may be slowing faster than forecast.

The number of unemployment claims unexpectedly shot up by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index turned negative in August, signaling contraction. more...

OkeZone 2014, Berau Coal Targetkan Produksi 30 Juta Ton

Selepas melakukan listing perdana pagi ini, PT Berau Coal Tbk (BRAU) menargetkan produksi batubara sampai dengan 2014 sebesar 30 juta ton.

"Tahun lalu produksi batubara perseroan mencapai 14 juta ton. Di semester pertama tahun ini produksi batubara kami sudah mencapai 8,1 juta ton sehingga kami optimis produksi tahun ini dapat mencapai 17,9 juta ton, dan di tahun depan dapat mencapai 20 juta ton," ujar Presiden Direktur BRAU Rosan Perkasa Roeslani kepada wartawan selepas acara listing perdana di Gedung BEI, Jakarta, Kamis (19/8/2010).

Untuk memenuhi target tersebut, lanjutnya, perseroan menganggarkan belanja modal (capital expenditure/capex) sampai dengan 2014 sebesar USD240 juta.

"Untuk capex tahun ini sebesar USD48 juta. Dan yang telah terpakai sampai dengan semester I-2010 sebesar USD25 juta. Untuk capex 2011 sebesar USD89 juta, dan di tahun berikutnya kami menganggarkan USD86 juta," tambahnya.

Total pendapatan hingga semester I-2010 sebesar USD477 juta dan sampai dengan akhir tahun sebesar USD986 juta.(wdi)

Tempo Interaktif asio Pengucuran Kredit Perbankan Meningkat

Rasio pengucuran kredit (Loan to Deposite Ratio) perbankan meningkat dari 76,76 persen menjadi 77,34 persen. Bank Indonesia memperkirakan, kenaikan LDR disebabkan oleh kenaikan kredit yang tidak diikuti peningkatan dana pihak ketiga (DPK)

"Kenaikan kredit yang tidak diikuti dengan peningkatan DPK menyebabkan LDR perbankan naik dari 76,76 persen menjadi 77,34 persen," ujar Kepala Humas Difi Ahmad Johansyah lewat surat elektronik hari ini (19/8).

Laporan mingguan Bank Indonesia menunjukkan penyaluran kredit tidak dibarengi dengan kenaikan DPK. Dalam sepekan terakhir misalnya, kredit naik Rp 5,44 triliun menjadi Rp 1592,3 triliun. "Sehingga ytd kredit tumbuh 11,33 persen atau yoy 19, 54 persen. Di sisi lain, DPK turun Rp 8,4 triliun menjadi Rp 2058,79 triliun, sehingga ytd DPK tumbuh 4,48 persen, atau yoy 13,84 persen." ujar Difi.

Peningkatan kredit bersumber dari peningkatan kredit rupiah sebesar Rp 3,79 triliun dan valas Rp 1,64 Triliun. Secara tahunan pula pertumbuhan kredit rupiah sebesar 21,82 persen. Ini jauh lebih tinggi dari kredit valas sebesar 6,95 persen. more...

china Daily Rubber climbs

BANGKOK - Rubber climbed to the highest level in more than three months on optimism that demand for tires will continue to grow after stockpiles expanded and on concerns of limited supply as rain in southern Thailand disrupted tapping.

The January-delivery contract climbed as much as 2.9 percent to 289.9 yen a kilogram ($3,395 per metric ton) on the Tokyo Commodity Exchange on Wednesday, the highest level since May 6, before settling at 289.4 yen.

China's auto sales may rise to 16 million this year, the China Association of Automobile Manufacturers said on Aug 10, boosting its forecast from a previous estimate of 15 million.

January-delivery rubber in Shanghai gained as much as 1.1 percent to 25,590 yuan ($3,768) a ton, before closing at 25,375 a ton.

BNPP BBNI Moving into the next league

Loan growth set at 10% for 2010 due to capital constraint.
However, BNI is set to see further earnings improvement.
Increasing share liquidity and rights issue to raise >IDR6t.
Raise TP to IDR3,800 based on 2.5x P/BV 2011E. BUY.

Loan growth limited in 2010 but should pick up in 2011
Bank Negara Indonesia (BNI) is likely to see 10% loan growth in 2010, instead of
the earlier guideline of 15%, as management is concentrating on the rights issue. Management believes that the 11.1% Tier 1 CAR (total CAR 13.8%) is insufficient to support high loan and asset growth, and a significant capital injection, such as the rights issue, is needed. In our calculation, BNI will see Tier 1 CAR of 8-9% (total CAR of 11.3- 11.5%) in 2010-11, which is relatively low according to the Indonesian banks’ standard. While we are yet to factor in the impact of the rights issue, we
expect 19% loan growth in 2011; the industry is likely to see more than 20% loan growth on rising consumption and capital expenditure from various industries.

Expect further earnings improvement
We tweaked our earnings for BNI in view of its stellar performance in 1H10, which saw earning grow 61% y-y to IDR1.9t versus 35% for average banks during the same period. The good results were due to the improvement in net interest margin to 5.9% and the lower NPL of 4.3%, which brought down provisioning charges significantly. In addition, BNI recorded IDR833b loan loss recovery in 1H10, which helped boost
earnings; we anticipate more recovery in the future. We expect NIM to improve slightly as loan expansion and declining NPL should lead to earnings improvement.

Share liquidity and rights issue
The government sold 474m shares or 3.1% of the outstanding shares in a green-shoe offering. This reduced the government ownership to 73.3% and improved share liquidity. The plan to conduct a rights issue is pending parliament’s approval, and the bank expects to finalise this by the year-end to raise at least IDR6t. We are yet to take into account this Tier 1 capital injection, which will bring the bank at par with other large banks in terms of CAR and ability to grow.

Raise TP to IDR3,800 based on 2.5x P/BV 2011E
While the anticipated rights issue may provide some overhang, it would be positive for BNI’s future earnings growth. We raise our TP to IDR3,800 based on 2.5x P/BV 2011E, which is 1 STD above the average valuation in the past ten years. Downside risks include an economic slowdown and more than 200bps interest rate hike in less than 12 months.

CLSA Oil and gas update from Hernan Ladeuix

The EIA reported inventory data quite in line with consensus expectations. The surprise this week was China, which reported a paltry 3% YoY growth based on preliminary data. Please see attachment for more details.

· Crude oil inventories declined 0,8m bbl versus consensus estimates of 1m bbl drop. Crude oil inventories continue to be comfortable, within the 7-8% range above its 5y average.

· China was the surprise of the week. Preliminary oil consumption data for the month of July shows just 3% growth YoY, in sharp contrast with the 18% YoY growth in 1Q10 and the 11% YoY growth in 2Q10.

· Clearly, one month does not make a trend, but it is in line with the economic deceleration taking place in China.

· This is an important data point for the oil market sentiment. China demand growth has been an important driver for oil prices over the years

CLSA Anti-monopoly rules no cartel in cement sector by analyst Sarina Lesmina

· KPPU (Anti Trust Commission)' verdict yesterday said that they can't find clue of cartel in cement companies in Indonesia. Specific statement was "Based on price parallelism, excessive price and production and marketing fixing and excessive profit, the commission's panel did not find enough reason to say there is cartel".

· However, Benny Pasaribu, the Head of Panel advised to dismiss Indonesia Cement Association and for the government to take over the function of the association, saying that production realization data of each of the eight cement companies can be found in the cement association, hence providing the cement companies the opportunity to do concerted action.

· KPPU also advised government to set a ceiling price for cement to protect consumers.

Comment:
· KPPU' non-cartel findings were as expected. The case had been under KPPU's investigation for over a year. The hearing yesterday did not conclude whether government will take action on KPPU's proposal to dismiss the Cement Association and for government to set a ceiling price for cement.

· Maintain BUY on our top picks: Indocement and Holcim. Both offer the best operational and financial leverage to earnings upside

· Indocement is now trading at 15x PE11, and 14x PE12, offering 11% upside to our TP of Rp19,000/sh. Indocement is generating US$27 net profit on every tonne of cement it sells into the local market. Moreover, the company is able to add 6.3m tonnes of additional cement on existing capacity alone. Assuming constant margins (unlikely as operational leverage will lower costs), INTP could add US$175m extra to earnings, 45% of our forecast profit this year.

· Holcim is now trading at 12.5x PE11 and 10.3x PE12, offering 29% upside to our TP of Rp3,000/sh. Holcim Indonesia currently generates only US$13 per tonne in profit, much less than peers. This reflects high COGS, low operating leverage plus debt servicing costs. We forecast the company will be net cash by 2011, reducing interest costs, while the company can add 3.9m tonnes to output. Even assuming constant margins, full capacity would imply a 42% boost to our 2010 earnings projection. A US$5 per tonne increase in net shareholder returns would lift that percentage gain to a healthy 58% increase.

CLSA Indonesian Banks, Asian Profit Kings

Bret Ginesky looks at Indonesian banks. Through application of Dupont® analysis, we disaggregate the ROA by its primary components to identify the profitability drivers. Despite being more conservative (less financial leverage than their peers), Indonesian banks produce higher ROEs.

The top 3 Indonesian banks (BCA, Bank Rakyat, and Bank Mandiri) have an average ROA of 2.6% which represents a 70% premium to the non-Indonesian top 10 peer average of 1.5%.

Indonesian banks have higher operating expenses and provisions. However, combined with higher lending rates Indo banks provide an additional margin of safety. On a relative value matrix Indonesian banks remain attractively priced looking at both ROA and ROE, particularly Bank Rakyat and Bank Mandiri. We believe a higher valuation is warranted as profitability is superior based on ROA.

Key points from the report:
· Three largest banks (BBCA, BBRI, and BMRI) have the highest ROA in Asia.
· Indonesian banks employ less leverage than their peers.
· While ROA could see moderate contraction, ROE is operating from a position of strength as highly capitalized Indonesian banks could increase leverage to maintain profitability.
· Indonesian banks set themselves apart through higher NIMs. This is a function of low credit penetration (26% loans/GDP) and perceived higher risk of default due to historical events.
· Higher operating expenses at Indonesia’s top three banks are a function of archipelago logistics, lack of a centralized credit monitoring system and emerging market bottlenecks. Greater efficiency gains could help offset NIM contraction as competition drives rates lower.
· Provision/assets at Indonesian banks are double the peer average as implied risks remain elevated.
· Excess provisioning combined with higher lending rates provides banks with an additional margin of safety.
· In our view, a higher valuation is warranted as profitability is superior based on ROA. Indonesian banks are underleveraged when compared to Asian peers.
· Bret is advising clients to maintain OWT Indonesian banks.
· Bank Mandiri (BMRI IJ) and Bank Rakyat (BBRI IJ) continue to look attractive at current multiples based on ROA and ROE.

Citigroup Global Equity Strategist - An Old Conundrum

 De-coupling — Global government bond yields have fallen to multi-decade lows but equity markets don’t seem to care. While global stock prices have rallied 8% over the last few weeks, global bond yields have fallen 25 basis points.

 Equities Winning 6-2 — Over the last 11 years, there have been 10 occasions when global bond yields and stock prices have diverged. Equities have been proven ‘right’ six times versus bonds two times. Divergence was unresolved twice.

 Bond Yields Expected to Rise — This time, we expect the conundrum to be resolved through rising bond yields. Citi rate strategists suggest that a sustained global economic recovery and gloomy fiscal outlook should push yields up from their current historically low levels.

 What Should Equity Investors Do? — Falling bond yields didn’t help stock prices rise so rising yields shouldn’t be a major headwind for equity investors. We think those expecting a rise in bond yields should consider buying Japanese equities (local currency) and global cyclicals like Diversified Financials, and consider selling global defensives like Telecoms.

NISP Modernland to team up with China Harbour in Rp200.0bn property project (MDLN, Rp280)

Modernland Realty (MDLN) will team up with China Harbour Engineering (CHEC) to develop its Rp200.0bn Green Central superblock project in West Jakarta. The superblock itself will consist of 2 apartment towers, a commercial area and 2 hotel towers. Moreover, the company plans to spend Rp600.0bn to develop its land bank in Tangerang.

For this year, the company plans to spend Rp125.0bn of capex at maximum to develop its property projects. The company is currently in negotiation process to obtain Rp37.5bn loan from a bank consortium to finance the capex budget.

NISP TRAM secures loan facilities from three major banks (TRAM, Rp560)

Trada Maritime has secured several long term loan facilities from OCBC Singapore, ICBC, and Bank Mandiri with tenor reaching 5 years.

The company needs around US$200.0mn to purchase 5 new dry bulk carriers with capacity between 50 th – 70 th tonnes. US$30.0mn will come from internal cash, while US$50.0mn has already lent by Bank of Tokyo. This leaves the company with another U$120.0mn deficit.

Currently the company is still inspecting the vessels and will soon finalize the
purchase.

NISP Astra Agro books Rp4.00tn sales in 7M10 (AALI, Rp19,800, Buy)

Astra Agro Lestari (AALI) until 7M10 has booked Rp4.00tn of revenue or slightly up by 1.5% YoY from Rp3.94tn in 7M09. This is mainly due to lower CPO and kernel sales volume in 7M10 which are down by 2% YoY and 14.6% YoY to only 573.6k tons and 71.4k tons, respectively.

The company’s CPO and kernel selling price was up by 3.0% YoY and 32.0% YoY in 7M10 to reach Rp6,563/kg and Rp3,430/kg, respectively.

Currently, AALI is trading at 2011F PER of 11.8x and EV/EBITDA of 7.5x, Buy.

NISP Newmont Nusa Tenggara’s IPO to convey positive benefit for Bumi Resources (BUMI, Rp1,430, Buy)

It is reported that as an option to finance capex, Newmont is choosing to sell its share to the general public, where this plan will be proposed in the company’s EGM today. Initial news stated that Newmont aims for US$800.0mn of cash from banks, investors or other third parties for its capital expenditure, which will be secured by all or a majority of its assets. The company plans to sell 1.13bn of new shares (10%) in this IPO.

The EGM will also discuss the sale for as much as 880 million shares from PT Pukuafu Indah, one of the shareholders, during the IPO.

Newmont Nusa Tenggara is owned by Nusa Tenggara Partnership (56%), Indonesia Marbaga Investama (2%) Pukuafu Indah Enterprises (18%) and Multi Daerah Bersaing (24%). The latter is owned by Bumi Resources (75%).

A high IPO price for Newmont will help the value of Bumi’s ownership in Newmont, as the latter company has acquired 24.0% ownership with total cost of US$867mn. We also see that Newmont’s IPO may lower attractiveness of Bumi Resources Mineral, but it will provide clearer valuation for BRM as it owns 24% of Newmont. This would enable BRM to utilize the ownership, to obtain financing for development of its projects, such as Herald.

Separately, Bumi’s share price has freefell by 17.3% to Rp1,430 yesterday from Rp1,730 early this month, sparked by news reporting that China’s domestic thermal coal supply outstripped its demand, due to shrinking power consumption in energy-intensive heavy industries and an increase in hydropower generation. The news dragged down coal price (Newcastle) to the lowest level this year at US$88.5/ton last week or 17.9% lower from its highest level this year at US$107.9/ton in May 2010.

The news conveyed negative sentiment for Bumi Resources as lower coal price may affect Bumi’s ASP target for 2010F at US$67/ton, despite strong operational data in 1H10.

Nevertheless, recent hefty correction provide attractive valuation as Bumi is currently trading at 2011F PER of 9.3x and EV/EBITDA of 4.7x, Buy.

JPM Astra International - No respite in volume momentum

• Car volumes up 72% y/y in July, 2W volumes accelerate: Indonesian vehicle sales surged to 72, 130 units in July, up 72% y/y and 2.5% m/m. More impressively, 2 wheeler volumes jumped 9% m/m to just under 700,000 units, up 44% y/y. While 4 wheeler sales volumes were flagged in the local press (Bisnis Indonesia), we see the 2 wheeler performance giving impetus to Astra’s stock performance in the short term.

• August outlook: Demand healthy – supply a potential factor: Our feedback from the recent Auto show and dealer visits in Jakarta suggests that demand in August remains strong. However, some question marks over the ability of factory output to match demand remain, given typically lower overtime hours engaged during the fasting month. If that is the case, we expect the spillover to keep September volumes healthy.

• Outperformance potential from earnings revisions and relative rerating: Our FY10 EPS forecasts for Astra remain 8% higher than consensus, and we remain optimistic that strong vehicle sales will drive Street earnings revisions. We also note that Astra has underperformed the JCI by over 5% in the last month, bringing valuations to a 4% premium on a 12M forward P/E. We believe that the stock deserves a wider premium on account of growth potential, RoE and Governance relative to the broader market and — see outperformance potential from both relative re-rating and earnings expansion.

• Reiterate OW, Rp55,000 PT: We reiterate our June 2011 P/E-based price target of Rp55,000 (which is broadly in line with SoP valuation). The key risks for Astra are: a) that it is a consensus overweight and possibly crowded trade; and b) we see the possibility for vehicle sales to ease up in 4Q, as most dealers are likely to be ahead of targets for the year; this could impede stock outperformance; c) Earlier-than-expected tightening in liquidity could constrict the 4 wheeler cycle.

Credit Suisse Astra International - As expected, another record high in July sales

● July auto sales recorded another record high for both cars and motorcycles, driven by: 1) low interest rates, 2) a stable and positive macro environment, and 3) a stronger rupiah rate, enabling companies to offer more discounts/promotions. We believe that the July auto expo also helped contributing to the strong growth.

● Although the YTD YoY growth looked to be higher than our estimates (+45% for cars and +15% for motorcycles), we believe that the YoY growth will slow down for the rest of the year due to the higher-base effect in 2H09.

● Astra’s market share remained solid, especially in motorcycles, which recorded a 48% market share in July.

● Interestingly, despite the strong earnings and volume numbers in the past one month, Astra’s share price has underperformed the market by 5% in the past five months. We maintain our NEUTRAL rating on the stock with a 12% potential upside, and would only turn more positive if the stock were to retreat below the Rp45,000 level.

JPM NO cement cartel in Indonesia

Cement decision – the anti monopoly body (KPPU) did not find evidence of a cartel among the eight Indonesian cement producers. A relief for the three cement stocks Indocement (O/W), Semen Gresik (O/W), and Holcim. On the run-up to this important event, SMGR has underperformed the JCI by 9% over the past 1-mo, Holcim lagged by 5%, while Indocement has traded in-line. My take – buy Semen Gresik (SMGR) on FY11 P/E estimate of 12.1x (vs. Indocement on 15.3x).

CIMB Company Update – Gudang Garam – Coming together

Maintain Outperform and target price of Rp41,600 for GGRM, based on 15x CY11 earnings, in line with our index target. We maintain our earnings forecasts following a recent visit to the company. The company continued to raise its selling prices gradually in June and July, particularly for SKM cigarettes. The price increases have exceeded the excise tax growth at the beginning of the year, strengthening our expectation for margin expansion. Much lower excise tax growth in 2011compared with previous years should also bode well for Gudang Garam. We expect stock catalysts from stronger gross margins on the back of timely price increases, low growth in the excise tax, and lower costs of interest.

Mansek Panin Bank:update from a company visit (PNBN,Rp1,180,Sell,TP: Rp1,050)

We visited Panin Bank yesterday with the following highlights:

The bank expects loans to grow by 30.0%yoy this year to Rp56tn,mainly
supported by commercial and consumer segment.

The bank estimated a gain of Rp300bn from the selling of its 14%
ownership in ANZ Panin Bank to ANZ Banking Group Limited.This
transaction is currently awaiting for BI ’s approval,hence no certainty yet
when the gain will be booked.

There is no further news on the possible acquisition of Panin Bank by other
parties.

At current price,Panin Bank is trading at 2011F P/BV of 2.3x and PER of
19.3x.We maintained our sell recommendation on the counter.

Mansek Cement industry:No evidence of cartel in cement industry

Anti Trust Committee concluded that 8 cement producers are not involved in any cartel.However,the Committee gives several recommendations to government,such as (1)to abolish cement industry association,(2)to set cement ceiling price,and (3)to guarantee cement availability at affordable price across Indonesia.

This decision is not surprising as we have anticipated it before.Currently, we have Neutral recommendation on cement companies.

DBS Telkom: Hold; Rp8,600; TP Rp8,500; TLKM IJ

Standoff between SingTel-Telkom on tower sale

According to Bisnis Indonesia , TLKM and SingTel have not reached agreement yet on takeover plan of 9,000 telecommunication towers. SingTel currently holds 35% stake in Telkomsel, with other 65% held by TLKM. Based on Indonesia Government regulation, telecommunication towers must be managed by domestic companies and foreign ownership is prohibited. TLKM is ready to takeover and restructure 9,000 towers, which will be operated under its subsidiary, Mitratel. For this purpose, TLKM has to allocate budget around Rp800m – Rp2bn per unit of tower or in total amounting to Rp2.5-3.78tr as takeover compensation to SingTel. However, the negotiation has not culminated into an agreement between the two companies.

DBS Bank Mandiri: Buy; Rp5,900; TP Rp7,000; BMRI IJ

Green NPL recovery target achievement

Bank Mandiri (BMRI) would like to close the year, achieving its loan recovery target of Rp1tr. Till July 2010, BMRI has managed to book NPL recovery of Rp700bn or 70% of annual target. In addition, BMRI plans to book around Rp279-290bn from Benua Indah’s loan collaterals auction in September. Benua Indah has been a big debtor since crisis era in 1998 with total outstanding loan of Rp480bn. On top of that, BMRI has reached agreement with Bakrie Sumatra Plantations (UNSP) to sell Domba Mas where UNSP has paid Rp935bn as first installment of acquisition price in June. Domba Mas has indebted to BMRI for Rp3.3tr. However, the acquisition negotiation progress with UNSP has been put off. It is reported that BMRI will cancel the agreement and look for other investors should UNSP not finalize its commitment. BMRI is also restructuring 20 debtors including Garuda Indonesia which will execute its IPO plan in November. Therefore, BMRI will sell its stake in Garuda Indonesia and book proceeds from IPO this year.

Macquarie Indonesian Strategy - State of the Nation address

Event
Indonesian President Susilo Bambang Yudhoyono (SBY) gave his State of the Nation address, revealing the 2011 budget and long-term economic growth targets. Overall, we believe that the GDP growth target for 2011 is conservative at 6.3% while the SBI rate of 6.5% looks aggressive. We believe the government understands what is important, given it has increased infrastructure development spending by 28% and civil servant and military salaries by 10%. Maintain Overweight on Indonesia.

Impact
Not so exciting on the macro indicators. The government's target of GDP growth of 6.3% looks unexciting to us, given that the running rate for the GDP growth in 2010 alone will reach around 6.2%. Our economist believes that economic growth could reach 6.5% in 2011. On the interest rate, the government is maintaining the three-month SBI rate of 6.5%, which is aggressive vs our expectation of a 50bp rate increase by end-2010. But Indonesia is currently one of the few countries in the region that is still experiencing a positive real interest rate environment; in contrast, countries such as India, China and Thailand have negative real interest rates.

Within expectations on state revenue. The government expects state revenue, including grants, to reach Rp1,086tr, up 10% YoY, and for tax revenue to contribute 77%, up 13ppt. Non-tax revenue (coming from revenue from the oil and gas sector and SOE dividend) is expected to contribute only Rp243tr in 2011, a 2% fall vs Rp247tr expected in 2010.

Government expenditure is more exciting; infrastructure spending +28% and civil servant salaries +10%. The interesting point in the budget highlights was the government's plan to increase infrastructure spending by 28% next year to Rp121.7tr (US$14bn). This is the highest increase among all expenditure items. Total government expenditure is expected to hit Rp1,202tr (19% of GDP), up 7% YoY while the central government will take up 69% of the expenditure allocation. Civil servant salaries will increase by 10% in 2011.

Development focus for 2011 and long-term economic target. SBY mentioned that the government will focus on reducing unemployment from 7.4% to 7.0% and the poverty rate from 13.3% to 12.5%. SBY revealed that the government had raised its economic growth target for 2014 from 7% to 7.7%, aiming to create 10.7m jobs.

Outlook
Positive overall. Although we think that the economic growth target looks conservative, the overall the budget looks positive and we believe focuses on what is important for the country. We believe Indonesia continues to pursue structural reforms by improving infrastructure spending and is trying to curb corruption by increasing salaries of civil servants. (Note that the lowest monthly salary in public service and police/military will be US$225 and US$295 from 2011, respectively, double and triple the minimum wages in Indonesia).We maintain our positive view on the country. Our preferred big-cap picks are Astra International, Bank BNI, BRI, BCA and Adaro.

Insiderstories Arch buys US$22.66 mio UNSP notes

Publicly listed palm oil producer PT Bakrie Sumatera Plantations Tbk (UNSP) today reports a new foreign investor dubbed Arch Advisory Limited has bought US$22.66 million equity-linked notes, increasing the notes issuance to US$100 million.

In a public announcement submitted to Indonesia Stock Exchange today, Bakrie Plantations Corporate Secretary Fitri Barnas said the company had issued US$77.34 million equity-linked notes on March 11 2010.

"Pursuant to trust deed and terms and conditions of the notes issuance dated on Fabruary 18 2010, we can issue up to US$100 million equity-linked notes," he said.
During the first half of this year, Bakrie Plantations suffers a 26.67% drop in its first half earning on the back of soaring financial interest charges.

The company posted Rp99.14 billion or Rp8.50 per share in the first half this year (1H 2010) from a year earlier of Rp135.19 billion or Rp36 per share. It has been burdened by soaring interest charges of Rp212.91 billion in 1H 2010, a 90.93% surge from a year earlier of Rp111.51 billion.

Operating profit reached Rp332.71 billion in 1H 2010, a 37.97% increase compared to the same period last year of Rp241.15 billion. Bakrie Plantations booked Rp1.13 trillion of net sales, a 8.65% rise from a year earlier of Rp1.04 trillion.

Bloomberg Rubber Surges to Three-Month High on Demand Optimism as Stockpiles Grow

Rubber climbed to the highest level in more than three months on optimism that demand for tires will continue to grow after stockpiles expanded and on concerns of limited supply as rain in southern Thailand disrupted tapping.

The January-delivery contract climbed as much as 2.9 percent to 289.9 yen a kilogram ($3,395 per metric ton) on the Tokyo Commodity Exchange, the highest level since May 6, before settling at 289.4 yen.

“The market was worried over output in Thailand as rainfall continues,” said Chaiwat Muenmee, an analyst at Bangkok-based DS Futures Co. “Buyers, especially from China, have returned, which helped boost the market,” he said.

China’s auto sales may rise to 16 million this year, the China Association of Automobile Manufacturers said on Aug. 10, boosting its forecast from a previous estimate of 15 million. The country’s passenger-car sales rose 13.6 percent to 946,200 in July, the association said.

India’s passenger car sales in July surged 38 percent to a record of 158,764 vehicles as economic growth and new models from Ford Motor Co. and Volkswagen AG boosted demand, the Society of Indian Automobile Manufacturers said in a statement on Aug. 9. That’s the highest monthly total the association has recorded, said Vishnu Mathur, director general of the grouping.

January-delivery rubber in Shanghai gained as much as 1.1 percent to 25,590 yuan ($3,768) a ton, before closing at 25,375 a ton.

“The Shanghai market took the lead and Tocom followed,” partly because of physical buying, said Felix Yeo, trading manager at the Singapore unit of Marubeni Corp.

China Stockpiles

Natural rubber inventories in China expanded for a third week by 1,667 tons to 21,875 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Aug. 13.

Stockpiles held at Japanese warehouses climbed 3.7 percent to 3,396 tons on Aug. 10, according to data from the Rubber Trade Association of Japan.

Cash prices in Thailand advanced 0.7 percent to 105 baht ($3.32) per kilogram, boosted by demand from rubber processors and on worries that rainfall will limit supply, the Rubber Research Institute of Thailand said on its website today. LINK

Bloomberg Nickel May Rise 14% as Consumption Climbs, According to Societe Generale

Nickel may rise 14 percent in the fourth quarter as higher stainless-steel production in China drives a gain in usage, according to Societe Generale SA.

Nickel for immediate delivery will probably average $26,835 a metric ton in the next quarter, compared with the bank’s estimate of $23,500 for the current period, David Wilson, director of metals research at Societe Generale in London, said today by phone. China’s stainless-steel output probably will climb at least 25 percent this year, he said.

“Prices above $24,000 a ton by the end of September are quite likely,” Wilson said. Spot nickel slipped $5 to $21,875 at 1:21 p.m. on the London Metal Exchange, for a 19 percent advance in 2010.

Asian prices for stainless steel have gained 8.7 percent from June’s low, according to figures from Metal Bulletin on Bloomberg, and are up 20 percent this year. About two-thirds of all nickel is used to make the alloy. Manufacturers of stainless steel are seemingly “gearing up for higher production in China,” according to Wilson.

“Prices partly reflect rising nickel costs, but the key point is if there wasn’t consumption, it would be difficult to pass on any price rises,” he said.

Wilson also pointed to higher production of nickel in China, the world’s largest consumer, as signaling improved local demand. Output was 18,043 tons in July, up 1.4 percent from June and 25 percent higher than at the start of the year, he said, citing figures from the Chinese National Bureau of Statistics.

Usage in Europe

Chinese production of stainless steel probably will climb to more than 11 million tons this year from 8.8 million tons in 2009, according to Wilson.

European nickel consumption also will probably increase for the rest of the year as mills resume production after maintenance work, he said. China will use about 31 percent of the world’s nickel this year and Europe will consume about 25 percent, Barclays Capital estimated in a report on Aug. 13.

Spot nickel has averaged $21,014 a ton this year on the LME. Inventories tracked by the exchange have dropped 31 percent to 115,968 tons from this year’s peak on Feb. 8.

Nickel supply fell 19,000 tons short of demand in the first half of 2010, compared with a year-earlier, 22,800-ton surplus, the World Bureau of Metal Statistics said today. LINK

Associated Press Oil prices fall on report of high crude supplies

Crude prices resume slide after gov't report shows more oil in storage than expected

NEW YORK (AP) -- Oil prices settled lower on Wednesday as the government said crude supplies shrank less than analysts expected and stock markets showed only modest gains after Tuesday's rally.

Benchmark crude lost 35 cents to settle at $75.42 a barrel on the New York Mercantile Exchange. The contract dropped as low as $73.83 before recovering most of its losses.

Gasoline pump prices dropped by another half cent to a national average of $2.737 for a gallon of unleaded regular. That's down 4.3 cents from a week ago and 10.3 cents above a year ago.

In its weekly report the Energy Department's Energy Information Administration said crude supplies fell last week by 800,000 barrels, considerably less than the drop of 2.25 million barrels that analysts forecast in a survey by Platts, the energy information arm of McGraw-Hill Cos. Gasoline stocks were virtually unchanged and supplies of distillate fuels -- like diesel and heating oil -- rose by 1.1 million barrels, about as much as expected.

U.S. refineries ran at a surprising 90 percent of total capacity, a rise of 1.9 percentage points from the prior week. Analysts expected capacity to slip to 87 percent. More...

Financial Time Vietnam devaluation fails to stem dong’s fall

Vietnam must have hoped that Tuesday’s devaluation of the dong would stem the downward pressure on the currency, but on Wednesday it was trading even lower on the black market suggesting the possibility of further devaluations.

The central bank moved to devalue the dong by two per cent to 18,932 against the US dollar in a bid to stem the country’s ballooning trade deficit. On Wednesday, however, the dong traded even lower in the black market, falling to 19,480 from 19,320 the previous day.

Earlier this week, a gap opened between the commercial bank rate of 19,100 to the dollar and the black market rate, which hit 19,260 on Tuesday. The central bank hoped the devaluation would close the gap, but instead the black market rate continued to fall.

Vietnam’s trade deficit hit $7.4bn in the first seven months of this year, double the rate for the same period last year. Economists said the continuing pressure on the dong indicated that Vietnam’s trade deficit would continue to expand, and that the economy might have trouble meeting World Bank growth forecasts of 6.5 per cent for the year. More...

CPO futures down on profit-taking

CPO FUTURES
CRUDE palm oil futures prices on Bursa Malaysia Derivatives ended lower yesterday on profit-taking activities and long liquidation, dealers said.

Players stayed on the sidelines after lower soyabean prices on the Chicago Board of Trade, said a dealer.

September 2010 and October 2010 declined RM35 each to RM2,735 and RM2,650 a tonne respectively, November 2010 was RM36 lower at RM2,610 and December 2010 fell RM34 to RM2,602 .

Volume was higher at 28,150 lots compared to 21,589 lots on Tuesday while open interest rose to 65,245 contracts from 65,056 previously. On the physical market, August South fell RM10 to RM2,760 from RM2,770 previously.

RUBBER
THE rubber market ended slightly higher yesterday as regional demand for the commodity had picked up ahead of festive season, dealers said.

At noon, the Malaysian Rubber Board official physical price for tyre-grade SMR 20 rose 5.5 sen to 967.00 sen a kg, from 961.5 sen on Tuesday, while latex-in-bulk added 1 sen to 694.0 sen, versus 693.0 previously.

The unofficial sellers closing price for tyre-grade SMR 20 rose 6 sen to 969.50 sen from 963.50 sen yesterday while latex-in-bulk rose 694.50 sen from 692.50 sen previously.

TIN
STRONG regional demand pushed tin price on the Kuala Lumpur Tin Market (KLTM) to settle US$420 (US$1.00 = RM3.15) higher at US$21,320 per tonne yesterday, dealers said.

The other factor was the stronger performance of the commodity on the London Metal Exchange (LME), they said.

LME, which usually influences the movement of global tin prices, saw tin price closing US$250 higher at US$21,350 per tonne.

"At the same time, market traders are catching up with LME, especially after a lower premium of US$180 was posted yesterday," one of the dealers said.

At KLTM, bids overwhelmed offers by 188 tonnes to 43 tonnes with the key players comprised Japanese, European and local traders.

Total turnover rose to 83 tonnes from 66 tonnes on Tuesday while the price differential between KLTM and LME widened to a premium of US$350 a tonne from US$180 per tonne. - Bernama LINK

Rights Issue Mandiri Targetkan Raup Rp14 T

PT Bank Mandiri Tbk menargetkan penerbitan saham baru (rights issue) perusahaan sebesar 7 persen bakal meraup dana sebesar Rp 13-14 triliun. Dana tersebut diharapkan mampu meningkatkan permodalan perseroan.

"Untuk sampai tahun 2014, dana itu sangat membantu permodalan. Bahkan Mandiri tidak perlu lagi cari permodalan," kata Direktur Utama Bank Mandiri Zulkifli Zaini dalam Buka Puasa Bersama Direksi Bank Mandiri di Hotel Four Season, Kuningan, Jakarta, Rabu malam, 18 Agustus 2010.

Menurut Zulkifli, target dana tersebut diperoleh dari perhitungan jumlah saham yang bakal dilepas sebesar 7 persen atau sebanyak 2,4 miliar lembar dikalikan harga saham per 30 Juni 2010 sebesar Rp6000 per lembar. "Waktu itu kami belum tahu persentase mau menjadi 40 persen. Sekarang sudah lebih detail," katanya menjelaskan kenaikan target dana rights issue.

Manajemen mengharapkan pelaksanaan rights issue dapat dilaksanakan pada tahun ini. Perhitungan manajemen, jika laporan keuangan menggunakan laporan 31 Juli 2010, right issue bisa dilaksanakan pada 13 Desember 2010. More...

UBS Investment Research Bumi Resources: Addressing short-term maturities

Mapping out the repayment components
We have received quite a fair bit of questions on how Bumi Resources (Ba3/BB) will address its short-term debt maturities. We attempt to map out the repayment components in this article. Bumi has in total USD965m debt maturities in the nine months following Mar 2010 (see Table 1). We have compiled a list of the potential resources: 1. USD60m cash on hand (as of Mar 2010); 2. Redemption of USD225m short-term investments from Recapital; 3. USD210m proceeds from asset sales (sale of Enercorp from Thionville Financier and PT Mitratama Perkasa from PT Cahaya Pratama Lestari); 4. 473m Treasury shares (26-July closing: USD90m); 5. USD300m loan repayment from Bukit Mutiara; and 6. Non preemptive shares issuance (the company has planned for USD508m). This assumes operating cash flow just covers capex & investments and dividends. Cash on hand may have changed as Bumi has raised two loans subsequently to Mar 2010 balance sheet date according to its disclosure (USD50m from Deutsche Bank and USD75m from UBS), this may change the cash balance on hand. We also note that there are some moving parts, for example, the success of Berau/Bukit Mutiara in refinancing at least USD900m (USD850m has been secured so far via bonds and loans), the cash component in the rights issue, and the timely repatriation of cash from Thionville Financier, and Cahaya Pratama Lestari and Recapital. After all, Bumi may still go for refinancing should market conditions allow. As we have highlighted earlier, refinancing risk is a key concern which caps the potential upside of the bond. We maintain Hold on BUMIIJ’16 (mid-yield 11.23%).

The CB puts are most critical
We think it is most critical for Bumi to address the two CB puts, among the USD965m short-term maturities. They amount to USD129m and USD302m (totalled USD431m), maturing in Oct and Nov 2010 respectively, taking into consideration of the put premium and assuming everything is put. This could potentially be handled by 1. USD60m cash on hand; 2. USD225m in short-term investments; and 3. USD210m payment from asset sale. Note that the obligation could be lower than USD431m if not everything is put back. By meeting the CB puts, we think it would go a long way in alleviating Bumi’s re-financing risks. The other key obligations are with investment banks (e.g. Credit Suisse and JP Morgan), and in particular, the USD300m from Credit Suisse contains an extension clause which allows Bumi to defer the payment till Oct-2012 from Oct-2010 with an amortising schedule starting from Nov-2011.

Negative headlines also an overhang
Another overhang on Bumi’s bond performance is the negative headlines on corporate governance. News reports two weeks ago suggested that there is a material difference in the COGS record in Bumi’s 2008 and 2009 financial against Darma Henwa (DEWA, 44% owned subsidiary). Bumi responded that there was a formatting problem and stressed that the total COGS remains unchanged. Moreover, last Thursday a local newspaper also reported that the Jakarta Stock Exchange imposed an IDR500m fine each on Bakrie & Brothers and two affiliated companies after these companies could not explain a deposit discrepancy in their financial reports. Meanwhile, Capital Market Supervisory Board stated that the agency could also continue the investigation on the case if deemed necessary.

UBS Bumi Resources (BUMI Buy PT 3,200): Buy as the chickens come home to roost…

Sales Focus: Bumi Resources

Two years ago, BUMI was hit with an unfortunate double whammy:
1 July 2008: Bapepam announced new margin trading requirements that required private investors using margin to meet minimum wealth and income restrictions and to restrict margin to 50% of the value of transactions.

2 July 2008: Benchmark coal prices decline overnight by $20 per tonne.

The BUMI stock price immediately began a long and painful collapse, losing 96% of its value (peak to trough) against a backdrop of repo agreements, margin calls, political strong-arming and enforced stock market closure.

The Bakrie group was left with the job of picking up the pieces. Simply put, the actions they took in late 2008 were sufficient to buy two years, and their chickens are coming home to roost right around now.

In summary, BUMI has USD 965 m of debt maturing in the nine months following March 2010. CB puts, amounting to USD 129 m and USD 302 m respectively and maturing in October and November 2010, are the most critical. August and September are also key months, as it is important for BUMI to show some traction on assets sales (and indeed, turning receivables related to past asset sales into cash) and the long-touted non-preemptive rights issue.

The newsflow on BUMI has been relentlessly negative in recent months
The list of negatives is long: Tax investigations, fraud investigations, funds missing from the bank accounts of other group companies, the IPO of the non-coal assets blocked by Bapepam, rumours of weather-related production shortfalls, continuous delays to asset sales and confirmation that CIC is unlikely to participate in the long-touted non-preemptive rights issue.

There are fresh rumours (perhaps contributing to Monday’s sharp fall) that BUMI will be downgraded in the upcoming August MSCI reweighting. This didn’t happen overnight, but might happen in the next review in 3 months.

Moreover, the fact that shipments are going through this week at a Newcastle price of $85/tonne (down from $100+ a few short weeks ago) means that it’s squeaky bum time for the number crunchers at BUMI.

However, there are some glimmers of hope
BUMI has repaid some of its banks early in recent weeks and the group has succeeded in raising funds at Berau ($850 mn bond issue) and Bakrie Telecom ($300 m in vendor financing). In short, whenever cash is needed, it is duly produced.

Another positive sign is that a buyer acting through local broking house Sinarmas Sekuritas has bought BUMI to the tune of approx. $200 million in the past three months. While various hypotheses exist as to who might be the buyer through Sinarmas Sekuritas (the Sinarmas group, Noble/Glencore, the Chinese), the identity remains a mystery and could provide surprise upside for the stock. Our instinct is that it is not the Bakries buying.

It’s also worth bearing in mind that there is potential for the company’s debts to be settled on a non-cash basis. In Asia, the culture allows for a greater degree of flexibility than in other markets.

The bottom line is that our credit analyst Selina Yu is of the view that the group will make it through the current cash crunch.

Should we be buying in BUMI’s darkest hour?
The short answer is no, not yet, but possibly soon. Our read is that the chickens are at the door of the henhouse, but not yet perched on the roost.

The chart looks very ugly and a new low was reached at close of trading today, raising concerns that there may be further margin calls. Our advice is to keep your ammunition dry and await a better opportunity.

Disclaimer: BUMI has a reputation for being a ‘leaky’ company from an operations and corporate governance perspective. For many of you, this company won’t tick the right boxes.

Kontan Grup Bakrie bakal mengutang lagi

JAKARTA. Grup Bakrie bakal berutang lagi. Sumber KONTAN di kelompok usaha ini mengungkapkan, hingga akhir tahun ini, sejumlah perusahaan milik keluarga Bakrie bakal merilis obligasi global sekitar US$ 550 juta-US$ 600 juta.

Perinciannya, PT Bakrie & Brothers Tbk (BNBR) akan melepas obligasi US$ 150 juta, PT Bakrie Sumatra Plantations Tbk (UNSP) sekitar Rp 200 juta-US$ 250 juta, dan PT Energi Mega Persada Tbk (ENRG) senilai US$ 200 juta. "Obligasi itu akan dipakai untuk melunasi pinjaman," ujar si sumber yang ogah disebut namanya itu, Senin malam (16/8).

Obligasi BNBR, lanjut si sumber, rencananya terbit paling awal, yaitu sekitar September mendatang. Setelah itu, baru obligasi anak usahanya yang dijual.

Si sumber bilang, hasil penerbitan obligasi tadi akan digunakan membayar utang-utang jangka pendek perusahaan, terutama pinjaman lewat gadai saham alias repurchase agreement (Repo). Maklum, seiring dengan melorotnya harga saham emiten grup Bakrie, BNBR harus menambah jumlah saham yang menjadi jaminan repo itu. "Utang-utang repo itu sangat merepotkan kami," lanjutnya.

Merujuk laporan keuangan BNBR di kuartal I-2010, nilai repo BNBR sekitar Rp 314,99 miliar. Repo tersebut dilakukan, antara lain dengan Recapital Securities Rp 155 miliar, Bapindo Bumi Sekuritas Rp 50 miliar, Sekuritas Indopasific Investasi Rp 29 miliar, dan Panin Sekuritas Rp 25 miliar.

Adapun jumlah pinjaman jangka pendek BNBR, termasuk utang anak usaha, mencapai Rp 4,03 triliun. Utang BNBR yang harus dilunasi tahun ini, antara lain utang kepada Sinarmas Sekuritas Rp 685,41 miliar, Bank Sarasin-Rabo (Asia) Ltd Rp 455,75 miliar, dan Harus Capital Pte Ltd senilai Rp 82, 035 miliar. Pinjaman dari Bank Sarasin jatuh tempo 4 Desember 2010 dan utang ke Harus Capital berakhir 14 September ini.

Senior VP Corporate Affairs BNBR Sidharta Moersjid mengakui, BNBR sedang mengkaji penerbitan surat utang global. Namun, ia enggan menjelaskan nilai obligasi yang akan dirilis. "Pastinya dana itu akan dipakai untuk melunasi repo dan pinjaman jangka pendek," ujarnya, pekan lalu.

Direktur Keuangan UNSP Harry Nadir juga mengakui bahwa perusahaannya berniat menerbitkan obligasi global. Rencananya, dana hasil penjualan surat utang itu akan digunakan melunasi pinjaman yang jatuh tempo tahun depan, senilai US$ 160 juta. Namun, Harry belum bisa memastikan waktu penerbitan dan nilai obligasi yang akan dijual itu. "Minimal US$ 160 juta," ujarnya pada KONTAN, beberapa waktu lalu.

Pengakuan berbeda datang dari Direktur Keuangan ENRG Didit Ratam. Menurut Didit, pihaknya belum punya rencana menerbitkan obligasi global dalam waktu dekat ini. "Kami tidak punya pinjaman jatuh tempo tahun ini," tampiknya, kemarin (17/8).

Pengamat pasar modal Irwan Ariston Napitupulu menilai, rencana grup Bakrie merilis obligasi global bisa menjadi pedang bermata dua. Di satu sisi, jika obligasi itu diminati investor asing, berarti kepercayaan investor asing terhadap grup Bakrie masih ada.

Sebaliknya, jika asing meminta kupon tinggi plus jaminan aset yang bagus, penerbitan obligasi ini justru akan membebani perusahaan. "Investor juga jadi takut pegang saham grup Bakrie," kata Irwan. LINK

Mandiri Sekuritas Weekly Debt Research (9-13 Aug-2010)

Taking the high road?

Review: high volatility. Volatility in the rupiah bond market increased during the week. After extending the rally in the first three days of the week, bond prices dropped significantly on Thursday before closing slightly higher at the end of the week. The 10-year government bond yield fell to a fresh low of 7.90% on Wednesday before rising to 8.1% on Thursday. Overall average government bond prices fell 0.59%, according to Mandiri Sekuritas Government Bond Index. Thus, total return investing in the government bonds is 16.6% year to date with average yield to maturity! up by 12 bps to 8.86%. The average return in the last 8 years was 15.6% p.a. In terms of USD, total return was higher to 21.4% as rupiah strengthened significantly this year.

Transaction volume was relatively high. Total value of the transaction in the secondary bond market was Rp5.9tn (vs. Rp5.5tn on the previous week) on average per day. The most actively traded security was the newly issued long-end series such as the 11-year FR53 and the 21-year FR54; both comprising about 16% of the total trading volume during the week. The FR53 was traded at 99.9, down by 1.9 percentage points yielding 8.22% from a week earlier. Meanwhile, the FR54 was down by 2.0 percentage points to 103.25, yielding 9.29%. Our fa ir prices for those bonds are 98.95 and 103.53, thus we think FR53 is traded above its face value, meanwhile the FR54 looks attractive.

What’s new?
The government plans to reduce T-bill (SPN) issuances. After announcing the plan to cut its remaining 2010 debt issue by Rp15tn (as budget deficit expected to narrow to 1.5% of GDP from earlier projection of 2.1%), director general of government debt management said Thursday that the government will reduce T-bill (SPN) issuance this year. We think there are two views on the plan, in my opinion: (1) The government is trying to reduce re! financing risk as there will be Rp65tn bonds maturing in 2011. Another action to mitigate refinancing risk is to use excess cash to buyback bonds, and switch bonds frequently. The Government bought back Rp168bn of bonds with a maturity date of Nov. 20, 2012 on Thursday (2) The government started to worry about strong foreign capital inflows. Demand for SPN from foreigners has been very strong after Bank Indonesia introduced mandatory 1-month holding period for its SBIs. Consequently, SPN attracted strong bids i.e. Rp7.5tn on average during auctions in the last three months. Due to the strong demand, yield of the SPN has also been below BI rate. In the last auction, the average yield awarded was 5.8% vs. BI rate of 6.5%. As the 1-year LIBOR is still low (i.e. 0.37%) and 1-year currency swap is 5.3% foreigners will still get positive result investing in SPN. The government’s plan to reduce SPN issuance might trigger yield curve to steepen as the short-term bond yield supply will be less while demand is still high. However, assuming that CDS 1 year (72.8bps) and currency swap rate are stable, the SPN yield of 5.8% will discourage arbitrage motive. Thus we think the downside yield for SPN is also limited, unless investors have naked position. Long term average of the yield of SPN 1 year vs. T-bill 1year is 7.99ppt! vs. curre ntly the spread is only 5.7ppt.

Bond auction result: total bid was still high. Total bid on the bond auction on Tuesday was still high reaching Rp17.2tn- higher than in the previous auction of Rp13.4tn. Demand for the short-term paper was still impressive with the bid for the SPN20110707 reaching Rp7.9tn or almost 46% of total bids. The average yields awarded for the SPN20110707, FR27, FR53 and FR54 were 5.84%, 7.42%, 7.96% and 8.94%, with the highest yields being 5.84%, 7.47%, 8% and 8.97% respectively. Thus, the government has issued Rp135.2tn (incl. global bonds issuances i.e. US$2bn) or almost 8! 3% of the new total target to finance budget deficit.

The Federal Reserve renewed its purchases of long end government debt. The U.S. Treasuries market rose after the Federal Reserve said it would renew its purchases of government debt, in a bold step to avert a double-dip recession. The Fed will deploy money from maturing agency bonds and mortgage-backed securities to buy long-dated Treasuries that are estimated to be between $10bn and $20bn a month from its mortgage assets to Treasuries. This action make the yield spre! ad betwee n two-year and 10-year tenors to shrink to 225 bps, the smallest margin since May 2009- long term average spread is 139bps. This also gives a spread between the 10 year rupiah bond against US Treasury note rose to 544bps. The average long term spread is 721bps, while historically when the spread is below 500bps, bond prices usually decreased

Mandiri Sekuritas UNVR: Look at risk-adjusted return

UNVR posted 1H10 net profit of Rp2.4tn (+13.9%yoy, -19.1%qoq), in line with our and consensus estimates. Net profit’s qoq decline was due to the jump in selling expenses of 27.5%yoy and 16.3%qoq. Our observation on major consumer goods stocks revealed that UNVR has the highest absolute share price return of 28.1% CAGR00-10, and highest risk-adjusted return of 4.4x using Sharpe ratio. Incorporating dividend payment, this ratio could be higher as it usually pays rich dividend payout of 80-100! %. However, at current price, the stock is trading at PER10-11F of 34.5-29.1x, which we believe has already incorporated UNVR strong fundamental and share price performance. Therefore, we have a Neutral call at TP of Rp16,000/share.

1H10 results were in line with expectations. Unilever posted 1H10 net income of Rp2.4tn (+13.9%yoy, -19.1%qoq). These figures represent some 48% of our and consensus estimates. Despite of revenue growth, operating profit contracted qoq mainly due to higher promotional expenses that rose by 27.5%yoy and 16.3%qoq.

Share price reflects fundamental performance. Our observation on major consumer goods companies in Indonesia and abroad revealed that UNVR delivered the highest share price return since 2000 with CAGR of 28.1%, compared with local peers average of 12.3%, and international peers of 2.6%. Note that this calculation underestimates UNVR true performance as it ignores dividend payment that the company usually pays at 80-100% payout ratio, aga! in, highest among its peers.

Highest Sharpe ratio (risk adjusted return). Still from the same observation, we found out that UNVR has the highest risk-adjusted return calculated using Sharpe ratio (stock price return in excess of risk-free rate, divided by standard deviation of stock price return) for 2000-2010 period. Its 4.4x Sharpe ratio is significantly higher than its local peers’ average of 0.6x and international peers of -0.2x. Highest absolute and risk-adjusted return, as well as solid fundamenta! l perform ance has become justification for the stock to be one of investors’ favorite holding so far.

Neutral recommendation. Our DCF valuation with WACC of 11.5% and TG rate of 7.0% results in TP of Rp16,000/share. At our TP, the stock is trading at PER10-11F of 33.2-28.1x, a premium to its peers to compensate for its strong fundamental performance and high Sharpe ratio. At present, we view that investors have priced in the positives of UNVR. Upside risk to our TP is investors’ bigger trust on UNVR as a safe-heaven stock, which is a very subjective assessment.

UBS Indosat (Buy PT 6,900): Operational inline, bottom line disappoints

H110 EBITDA came in at Rp4.6 tn (+7% YoY) represents 46% of UBS 2010 estimate of Rp10.2 tn. H110 net income accounts for only 19% of UBS 2010 forecast of Rp1.5 tn.

Operationsl-wise, ISAT H110 result is in-line with UBS and Street's estimates. ISAT's H110 net income, however, is below expectations. We believe this could be due to one-off charges below the operating line. ISAT is currently undergoing a limited review, and the full H110 financials will be released on Aug 24, 2010 when the management will also host a conference call – details tba.

Deutsche Indo Telecom : Good 1H10 operating results, but mixed NP

Major Indonesian telecom operators have released their 1H10 results (see table below for details). They had good operating results. On qoq basis, revenue rose by 4.6% to Rp26.0tr with most of the growth coming from Telkom's 5.7% increase followed by Indosat's 4.1%. Meanwhile EBITDA rose to Rp14.4tr (+7.5% qoq) with Indosat growing at slowest pace of 6.8% qoq (vs Telkom's 7.7% and XL's 7.8%). However, at NP line, it is a mixed bag. While the industry delivered an 8.4% qoq increase in NP; Indosat saw a reduction of 96.7% qoq to Rp9bn in 2Q10. This is the worst results amongst its peers which may be due to inefficient asset turnover, high depreciation charges and interest costs. On the flip side, XL had highest NP growth qoq of 21.3% followed by Telkom's 16.2%.

On yoy basis, the industry reported a revenue of Rp50.8tr (+9.2% yoy), mostly driven by XL's 34.7% increase in revenue to Rp8.4tr. While Telkom and Indosat had similar revenue growth trends of 5.1% and 5.8%. Industry EBITDA of Rp27.8tr is up 10.6% yoy - a healthy growth considering the still intense competition in cellular space.

However, at NP level, the industry reported a decline of 1.8% yoy to Rp7.6tr. Mostly this is due to Indosat's -71.5% decline in NP to Rp287bn (from 1H09 of Rp1.0tr). On the back of this, we retain our BUY calls on Telkom and XL Axiata. While XL remains
most attractive in terms of growth and value, Telkom is our top pick as it has better stock trading liquidity.