State-owned National Aluminium Company (Nalco) has invited bids from coal companies in Indonesia to mine its coking coal mines in East Kalimantan province, that has an annual capacity of 10 million tonne, by 2014 The project, the biggest overseas mine venture so far by an Indian company, will use 5 mt of coal for a proposed aluminium smelter in Indonesia and the rest would be shipped to India for use at Nalco’s operations in Orissa, said a senior executive. Nalco plans a Rs 16,000-crore smelter-cum-power project in East Kalimantan province.
“We issued a public notice on August 30 inviting bids from coal owners that own mining licences in Indonesia,” Nalco’s finance director BL Bagra told ET. “Prospective applicants will be required to submit their bids within a month. Specifically, we are looking for partners who have mining licences for coal, infrastructure linkages and land for the project,” he added.
Nalco had signed an agreement with RAK Minerals and Metals of UAE for the smelter project. Under the agreement, RAK was to buy up to 26% stake in an SPV for the project. RAK was chosen as a partner since the tie-up promised to offer better logistics and infrastructure management in south Sumatra, the earlier chosen site for the project.
Nalco relocated from south Sumatra after delays in getting concessions for port and rail infrastructure.It is believed that RAK Minerals could be one of the potential bidders for Nalco’s coal mines. Nalco plans to build a 0.5-million-tonne aluminium smelter and a 1,250-mw power plant in Indonesia.
Kamis, 02 September 2010
Hellenic Shipping News BHP Agrees to 7% Coking Coal Price Reduction With Japan's Mills, UBS Says
Japanese steelmakers, the world’s second-largest producer of the metal, won a 7 percent cut in quarterly coking coal prices, the first reduction this year, from BHP Billiton Ltd., according to UBS AG. Prices for the material used to make steel will fall to $209 a metric ton for the three months starting Oct. 1, from $225 a ton in the current quarter, UBS said in a note. A venture between BHP Billiton and Mitsubishi Corp. is the world’s biggest supplier of coking coal.
Prices for coal and iron ore are falling as China’s moves to curb property speculation and restrain credit growth sapped building and autos demand. BHP and Vale SA, the world’s largest suppliers of the two steelmaking materials, this year broke with the custom of setting prices annually by signing quarterly contracts, betting on rising prices.
“Lower prices, but still good outcomes for the producers, during a seasonally weak trading period,” UBS analysts including Tom Price said in the report dated Aug. 31.
JFE Holdings Inc.’s steel unit and other mills agreed to a 12.5 percent price increase for coking coal for the July-to- September quarter. That followed a 55 percent price gain in the April quarter.
Contract prices of iron ore sold by BHP and Rio Tinto Group will probably decline 11 percent in the quarter starting Oct. 1, researcher UC361.com said, citing the average Platts index price.
Hayato Uchida, a spokesman for Tokyo-based Nippon Steel Corp., Japan’s largest steelmaker, declined to comment. Amanda Buckley, a spokeswoman with Melbourne-based BHP, also declined to comment.
Prices for coal and iron ore are falling as China’s moves to curb property speculation and restrain credit growth sapped building and autos demand. BHP and Vale SA, the world’s largest suppliers of the two steelmaking materials, this year broke with the custom of setting prices annually by signing quarterly contracts, betting on rising prices.
“Lower prices, but still good outcomes for the producers, during a seasonally weak trading period,” UBS analysts including Tom Price said in the report dated Aug. 31.
JFE Holdings Inc.’s steel unit and other mills agreed to a 12.5 percent price increase for coking coal for the July-to- September quarter. That followed a 55 percent price gain in the April quarter.
Contract prices of iron ore sold by BHP and Rio Tinto Group will probably decline 11 percent in the quarter starting Oct. 1, researcher UC361.com said, citing the average Platts index price.
Hayato Uchida, a spokesman for Tokyo-based Nippon Steel Corp., Japan’s largest steelmaker, declined to comment. Amanda Buckley, a spokeswoman with Melbourne-based BHP, also declined to comment.
Insider Stories - Calipso secures US$150 million loan
Calipso Investment Pte Ltd (Calipso), subsidiary of PT Bumi Resources Tbk (BUMI), has secured US$150 million loan facility from Bright Ventures Pte Ltd.
In BUMI's first half financial statement submitted to Indonesia Stock Exchange (IDX), Calipso and Bright entered into credit agreement on May 26 2010 at interest rate of 10% per annum.
The loan, with with maturity date being the earlier of 36 months after the date of the agreement or 5 business days after IPO of PT Bumi Resources Minerals, a subsidiary, will be used for working capital requirements. The amortized cost of this loan as of June 30, 2010 amounted to US$148.8 million.
Bumi Resources reported a 30.01% drop in its net profit in the first half of 2010 as a result of ballooning interest and financial charges by 437.90. But, the company remained positive in revenue growth. Bumi booked US$134.58 million net profit in 1H 2010 from US$192.29 million a year earlier. LINK
In BUMI's first half financial statement submitted to Indonesia Stock Exchange (IDX), Calipso and Bright entered into credit agreement on May 26 2010 at interest rate of 10% per annum.
The loan, with with maturity date being the earlier of 36 months after the date of the agreement or 5 business days after IPO of PT Bumi Resources Minerals, a subsidiary, will be used for working capital requirements. The amortized cost of this loan as of June 30, 2010 amounted to US$148.8 million.
Bumi Resources reported a 30.01% drop in its net profit in the first half of 2010 as a result of ballooning interest and financial charges by 437.90. But, the company remained positive in revenue growth. Bumi booked US$134.58 million net profit in 1H 2010 from US$192.29 million a year earlier. LINK
Associated Press Markets start September with a bang; Dow up 255
Stocks start month with a big rally after signs of growth in US, Chinese manufacturing
NEW YORK (AP) -- The fear that has been hanging over markets for most of August lifted on Wednesday. For how long remains anyone's guess.
The stock market started September with a jolt, turning sharply higher after a pair of encouraging reports on manufacturing sent investors seeking out riskier investments. Prices for the safest assets -- Treasurys, gold and the dollar -- all fell.
With investors suddenly willing to embrace risk, the Dow Jones industrial average added 255 points, its best day since July 7. All 30 stocks in the Dow closed higher. That marked a sharp break from August, when the market's most widely used index turned in its worst performance for the month in nine years.
Reports of stronger-than-expected manufacturing growth in China and the U.S snapped a run of discouraging data on the economy, including dismal readings on home sales and economic output. The Institute for Supply Management said manufacturing activity in the U.S. rose in August, in contrast to regional reports from recent weeks that pointed to a slowdown.
"It gives up hope that things may not be as bad as they seem," said Zahid Siddique, an associate portfolio manager at Gabelli Equity Trust Inc.
The Dow gained 254.75 points, or 2.5, percent to close at 10,269.47. Industrial stocks such as General Electric Co. and Caterpillar Inc. were among the Dow's biggest gainers.
Analysts cautioned that the gains, like many others the market has seen in recent weeks, could quickly pass. A bad surprise from the Labor Department's monthly report on employment, due out Friday, could investors back into hiding.
The good news on manufacturing "gives some comfort, but that is only good until the next number," said Darell Krasnoff, managing director at Bel Air Investment Advisors. LINK
NEW YORK (AP) -- The fear that has been hanging over markets for most of August lifted on Wednesday. For how long remains anyone's guess.
The stock market started September with a jolt, turning sharply higher after a pair of encouraging reports on manufacturing sent investors seeking out riskier investments. Prices for the safest assets -- Treasurys, gold and the dollar -- all fell.
With investors suddenly willing to embrace risk, the Dow Jones industrial average added 255 points, its best day since July 7. All 30 stocks in the Dow closed higher. That marked a sharp break from August, when the market's most widely used index turned in its worst performance for the month in nine years.
Reports of stronger-than-expected manufacturing growth in China and the U.S snapped a run of discouraging data on the economy, including dismal readings on home sales and economic output. The Institute for Supply Management said manufacturing activity in the U.S. rose in August, in contrast to regional reports from recent weeks that pointed to a slowdown.
"It gives up hope that things may not be as bad as they seem," said Zahid Siddique, an associate portfolio manager at Gabelli Equity Trust Inc.
The Dow gained 254.75 points, or 2.5, percent to close at 10,269.47. Industrial stocks such as General Electric Co. and Caterpillar Inc. were among the Dow's biggest gainers.
Analysts cautioned that the gains, like many others the market has seen in recent weeks, could quickly pass. A bad surprise from the Labor Department's monthly report on employment, due out Friday, could investors back into hiding.
The good news on manufacturing "gives some comfort, but that is only good until the next number," said Darell Krasnoff, managing director at Bel Air Investment Advisors. LINK
Reuters Manufacturing grows in August but private jobs cut
(Reuters) - The manufacturing sector grew faster than expected in August, but private employers unexpectedly cut jobs, showing the economic recovery still faces headwinds.
The 13th straight month of manufacturing expansion calmed fears that U.S. economy may fall back into recession, but the drop in employment and a slump in July construction spending to a 10-year low kept concerns about slow economic growth alive.
"Our expectation is that we don't have an economic double-dip, though we recognize that the risks of something like that are a lot higher now that we're closer to zero on the growth rate," said Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia.
"We're in the middle of what is typically a growth scare, where the economic cycle slows down after an initial run up as stimulus fades and we transition from stimulus to having the economy standing on its own," he said.
The Institute for Supply Management said its index of national factory activity rose to 56.3 from 55.5 in July. Economists had forecast a fall in the index to 53.0. A reading above 50 indicates expansion in the sector.
In a separate report, the private sector unexpectedly cut 10,000 jobs in August compared to a gain of 37,000 in July, ADP Employer Services said.
U.S. stocks rallied more than 2 percent, while prices for safe-haven U.S. government debt fell. The U.S. dollar fell against the euro while high-yielding currencies such as the Australian dollar rose as investors rediscovered an appetite for risk.
MANUFACTURING GROWING, BUT JOBS LAG
The U.S. government is expected to report on Friday that total payrolls dropped by 100,000 in August, the third straight month of job declines, while private sector employment increased only 41,000, according to a Reuters survey.
Last month, second quarter gross domestic product data showed the economic recovery slowing as the boost from an $814 billion government stimulus package and business inventories rebuilding faded.
But manufacturing, which has been leading the recovery, is still showing some strength and has expanded every month since August 2009. LINK
The 13th straight month of manufacturing expansion calmed fears that U.S. economy may fall back into recession, but the drop in employment and a slump in July construction spending to a 10-year low kept concerns about slow economic growth alive.
"Our expectation is that we don't have an economic double-dip, though we recognize that the risks of something like that are a lot higher now that we're closer to zero on the growth rate," said Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia.
"We're in the middle of what is typically a growth scare, where the economic cycle slows down after an initial run up as stimulus fades and we transition from stimulus to having the economy standing on its own," he said.
The Institute for Supply Management said its index of national factory activity rose to 56.3 from 55.5 in July. Economists had forecast a fall in the index to 53.0. A reading above 50 indicates expansion in the sector.
In a separate report, the private sector unexpectedly cut 10,000 jobs in August compared to a gain of 37,000 in July, ADP Employer Services said.
U.S. stocks rallied more than 2 percent, while prices for safe-haven U.S. government debt fell. The U.S. dollar fell against the euro while high-yielding currencies such as the Australian dollar rose as investors rediscovered an appetite for risk.
MANUFACTURING GROWING, BUT JOBS LAG
The U.S. government is expected to report on Friday that total payrolls dropped by 100,000 in August, the third straight month of job declines, while private sector employment increased only 41,000, according to a Reuters survey.
Last month, second quarter gross domestic product data showed the economic recovery slowing as the boost from an $814 billion government stimulus package and business inventories rebuilding faded.
But manufacturing, which has been leading the recovery, is still showing some strength and has expanded every month since August 2009. LINK
Bisnis.com Investor Intiland (DILD) akan lepas saham Rp1,24 triliun
JAKARTA: Tiga pemegang saham PT Intiland Development Tbk berencana melepas kepemilikan sahamnya di emiten properti tersebut, dengan membidik dana setidaknya US$138 juta atau sekitar Rp1,24 triliun.
Bloomberg melaporkan pemegang saham tersebut adalah PT Permata Ratna Mulia, PT Cakrawala Persada Gemilang, dan PT Cempaka Andalan Kharisma. Saham yang akan dilepas mencapai 2,11 miliar saham.
Sekretaris Perusahaan Intiland Theresia Rustandi mengakui pemegang saham memang berencana melepas kepemilikannya di emiten properti tersebut.
"Kami mendapat informasi dari pemegang saham Intiland, bahwa saat ini ada penawaran saham. Namun itu bukan di level perusahaan sehingga dana hasil pelepasan saham itu tidak masuk ke perusahaan," tuturnya kepada Bisnis, kemarin.
Pemberitahuan dari pemegang saham tersebut, lanjutnya, terkait dengan ketentuan keterbukaan informasi sehingga manajemen bisa menjelaskan kepada otoritas bursa ketika rencana tersebut direalisasikan. Pihaknya telah meminta suspen perdagangan sahamnya di pasar kemarin. LINK
Bloomberg melaporkan pemegang saham tersebut adalah PT Permata Ratna Mulia, PT Cakrawala Persada Gemilang, dan PT Cempaka Andalan Kharisma. Saham yang akan dilepas mencapai 2,11 miliar saham.
Sekretaris Perusahaan Intiland Theresia Rustandi mengakui pemegang saham memang berencana melepas kepemilikannya di emiten properti tersebut.
"Kami mendapat informasi dari pemegang saham Intiland, bahwa saat ini ada penawaran saham. Namun itu bukan di level perusahaan sehingga dana hasil pelepasan saham itu tidak masuk ke perusahaan," tuturnya kepada Bisnis, kemarin.
Pemberitahuan dari pemegang saham tersebut, lanjutnya, terkait dengan ketentuan keterbukaan informasi sehingga manajemen bisa menjelaskan kepada otoritas bursa ketika rencana tersebut direalisasikan. Pihaknya telah meminta suspen perdagangan sahamnya di pasar kemarin. LINK
Insider Stories - Banpu disposes 8.72% Indo Tambang
Banpu Minerals (Singapore) Ltd, subsidiary of Thai Banpu Public Company Limited, plans to place 98.5 million shares in coal mining company PT Indo Tambangraya Tbk (ITMG) in a bid to snap up Rp3.56 trillion-Rp3.79 trillion. A source familiar with the matter said Banpu, arranged by international placement agent Goldman Sachs, last night started to hold book building. "Book building started last night and might be accomplished this afternoon," the source said.
Banpu offers 73.9 million shares of Indo Tambang with option to add 24.6 million shares. In total, Banpu will dispose 98.5 million shares or 8.72% stakes
According to the source, Goldman determined to sell Indo Tambang at Rp36.150-Rp38,500 per share or 2%-8% discount from Indo Tambang's closing price yesterday.
Three local houses PT Bahana Securities, PT Danareksa Sekuritas, and PT Mandiri Sekuritas also involve the placement with 10% allocation.
"Mandiri Sekuritas is mandated 4%, while Bahana and Danareksa obtain 3% respectively," the source said. Bahana Director Eko Yuliantoro didn't recognize the shares sale. "We don't have any information about the placement," he said.
Danareksa President Director Marciano Herman and Mandiri Sekuritas Executive Director declined to comment. LINK
Banpu offers 73.9 million shares of Indo Tambang with option to add 24.6 million shares. In total, Banpu will dispose 98.5 million shares or 8.72% stakes
According to the source, Goldman determined to sell Indo Tambang at Rp36.150-Rp38,500 per share or 2%-8% discount from Indo Tambang's closing price yesterday.
Three local houses PT Bahana Securities, PT Danareksa Sekuritas, and PT Mandiri Sekuritas also involve the placement with 10% allocation.
"Mandiri Sekuritas is mandated 4%, while Bahana and Danareksa obtain 3% respectively," the source said. Bahana Director Eko Yuliantoro didn't recognize the shares sale. "We don't have any information about the placement," he said.
Danareksa President Director Marciano Herman and Mandiri Sekuritas Executive Director declined to comment. LINK
JP Morgan - Bumi Resources - Strong 2Q10 results on an absolute basis but below expectation
1H10 results below expectation: BUMI reported 1H10 net income of US$135MM, down 30% Y/Y. As its historical net income has been very volatile, a comparison with historical operating profit is probably a more stable and accurate measure. 1H10 operating profit of US$532MM was below both J.P. Morgan’s (40.1%) and consensus’ (45.9%) full-year operating profit forecasts of US$1,327MM and US$1,158MM, respectively. (Note: Historically, 1H operating profit has contributed to an average of 53.6% of the full-year profit).
2Q10 was strong on an absolute basis: Subtracting 1Q10 results, 2Q10 operating profit of US$313MM was up by 41.5% Y/Y and 43.1% Q/Q. Excluding non-recurring items and forex gain (loss), 2Q10 core income rose by 65.2% Y/Y and 105.4% Q/Q. Much of the growth in profit was derived from a margin expansion at the gross profit level, likely due to high ASP. Despite the lower-than-expected results, 2Q10 was strong on
an absolute basis as evidenced by the strong Y/Y and Q/Q growth.
Downside risks to our FY10E earnings forecast: With these, we view that there is a downside risk to both our and consensus FY10E earnings forecasts. Meanwhile, we expect the share price to trade lower due to the lower-than-expected 1H10 results.
• We maintain our OW rating and PT of Rp3,400: We are still waiting for detailed financials. Meanwhile, we maintain our Overweight rating and Dec-10 SOTP-based PT of Rp3,400. Our SOTP method is a sum of the DCF values of each mine. The DCF method is derived using a riskfree rate of 10.0%, equity risk premium of 5.5% and terminal growth rate of 5.5%. We incorporate a value of US$10 cents/ton to BUMI's resources. Finally, we incorporate Rp359 per share of potential tax penalty and apply 15% discount to NAV to derive our PT.
2Q10 was strong on an absolute basis: Subtracting 1Q10 results, 2Q10 operating profit of US$313MM was up by 41.5% Y/Y and 43.1% Q/Q. Excluding non-recurring items and forex gain (loss), 2Q10 core income rose by 65.2% Y/Y and 105.4% Q/Q. Much of the growth in profit was derived from a margin expansion at the gross profit level, likely due to high ASP. Despite the lower-than-expected results, 2Q10 was strong on
an absolute basis as evidenced by the strong Y/Y and Q/Q growth.
Downside risks to our FY10E earnings forecast: With these, we view that there is a downside risk to both our and consensus FY10E earnings forecasts. Meanwhile, we expect the share price to trade lower due to the lower-than-expected 1H10 results.
• We maintain our OW rating and PT of Rp3,400: We are still waiting for detailed financials. Meanwhile, we maintain our Overweight rating and Dec-10 SOTP-based PT of Rp3,400. Our SOTP method is a sum of the DCF values of each mine. The DCF method is derived using a riskfree rate of 10.0%, equity risk premium of 5.5% and terminal growth rate of 5.5%. We incorporate a value of US$10 cents/ton to BUMI's resources. Finally, we incorporate Rp359 per share of potential tax penalty and apply 15% discount to NAV to derive our PT.
Credit Suisse: Asia Equity Focus China's August PMI rebounds after seasonal weakness
China's August PMI rebounded to 51.7 from July's 51.2. We have highlighted on previous occasions that the series undergoes a seasonal weakness during the months of May to July. The rebound is very welcome news, given the recent spate of poor global economic data, which has triggered fears of a double-dip recession.
Gains were broad-based, with the key components of output and new orders rising to 53.1 from 52.7 and 50.9 respectively. New export orders also posted a one-point gain to 52.2 in August. Input prices clocked the biggest jump, rising to 60.5 in August from July's 50.4. These sharp gains are likely to be inflationary and suggest that the authorities are unlikely to reverse monetary policy normalization any time soon.
Indeed, we continue to expect the CNY to gain as much as 5% versus the USD in the next 12 months. That said, given the moderating global outlook, the likelihood of the authorities pushing back rate hikes to 2011 is gradually rising.
From an equities’ perspective, we regard this set of data as neutral, which largely meets expectations. While decelerating infrastructure growth should remain a concern, a potential re-acceleration of property-related investment growth in H2 could offset most of the potential impact. If the PMI rebound continues into the coming months, the Beijing government would have more leeway for a more determined second round of property tightening. This rising policy risk supports our call for not turning too bullish on China's property stocks yet. On the other hand, the interim reporting season has just ended with few positive surprises. While earnings growth for the key sectors (e.g. banks, telecom and energy) largely meets expectations, some of the smaller ones disappointed (e.g. insurance, sportswear, food and beverage, gaming, steel, aluminum). Fortunately, most managements still forecast a cautiously positive outlook in H2.
Without a clear policy signal or a fundamental change, both the A and H share markets are likely to stay directionless and rangebound in the near term. A lack of strong internal catalysts would expose the China markets, in particular Hong Kong H shares, to changes in the global equity markets and risk appetite. While risk-tolerant investors may consider trading the range, long-term investors should selectively increase positions in China equities ahead of the rebound in Q4. We have fine-tuned our top BUY list after the interim results; these include China Construction Bank-H (939 HK), China Railway Group-H (390 HK), CNOOC (883 HK), Angang Steel (347 HK) and Belle (1880 HK).
Gains were broad-based, with the key components of output and new orders rising to 53.1 from 52.7 and 50.9 respectively. New export orders also posted a one-point gain to 52.2 in August. Input prices clocked the biggest jump, rising to 60.5 in August from July's 50.4. These sharp gains are likely to be inflationary and suggest that the authorities are unlikely to reverse monetary policy normalization any time soon.
Indeed, we continue to expect the CNY to gain as much as 5% versus the USD in the next 12 months. That said, given the moderating global outlook, the likelihood of the authorities pushing back rate hikes to 2011 is gradually rising.
From an equities’ perspective, we regard this set of data as neutral, which largely meets expectations. While decelerating infrastructure growth should remain a concern, a potential re-acceleration of property-related investment growth in H2 could offset most of the potential impact. If the PMI rebound continues into the coming months, the Beijing government would have more leeway for a more determined second round of property tightening. This rising policy risk supports our call for not turning too bullish on China's property stocks yet. On the other hand, the interim reporting season has just ended with few positive surprises. While earnings growth for the key sectors (e.g. banks, telecom and energy) largely meets expectations, some of the smaller ones disappointed (e.g. insurance, sportswear, food and beverage, gaming, steel, aluminum). Fortunately, most managements still forecast a cautiously positive outlook in H2.
Without a clear policy signal or a fundamental change, both the A and H share markets are likely to stay directionless and rangebound in the near term. A lack of strong internal catalysts would expose the China markets, in particular Hong Kong H shares, to changes in the global equity markets and risk appetite. While risk-tolerant investors may consider trading the range, long-term investors should selectively increase positions in China equities ahead of the rebound in Q4. We have fine-tuned our top BUY list after the interim results; these include China Construction Bank-H (939 HK), China Railway Group-H (390 HK), CNOOC (883 HK), Angang Steel (347 HK) and Belle (1880 HK).
Credit Suisse: Indonesia Banks Sector – LDR targeting unlikely to result in lower asset quality
● Bisnis Indonesia, on 30 August 2010, reported that LDR targeting by Indonesian central bank, Bank Indonesia (BI), may pose a threat of lower asset quality ahead. We disagree with such a view.
● We believe most banks indeed fall within the LDR range targeted by BI (78%-102%). Of the top-ten largest banks, only three banks have LDR below 78% and one bank with LDR above 102%.
Outside the top-ten largest banks, we find average LDR of 84%.
● Our analysis suggests that with 0.5-1% increase in reserve requirements, BBCA, BMRI and BBNI will only incur penalties equivalent to 0.5-1.4% of their FY10E net interest income and will erode their FY10E NIM merely by 2.7-7.2 bp.
● We believe that the potential penalties are insufficient to provide any incentives for banks with LDR outside BI’s targeted range to alter their strategies just to meet the LDR target intended by BI. Thus, we maintain our ratings on Indonesia banks under our coverage and maintain BMRI as our top pick, followed by BBNI.
● We believe most banks indeed fall within the LDR range targeted by BI (78%-102%). Of the top-ten largest banks, only three banks have LDR below 78% and one bank with LDR above 102%.
Outside the top-ten largest banks, we find average LDR of 84%.
● Our analysis suggests that with 0.5-1% increase in reserve requirements, BBCA, BMRI and BBNI will only incur penalties equivalent to 0.5-1.4% of their FY10E net interest income and will erode their FY10E NIM merely by 2.7-7.2 bp.
● We believe that the potential penalties are insufficient to provide any incentives for banks with LDR outside BI’s targeted range to alter their strategies just to meet the LDR target intended by BI. Thus, we maintain our ratings on Indonesia banks under our coverage and maintain BMRI as our top pick, followed by BBNI.
CLSA Tins bucking the trend
The market continues its consolidation mode for three days as locals are taking some of their recent profits in the absence of further catalysts. Volumes have started to taper off a bit after last week's record breaking run but foreign institutional buying support still quite noticeable on every dip. Looking at 1H reporting, domestic consumption names continue to show resilience despite rising inflation risk. August inflation data at noon today. Consensus is looking at 1%MoM and 6.69%YoY Vs last month 1.57% and 6.22%. That will likely be followed on Friday Sep 3 with the Central Bank keeping their rates unchanged.
Be assured that ultra cheap central bank credit will stay much longer. It is not surprising that we are beginning to see signs that US credit cycle is turning as noted by Russell Napier in his latest report. This is inflationary. Risk reward of commodity producer is looking increasingly attractive. (Note: Indonesian commodity plays reported lackluster 1H due usually heavy rainfall affecting production)
One commodity that really stand up but hardly anyone looks at is TIN. Even with the slowdown in China, tin price are still up 25% this year and 12% last month alone making it the best performing base metal. Prices are not being forced up by overwhelming demand, but by constrained supply from expanding threat.
Tin prices since 2009
A global movement to reduce the use of lead for soldering is boosting demand for tin in such applications. Inventory at LME warehouses has fallen 46% this year and prices are rising towards the all-time high, demand remains well below levels seen prior to the global financial crisis.
The principal reason for the rapid rise in tin prices is that production is constrained. Tin production has been falling since 2007, including a 1.8% fall in mine output last year that left supply 3.4% shy of demand, according to the World Bureau of Metal Statistics.
China produces 37% of the global total and Indonesia accounts for 33%. The high concentration of production centered in these two markets make global tin prices vulnerable to supply shocks, and Indonesia’s tin exports fell 14.5% in the first six months this year due to heavy rainfall.
Dominant Indonesia tin producer Timah TINS IJ trades on 9x 2011 earnings with lots of operating leverage. I would be a buyer.
Be assured that ultra cheap central bank credit will stay much longer. It is not surprising that we are beginning to see signs that US credit cycle is turning as noted by Russell Napier in his latest report. This is inflationary. Risk reward of commodity producer is looking increasingly attractive. (Note: Indonesian commodity plays reported lackluster 1H due usually heavy rainfall affecting production)
One commodity that really stand up but hardly anyone looks at is TIN. Even with the slowdown in China, tin price are still up 25% this year and 12% last month alone making it the best performing base metal. Prices are not being forced up by overwhelming demand, but by constrained supply from expanding threat.
Tin prices since 2009
A global movement to reduce the use of lead for soldering is boosting demand for tin in such applications. Inventory at LME warehouses has fallen 46% this year and prices are rising towards the all-time high, demand remains well below levels seen prior to the global financial crisis.
The principal reason for the rapid rise in tin prices is that production is constrained. Tin production has been falling since 2007, including a 1.8% fall in mine output last year that left supply 3.4% shy of demand, according to the World Bureau of Metal Statistics.
China produces 37% of the global total and Indonesia accounts for 33%. The high concentration of production centered in these two markets make global tin prices vulnerable to supply shocks, and Indonesia’s tin exports fell 14.5% in the first six months this year due to heavy rainfall.
Dominant Indonesia tin producer Timah TINS IJ trades on 9x 2011 earnings with lots of operating leverage. I would be a buyer.
OSK Timah: 1H10: Expect a stronger 2H10 on higher sales volume. BUY
Results
• Strong net profit in 1H10, but below expectation. Timah (TINS) reported net profit of Rp322.3b in 1H10 (1H09: Rp42.8b), driven by: a) higher tin ASP (+45% yoy) offset by lower refined tin sales volume (- 18% yoy), b) lower forex loss (-76% yoy), and c) lower interest expenses (-73.3% yoy). Results were below expectation as 1H10 net
profit accounted for 30% of full-year consensus and 39% of ours.
• Margin improvement on strong tin price. Owing to strong tin price, which resulted in strong margin of US$2,222/tonne in 1H10 (1H09: US$645/tonne), gross and operating margin jumped from 10.6% and 5.0% in 1H09 to 18.4% and 11.1% in 1H10 respectively. However, 2Q10 margin/tonne declined from 19.2% in 1Q10 to 8.2% in 2Q10 due
to higher cost of tin-ore from small miners on TINS’ onshore mining activities.
Stock Impact
• Higher expected sales volume in 2H10. TINS registered total refined tin production of 19,501 tonnes in 1H10, which accounted for 46% of 2010 total contracts. As 2H production is historically higher than in 1H, we expect the company to fulfil the balance of 42,000-43,000 tonnes of refined tin contracts delivery to customers in 2H10
• Strong net profit in 1H10, but below expectation. Timah (TINS) reported net profit of Rp322.3b in 1H10 (1H09: Rp42.8b), driven by: a) higher tin ASP (+45% yoy) offset by lower refined tin sales volume (- 18% yoy), b) lower forex loss (-76% yoy), and c) lower interest expenses (-73.3% yoy). Results were below expectation as 1H10 net
profit accounted for 30% of full-year consensus and 39% of ours.
• Margin improvement on strong tin price. Owing to strong tin price, which resulted in strong margin of US$2,222/tonne in 1H10 (1H09: US$645/tonne), gross and operating margin jumped from 10.6% and 5.0% in 1H09 to 18.4% and 11.1% in 1H10 respectively. However, 2Q10 margin/tonne declined from 19.2% in 1Q10 to 8.2% in 2Q10 due
to higher cost of tin-ore from small miners on TINS’ onshore mining activities.
Stock Impact
• Higher expected sales volume in 2H10. TINS registered total refined tin production of 19,501 tonnes in 1H10, which accounted for 46% of 2010 total contracts. As 2H production is historically higher than in 1H, we expect the company to fulfil the balance of 42,000-43,000 tonnes of refined tin contracts delivery to customers in 2H10
DBS Gajah Tunggal: Not Rated; Rp1,720; GJTL IJ FY10 revenue growth target of 25%
GJTL targets 25% y-o-y revenue growth in FY10 to Rp9.92tr on the back of 20% growth in expected sales volume to 30m tires. In 1H10, GJTL has booked 186.74% y-o-y growth in net profit of Rp415bn from Rp144.73bn. This robust growth is mainly driven by this year global automotive industry growth due to the economic recovery. Their export sales, which account for 40% of its revenues have also improved due to increase in demand from USA and Middle East . As for FY11, GJTL has set a more conservative target of 10-20% revenue growth.
This year, GJTL has set aside US$30-40m for capex on top of its yearly maintenance expenses of around US$20-25m. With this capex, GJTL will increase its production capacity from 40,000 radial tires per day to 45,000 in FY11. As for motorbike tires, GJTL expects the capacity to increase from 75,000 motorbike tires per day to 90,000 in FY11 and reach 105,000 in FY12.
This year, GJTL has set aside US$30-40m for capex on top of its yearly maintenance expenses of around US$20-25m. With this capex, GJTL will increase its production capacity from 40,000 radial tires per day to 45,000 in FY11. As for motorbike tires, GJTL expects the capacity to increase from 75,000 motorbike tires per day to 90,000 in FY11 and reach 105,000 in FY12.
DBS Economy Trade and inflation expectations
July trade and August inflation are the key data to be released today. Merchandise exports are likely to continue slowing to 29% YoY in July from 31% in the prior month (consensus: 28.2%), in tandem with the moderation in export numbers seen across the region. Trade surplus is expected to remain weak at less than USD 1bn for the second consecutive month (USD 0.6bn in June). Despite the weakening in merchandise trade balance, Indonesia ’s overall balance of payments has continued to strengthen thus far supported by portfolio capital inflows. Foreign reserves increased a solid USD 2.5bn in July and surpassed the peak level of USD78.6bn recorded in April prior to the European debt crisis. Foreign reserves have risen further in August to USD 80.9bn according to official information.
More attention will be given to inflation data. Headline CPI inflation is likely to rise to 6.5% YoY in August after breaching the 6% mark in July (consensus: 6.7%). In MoM (sa) terms, the increase in consumer prices should also stay high at 1% for the second consecutive month, well above the long-run average of 0.5%. Food prices are likely to account for the majority of the CPI rises, partly due to the early arrival of the Ramadan fasting month, partly due to bad weather and harvest failures. Core inflation thus far remains benign at the 4% level (though we think there will be upside risks). The central bank would wait for a while to judge whether inflationary pressures are solely due to seasonal and weather factors, or the demand-side dynamics will also develop. In terms of the possible policy responses at this juncture, Bank Indonesia has hinted that they would tighten liquidity quantity (via the reserve requirement ratio) to anchor inflation expectations, rather than directly boosting interest rates. We expect BI to leave the overnight reference rate unchanged at 6.5% at Friday’s MPC meeting, before hiking rate in 4Q (October/November).
More attention will be given to inflation data. Headline CPI inflation is likely to rise to 6.5% YoY in August after breaching the 6% mark in July (consensus: 6.7%). In MoM (sa) terms, the increase in consumer prices should also stay high at 1% for the second consecutive month, well above the long-run average of 0.5%. Food prices are likely to account for the majority of the CPI rises, partly due to the early arrival of the Ramadan fasting month, partly due to bad weather and harvest failures. Core inflation thus far remains benign at the 4% level (though we think there will be upside risks). The central bank would wait for a while to judge whether inflationary pressures are solely due to seasonal and weather factors, or the demand-side dynamics will also develop. In terms of the possible policy responses at this juncture, Bank Indonesia has hinted that they would tighten liquidity quantity (via the reserve requirement ratio) to anchor inflation expectations, rather than directly boosting interest rates. We expect BI to leave the overnight reference rate unchanged at 6.5% at Friday’s MPC meeting, before hiking rate in 4Q (October/November).
CIMB 2QFY10 Results - Adaro Energy - Bad quarter
We downgrade Adaro to Neutral from Outperform. 1H10 core net profit was 15% below our forecast and consensus expectation, with the culprits being a currency mismatch, weak production and lower ASPs, all of which caused EBIT to be 8% lower than expected, worsened by a higher-than-expected effective tax rate. We are cutting our FY10-12 EPS estimates by 19-32% as we reduce production expectations and adjust our tax rate. Our target price falls to Rp2,100 from Rp2,375 following a lower NAV estimate for its thermal-coal operation. The company has no plans to change its reporting to US$, meaning its currency mismatch may persist. If Adaro could meet its 45m-tonne production target this year, there is 11% upside to our net profit forecast to Rp3tr.
NISP Wijaya Karya books Rp4.79tn of new contracts (WIKA, Rp590)
· Wika managed to book Rp4.79tn of new contracts during 8M10 where US$175.01 of which came from recent agreement with Antam (ANTM, Rp2,075, Buy) on CGA project in West Kalimantan . The achievement is expected to help Wika to reach its target of Rp10tn from new contracts this year.
· The company added total contracts booked until August 2010 reached Rp15.5tn or 74.52% of this year expectation at Rp20.8tn.
· For CGA, Wika explained that revenue will start to be recorded next year as this project starts in 1Q11. The project costs Wika US$175.01mn or equal to Rp1.57tn where Wika responsible for energy and building facilities.
· WIKA is trading at 2011F consensus PER of 11.4x and EV/EBITDA of 4.1x.
· The company added total contracts booked until August 2010 reached Rp15.5tn or 74.52% of this year expectation at Rp20.8tn.
· For CGA, Wika explained that revenue will start to be recorded next year as this project starts in 1Q11. The project costs Wika US$175.01mn or equal to Rp1.57tn where Wika responsible for energy and building facilities.
· WIKA is trading at 2011F consensus PER of 11.4x and EV/EBITDA of 4.1x.
NISP Indika obtains US$124.0mn contract from Pertagas (INDY, Rp3,200)
· Indika Energy through its subsidiary, Tripatra, has obtained a US$138.0mn contract from Pertagas to build an oil&gas construction run by the latter company.
· In addition Indika is currently participating in the US$3.15bn tender, which includes the US$1.0bn Exxon Mobil project in Cepu. However the value of the contract targeted by Indika is undisclosed.
· The company has not released its financial statements due to audit process, however it expects its half year target for coal sales volume of 14.5mn ton will be achieved.
· INDY is trading at 2011F consensus PER of 9.1x and EV/EBITDA of 31.0x.
· In addition Indika is currently participating in the US$3.15bn tender, which includes the US$1.0bn Exxon Mobil project in Cepu. However the value of the contract targeted by Indika is undisclosed.
· The company has not released its financial statements due to audit process, however it expects its half year target for coal sales volume of 14.5mn ton will be achieved.
· INDY is trading at 2011F consensus PER of 9.1x and EV/EBITDA of 31.0x.
NISP Flat growth for Perusahaan Gas Negara (PGAS, Rp4,000)
· During 1H10, Perusahaan Gas Negara revenue was up by 5.7% YoY to Rp 9.52tn from Rp9.01tn. However net income was unchanged from Rp3.21tn from Rp3.19tn. The results satisfied market expectation, making up 48.7% and 51.0% of full year revenue and net income expectation.
· On quarterly basis, sales were strong, growing by 12.3% QoQ to Rp5.04tn. However net income declined by 19% QoQ to Rp1.43tn as the company recorded forex loss and higher interest expense in this quarter.
· Partial factor to the flat growth was due to the company’s revenue which were in US$, had been adversely affected by the strengthening Rupiah. However management admits that due to unchanging supply, it also expects flat growth or single-digit growth for the full year.
· PGAS is trading at 2011F PER of 12.6x and EV/EBITDA of 7.5x.
· On quarterly basis, sales were strong, growing by 12.3% QoQ to Rp5.04tn. However net income declined by 19% QoQ to Rp1.43tn as the company recorded forex loss and higher interest expense in this quarter.
· Partial factor to the flat growth was due to the company’s revenue which were in US$, had been adversely affected by the strengthening Rupiah. However management admits that due to unchanging supply, it also expects flat growth or single-digit growth for the full year.
· PGAS is trading at 2011F PER of 12.6x and EV/EBITDA of 7.5x.
NISP Antam starts Chemical Grade Alumina project next year (ANTM, Rp2,075, Buy)
· Antam will start its CGA project next year as the company has signed the engineering, procurement and construction (EPC) agreement yesterday. This US$450mn project involves Wijaya Karya (WIKA, Rp590), Nusea, Tsukishima Kikai Co. Ltd., and Indonesia Chemical alumina (owned by Antam and Showa Denko).
· The construction is scheduled to start in 1Q11 and the facility is expected to commence in 1Q14. The project will bear 300k ton CGA production capacity, 200k tons of which is exclusive for Showa Denko and will be shipped to Japan . Meanwhile, the balance will be allocated for domestic market.
· The progress is positive for Antam despite the impact would not be imminent.
· Currently ANTM is trading at 2011F PER of 11.2x and EV/EBITDA of 5.8x, Buy.
· The construction is scheduled to start in 1Q11 and the facility is expected to commence in 1Q14. The project will bear 300k ton CGA production capacity, 200k tons of which is exclusive for Showa Denko and will be shipped to Japan . Meanwhile, the balance will be allocated for domestic market.
· The progress is positive for Antam despite the impact would not be imminent.
· Currently ANTM is trading at 2011F PER of 11.2x and EV/EBITDA of 5.8x, Buy.
NISP Government to limit subsidized fuel distribution
· The Government of Indonesia confirmed it will execute its plan to limit subsidized fuel distribution in October 2010. The mechanism is conducted through closed distribution system that prohibits vehicles to buy subsidized fuel. Only several vehicles produced in particular years are allowed to buy subsidized fuel (premium).
· The reason behind this step is a possibility that domestic consumption on subsidized fuel will exceed Government’s budget next year as this year’s realization is likely to pass its budget by 2.09mn kl at 38.59mn kl.
· There is no further explanation on what vehicles will be prohibited, or whether it will be 2W or 4W. Thus, this would sparks questions and likely to affect automotive players in JCI.
· From a positive side, this step may help Government to control inflation next year and lower pressure on its 2011 budget.
· Thus, despite the limitation may affect domestic automotive sales in the short run, manageable inflation would translate into a still favorable interest rate condition, which is the main key driver of domestic automotive sales volume.
· The reason behind this step is a possibility that domestic consumption on subsidized fuel will exceed Government’s budget next year as this year’s realization is likely to pass its budget by 2.09mn kl at 38.59mn kl.
· There is no further explanation on what vehicles will be prohibited, or whether it will be 2W or 4W. Thus, this would sparks questions and likely to affect automotive players in JCI.
· From a positive side, this step may help Government to control inflation next year and lower pressure on its 2011 budget.
· Thus, despite the limitation may affect domestic automotive sales in the short run, manageable inflation would translate into a still favorable interest rate condition, which is the main key driver of domestic automotive sales volume.
DBS Perusahaan Gas Negara: Strong 2Q earnings (Buy; Rp4,00; TP Rp4,800; PGAS IJ)
At a Glance
• 2Q10 results in line with expectations
• On track to meet target sales volume and forecasts
• New gas supply contract supports higher volume and tariffs
• Promising outlook but trades at discount to regional peers’ valuations
• Maintain Buy and TP of Rp4,800, with 20% upside.
Comment on Result
2Q revenue grew 11% y-o-y to Rp5t.0tr on 9.3% and 11% increases in gas distribution and transmission volume to 827 MMScfd and 847 MMScfd, respectively.
2Q EBIT improved by a stronger 27% y-o-y to Rp2.5tr helped by 6ppt increase in operating margin following an average 15% hike in gas price for industrial and commercial users in Indonesia effective 1 April 2010. 2Q net profit (excluding forex loss on loan translation) grew by an even stronger 66% y-o-y to Rp1.6tr supported by both higher volume and tariff rates.
Outlook for PGAS is promising given its recent new gas supply contract with ConocoPhillip from Grissik field. Given PLN ’s urgent need for gas, we expect more new supply to come trough over the next few months. We estimate that every 10ppt increase in gas supply will boost PGAS FY10F net earnings by 11.4%.
Recommendation
PGAS is poised to benefit from Indonesia’s rising energy demand fuelled by strong economic growth and rapid infrastructure development. Maintain Buy and DCF-derived target price of Rp4800. PGAS is trading at attractive 12x FY11F PE versus peers’
average of 17x, despite its more promising growth prospects. It also offers higher net dividend yield of 4% versus regional peers’ average of 2%.
• 2Q10 results in line with expectations
• On track to meet target sales volume and forecasts
• New gas supply contract supports higher volume and tariffs
• Promising outlook but trades at discount to regional peers’ valuations
• Maintain Buy and TP of Rp4,800, with 20% upside.
Comment on Result
2Q revenue grew 11% y-o-y to Rp5t.0tr on 9.3% and 11% increases in gas distribution and transmission volume to 827 MMScfd and 847 MMScfd, respectively.
2Q EBIT improved by a stronger 27% y-o-y to Rp2.5tr helped by 6ppt increase in operating margin following an average 15% hike in gas price for industrial and commercial users in Indonesia effective 1 April 2010. 2Q net profit (excluding forex loss on loan translation) grew by an even stronger 66% y-o-y to Rp1.6tr supported by both higher volume and tariff rates.
Outlook for PGAS is promising given its recent new gas supply contract with ConocoPhillip from Grissik field. Given PLN ’s urgent need for gas, we expect more new supply to come trough over the next few months. We estimate that every 10ppt increase in gas supply will boost PGAS FY10F net earnings by 11.4%.
Recommendation
PGAS is poised to benefit from Indonesia’s rising energy demand fuelled by strong economic growth and rapid infrastructure development. Maintain Buy and DCF-derived target price of Rp4800. PGAS is trading at attractive 12x FY11F PE versus peers’
average of 17x, despite its more promising growth prospects. It also offers higher net dividend yield of 4% versus regional peers’ average of 2%.
Mandiri Sekuritas Government to limit subsidized fuel starting October 2010 the soonest
According to Kontan daily, the government, which pointed out by the Finance minister, Agus Martowardojo yesterday, would start to limit the usage of subsidized fuel in Oct10 the soonest, as at the fuel consumption is expected to exceed the 2010 quota by 2.1mn kl to 38.6mn kl. The government would prohibit private vehicle that been produced in a certain year to consume the subsidized fuel.
Should this policy is implemented this year, we believe, it would give an upward pressure to this year inflation. We currently expect the fuel consumption rationing would occur early next year, which bring us to expect inflation to accelerate to 6.6% yoy in 2011 from this year around 6.3% yoy.
Should this policy is implemented this year, we believe, it would give an upward pressure to this year inflation. We currently expect the fuel consumption rationing would occur early next year, which bring us to expect inflation to accelerate to 6.6% yoy in 2011 from this year around 6.3% yoy.
Mandiri Sekuritas Perusahaan Gas : 1H10 Above ours, within consensus (PGAS, Rp4,000, Buy, TP: Rp5,260)
PGAS 1H10 result announcement showed a net income which already has been reported in newspaper weeks before. Based on full result reported, differences in our forecast lies in our cost assumptions. Therefore we have make cost adjustments. We also do volume upgrade to our forecasts. In his comment to Bloomberg, PGAS CEO, Hendy P. Santoso, hinted 2011 revenue will be flat as no additional supply indicated. This also has been our view that although still attractive, PGAS lacks catalyst, as no new supply is seen until the completion of its Floating Storage Regasification Terminal in 2012.
Our new forecast resulted in an upgrade of target price from currently Rp4,650/share to Rp5,260/share. At Rp4,000/share, PGAS is trading at FY10F PER of 14.2x and FY11F PER of 14.0x, with EV/EBITDA 10F and 11F of 8.6x, and 7.6x, respectively.
Our new forecast resulted in an upgrade of target price from currently Rp4,650/share to Rp5,260/share. At Rp4,000/share, PGAS is trading at FY10F PER of 14.2x and FY11F PER of 14.0x, with EV/EBITDA 10F and 11F of 8.6x, and 7.6x, respectively.
Credit Suisse: Perusahaan Gas Negara - Strong 2Q10 results on higher selling prices
● PGAS posted 2Q10 recurring net profit of Rp1,885 bn, up 35% QoQ and 56% YoY mainly due to higher selling prices. Its reported net profit of Rp1,435 bn in 2Q10 declined 19% QoQ and 27% YoY due to forex and derivative losses.
● The recurring net profit was above our expectation, at about 53% of our 2010 forecast (and 51% of the consensus estimate), as we expect a better 2H10. Gas ASP of US$6.83 in 2Q10 was above our forecast of US$6.4, while the average gas blended cost of US$2.54 was in line with our 2010 forecast. The positive impact of higher ASP was partially offset by weaker 2Q distribution volumes of 813 mmscfd, down 3% QoQ.
● We expect higher distribution volumes in 2H10 due to a recovery in Conoco volumes. Since June 2010, Conoco volumes have recovered to an average of 340 mmscfd, versus its 2010 contract of 350 mmscfd.
● We increase our forecast for average realised selling price to US$6.6/mmbtu, based on higher realised selling prices achieved in 2Q10. We maintain our positive view and our OUTPERFORM rating on PGAS and our DCF-based target price of Rp5,300.
● The recurring net profit was above our expectation, at about 53% of our 2010 forecast (and 51% of the consensus estimate), as we expect a better 2H10. Gas ASP of US$6.83 in 2Q10 was above our forecast of US$6.4, while the average gas blended cost of US$2.54 was in line with our 2010 forecast. The positive impact of higher ASP was partially offset by weaker 2Q distribution volumes of 813 mmscfd, down 3% QoQ.
● We expect higher distribution volumes in 2H10 due to a recovery in Conoco volumes. Since June 2010, Conoco volumes have recovered to an average of 340 mmscfd, versus its 2010 contract of 350 mmscfd.
● We increase our forecast for average realised selling price to US$6.6/mmbtu, based on higher realised selling prices achieved in 2Q10. We maintain our positive view and our OUTPERFORM rating on PGAS and our DCF-based target price of Rp5,300.
JP Morgan - Astra International (ASII) and Tunas Ridean (TURI)
JPMorgan analyst Benjamin Lo launched coverage on Jardine Matheson and Jardine Strategic, both listed in Singapore. Both stocks rated Neutral, but quite easy to see the share price and earnings momentum behind these stocks, driven by domestic consumption plays Astra International and Dairy Farm. I personally think the re-rating of Asia’s consumption outlook is only half-done; the space is looking particularly attractive. For the more adventurous investors, look at Tunas Ridean (TURI IJ), the auto & motorcycle dealer / consumer financing company that is also part of the Jardines.
JP Morgan - Banpu: Analyst briefing (Sukit Chawalitakul)
Key points from BANPU’s recent quarterly analyst briefing:
• Production guidance: Despite reducing its output forecast for Jorong to 1MM tons (due to a permit problem earlier), BANPU maintains its FY10E target of 23MM tons, with help from the out-performing Indominco mine. Our FY10E output estimates are slightly more conservative at 22MMtons.
• Development update: Two key efficiency projects—Bontang port expansion and power plant—are essentially completed. This should help reduce BANPU’s production costs, longer term. Management previously estimates a US$2/ton cost reduction from the port project alone.
• New mines: Commissioning of 45%-owned Gao He project in China should begin imminently—this is 2-3 months behind schedule. The delay is due purely to the company’s waiting for a production license. Operation-wise, Gao He has already begun producing development tonnage. Progress at new Indonesian mine Bharinto is well on schedule, and management still targets Y/E10 production with 0.2MM maiden tonnage (JPM forecasts zero this year, 2MM tons in FY11E).
• Pricing update: Currently, BANPU has 4% of FY10E tonnage un-priced. But, the company has linked additional 14% to an index. This means that 18% of FY10E volume—or roughly 35% of 2H10E volume—remains exposed to pricing volatility.
• Coal market outlook: BANPU appears sanguine about the coal market outlook, as the firm sees still robust demand from its traditional markets of Japan, Taiwan and Korea. More importantly, China is emerging as the most important market for BANPU’s Indonesian coal (22%-24% of total volume over the past three quarters).
• Production guidance: Despite reducing its output forecast for Jorong to 1MM tons (due to a permit problem earlier), BANPU maintains its FY10E target of 23MM tons, with help from the out-performing Indominco mine. Our FY10E output estimates are slightly more conservative at 22MMtons.
• Development update: Two key efficiency projects—Bontang port expansion and power plant—are essentially completed. This should help reduce BANPU’s production costs, longer term. Management previously estimates a US$2/ton cost reduction from the port project alone.
• New mines: Commissioning of 45%-owned Gao He project in China should begin imminently—this is 2-3 months behind schedule. The delay is due purely to the company’s waiting for a production license. Operation-wise, Gao He has already begun producing development tonnage. Progress at new Indonesian mine Bharinto is well on schedule, and management still targets Y/E10 production with 0.2MM maiden tonnage (JPM forecasts zero this year, 2MM tons in FY11E).
• Pricing update: Currently, BANPU has 4% of FY10E tonnage un-priced. But, the company has linked additional 14% to an index. This means that 18% of FY10E volume—or roughly 35% of 2H10E volume—remains exposed to pricing volatility.
• Coal market outlook: BANPU appears sanguine about the coal market outlook, as the firm sees still robust demand from its traditional markets of Japan, Taiwan and Korea. More importantly, China is emerging as the most important market for BANPU’s Indonesian coal (22%-24% of total volume over the past three quarters).
JP Morgan - Indo Tambang (ITMG)
Its parent company Banpu held an analyst meeting yesterday, painting a sanguine coal market outlook given robust export market demand. China is emerging as the most important market for BANPU’s Indonesian coal (22%-24% of total volume over the past three quarters). In retrospect, compared to Adaro’s surprisingly weak results yesterday, investors should have given more credit to ITMG’s 2Q10 results that showed a 17% QoQ uplift in average selling price (versus flat ASP for Adaro). Our Thai based analyst Sukit Chawalitakul is showing a P/E ratio of 13.7x and 9.9x for FY10-11 for Banpu, while Indo based analyst Stevanus Juanda is showing a P/E ratio of 13.2x and 10.0x for FY10-11 for ITMG. This stock could benefit from the heavy selling flow we seen on Adaro post the earnings disappointment, that could put ADRO on high-teens P/E multiple for FY10.
Mandiri Sekuritas Weekly Economic Research (31-Aug-2010) - Economy: Rupiah weakens on concerns over global economic recovery; Inflation may accelerate
Market review
§ Concern over faltering global economy recovery continues to weaken rupiah.
§ JCI contracted last week.
Global economy
§ Recent releases of weak economic indicators have prompted the US and Japan governments to extend stimulus. We expect rupiah appreciation to continue toward YE2010.
Domestic economy
§ Inflation may accelerate to 6.8% yoy in Aug10, mainly on the back of seasonal factors and higher administered prices.
§ Foreign exchange reserves reached the highest level of US$80.9bn in Aug10. BI expects the reserves to reach US$85bn to US$90bn by YE10.
§ Concern over faltering global economy recovery continues to weaken rupiah.
§ JCI contracted last week.
Global economy
§ Recent releases of weak economic indicators have prompted the US and Japan governments to extend stimulus. We expect rupiah appreciation to continue toward YE2010.
Domestic economy
§ Inflation may accelerate to 6.8% yoy in Aug10, mainly on the back of seasonal factors and higher administered prices.
§ Foreign exchange reserves reached the highest level of US$80.9bn in Aug10. BI expects the reserves to reach US$85bn to US$90bn by YE10.
Rabu, 01 September 2010
Businessweek Newcastle Coal Exports Fall; Ship Queue Lengthens
Aug. 31 (Bloomberg) -- Coal shipments from Australia’s Newcastle, the world’s biggest export port for the power-station fuel, fell by 11.5 percent last week while the queue of vessels waiting to load lengthened.
The volume exported in the week ended 7 a.m. local time yesterday dropped to 1.66 million metric tons from 1.88 million tons in the preceding period, Newcastle Port Corp. said on its website today.
Rio Tinto Group, Xstrata Plc and BHP Billiton Ltd. are among mining companies that ship the fuel from the harbor, which has three export terminals. Sixteen vessels were outside the port, up from 14 a week earlier and coal ships waited to load for an average of 14.25 days, up from 13.13, the report said.
Power-station coal prices at Newcastle, an Asian benchmark, rose 3.7 percent, according to the globalCOAL NEWC Index. Prices climbed to $91.03 a ton in the week ended Aug. 27 from $87.79 in the previous period, gaining for the second week. LINK
The volume exported in the week ended 7 a.m. local time yesterday dropped to 1.66 million metric tons from 1.88 million tons in the preceding period, Newcastle Port Corp. said on its website today.
Rio Tinto Group, Xstrata Plc and BHP Billiton Ltd. are among mining companies that ship the fuel from the harbor, which has three export terminals. Sixteen vessels were outside the port, up from 14 a week earlier and coal ships waited to load for an average of 14.25 days, up from 13.13, the report said.
Power-station coal prices at Newcastle, an Asian benchmark, rose 3.7 percent, according to the globalCOAL NEWC Index. Prices climbed to $91.03 a ton in the week ended Aug. 27 from $87.79 in the previous period, gaining for the second week. LINK
Bloomberg Gold Rallying to $1,500 as Soros's Bubble Inflates
Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.
Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.
“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.”
Investors added to their gold holdings through ETPs for three consecutive weeks, reflecting demand for assets typically favored in times of financial stress. Two-year Treasury yields fell to a record low of 0.4542 percent on Aug. 24 and the yen reached a 15-year high against the dollar the same day. Pacific Investment Management Co., Deutsche Bank AG and Citigroup Inc. have announced or are offering funds or traded instruments designed to guard against sudden market declines. LINK
Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.”
Investors added to their gold holdings through ETPs for three consecutive weeks, reflecting demand for assets typically favored in times of financial stress. Two-year Treasury yields fell to a record low of 0.4542 percent on Aug. 24 and the yen reached a 15-year high against the dollar the same day. Pacific Investment Management Co., Deutsche Bank AG and Citigroup Inc. have announced or are offering funds or traded instruments designed to guard against sudden market declines. LINK
Bloomberg Fed Officials Saw Risk of Sending Wrong Policy Signal
Some Federal Reserve officials were concerned that a decision to keep securities holdings unchanged would inadvertently signal an intention to resume large-scale asset purchases, minutes of the Aug. 10 meeting showed.
Also, a few policy makers said the economic effects of the decision “likely would be quite small,” the Fed’s Open Market Committee said in a report today in Washington. At the same time, some officials saw “increased downside risks to the outlook for both growth and inflation” and voiced concern that further shocks would cause “significant slowing in growth.”
The debate shows the challenge Fed Chairman Ben S. Bernanke may face in achieving consensus for any additional monetary stimulus to reverse a slowdown in growth and reduce joblessness more quickly. Policy makers haven’t agreed on “specific criteria or triggers for further action,” Bernanke said in a speech last week.
“A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee’s readiness to resume large-scale asset purchases,” the Fed said in the report, referring to mortgage-backed securities.
Fed officials agreed at the meeting to put a $2.05 trillion floor on securities holdings and buy Treasuries to replace an estimated $395 billion of mortgage assets that would be repaid from August 2010 through the end of 2011. LINK
Also, a few policy makers said the economic effects of the decision “likely would be quite small,” the Fed’s Open Market Committee said in a report today in Washington. At the same time, some officials saw “increased downside risks to the outlook for both growth and inflation” and voiced concern that further shocks would cause “significant slowing in growth.”
The debate shows the challenge Fed Chairman Ben S. Bernanke may face in achieving consensus for any additional monetary stimulus to reverse a slowdown in growth and reduce joblessness more quickly. Policy makers haven’t agreed on “specific criteria or triggers for further action,” Bernanke said in a speech last week.
“A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee’s readiness to resume large-scale asset purchases,” the Fed said in the report, referring to mortgage-backed securities.
Fed officials agreed at the meeting to put a $2.05 trillion floor on securities holdings and buy Treasuries to replace an estimated $395 billion of mortgage assets that would be repaid from August 2010 through the end of 2011. LINK
Reuters METALS-Copper adds to losses after gloomy Fed minutes
* Fed's meeting minutes send prices below closing losses
* Investors still betting the U.S. Fed will help growth
* Dollar down vs euro, U.S. stocks positive after data
* Coming Wed: US mfg gauge, construction spend, car sales
NEW YORK/LONDON, Aug 31 (Reuters) - Copper lost ground in after hours trade on Tuesday, after a worrisome report on the Federal Reserve's last policy-setting meeting, which added to earlier losses from the latest weak data and month-end position squaring.
Copper had pared declines after U.S. consumer confidence data showed a modest rise in August, but failed to press higher as concern over the pace of global economic recovery persisted. "Investors do not seem convinced (about the pace of recovery) and they are looking to see more help from U.S.," analyst David Wilson at Societe Generale said.
A slew of weak U.S. economic indicators damaged prices, though dollar declines against the euro and yen provided copper with an underpinning. Among the weaker economic data thwarting copper's chances for gains was business activity in New York City, which fell in August to its lowest level in a year.
Business activity in the U.S. Midwest also registered a slowdown in August, growing at a pace just shy of analysts forecasts. And prices of U.S. single-family homes gained more than expected in June and rose in the second quarter.
Base metals analyst Justin Lennon at Mitsui Bussan Commodities (U.S.A.) pointed out that the discrepancy between the latest steep declines in home sales data and the increase in house prices will likely keep future home sales weak for the near to medium term.
Though the data out on Tuesday was somewhat gloomy, Lennon said he did not think they painted a different picture than what had already been portrayed in other recent data. Instead, he and others attributed the sharp declines to position
squaring at month end. Later in after-hours trade, the Federal Reserve released minutes for its last policy-setting meeting, driving copper prices even lower than its weak close.
Tin CMSN3 ended at $21,000 from $21,640, and nickel CMNI3 at $20,700 from $21,050.
Tin prices hit a two-year high on Friday on the back of ongoing supply constraints in top exporter Indonesia, which have bolstered the metal's price prospects.
Metal Prices at 4:45 p.m. EDT (2045 GMT)
Metal Last Change Pct Move End 2009 Ytd Pct
move
COMEX Cu 337.35 -4.65 -1.36 334.65 0.81
LME Alum 2045.00 -13.00 -0.63 2230.00 -8.30
LME Cu 7375.00 -84.00 -1.13 7375.00 0.00
LME Lead 2050.00 -40.00 -1.91 2432.00 -15.71
LME Nickel 20690.00 -360.00 -1.71 18525.00 11.69
LME Tin 20900.00 -740.00 -3.42 16950.00 23.30
LME Zinc 2070.00 20.00 +0.98 2560.00 -19.14
SHFE Alu 15370.00 -145.00 -0.93 17160.00 -10.43
SHFE Cu* 58350.00 -980.00 -1.65 59900.00 -2.59
SHFE Zin 17060.00 -450.00 -2.57 21195.00 -19.51 LINK
* Investors still betting the U.S. Fed will help growth
* Dollar down vs euro, U.S. stocks positive after data
* Coming Wed: US mfg gauge, construction spend, car sales
NEW YORK/LONDON, Aug 31 (Reuters) - Copper lost ground in after hours trade on Tuesday, after a worrisome report on the Federal Reserve's last policy-setting meeting, which added to earlier losses from the latest weak data and month-end position squaring.
Copper had pared declines after U.S. consumer confidence data showed a modest rise in August, but failed to press higher as concern over the pace of global economic recovery persisted. "Investors do not seem convinced (about the pace of recovery) and they are looking to see more help from U.S.," analyst David Wilson at Societe Generale said.
A slew of weak U.S. economic indicators damaged prices, though dollar declines against the euro and yen provided copper with an underpinning. Among the weaker economic data thwarting copper's chances for gains was business activity in New York City, which fell in August to its lowest level in a year.
Business activity in the U.S. Midwest also registered a slowdown in August, growing at a pace just shy of analysts forecasts. And prices of U.S. single-family homes gained more than expected in June and rose in the second quarter.
Base metals analyst Justin Lennon at Mitsui Bussan Commodities (U.S.A.) pointed out that the discrepancy between the latest steep declines in home sales data and the increase in house prices will likely keep future home sales weak for the near to medium term.
Though the data out on Tuesday was somewhat gloomy, Lennon said he did not think they painted a different picture than what had already been portrayed in other recent data. Instead, he and others attributed the sharp declines to position
squaring at month end. Later in after-hours trade, the Federal Reserve released minutes for its last policy-setting meeting, driving copper prices even lower than its weak close.
Tin CMSN3 ended at $21,000 from $21,640, and nickel CMNI3 at $20,700 from $21,050.
Tin prices hit a two-year high on Friday on the back of ongoing supply constraints in top exporter Indonesia, which have bolstered the metal's price prospects.
Metal Prices at 4:45 p.m. EDT (2045 GMT)
Metal Last Change Pct Move End 2009 Ytd Pct
move
COMEX Cu 337.35 -4.65 -1.36 334.65 0.81
LME Alum 2045.00 -13.00 -0.63 2230.00 -8.30
LME Cu 7375.00 -84.00 -1.13 7375.00 0.00
LME Lead 2050.00 -40.00 -1.91 2432.00 -15.71
LME Nickel 20690.00 -360.00 -1.71 18525.00 11.69
LME Tin 20900.00 -740.00 -3.42 16950.00 23.30
LME Zinc 2070.00 20.00 +0.98 2560.00 -19.14
SHFE Alu 15370.00 -145.00 -0.93 17160.00 -10.43
SHFE Cu* 58350.00 -980.00 -1.65 59900.00 -2.59
SHFE Zin 17060.00 -450.00 -2.57 21195.00 -19.51 LINK
CNBC Wall Street Insiders Want Out, Selling $100 Million in Stock
In a move that may reflect a growing unwillingness to tie their personal fortunes to those of their companies, Wall Street insiders this year have undertaken more than five times the number of stock sales of their corporate shares as they have purchases.
Officers and directors of Goldman Sachs, J.P. Morgan, Citigroup, and Wells Fargo have sold about $100 million worth of stock so far this year, amid relatively small buying activity, according to public stock filings with the U.S. Securities and Exchange Commission that have been analyzed by the research firm InsiderScore.
Ben Silverman, research director at InsiderScore, said the recent swath of insider sales at banks signifies that “business is back to normal.” After wild swings in valuation at the major Wall Street firms, “we’ve got a degree of stabilization at the banks,” he said, and insiders may be looking for attractive prices at which to sell.
Another factor: the increasing degree to which annual bonuses are made up of stock or options rather than cash. Last year, about 70 percent of companies used stock options for compensation, up from 63 percent for the prior year, according to the management consulting firm the Hay Group. Banks say that a larger proportion of pay is now doled out in options as well—making recipients want to cash out at an earlier date than in past years.
For many on Wall Street, the pre-crisis buy-and-hold mentality may be changing, say bank employees and compensation trackers. Holding company stock was once a chance for great wealth creation, as well as a source of pride for bank employees. But after the bankruptcy of Lehman Brothers rendered its shares worthless and the fire sale of Bear Stearns dropped its stock to rock-bottom levels, more and more bank workers are reluctant to keep the company shares longer than they have to.
“There’s an understanding of the risk that these companies entail now,” said Silverman.
Bank spokespeople noted that much of the activity was governed by strict timing parameters placed on insiders as well as personal financial decisions, rather than a lack of confidence in the company’s stocks.
The largest stock sales at Goldman were undertaken by Blankfein, Cohn, and Viniar, who sold about $14 million, $11 million, and $10 million worth of stock respectively. Under an agreement struck two years ago, none of those executives may sell more than 10 percent of their common-stock holdings until October 2011.
But senior executives in the firm’s compliance area, including general counsel Esta Stecher, who sold about $9 million in stock, head of compliance Alan Cohen, who sold $1.5 million in stock, and chief accountant Sarah Smith, who sold a little more than $500,000 in stock, were also active sellers. Those officials are not bound by the October 2011 lockup.
The activity was nothing unusual, said a firm spokesman. Insiders at Goldman “are restricted by very narrow windows in which they can sell,” he said, and it “shouldn’t be surprising” if they take advantage of them. Much of the activity, he added, “was exercising ten-year options” that expired late last year. LINK
Officers and directors of Goldman Sachs, J.P. Morgan, Citigroup, and Wells Fargo have sold about $100 million worth of stock so far this year, amid relatively small buying activity, according to public stock filings with the U.S. Securities and Exchange Commission that have been analyzed by the research firm InsiderScore.Ben Silverman, research director at InsiderScore, said the recent swath of insider sales at banks signifies that “business is back to normal.” After wild swings in valuation at the major Wall Street firms, “we’ve got a degree of stabilization at the banks,” he said, and insiders may be looking for attractive prices at which to sell.
Another factor: the increasing degree to which annual bonuses are made up of stock or options rather than cash. Last year, about 70 percent of companies used stock options for compensation, up from 63 percent for the prior year, according to the management consulting firm the Hay Group. Banks say that a larger proportion of pay is now doled out in options as well—making recipients want to cash out at an earlier date than in past years.
For many on Wall Street, the pre-crisis buy-and-hold mentality may be changing, say bank employees and compensation trackers. Holding company stock was once a chance for great wealth creation, as well as a source of pride for bank employees. But after the bankruptcy of Lehman Brothers rendered its shares worthless and the fire sale of Bear Stearns dropped its stock to rock-bottom levels, more and more bank workers are reluctant to keep the company shares longer than they have to.
“There’s an understanding of the risk that these companies entail now,” said Silverman.
Bank spokespeople noted that much of the activity was governed by strict timing parameters placed on insiders as well as personal financial decisions, rather than a lack of confidence in the company’s stocks.
The largest stock sales at Goldman were undertaken by Blankfein, Cohn, and Viniar, who sold about $14 million, $11 million, and $10 million worth of stock respectively. Under an agreement struck two years ago, none of those executives may sell more than 10 percent of their common-stock holdings until October 2011.But senior executives in the firm’s compliance area, including general counsel Esta Stecher, who sold about $9 million in stock, head of compliance Alan Cohen, who sold $1.5 million in stock, and chief accountant Sarah Smith, who sold a little more than $500,000 in stock, were also active sellers. Those officials are not bound by the October 2011 lockup.
The activity was nothing unusual, said a firm spokesman. Insiders at Goldman “are restricted by very narrow windows in which they can sell,” he said, and it “shouldn’t be surprising” if they take advantage of them. Much of the activity, he added, “was exercising ten-year options” that expired late last year. LINK
Reuters NYMEX-Crude ends down, posts biggest loss in 3 months
* POLL: U.S. crude stocks up, pins down oil futures
* Stalled growth, recession fear hit equities, oil prices
* Hurricane Earl may threaten U.S. East Coast
* Coming up: EIA inventory data, 10:30 a.m. EDT, Wed
NEW YORK, Aug 31 (Reuters) - U.S. crude oil futures fell for a second day on Tuesday, ending August with the worst performance in three months, as traders squared books ahead of weekly inventory data forecast to show a further rise in crude
inventories.
Worries about bearish fundamentals mingled with fears of a slowing pace of economic recovery, even though the day's economic reports showed that consumer confidence rose this month and home prices rose slightly more than expected in July.
Month-end book-squaring and liquidations of September heating oil and gasoline futures, which expired at the close, added pressure to crude oil futures.
U.S. weekly retail gasoline demand fell 3.1 percent in the week ending Aug. 27 as the summer driving season waned, according to the SpendingPulse report from MasterCard Advisors.
The outlook for the U.S. economy would have to deteriorate "appreciably" to spur fresh support from the Federal Reserve, minutes of the central bank's last policy
meeting released on Tuesday said.
U.S. consumer confidence rose more than expected in August, lifted by a mild improvement in the short-term outlook, though a separate report showed business activity in the U.S. Midwest registered a slowdown in August.
MARKETS NEWS
The dollar held losses against the Japanese yen and the euro after the release of the U.S. Federal Reserve's minutes of its most recent policymakers' meeting, on Aug. 10.
Major Wall Street equities indexes ended the month lower. Near the end of the day's trading, equities turned negative, weighed down by technology, energy and industrial shares.
U.S. gold futures rose to a two-month high after data showed improving U.S. consumer confidence and rising prices for U.S. homes.
An expanded Reuters poll showed forecasts for a 1.1 million-barrel increase in U.S. crude stocks last week. Domestic distillate stocks were forecast 1.2 million barrels
higher and gasoline stocks to fall 200,000 barrels. LINK
* Stalled growth, recession fear hit equities, oil prices
* Hurricane Earl may threaten U.S. East Coast
* Coming up: EIA inventory data, 10:30 a.m. EDT, Wed
NEW YORK, Aug 31 (Reuters) - U.S. crude oil futures fell for a second day on Tuesday, ending August with the worst performance in three months, as traders squared books ahead of weekly inventory data forecast to show a further rise in crude
inventories.
Worries about bearish fundamentals mingled with fears of a slowing pace of economic recovery, even though the day's economic reports showed that consumer confidence rose this month and home prices rose slightly more than expected in July.
Month-end book-squaring and liquidations of September heating oil and gasoline futures, which expired at the close, added pressure to crude oil futures.
U.S. weekly retail gasoline demand fell 3.1 percent in the week ending Aug. 27 as the summer driving season waned, according to the SpendingPulse report from MasterCard Advisors.
The outlook for the U.S. economy would have to deteriorate "appreciably" to spur fresh support from the Federal Reserve, minutes of the central bank's last policy
meeting released on Tuesday said.
U.S. consumer confidence rose more than expected in August, lifted by a mild improvement in the short-term outlook, though a separate report showed business activity in the U.S. Midwest registered a slowdown in August.
MARKETS NEWS
The dollar held losses against the Japanese yen and the euro after the release of the U.S. Federal Reserve's minutes of its most recent policymakers' meeting, on Aug. 10.
Major Wall Street equities indexes ended the month lower. Near the end of the day's trading, equities turned negative, weighed down by technology, energy and industrial shares.
U.S. gold futures rose to a two-month high after data showed improving U.S. consumer confidence and rising prices for U.S. homes.
An expanded Reuters poll showed forecasts for a 1.1 million-barrel increase in U.S. crude stocks last week. Domestic distillate stocks were forecast 1.2 million barrels
higher and gasoline stocks to fall 200,000 barrels. LINK
Financial Time Fed minutes fuel recovery fears
Global shares, which spent most of the day in negative territory, fell further after the Federal Reserve raised concerns that it may have ruled out large-scale asset purchases
Throughout much of Tuesday’s session there has been an overriding sense that fiscal and monetary authorities are bumbling their lines in the face of a dangerous plot twist for the global economy, pushing traders away from stocks and back into havens such as core government bonds.
Risk appetite improved somewhat after the Case-Shiller house price index rose more than forecast in June and a reading of US household sentiment rebounded from a five month low. These reports helped lift the S&P 500 but after the minutes of the Federal Reserve’s Open Market Committee were released in early afternoon in New York, it erased these gains to close almost flat.
The minutes showed some officials saw increased risk to economic growth but indicated that they were not prepared to resume large-scale asset purchases.
The yields on benchmark 10-year Treasuries fell slightly further after the minutes were released, down 6 basis points to 2.47 per cent.
The FTSE All-World equity index is down 0.3 per cent and industrial commodities are struggling to make headway. The yen, one of the favoured currencies in times of strife, is again flirting with 15-year highs against the dollar.
The Japanese unit’s strength stands in contrast to – indeed, is partly the cause of – the stock market’s slide into bear market territory. The Nikkei 225 is down 22 per cent since April’s peak, having lost 3.6 per cent on Tuesday as investors worried that the previous day’s announcement of stimulus measures by the government and the Bank of Japan were insufficient to drag the economy out of its slough. LINK
Throughout much of Tuesday’s session there has been an overriding sense that fiscal and monetary authorities are bumbling their lines in the face of a dangerous plot twist for the global economy, pushing traders away from stocks and back into havens such as core government bonds.
Risk appetite improved somewhat after the Case-Shiller house price index rose more than forecast in June and a reading of US household sentiment rebounded from a five month low. These reports helped lift the S&P 500 but after the minutes of the Federal Reserve’s Open Market Committee were released in early afternoon in New York, it erased these gains to close almost flat.
The minutes showed some officials saw increased risk to economic growth but indicated that they were not prepared to resume large-scale asset purchases.
The yields on benchmark 10-year Treasuries fell slightly further after the minutes were released, down 6 basis points to 2.47 per cent.
The FTSE All-World equity index is down 0.3 per cent and industrial commodities are struggling to make headway. The yen, one of the favoured currencies in times of strife, is again flirting with 15-year highs against the dollar.
The Japanese unit’s strength stands in contrast to – indeed, is partly the cause of – the stock market’s slide into bear market territory. The Nikkei 225 is down 22 per cent since April’s peak, having lost 3.6 per cent on Tuesday as investors worried that the previous day’s announcement of stimulus measures by the government and the Bank of Japan were insufficient to drag the economy out of its slough. LINK
The Economic Times Base metals down on poor global cues
NEW DELHI: Prices of select base metals, led by copper, plunged up to Rs 10 per kg in the local non-ferrous metal market today after taking cues from weak global markets.
Trading sentiment turned bearish after base metals softened on the London Metal Exchange, as slower-than-forecast growth in US personal incomes added to speculation the pace of economic recovery in the world's second-largest user of copper after China may falter.
Meanwhile, copper fell by 0.8 per cent to $7,400, lead by 1.6 per cent at $2,057 and zinc by 0.8 per cent to $2,077.50 a metric tonne on the London Metal Exchange.
Reduced offtake by consuming industries also put pressure on the prices traders said.
In the national capital, copper wire scrap, copper wire bar and copper mixed scrap were down by Rs 2 each to Rs 386, Rs 405 and Rs 366, while nickel (4x4) followed suit and plunged by Rs 10 to Rs 900-904 per kg, respectively.
In line with a weakening trend, zinc, lead ingot and lead imported were down by Rs 2 each to Rs 118.50, Rs 121 and Rs 123 per kg, respectively.
Following were today's quotations in Rs per kg: Tin ingot 810, zinc ingot 118.50, nickel plate (4x4) 900-904, gun metal scrap 226 bell metal scrap 228, copper wire scrap 386, copper wire bar 405, copper mixed scrap 366.00, Utensil scrap 224, Chadripital 175.
Lead ingot 121, lead imported 123, aluminium ingots 100, sheet cutting 103, aluminium wire scrap 100 and aluminium utensils scrap 100. LINK
Trading sentiment turned bearish after base metals softened on the London Metal Exchange, as slower-than-forecast growth in US personal incomes added to speculation the pace of economic recovery in the world's second-largest user of copper after China may falter.
Meanwhile, copper fell by 0.8 per cent to $7,400, lead by 1.6 per cent at $2,057 and zinc by 0.8 per cent to $2,077.50 a metric tonne on the London Metal Exchange.
Reduced offtake by consuming industries also put pressure on the prices traders said.
In the national capital, copper wire scrap, copper wire bar and copper mixed scrap were down by Rs 2 each to Rs 386, Rs 405 and Rs 366, while nickel (4x4) followed suit and plunged by Rs 10 to Rs 900-904 per kg, respectively.
In line with a weakening trend, zinc, lead ingot and lead imported were down by Rs 2 each to Rs 118.50, Rs 121 and Rs 123 per kg, respectively.
Following were today's quotations in Rs per kg: Tin ingot 810, zinc ingot 118.50, nickel plate (4x4) 900-904, gun metal scrap 226 bell metal scrap 228, copper wire scrap 386, copper wire bar 405, copper mixed scrap 366.00, Utensil scrap 224, Chadripital 175.
Lead ingot 121, lead imported 123, aluminium ingots 100, sheet cutting 103, aluminium wire scrap 100 and aluminium utensils scrap 100. LINK
WSJ Data Points: Energy and Metals
Nymex crude for October delivery fell $7.03 per barrel this month, or 8.90% to $71.92.
* Halts a two month winning streak.
* Today, it is down $2.78, or 3.72%.
* Intraday, it traded as high as $74.73, and as low as $71.68.
* Year-to-date, it is down 9.38%.
Nymex natural gas for October delivery dropped $1.107 per million BTU’s this month, or 22.49% to $3.816.
* Snaps a four month winning streak.
* Largest one month percentage loss since July 2008.
* Today, it is up 0.4 cents or 0.10%.
* Year-to-date, it is down 31.59%.
Comex gold for September delivery gained $66.60 per troy ounce this month, or 5.64% to $1248.30.
* Best month since April 2010.
* Today, gold gained $11.20, or 0.91%.
* Up $12.90, or 1.04% over the last three sessions.
* Year-to-date, it is up 13.98%.
* Halts a two month winning streak.
* Today, it is down $2.78, or 3.72%.
* Intraday, it traded as high as $74.73, and as low as $71.68.
* Year-to-date, it is down 9.38%.
Nymex natural gas for October delivery dropped $1.107 per million BTU’s this month, or 22.49% to $3.816.
* Snaps a four month winning streak.
* Largest one month percentage loss since July 2008.
* Today, it is up 0.4 cents or 0.10%.
* Year-to-date, it is down 31.59%.
Comex gold for September delivery gained $66.60 per troy ounce this month, or 5.64% to $1248.30.
* Best month since April 2010.
* Today, gold gained $11.20, or 0.91%.
* Up $12.90, or 1.04% over the last three sessions.
* Year-to-date, it is up 13.98%.
CNBC JPMorgan Shutting Commodities Prop Trading in London
P Morgan Chase has notified commodities traders in London that they’ll soon be out of a job, joining a slew of U.S. financial firms that are cutting proprietary-trading divisions because of recent regulatory reforms.
The firm recently informed a group of less than 20 commodities prop traders—who trade for the firm’s own benefit—that their positions are “at risk,” said a person familiar with the matter. The traders can apply for other posts within JP Morgan, this person said, but their current jobs will likely be eliminated within two months.
JP Morgan’s [JPM 36.36 0.51 (+1.42%) ] move is the first in a series of expected cuts to its prop-trading business, which numbers roughly 100 people and accounts for less than 1% of annual revenue, according to people familiar with the matter.
Under the recently-passed “Volcker rule” provision of the Dodd-Frank Act, U.S. banks must curb their prop-trading activities as well as reduce their investments in private equity and hedge funds to minimal levels.
While the rule may take years to be fully interpreted and implemented, some banks have made moves to comply early. LINK
The firm recently informed a group of less than 20 commodities prop traders—who trade for the firm’s own benefit—that their positions are “at risk,” said a person familiar with the matter. The traders can apply for other posts within JP Morgan, this person said, but their current jobs will likely be eliminated within two months.
JP Morgan’s [JPM 36.36 0.51 (+1.42%) ] move is the first in a series of expected cuts to its prop-trading business, which numbers roughly 100 people and accounts for less than 1% of annual revenue, according to people familiar with the matter.
Under the recently-passed “Volcker rule” provision of the Dodd-Frank Act, U.S. banks must curb their prop-trading activities as well as reduce their investments in private equity and hedge funds to minimal levels.
While the rule may take years to be fully interpreted and implemented, some banks have made moves to comply early. LINK
Selasa, 31 Agustus 2010
OkeZone Laba PGN Naik Tipis Jadi Rp3,2 T
PT Perusahaan Gas Negara Tbk (PGAS) mencatatkan kenaikan tipis laba bersih menjadi Rp3,2 triliun pada semester I-2010 dari periode yang sama tahun sebelumnya yang sebesar Rp3,19 triliun.
Pendapatan perseroan dari distribusi naik menjadi Rp8,7 triliun dari sebelumnya Rp8,12 triliun. Pendapatan transmisi turun menjadi Rp800 miliar, dari sebelumnya Rp877 miliar dan pendapatan dari sewa serat optik naik Rp15 miliar dari sebelumnya Rp9 miliar.
Volume penyaluran distribusi meningkat menjadi sebesar 827 mmscfd dari sebelumnya 756 mmscfd. Volume penyaluran transmisinya tercatat 847 mmscfd, dari sebelumnya 763 mmscfd.
"Penyaluran volume gas bumi kepada pelanggan selama semester I-2010 telah mengalami peningkatan sembilan persen dibanding tahun lalu yang disalurkan untuk industri, pembangkit listrik, dan rumah tangga di dalam negeri," jelas Direktur Utama PGAS Hendi Prio Santoso dalam keterangan tertulisnya di Jakarta, Selasa (31/8/2010).
Sementara jumlah pelanggan distribusi tercatat 87.217 pelannggan, naik dari sebelumnya yang sebanyak 85.930 pelanggan. Hal ini mendorong laba usaha naik menjadi Rp4,57 triliun dari sebelumnya Rp3,93 triliun. EBITDA tercatat Rp5,3 triliun dari sebelumnya Rp4,76 triliun. LINK
Pendapatan perseroan dari distribusi naik menjadi Rp8,7 triliun dari sebelumnya Rp8,12 triliun. Pendapatan transmisi turun menjadi Rp800 miliar, dari sebelumnya Rp877 miliar dan pendapatan dari sewa serat optik naik Rp15 miliar dari sebelumnya Rp9 miliar.
Volume penyaluran distribusi meningkat menjadi sebesar 827 mmscfd dari sebelumnya 756 mmscfd. Volume penyaluran transmisinya tercatat 847 mmscfd, dari sebelumnya 763 mmscfd.
"Penyaluran volume gas bumi kepada pelanggan selama semester I-2010 telah mengalami peningkatan sembilan persen dibanding tahun lalu yang disalurkan untuk industri, pembangkit listrik, dan rumah tangga di dalam negeri," jelas Direktur Utama PGAS Hendi Prio Santoso dalam keterangan tertulisnya di Jakarta, Selasa (31/8/2010).
Sementara jumlah pelanggan distribusi tercatat 87.217 pelannggan, naik dari sebelumnya yang sebanyak 85.930 pelanggan. Hal ini mendorong laba usaha naik menjadi Rp4,57 triliun dari sebelumnya Rp3,93 triliun. EBITDA tercatat Rp5,3 triliun dari sebelumnya Rp4,76 triliun. LINK
Credit Suisse ANEKA TAMBANG (ANTM): In-line and strong 2Q results – reit Hold
We continue to be bearish with 2H nickel price while remains positive with Gold price. For 2011F EBITDA, we are forecasting 50-50 from Gold and Nickel. At Rp2,050- ANTM is trading on 13.5x-15.1x 2010F-11F PER and implying 7% downside to Target Price Rp1,900 (based on 6.3x 2010F EV/EBITDA), therefore we maintain Hold ANTM.
· Fonny Surya: ANTM posted Rp756.3 bn of net profit in 1H10 (55% of consensus, 52% of our FY10 estimates) increased 238% YoY from 1H09 figures of Rp223.8 bn. Operating profit is about 67% of our 2010E, or 64% concensus, up 117% QoQ and 416% YoY due to stronger nickel prices in 2Q10. This is inline with our expectations as we expect to see highest nickel prices in 2Q10 but lower nickel prices into 2H10. Net income is also supported by dividends from Newcrest's Gosowong gold mine, which is expected to contribute to approximately 10% of earnings in 2010.
· Fonny Surya: ANTM posted Rp756.3 bn of net profit in 1H10 (55% of consensus, 52% of our FY10 estimates) increased 238% YoY from 1H09 figures of Rp223.8 bn. Operating profit is about 67% of our 2010E, or 64% concensus, up 117% QoQ and 416% YoY due to stronger nickel prices in 2Q10. This is inline with our expectations as we expect to see highest nickel prices in 2Q10 but lower nickel prices into 2H10. Net income is also supported by dividends from Newcrest's Gosowong gold mine, which is expected to contribute to approximately 10% of earnings in 2010.
Credit Suisse BUKIT ASAM (PTBA): New 3rd rail-way project with Adani– Buy for Long-Term
At Rp17,300- PTBA is trading on 18.8x-12.2x 2010F-11F PER, 4.0% 2011F Dividend Yield, and implying 6% upside to Target Price Rp18,400 (13x 2011F PER). We maintain Hold PTBA over 6 months horizon, while PTBA is Buy for Long-Term due to its long-term capacity expansion projects!
· Fonny Surya (previous Daily attached): PTBA signed a Heads of Agreement (HOA) with India’s Adani group to build a 270-km railway project with a capacity of 35 mtpa. In exchange, PTBA agreed to an offtake of 60% of total volumes transported through this project at the prevailing benchmark price. This project will be an addition to the other joint railway project with Rajawali. Assuming that the dual-track program and the Rajawali project are progressing on time, altogether, we forecast PTBA achieve a 54% volumes CAGR between 2013-2015.
· We believe this is a positive for PTBA, and brings it one step closer to unlocking its massive reserves of 1.9 bn tonnes. However, given the uncertainties and challenges, coupled with short-term volumes growth risks from the existing railway, we believe that the benefit is still long term. At 18x 2010E P/E and 12x 2011E P/E, we believe that PTBA’s share is not cheap, and long-term growth has been priced in to some extent. We reiterate our NEUTRAL rating and maintain our target price of Rp18,400.
· Fonny Surya (previous Daily attached): PTBA signed a Heads of Agreement (HOA) with India’s Adani group to build a 270-km railway project with a capacity of 35 mtpa. In exchange, PTBA agreed to an offtake of 60% of total volumes transported through this project at the prevailing benchmark price. This project will be an addition to the other joint railway project with Rajawali. Assuming that the dual-track program and the Rajawali project are progressing on time, altogether, we forecast PTBA achieve a 54% volumes CAGR between 2013-2015.
· We believe this is a positive for PTBA, and brings it one step closer to unlocking its massive reserves of 1.9 bn tonnes. However, given the uncertainties and challenges, coupled with short-term volumes growth risks from the existing railway, we believe that the benefit is still long term. At 18x 2010E P/E and 12x 2011E P/E, we believe that PTBA’s share is not cheap, and long-term growth has been priced in to some extent. We reiterate our NEUTRAL rating and maintain our target price of Rp18,400.
Credit Suisse BUMI RESOURCES (non-rated): Ahead Consensus and Strong 2Q Top-line
We have not reinstated coverage on BUMI. Despite heavy rain, compared to Consensus estimates the results seems strong and ahead of expectation, 1H10 EBIT $531.8m (+5%YoY & 46% of 2010C) on the back of 1H10 Revenue $2,138.7bn (+25%YoY & 53.6% of 2010C). @Rp1,690- BUMI is trading on 10.4x-6.9x 2010-11 Consensus PER, the cheapest in the sector.
· Fonny Surya: BUMI (non-rated) posted US$134.6 mn of net profit in 1H10 (39% of consensus) decreased 30% YoY from 1H09 figures of US$192.3 mn. On quarter basis, BUMI's net profit is down 61% QoQ primarily due to a large derivative loss booked in 2Q10 of US$ 60mn vs loss of US$ 9.6mn booked in 1Q10. 2Q Operating profit is up 43% QoQ (45% consensus for 1H10). Operating margin is improving, from 21% in 1Q10 to 27% in 2Q10.
· Fonny Surya: BUMI (non-rated) posted US$134.6 mn of net profit in 1H10 (39% of consensus) decreased 30% YoY from 1H09 figures of US$192.3 mn. On quarter basis, BUMI's net profit is down 61% QoQ primarily due to a large derivative loss booked in 2Q10 of US$ 60mn vs loss of US$ 9.6mn booked in 1Q10. 2Q Operating profit is up 43% QoQ (45% consensus for 1H10). Operating margin is improving, from 21% in 1Q10 to 27% in 2Q10.
Credit Suisse ADARO ENERGY (ADRO): In-line 2Q EBITDA, but disappointing 2Q EPS
Despite heavy rain, operationally in-line 2Q results with 1H10 Sales volume +22%YoY to 21.8m tonnes, and 1H10 ASP -17%YoY to USD55.6/t. Therefore 1H10 EBITDA Rp4,262bn (-23%YoY & 41% of 2010F) on the back 1H10 Revenue Rp11,985bn (-7%YoY & 44% of 2010F). During CS Asean day last Friday, Management disclosed that volume has been fully contracted for 2011 and ASP has been 30% fixed to Index while 50% will be priced to Japan coal index (currently +50% YoY from $70 to $98). Based on Fonny’s existing forecast, at Rp1,980- trading on 15.4x-10.9x 2010F-11F PER, 4.1% 2011F Dividend Yield and implying 26% upside to Target Price Rp2,500 (based on 14x 2011F PER), I personally recommend Buy on Weakness ADRO!
· Fonny Surya: ADRO reported 2Q net profit of Rp 292bn, down 66% QoQ and 73.5% YoY. 1H EBITDA profit is in-line at 41% of our full year forecasts (2Q EBITDA declined 24% QoQ and declined 35% YoY) and 45% of consensus. However, net profit is about 28% our forecasts and 29% of consensus primarily due to higher effective tax rate at 54%, non recurring forex loss, and higher interest expenses.
· ASP is flat QoQ at US$ 55.7/t as most of the prices were still based on 1H09 benchmark. 2Q volume released in July was a 9% QoQ decrease due to heavy rain. Cash cost ex-royalty increased by 11.4% QoQ at US 33/t due to higher mining and coal processing costs. Overall EBITDA margin decreased from 39% in 1Q to 32% in Q2.
· Pending talk to management to get more clarifications on 2H outlook , we do expect a better result in 2H from improving ASP and volume.
· Fonny Surya: ADRO reported 2Q net profit of Rp 292bn, down 66% QoQ and 73.5% YoY. 1H EBITDA profit is in-line at 41% of our full year forecasts (2Q EBITDA declined 24% QoQ and declined 35% YoY) and 45% of consensus. However, net profit is about 28% our forecasts and 29% of consensus primarily due to higher effective tax rate at 54%, non recurring forex loss, and higher interest expenses.
· ASP is flat QoQ at US$ 55.7/t as most of the prices were still based on 1H09 benchmark. 2Q volume released in July was a 9% QoQ decrease due to heavy rain. Cash cost ex-royalty increased by 11.4% QoQ at US 33/t due to higher mining and coal processing costs. Overall EBITDA margin decreased from 39% in 1Q to 32% in Q2.
· Pending talk to management to get more clarifications on 2H outlook , we do expect a better result in 2H from improving ASP and volume.
MSCI (+ BDMN BMRI BBRI, - INCO)
MSCI announced Quarterly Index Review results Aug 18, 2010 (Asia time), to be effective at the close of trading on Aug 31. MSCI Indonesia Index will increase weighting (due to number of shares) for Bank Danamon, Bank Mandiri and Bank Rakyat Indonesia, while will decrease weighting (due to number of shares) for International Nickel Indonesia.
Credit Suisse Asia Equity Focus Australian EPS momentum slows but valuation remains attractive
Australian reporting season is in line with expectations but outlook statements are cautious
The recently completed FY 2010 (ended June 2010) earnings season in Australia
has come in largely in line with expectations. Although there were some early
disappointments, the number of positive and negative surprises seems to be largely
balanced at the end of August. The outlook statements of companies are an area of
disappointment, however. These were either not forthcoming or often weaker than
expected. The notable exception is the resources sector, where both the actual
results and the outlook comments were positive across the sector. We believe that
roughly half of companies reporting met expectations. On balance, there appears to
be a fairly even spread between positive and negative surprises. IBES consensus
data suggest that growth for the 2010 year is close to the 10% estimated prior to
the reporting season. The weaker outlook statements have resulted in modest
downgrades to the 2011 EPS growth outlook – but not the savage downgrades that
some pessimists were predicting. Companies reporting weaker-than-expected
outlooks were located in diverse sectors, including areas such as healthcare, general
insurance, consumer and, to a lesser extent, banks (with the notable exception of ANZ, which outperformed its peers).
Offsetting the weaker outlook statements were many positive surprises in the area of
dividends. Market data suggests that positive dividend surprises outweighed the negatives by 2 to 1. We believe this reflects the solid balance sheets and strong
cash flows reported by most companies. While giving cautious outlooks or sometimes unable to give any guidance at all for the coming year due to the uncertainty, companies find themselves in a comfortable financial position at present.
Although the outlook for EPS growth for FY 2011 (ending June 2011) has been lowered following the reporting season, the consensus is still expecting strong growth. The market growth estimate prior to the reporting season was around 25%, according to IBES. This has now been lowered to around 20%, but it still represents strong growth. The key driver of the big growth estimate is the resources sector. Higher commodity price estimates and currently very high prices for iron ore and coal result in an estimated growth rate for this sector of 46%. The expectation for the industrials sector is for growth of around 8%, similar to 2010. Updates from banks suggest revenue growth is subdued and interest margins remain under pressure. Offsetting this is the continued drop in bad debt charges as the domestic economy continues its solid performance. EPS growth estimates for the banks in 2011 are for +13%, following +1% in 2010. This is one sector we believe could face further negative revisions. The ASX 200 has fallen by 9% YTD as investors have become nervous about a double-dip recession in the USA and slower growth in China. An increase in risk aversion has impacted the Australian index, as it is seen as a play on world growth and on China, in particular. This is despite the fact that the domestic economy has continued to perform well and that EPS growth has largely met expectations.
Despite the still uncertain outcome of the federal election, we believe the fundamentals for the Australian equity market remain positive. The Australian economy has continued its solid performance. We do not see a significant impact of the election outcome on the macro economic variables. We expect the Reserve Bank of Australia to remain on hold in the short term, but forecast a further 75 bp of rate increases on a one year view. We do no not expect a "double dip" and continue to believe the major economies are heading for a period of more moderate but still positive growth. We expect the strong Chinese growth to continue, which is also an important driver of the Australian economy and of commodity prices and the mining sector, in particular. The ASX 200 is trading below its longer-term average P/E and the outlook for EPS growth in FY 2011 (ending June 2011) remains positive.
In the short term the market is likely to remain volatile as investors focus on major global economic releases. The domestic political uncertainty could also overhang the market in the very short term. The risks of a downside surprise on the global economic front have certainly increased, but our central case remains that a "double-dip" recession is unlikely. On a 12 month view, we believe that growth momentum will continue, even if it is at a more modest rate. We see a positive medium-term outlook for commodities and are overweight mining and related cyclical stocks. The positive results announced by companies in the resources sector have added to our confidence regarding this call. Our TOP PICKS in the sector include Rio Tinto (RIO AU, BUY), Fortescue Metals (FMG AU, BUY) and Orica (ORI AU, BUY).
The recently completed FY 2010 (ended June 2010) earnings season in Australia
has come in largely in line with expectations. Although there were some early
disappointments, the number of positive and negative surprises seems to be largely
balanced at the end of August. The outlook statements of companies are an area of
disappointment, however. These were either not forthcoming or often weaker than
expected. The notable exception is the resources sector, where both the actual
results and the outlook comments were positive across the sector. We believe that
roughly half of companies reporting met expectations. On balance, there appears to
be a fairly even spread between positive and negative surprises. IBES consensus
data suggest that growth for the 2010 year is close to the 10% estimated prior to
the reporting season. The weaker outlook statements have resulted in modest
downgrades to the 2011 EPS growth outlook – but not the savage downgrades that
some pessimists were predicting. Companies reporting weaker-than-expected
outlooks were located in diverse sectors, including areas such as healthcare, general
insurance, consumer and, to a lesser extent, banks (with the notable exception of ANZ, which outperformed its peers).
Offsetting the weaker outlook statements were many positive surprises in the area of
dividends. Market data suggests that positive dividend surprises outweighed the negatives by 2 to 1. We believe this reflects the solid balance sheets and strong
cash flows reported by most companies. While giving cautious outlooks or sometimes unable to give any guidance at all for the coming year due to the uncertainty, companies find themselves in a comfortable financial position at present.
Although the outlook for EPS growth for FY 2011 (ending June 2011) has been lowered following the reporting season, the consensus is still expecting strong growth. The market growth estimate prior to the reporting season was around 25%, according to IBES. This has now been lowered to around 20%, but it still represents strong growth. The key driver of the big growth estimate is the resources sector. Higher commodity price estimates and currently very high prices for iron ore and coal result in an estimated growth rate for this sector of 46%. The expectation for the industrials sector is for growth of around 8%, similar to 2010. Updates from banks suggest revenue growth is subdued and interest margins remain under pressure. Offsetting this is the continued drop in bad debt charges as the domestic economy continues its solid performance. EPS growth estimates for the banks in 2011 are for +13%, following +1% in 2010. This is one sector we believe could face further negative revisions. The ASX 200 has fallen by 9% YTD as investors have become nervous about a double-dip recession in the USA and slower growth in China. An increase in risk aversion has impacted the Australian index, as it is seen as a play on world growth and on China, in particular. This is despite the fact that the domestic economy has continued to perform well and that EPS growth has largely met expectations.
Despite the still uncertain outcome of the federal election, we believe the fundamentals for the Australian equity market remain positive. The Australian economy has continued its solid performance. We do not see a significant impact of the election outcome on the macro economic variables. We expect the Reserve Bank of Australia to remain on hold in the short term, but forecast a further 75 bp of rate increases on a one year view. We do no not expect a "double dip" and continue to believe the major economies are heading for a period of more moderate but still positive growth. We expect the strong Chinese growth to continue, which is also an important driver of the Australian economy and of commodity prices and the mining sector, in particular. The ASX 200 is trading below its longer-term average P/E and the outlook for EPS growth in FY 2011 (ending June 2011) remains positive.
In the short term the market is likely to remain volatile as investors focus on major global economic releases. The domestic political uncertainty could also overhang the market in the very short term. The risks of a downside surprise on the global economic front have certainly increased, but our central case remains that a "double-dip" recession is unlikely. On a 12 month view, we believe that growth momentum will continue, even if it is at a more modest rate. We see a positive medium-term outlook for commodities and are overweight mining and related cyclical stocks. The positive results announced by companies in the resources sector have added to our confidence regarding this call. Our TOP PICKS in the sector include Rio Tinto (RIO AU, BUY), Fortescue Metals (FMG AU, BUY) and Orica (ORI AU, BUY).
Mansek Rising inflation risks comes with rising debt
Review: Bond prices and rupiah weakened ahead of inflation data. Volatility in the rupiah bond market continued during the week. Having rallied in the first three days of the week, bond prices dropped Thursday. The 10-year government bond yield fell to 7.98% on Wednesday before rising to 8.05% on Thursday. Yield curve steepened as short-term yield were relatively stable. The gap between the 10year and 1-year yields was up to 2.06ppt from 1.6ppt in July – still slightly below the long term historical average of 2.4ppt (Figure 1). Overall, government bond prices fell 0.2% on average, according to Mandiri Sekuritas! Governme nt Bond Index. Thus, total return investing in the government bonds is 16.4% year to date with average yield to maturity up slightly by 3bps to 8.88%. The rupiah also weakened during the week by 0.48%, trading at 9,016 against US Dollar.
Transaction volume was relatively high. Total value of the transaction in the secondary bond market was Rp6.7tn (vs. Rp3.7tn on the previous week) on average per day. The most actively traded security was the long-end series such as the 15-year FR40 and the 20-year FR52; both comprising about 38% of the total trading volume during the week. The FR40 was traded at 120, up by 1.1 percentage points yielding 8.60% from a week earlier. Meanwhile, the FR52 was also up by 0.2 percentage points to 112.29, yielding 9.15%. Our fair p! rices for those bonds are 118.50 and 112.39, thus we think FR40 is traded above its fair value, meanwhile we have no recommendation for the FR52 as it’s already traded at its fair value.
Foreigners were still bullish on the rupiah bonds. After slightly reducing their portfolio in the last two week by almost Rp1tn, foreign investors become net buyers during the week by mostly increasing their holdings of the long end tenors. Their holdings of over 10-year tenors increased by Rp1.9tn during the week to Rp96.7tn. Meanwhile, they net sold 2-5 year tenors by Rp0.5tn to be Rp32.2tn. Thus foreigners’ total portfolio of bonds over 10-years rose to 54.1% from 53.4% in the week.
Bond auction result: total bid was still robust but the lowest yield bid increased. Total bid on the bond auction on Tuesday was still high reaching Rp16.1tn— lower than in the previous auction of Rp17.2tn. Demand for the short-term paper was still remarkable with the bid for the SPN20110811 reaching Rp6.8tn or almost 42% of total bids. The average yields awarded were slightly below our fair yield estimate. The SPN20110811, FR53, FR54 and FR50 average yield awarded were 5.82% (vs. our estimates: 6.0%), 8.06% (8.14%), 8.96% (9.07%), and 9.20% (9.46%), with the highest ! yields aw arded being 5.84%, 8.09%, 8.97% and 9.22% respectively. However on Friday the FR53, FR54 and FR50 are closed lower at yield, 8.23%, 9.24%, and 9.43% respectively compared with Tuesday. There are two interesting point on the last auction (1) The government continued to try reducing the T-bill (SPN) issuances, although total bids was very high i.e. Rp6.6tn, The government only issued Rp0.4tn. (2) Although total bids for the long-end tenors were relatively high but the bid for the lowest yield increased from the previous auction. Thus, the government has issued Rp139.6tn (incl. including sukuk private placement with the Ministry of Religious Affairs totaling Rp336bn on 26-Aug) or almost 83% of the new total target to finance budget deficit. The Sukuk SDHI 2014 B is maturing 4 years and offering coupon fee of 7.3%.!
Rising debt issuance in 2011? According to the 2011 budget plan, the deficit would amount to Rp115.7tn, equivalent to 1.7% of GDP, or lower than 2010 budgeted deficit of Rp134tn or 2.1% of GDP. For the bond market perspective there are two things that should be watched carefully (1) financing account. Although budget deficit is narrowing but the government plans to sell more bonds while at the same time reduce offshore borrowings. Net sales of government bonds are targeted to be Rp125.5tn in 2011 or higher by almost Rp18tn than in 2010. On gross issuances basis, the government projected to issue more than Rp200tn in 2011. The government would prio! ritize th e rupiah-denominated bonds emission. Meanwhile, drawings of external loans will be recorded at Rp57.1tn next year, lower than an estimated Rp70.8tn in 2010. However, we think the government might reduce bond issuances if there’s an excess fund from 2010 and government reduces SPN issuances this year. (2) Subsidize account. The government plans to reduce electricity and fertilizer subsidies in 2011. Electricity tariff is projected to rise 15%, allowing subsidies to decline from Rp201.3 trillion in 2010 to Rp184.8tn in the subsequent year. In addition, the government also anticipates lower subsidies for fertilizer, seed, interest on program loans, and taxes, resulting in 10.9% decrease of non-energy subsidies during 2011. This condition might stoke inflation in 2011, although the government still maintains their inflation forecast at 5.3%. Our economist expects inflation to rise to 6.6% in 2011.
Outlook: We still maintain our duration shortening suggestion. Rising inflation risks come with rising debts might continue to yield curve steepening. Augusts’ inflation figure will be released on 1-Sept. In the last five years, average August inflation reached 0.43% m-o-m. Our economist expects 1.14% m-o-m and 6.84% y-o-y inflation following the impacts of electricity tariff hike, school-fees increase, and higher food prices during the fasting month. Market consensus expected inflation will be higher in August ! i.e. 1% m -o-m (6.7% y-o-y). Thus, in terms of risk reward wise, we still maintain our strategy to shorten the duration. We still maintain our view that it’s not comfortable owning the 10-year bond with the yield offered below 9% taking into account mounting inflation pressure and rising debt issuances. Short-term tenors might be safer bets. However, if the 10-year bond yield is higher than 9%, long term tenors will be attractive. We also maintain our yield forecasts for the 2- and 10-year bonds at 7.7% (range: 7%-8.3%) and 9.8% (range: 9.2%-10.4%) by the end of this year, assuming inflation rate of 5.9%, the rupiah at Rp8,900 against the US dollar and BI rate 7% by YE2010
Transaction volume was relatively high. Total value of the transaction in the secondary bond market was Rp6.7tn (vs. Rp3.7tn on the previous week) on average per day. The most actively traded security was the long-end series such as the 15-year FR40 and the 20-year FR52; both comprising about 38% of the total trading volume during the week. The FR40 was traded at 120, up by 1.1 percentage points yielding 8.60% from a week earlier. Meanwhile, the FR52 was also up by 0.2 percentage points to 112.29, yielding 9.15%. Our fair p! rices for those bonds are 118.50 and 112.39, thus we think FR40 is traded above its fair value, meanwhile we have no recommendation for the FR52 as it’s already traded at its fair value.
Foreigners were still bullish on the rupiah bonds. After slightly reducing their portfolio in the last two week by almost Rp1tn, foreign investors become net buyers during the week by mostly increasing their holdings of the long end tenors. Their holdings of over 10-year tenors increased by Rp1.9tn during the week to Rp96.7tn. Meanwhile, they net sold 2-5 year tenors by Rp0.5tn to be Rp32.2tn. Thus foreigners’ total portfolio of bonds over 10-years rose to 54.1% from 53.4% in the week.
Bond auction result: total bid was still robust but the lowest yield bid increased. Total bid on the bond auction on Tuesday was still high reaching Rp16.1tn— lower than in the previous auction of Rp17.2tn. Demand for the short-term paper was still remarkable with the bid for the SPN20110811 reaching Rp6.8tn or almost 42% of total bids. The average yields awarded were slightly below our fair yield estimate. The SPN20110811, FR53, FR54 and FR50 average yield awarded were 5.82% (vs. our estimates: 6.0%), 8.06% (8.14%), 8.96% (9.07%), and 9.20% (9.46%), with the highest ! yields aw arded being 5.84%, 8.09%, 8.97% and 9.22% respectively. However on Friday the FR53, FR54 and FR50 are closed lower at yield, 8.23%, 9.24%, and 9.43% respectively compared with Tuesday. There are two interesting point on the last auction (1) The government continued to try reducing the T-bill (SPN) issuances, although total bids was very high i.e. Rp6.6tn, The government only issued Rp0.4tn. (2) Although total bids for the long-end tenors were relatively high but the bid for the lowest yield increased from the previous auction. Thus, the government has issued Rp139.6tn (incl. including sukuk private placement with the Ministry of Religious Affairs totaling Rp336bn on 26-Aug) or almost 83% of the new total target to finance budget deficit. The Sukuk SDHI 2014 B is maturing 4 years and offering coupon fee of 7.3%.!
Rising debt issuance in 2011? According to the 2011 budget plan, the deficit would amount to Rp115.7tn, equivalent to 1.7% of GDP, or lower than 2010 budgeted deficit of Rp134tn or 2.1% of GDP. For the bond market perspective there are two things that should be watched carefully (1) financing account. Although budget deficit is narrowing but the government plans to sell more bonds while at the same time reduce offshore borrowings. Net sales of government bonds are targeted to be Rp125.5tn in 2011 or higher by almost Rp18tn than in 2010. On gross issuances basis, the government projected to issue more than Rp200tn in 2011. The government would prio! ritize th e rupiah-denominated bonds emission. Meanwhile, drawings of external loans will be recorded at Rp57.1tn next year, lower than an estimated Rp70.8tn in 2010. However, we think the government might reduce bond issuances if there’s an excess fund from 2010 and government reduces SPN issuances this year. (2) Subsidize account. The government plans to reduce electricity and fertilizer subsidies in 2011. Electricity tariff is projected to rise 15%, allowing subsidies to decline from Rp201.3 trillion in 2010 to Rp184.8tn in the subsequent year. In addition, the government also anticipates lower subsidies for fertilizer, seed, interest on program loans, and taxes, resulting in 10.9% decrease of non-energy subsidies during 2011. This condition might stoke inflation in 2011, although the government still maintains their inflation forecast at 5.3%. Our economist expects inflation to rise to 6.6% in 2011.
Outlook: We still maintain our duration shortening suggestion. Rising inflation risks come with rising debts might continue to yield curve steepening. Augusts’ inflation figure will be released on 1-Sept. In the last five years, average August inflation reached 0.43% m-o-m. Our economist expects 1.14% m-o-m and 6.84% y-o-y inflation following the impacts of electricity tariff hike, school-fees increase, and higher food prices during the fasting month. Market consensus expected inflation will be higher in August ! i.e. 1% m -o-m (6.7% y-o-y). Thus, in terms of risk reward wise, we still maintain our strategy to shorten the duration. We still maintain our view that it’s not comfortable owning the 10-year bond with the yield offered below 9% taking into account mounting inflation pressure and rising debt issuances. Short-term tenors might be safer bets. However, if the 10-year bond yield is higher than 9%, long term tenors will be attractive. We also maintain our yield forecasts for the 2- and 10-year bonds at 7.7% (range: 7%-8.3%) and 9.8% (range: 9.2%-10.4%) by the end of this year, assuming inflation rate of 5.9%, the rupiah at Rp8,900 against the US dollar and BI rate 7% by YE2010
Danareksa Adaro Energy (ADRO IJ, Rp 1,980 BUY) 1H10 earnings: below expectations
Highlights:
Coal production was down 9.7% qoq in 2Q10 on the back of heavy rains in Kalimantan. On a yoy basis, however, coal production was still up 14.6% in 2Q10. In 1H10, coal production reached 21.6Mt, or 47.0% of our full year forecast – i.e. inline.
Along with the slowdown in production, coal sales also slowed. They reached 21.8Mt in 1H10 (+22.0% yoy). Similarly, coal sales were in line with our forecast (the 1H10 sales were 47.3% of our full year forecast).
The stripping ratio increased from 4.3x in 1Q10 to 5.6x in 2Q10.
In regard to its mining contracting business, coal production and hauling was also in line with our target (46-47% of our full year target). Overburden removal was below expectations, however, and only reached 31-43% of our full year target.
While 2Q10 ASP increased slightly by 1.9%, lower coal production combined with a lower-than-expected contribution from coal mining services resulted in lower revenues, down by 9.1% qoq. In USD terms, revenues were down 7.6% qoq to USD626mn in 2Q10. 1H10 revenues of Rp11,985bn are only 42.6% of our FY10F target.
Production cash costs (ex. royalties) increased by 22.1% qoq in 2Q10. All in all, net profits were down 66.1% qoq in 2Q10. The 1H10 net income was below our expectations at only 28.9% of our FY10F target, while the core profits were only 33.7% of our FY10F target.
Comments:
The increase in the stripping ratio is not a cause for alarm since mining contractors tend to push overburden removal during the first two quarters of the year - and then concentrating on excavating the coal in the remaining two quarters of the year. However, we expect the stripping ratio to increase in the following quarters - as the actual stripping ratio is still below the company’s planned stripping ratio of 5.5x - due to heavy rains in Kalimantan.
We are reviewing our assumptions for coal mining contracting services, as the 1H10 overburden removal came in below our expectation.
Although there was a slight increase in quarterly ASP, the 1H10 ASP was still far below our FY10F ASP expectation. As a result, we are reviewing our ASP target for FY10F.
Mining, coal processing, freight and handling costs all contributed to the production cash cost increase, along with the increases in the stripping ratio and fuel prices in 2Q10 that affected the mining industry as a whole. This is likely to remain the case in the near future.
We are reviewing our forecasts and currently have a BUY call on ADRO with a TP of Rp2,650, implying FY10-11F P/E of 20.9-16.1x.
Coal production was down 9.7% qoq in 2Q10 on the back of heavy rains in Kalimantan. On a yoy basis, however, coal production was still up 14.6% in 2Q10. In 1H10, coal production reached 21.6Mt, or 47.0% of our full year forecast – i.e. inline.
Along with the slowdown in production, coal sales also slowed. They reached 21.8Mt in 1H10 (+22.0% yoy). Similarly, coal sales were in line with our forecast (the 1H10 sales were 47.3% of our full year forecast).
The stripping ratio increased from 4.3x in 1Q10 to 5.6x in 2Q10.
In regard to its mining contracting business, coal production and hauling was also in line with our target (46-47% of our full year target). Overburden removal was below expectations, however, and only reached 31-43% of our full year target.
While 2Q10 ASP increased slightly by 1.9%, lower coal production combined with a lower-than-expected contribution from coal mining services resulted in lower revenues, down by 9.1% qoq. In USD terms, revenues were down 7.6% qoq to USD626mn in 2Q10. 1H10 revenues of Rp11,985bn are only 42.6% of our FY10F target.
Production cash costs (ex. royalties) increased by 22.1% qoq in 2Q10. All in all, net profits were down 66.1% qoq in 2Q10. The 1H10 net income was below our expectations at only 28.9% of our FY10F target, while the core profits were only 33.7% of our FY10F target.
Comments:
The increase in the stripping ratio is not a cause for alarm since mining contractors tend to push overburden removal during the first two quarters of the year - and then concentrating on excavating the coal in the remaining two quarters of the year. However, we expect the stripping ratio to increase in the following quarters - as the actual stripping ratio is still below the company’s planned stripping ratio of 5.5x - due to heavy rains in Kalimantan.
We are reviewing our assumptions for coal mining contracting services, as the 1H10 overburden removal came in below our expectation.
Although there was a slight increase in quarterly ASP, the 1H10 ASP was still far below our FY10F ASP expectation. As a result, we are reviewing our ASP target for FY10F.
Mining, coal processing, freight and handling costs all contributed to the production cash cost increase, along with the increases in the stripping ratio and fuel prices in 2Q10 that affected the mining industry as a whole. This is likely to remain the case in the near future.
We are reviewing our forecasts and currently have a BUY call on ADRO with a TP of Rp2,650, implying FY10-11F P/E of 20.9-16.1x.
Madia Indonesia Inalum Raih Laba US$101 Juta
PT Inalum yang memproduksi ingot (timah batangan) meraih laba bersih pada 2009 sebesar US$101 juta dan diharapkan tahun ini akan meraup laba lebih besar seiring kian meningkatnya harga di pasar dunia.
Keuntungan yang diperoleh itu tidak terlepas dari stabilnya produksi, operasional yang baik dan lancar dikarenakan tingginya permukaan air Danau Toba pada level 904 meter dari permukaan laut, ungkap Direktur Umum dan SDM PT Inalum Nasril Kamaruddin di Medan, Senin malam.
Seusai acara buka puasa bersama dengan jajaran pers di Sumatera Utara, juga dihadiri para direksi perusahaan patungan Indonesia-Jepang itu, Nasril mengutarakan keyakinannya PT. Inalum akan berkembang lebih baik.
Pada 2009 produksi perusahaan peleburan timah yang berlokasi di Tanjung Gading, Kabupaten Batubara tersebut mencapai 256.000 ton dan tahun ini telah direncanakan pencapaian produksi 254.000 ton.
Menyinggung akan berakhirnya kerja sama Indonesia-Jepang pada 2013, pihak manajemen PT. Inalum menyatakan perusahaan akan tetap eksis.
Perusahaan yang telah berdiri sejak 35 tahun lalu itu, menurut Nasril selama ini juga memberikan perhatian yang cukup besar terhadap warga di beberapa kabupaten melalui program pemberdayaan masyarakat.
Bantuan kegiatan kemasyarakatan yang diberikan perusahaan itu, di antaranya perbaikan sejumlah rumah sekolah, rumah-rumah ibadah, kesehatan, beasiswa, peralatan pedagogik, pemberdayaan nelayan dan modal bergulir untuk usaha kecil. LINK
Keuntungan yang diperoleh itu tidak terlepas dari stabilnya produksi, operasional yang baik dan lancar dikarenakan tingginya permukaan air Danau Toba pada level 904 meter dari permukaan laut, ungkap Direktur Umum dan SDM PT Inalum Nasril Kamaruddin di Medan, Senin malam.
Seusai acara buka puasa bersama dengan jajaran pers di Sumatera Utara, juga dihadiri para direksi perusahaan patungan Indonesia-Jepang itu, Nasril mengutarakan keyakinannya PT. Inalum akan berkembang lebih baik.
Pada 2009 produksi perusahaan peleburan timah yang berlokasi di Tanjung Gading, Kabupaten Batubara tersebut mencapai 256.000 ton dan tahun ini telah direncanakan pencapaian produksi 254.000 ton.
Menyinggung akan berakhirnya kerja sama Indonesia-Jepang pada 2013, pihak manajemen PT. Inalum menyatakan perusahaan akan tetap eksis.
Perusahaan yang telah berdiri sejak 35 tahun lalu itu, menurut Nasril selama ini juga memberikan perhatian yang cukup besar terhadap warga di beberapa kabupaten melalui program pemberdayaan masyarakat.
Bantuan kegiatan kemasyarakatan yang diberikan perusahaan itu, di antaranya perbaikan sejumlah rumah sekolah, rumah-rumah ibadah, kesehatan, beasiswa, peralatan pedagogik, pemberdayaan nelayan dan modal bergulir untuk usaha kecil. LINK
JPM Adaro Energy - 2Q10 result is weak and significantly below expectation
1H10 net income significantly below expectations: Adaro reported 1H10 net income of Rp1,153 bn, down 48.7%Y/Y. As, historically, 1H contributes 50.8% to the full year forecast, the reported 1H10 net income came in significantly below both JPM's (31.6%) and consensus' (29.6%) forecast of Rp3,648 bn and Rp3,893 bn, respectively.
2Q10 was weak: Subtracting the 1Q10 result, 2Q10 net income of Rp292 bn declined 73.5% Y/Y and 66.1% Q/Q. The reason for this weak performance was that the Rp strengthened by 13.5% Y/Y and 1.6% Q/Q. Sales volume declined 10.2% Q/Q on the back of heavy rain in 2Q10. Despite this, on a Y/Y basis sales volume rose by 13.1%; lower ASP and stronger Rp caused revenue to fall 10.3% Y/Y. With ASP per ton down by 20.7%Y/Y in Rp terms, cost per ton failed to catch up, falling only by 5.6%Y/Y.
In USD terms, 2Q10 was weak: Although the strengthening of the Rp has negatively affected the operating result, our analysis of 2Q10 results in US$ terms indicates that 2Q10 net income was also disappointing. 2Q10 net income fell 69.4% on the back of higher interest income, forex losses and other non- operational charges. Adjusted for these nonrecurring items, 2Q10 core net income reached US$40.6MM; down 60.8% Y/Y and 56.1% Q/Q. In summary, 2Q10 net income was weak.
Will revisit model; maintain OW and PT of Rp2,600: Meanwhile, we view that the share price could decline on the back of the weak 2Q10 results. We see risk to our and consensus forecasts; and note that our estimates are currently under review. We maintain our Overweight rating and PT of Rp2,600, but will follow up with more detail analysis.
2Q10 was weak: Subtracting the 1Q10 result, 2Q10 net income of Rp292 bn declined 73.5% Y/Y and 66.1% Q/Q. The reason for this weak performance was that the Rp strengthened by 13.5% Y/Y and 1.6% Q/Q. Sales volume declined 10.2% Q/Q on the back of heavy rain in 2Q10. Despite this, on a Y/Y basis sales volume rose by 13.1%; lower ASP and stronger Rp caused revenue to fall 10.3% Y/Y. With ASP per ton down by 20.7%Y/Y in Rp terms, cost per ton failed to catch up, falling only by 5.6%Y/Y.
In USD terms, 2Q10 was weak: Although the strengthening of the Rp has negatively affected the operating result, our analysis of 2Q10 results in US$ terms indicates that 2Q10 net income was also disappointing. 2Q10 net income fell 69.4% on the back of higher interest income, forex losses and other non- operational charges. Adjusted for these nonrecurring items, 2Q10 core net income reached US$40.6MM; down 60.8% Y/Y and 56.1% Q/Q. In summary, 2Q10 net income was weak.
Will revisit model; maintain OW and PT of Rp2,600: Meanwhile, we view that the share price could decline on the back of the weak 2Q10 results. We see risk to our and consensus forecasts; and note that our estimates are currently under review. We maintain our Overweight rating and PT of Rp2,600, but will follow up with more detail analysis.
CLSA Strategy - Rupiah, pressure point
The Indonesian Rupiah has been one of the worst stores of value since 1949. From 1 rupiah to 1 Dutch guilder (whose value was 3.8 US dollar), the rupiah has depreciated to nine million today after a series of hyperinflation and devaluation.
Nick Cashmore in his latest strategy report points out that there has been a vast improvement in the country’s financial position over the past decade. Indonesia has gone from the most indebted to one of the least indebted countries in Asia as both public and private balance sheets have used an improvement in cashflow to reduce risk. As a whole, Indonesia has run current account surpluses every year for the past ten. This is really a stark contrast to not only the history of policies in Indonesia but also increasing to the fundamentals of economies in the west.
The report points out that Indonesia policymakers now facing great challenges from sterilizing fund flow in the face of a tsunami of cash seeking higher returns with solid fundamentals (this is a good problem to have). This would mean pushing down the yield curve of Indonesia IDR bonds, effectively lower the cost of doing business here. Esp bullish for infrastructure projects bidding on fixed IRR basis. Our top pick here Jasa Marga. However, this flock of money will limit the ability of central bank to sterilize flow. As such, it will leave BI no choice but have the nature law of supply/demand work, that is to let the Rupiah appreciate.
A sustained rise in the value of the rupiah would improve consumer purchasing power and boost living standards;
Companies with balance sheet leverage to a higher rupiah include Holcim, Indofood, AKR and Telkom Indonesia.
Operating margins for consumer companies have dropped by a third over the last five years. A higher rupiah would help restore purchasing power.
Unilever Indonesia, Kalbe Farma and Indofood all have significant operating leverage to the rupiah.
Nick Cashmore in his latest strategy report points out that there has been a vast improvement in the country’s financial position over the past decade. Indonesia has gone from the most indebted to one of the least indebted countries in Asia as both public and private balance sheets have used an improvement in cashflow to reduce risk. As a whole, Indonesia has run current account surpluses every year for the past ten. This is really a stark contrast to not only the history of policies in Indonesia but also increasing to the fundamentals of economies in the west.
The report points out that Indonesia policymakers now facing great challenges from sterilizing fund flow in the face of a tsunami of cash seeking higher returns with solid fundamentals (this is a good problem to have). This would mean pushing down the yield curve of Indonesia IDR bonds, effectively lower the cost of doing business here. Esp bullish for infrastructure projects bidding on fixed IRR basis. Our top pick here Jasa Marga. However, this flock of money will limit the ability of central bank to sterilize flow. As such, it will leave BI no choice but have the nature law of supply/demand work, that is to let the Rupiah appreciate.
A sustained rise in the value of the rupiah would improve consumer purchasing power and boost living standards;
Companies with balance sheet leverage to a higher rupiah include Holcim, Indofood, AKR and Telkom Indonesia.
Operating margins for consumer companies have dropped by a third over the last five years. A higher rupiah would help restore purchasing power.
Unilever Indonesia, Kalbe Farma and Indofood all have significant operating leverage to the rupiah.
DBS Adaro Energy: Buy; Rp1,980; TP Rp2,500; ADRO IJ 2Q earnings below expectation
Adaro Energy (ADRO) 2Q earnings fell sharply to Rp292b (-66%qoq, -74%yoy) due to weaker 2Q output, rising production costs, Rp121b forex loss and higher effective tax rate. 1H10 net profit came up at Rp1.1t (-49%yoy) accounted for only 30% of our FY forecast.
2Q10 output fell to 10.3m tons (-10%qoq) due to wet weather in June with 1H output at 47% of our FY forecast. We estimate 2Q ASP rose slightly to US$57/ton (+3.7%qoq) while production cost rose by 12%qoq to US$43/ton on higher mining costs. As a result, gross margin fell to 30% from 36%. Meanwhile, unexpected increase in effective tax rate of 65% in 2Q from 49% in 1Q pushed earnings even lower. We expect earnings to recover in 2H due to seasonally higher production and higher ASP. There is a possibility of downward revision in our FY10F earnings, pending clarity from the company on the tax rate.
2Q10 output fell to 10.3m tons (-10%qoq) due to wet weather in June with 1H output at 47% of our FY forecast. We estimate 2Q ASP rose slightly to US$57/ton (+3.7%qoq) while production cost rose by 12%qoq to US$43/ton on higher mining costs. As a result, gross margin fell to 30% from 36%. Meanwhile, unexpected increase in effective tax rate of 65% in 2Q from 49% in 1Q pushed earnings even lower. We expect earnings to recover in 2H due to seasonally higher production and higher ASP. There is a possibility of downward revision in our FY10F earnings, pending clarity from the company on the tax rate.
CIMB 2QFY10 Results - BW Plantation - 2H could be stronger
Maintain Outperform on BWPT. 1H10 core earnings of Rp81bn, -23% yoy and +82% qoq, form only 37% and 32% of our FY10 estimates and consensus respectively. The shortfall was due to FFB production which came in at only 44% of our FY10 estimate and higher-than-expected costs, while we would have been more comfortable with a 50% contribution from 1H10 based on seasonality. Management maintains its production-growth target of 4-5% yoy for this year, barring bad weather. This is the main reason we are maintaining our forecasts and target price of Rp950, based on 12x CY11 P/E. We expect catalysts from firmer CPO prices and production. To top it off, a more fragmented shareholding structure than peers and more attractive valuations could render BWPT an acquisition target if the industry consolidates over environmental issues, for instance. This is a mid-term probability.
Detikffinance Operasikan Tambang Nikel Tapunopaka, Antam Bidik Produksi Nikel 1,5 Juta
PT Aneka Tambang Tbk (ANTM) telah memulai operasi tambang nikel di Tapunopaka, Sulawesi Tenggara. Perseroan menargetkan dapat memproduksi nikel sebanyak 1,5 juta wmt per tahun.
Demikian disampaikan Direktur Pengembangan Antam, Tato Miraza dalam keterangan tertulisnya di Jakarta, Selasa (31/8/2010).
Perseroan telah meresmikan operasi tambang nikel ini pada 30 Agustus 2010 kemarin. Sebagai seremonia operasi, Antam mengekspor 50 ribu wmt bijih nikel.
Ia menambahkan, perseroan berencana menggunakan bijih nikel Tapunopaka sebagai bahan baku pabrik feronikel di Pomalaam yang kini cadangannya sudah hampir habis. Selain itu nikel asal Tapunopaka juga akan dikirimk ke proyek Nickel Pig Iron (NPI), Mandiodo di tahun 2014, pada saat larangan ekspor bijih mineral berlaku.
"Tambang nikel Tapunopaka akan memperkuat kegiatan operasi komoditas nikel Antam, yang saat ini mencakup tambang Pomalaa, Gee dan Buli. Serta tiga pabrik pengolahan feronikel yang berlokasi di Pomalaa, Sulawesi Tenggara," ungkap Tato Miraza.
Guna kegiatan eksplorasi tambang Tapunopaka, perseroan menghabiskan dana Rp 75 miliar, dengan pembukaan lahan seluas 6.213 ha. Jumlah bijih nikel yang ada di Tapunopaka mencapai berjumlah 7,1 juta wmt, dengan kadar tinggi bijih nikel 2,3%. Juga ada 43,7 juta wmt berkadar rendah (1,6%).
"Operasi tambang Tapunopaka akan menyerap sekitar 200 tenaga kerja. Dan diharapkan dapat meningkatkan pendapatan Antam juga akan dapat menggerakkan roda perekonomian setempat karena operasi tambang ini," katanya. LINK
Demikian disampaikan Direktur Pengembangan Antam, Tato Miraza dalam keterangan tertulisnya di Jakarta, Selasa (31/8/2010).
Perseroan telah meresmikan operasi tambang nikel ini pada 30 Agustus 2010 kemarin. Sebagai seremonia operasi, Antam mengekspor 50 ribu wmt bijih nikel.
Ia menambahkan, perseroan berencana menggunakan bijih nikel Tapunopaka sebagai bahan baku pabrik feronikel di Pomalaam yang kini cadangannya sudah hampir habis. Selain itu nikel asal Tapunopaka juga akan dikirimk ke proyek Nickel Pig Iron (NPI), Mandiodo di tahun 2014, pada saat larangan ekspor bijih mineral berlaku.
"Tambang nikel Tapunopaka akan memperkuat kegiatan operasi komoditas nikel Antam, yang saat ini mencakup tambang Pomalaa, Gee dan Buli. Serta tiga pabrik pengolahan feronikel yang berlokasi di Pomalaa, Sulawesi Tenggara," ungkap Tato Miraza.
Guna kegiatan eksplorasi tambang Tapunopaka, perseroan menghabiskan dana Rp 75 miliar, dengan pembukaan lahan seluas 6.213 ha. Jumlah bijih nikel yang ada di Tapunopaka mencapai berjumlah 7,1 juta wmt, dengan kadar tinggi bijih nikel 2,3%. Juga ada 43,7 juta wmt berkadar rendah (1,6%).
"Operasi tambang Tapunopaka akan menyerap sekitar 200 tenaga kerja. Dan diharapkan dapat meningkatkan pendapatan Antam juga akan dapat menggerakkan roda perekonomian setempat karena operasi tambang ini," katanya. LINK
DBS PTBA A laggard no more
• Expanding railway capacity and new power projects will improve earnings visibility
• Near term catalysts are new acquisition and stronger 2H earnings
• Potential not reflected in current valuation; maintain Buy rating and Rp21,350 TP
Attractive entry point. PTBA’s recent share price weakness due to poor 1H earnings offers an attractive entry point as we believe upside from new railway and power projects have not been priced in. Execution risk is now lower following government support for railway spending, while the market has not priced in the latest development – increasing interest in investing in infrastructure projects in Indonesia. We expect strong 2H earnings and a potential new acquisition to be near-term catalysts for PTBA.
Improving earnings visibility. PTBA is the most resilient coal player in Indonesia, as the government has increased commodity-related infrastructure projects to accelerate Indonesia’s development plan. This would help PTBA to monetize its abundant coal reserves and raise coal output. PTBA’s plan to enter the power business will also provide the group with more resilient
earnings and steady cash flows than peers, and provide stable demand for 12-13m tons of coal (32% of FY14F total production). Its strong balance sheet with Rp4.2t
net cash in 1H10 would also provide upside from potential new acquisition.
Maintain Buy. PTBA is attractively priced at 12x FY11F PE on the back of FY09-14F net profit CAGR of 20%, supported by 26% p.a. output growth following improved logistics. We maintain our Buy call for PTBA and Rp21,350/share target price based on blended 13x FY11F PE and 4x PBV.
• Near term catalysts are new acquisition and stronger 2H earnings
• Potential not reflected in current valuation; maintain Buy rating and Rp21,350 TP
Attractive entry point. PTBA’s recent share price weakness due to poor 1H earnings offers an attractive entry point as we believe upside from new railway and power projects have not been priced in. Execution risk is now lower following government support for railway spending, while the market has not priced in the latest development – increasing interest in investing in infrastructure projects in Indonesia. We expect strong 2H earnings and a potential new acquisition to be near-term catalysts for PTBA.
Improving earnings visibility. PTBA is the most resilient coal player in Indonesia, as the government has increased commodity-related infrastructure projects to accelerate Indonesia’s development plan. This would help PTBA to monetize its abundant coal reserves and raise coal output. PTBA’s plan to enter the power business will also provide the group with more resilient
earnings and steady cash flows than peers, and provide stable demand for 12-13m tons of coal (32% of FY14F total production). Its strong balance sheet with Rp4.2t
net cash in 1H10 would also provide upside from potential new acquisition.
Maintain Buy. PTBA is attractively priced at 12x FY11F PE on the back of FY09-14F net profit CAGR of 20%, supported by 26% p.a. output growth following improved logistics. We maintain our Buy call for PTBA and Rp21,350/share target price based on blended 13x FY11F PE and 4x PBV.
Mansek BW Plantation:1H10 results were below consensus estimates (BWPT,Rp820,Not rated)
BWPT reported 1H10 net income of Rp86bn (-20.1%yoy),represented 34.4%of consensus estimates.These results were below consensus expectation due to decrease in CPO production volume by 16.6%yoy from 46,339 ton in 1H09 to 38,663 ton in 1H10,which resulted a decrease in CPO sales volume by 16.8%yoy from 47,426 ton in 1H09 to 39,438 ton in 1H10.The main reason of decrease in CPO production was seasonality and bad weather.
At current price,BWPT is trading at 2010 Consensus and 2011Consensus PER of 12.7x and 11.1x.
At current price,BWPT is trading at 2010 Consensus and 2011Consensus PER of 12.7x and 11.1x.
Mansek Timah:1H10 results were below our and consensus estimates (TINS,Rp2,425,Neutral,TP:Rp2,800)
TINS reported 1H10 net income of Rp322bn (+652.6%yoy),represented 27.3%of our FY forecast and and 28.9%of consensus estimates.These results were below our and consensus expectation.The main reason of below expectation result was a decrease in production volume from 17,588 ton in 1H09 to 10,191 in 1H10,which resulted a decrease in sales volume from 19,760 ton in 1H09 to 9,990 ton in 1H10.Decrease in production volume due to bad weather.
At current price,TINS is trading at 2010F and 2011F PER of 14.7x and 9.7x.We maintain our NEUTRAL recommendation on the counter.
At current price,TINS is trading at 2010F and 2011F PER of 14.7x and 9.7x.We maintain our NEUTRAL recommendation on the counter.
Mansek Aneka Tambang:1H10 net profits of Rp756bn up by more than 2-folds yoy;above ours and consensus (ANTM, Rp2,050,Neutral,TP:Rp2,500)
Due to the switch in revenue contribution from low-margin gold trading last year to higher margin nickel this year as well the improvement in selling prices of the latter,Antam ’ s 1H10 net income improved by 238%yoy to Rp756bn,despite a relatively flat top-line of Rp4.3tn(-2.1%yoy),thus running ahead of ours and consensus estimates.Additionally on the production side,the divisional production remains within FY10F target with nickel and gold production rates achieving 50%and 54%of FY10F.Currently,the stock trades at PER10F 16.7x.Additional upside would come from the appreciation of nickel prices (at US$20.6k/t as of 1H10)which runs at par with our FY10F price assumption of about US$21k/ton.
Mansek Bakrie Telecom:Net profit below our and consensus estimates (BTEL,Rp159,Neutral,TP:Rp128)
Revenue 1H10 booked at Rp1.4tn (+3.5%yoy,-5.7%QoQ)below ours target and consensus
Operating profit at Rp174.6bn (+6.0%yoy,-31.0%QoQ)due to declining of marketing and selling expenses by 19.7%yoy to Rp165.1bn
Interest expense increase by 38.5%to Rp214.2bn,resulting net profit Rp2.7bn (-96.3%yoy,-190.6%QoQ),below our target and consensus.In 2Q10,Bakrie Telecom Pte.Ltd a 100%owned subsidiary release a US$250mn guaranteed senior notes maturing in 2015.
Subscribers in 1H10 totaling 11.1mn (+24.7%yoy)
We have a Neutral call on BTEL,currently it trades at PER10F-11F of 28.7x and 19.4x,respectively.
Operating profit at Rp174.6bn (+6.0%yoy,-31.0%QoQ)due to declining of marketing and selling expenses by 19.7%yoy to Rp165.1bn
Interest expense increase by 38.5%to Rp214.2bn,resulting net profit Rp2.7bn (-96.3%yoy,-190.6%QoQ),below our target and consensus.In 2Q10,Bakrie Telecom Pte.Ltd a 100%owned subsidiary release a US$250mn guaranteed senior notes maturing in 2015.
Subscribers in 1H10 totaling 11.1mn (+24.7%yoy)
We have a Neutral call on BTEL,currently it trades at PER10F-11F of 28.7x and 19.4x,respectively.
Mansek Bumi Resources :1H10 within our estimates (BUMI,Rp1,710,Buy,TP:Rp3,665)
Discussing BUMI is not about discussing its operational performance.Their operational performances are inline with our expectation with a positive bias toward 2H10.However debt is still worrying.BUMI recorded a US$89.9mn (vs 1H09 : US$17.3mn)contribution in equity net income of associated companies,less than additional burden taken from ballooning debt and rising interest payment from US$4,189.8mn debt.BUMI paid US$257.4mn in financial charges (vs 1H09 :US$47.9mn).Therefore main concern is the state of its financial burden.In 1H10,BUMI increase its asset sales to US$171.7mn (1Q10:US$93.7mn),balancing the interest payment.Bumi also suffered US$60mn in derivative book losses. The derivative losses according to the company is in relation with its options contract for its convertible bonds issuance.
Mansek ADRO:net profit below our and consensus estimates (ADRO,Rp1,980,Buy, TP:Rp2,600)
1H10 net profit at Rp1.2tn (-48.7%yoy,-66.1%QoQ)below ours and consensus estimates.
ADRO booked revenue 1H10 at Rp12.0tn (-7.1%yoy,-9.1%QoQ)below our and consensus estimates.
In US dollar basis,revenue was at US$1.3bn (+11.9%yoy),due to increased production and sales volume.Production volume increased 20.2%yoy and sales volume increase 22.0%yoy.
The strong US dollar revenue had been offset by strengthening of rupiah against US dollar;in the first 6 months in 2010,average rupiah/US$ exchange rate strengthened 17%to Rp9,189/US$compare with Rp11,067/US$.
Cost of revenues increased by 7.9%yoy,due to increasing stripping ratio and increasing production volume.ADRO ’s cash cost (excluding royalties)increased 6%yoy,dragging down operating margin and net margin.
ADRO trades at PER10F-11F of 16.0x and 11.8x,respectively,maintain Buy.
ADRO booked revenue 1H10 at Rp12.0tn (-7.1%yoy,-9.1%QoQ)below our and consensus estimates.
In US dollar basis,revenue was at US$1.3bn (+11.9%yoy),due to increased production and sales volume.Production volume increased 20.2%yoy and sales volume increase 22.0%yoy.
The strong US dollar revenue had been offset by strengthening of rupiah against US dollar;in the first 6 months in 2010,average rupiah/US$ exchange rate strengthened 17%to Rp9,189/US$compare with Rp11,067/US$.
Cost of revenues increased by 7.9%yoy,due to increasing stripping ratio and increasing production volume.ADRO ’s cash cost (excluding royalties)increased 6%yoy,dragging down operating margin and net margin.
ADRO trades at PER10F-11F of 16.0x and 11.8x,respectively,maintain Buy.
Citigroup Bank Tabungan Negara - Initiate with Sell: Balancing Valuations with Risks
Trading at a Premium — We initiate coverage at Sell/High Risk (3/H). Our Non-consensus Sell is based on 1) expensive valuations and 2) below consensus 2011/12 EPS forecast (15-17%). Forward PER (Consensus) of 17.4x compares with peak or above-peak PER for larger banks, with a weaker deposit franchise. Our EPS growth forecast for 2010-12 of 23% pa is based on 26% pa loan growth (management guidance) and flat NIMs/Credit Costs. In our opinion, consensus expects rising NIMs, in line with management’s goal of improving ROA from 1.4% to 2%. Our DDM-based target price implies 2011F PER of 12x and P/B of 1.9x.
Changing Business Model — BBTN is a state-owned bank set up to provide 1) mortgages subsidized by the government to mostly civil servants and 2) nonsubsidized mortgages. Future goal is to raise ROA via 1) consumer loans to existing 1.2mn customers and 2) SME banking and 3) build CASA through network expansion and a tie up with the Post Office.
Will be a Slow Process — The share of Consumer/SME loans must increase from 8% to 20% to lift ROA significantly (40%+ pa growth needed over the next 5 years). This will increase administrative and credit costs, as it requires upgrade of skills and technology. Deposit mobilization through Post Office tie up is slow and branch expansion will compete with other banks like BBRI.
Competition at High End — The front-end rates have been declining with banks offering fixed rate of c~9% for the first two years. While BBTN operates at the low end of the market, it may face competition in middle market (non-subsidized).
Pressure Points — LDR is > 100% with CASA only 30% of deposits. Maturities of c~80% of assets is >1 YR and of c~70% of liabilities is upto 1 month. Re-pricing risk is mitigated by floating nature of loans/bonds, but liquidity reversal risk is high. Gross NPLs have are up from 3.4% in Dec 09 to 4.1%, even in low inflation.
Changing Business Model — BBTN is a state-owned bank set up to provide 1) mortgages subsidized by the government to mostly civil servants and 2) nonsubsidized mortgages. Future goal is to raise ROA via 1) consumer loans to existing 1.2mn customers and 2) SME banking and 3) build CASA through network expansion and a tie up with the Post Office.
Will be a Slow Process — The share of Consumer/SME loans must increase from 8% to 20% to lift ROA significantly (40%+ pa growth needed over the next 5 years). This will increase administrative and credit costs, as it requires upgrade of skills and technology. Deposit mobilization through Post Office tie up is slow and branch expansion will compete with other banks like BBRI.
Competition at High End — The front-end rates have been declining with banks offering fixed rate of c~9% for the first two years. While BBTN operates at the low end of the market, it may face competition in middle market (non-subsidized).
Pressure Points — LDR is > 100% with CASA only 30% of deposits. Maturities of c~80% of assets is >1 YR and of c~70% of liabilities is upto 1 month. Re-pricing risk is mitigated by floating nature of loans/bonds, but liquidity reversal risk is high. Gross NPLs have are up from 3.4% in Dec 09 to 4.1%, even in low inflation.
CLSA INDO PREVIEW - TUESDAY 31 AUGUST
The market is in the middle of consolidation after its recent record break-ing run. This period of waiting for new catalysts is likely going to be pro-longed, as net-buying foreign institutional investors are being balanced against profit taking
- COAL: more 1H10 earnings are being released. And at face value they do fall a bit short of expectations. ADRO net -49%YoY, and BUMI net -30%YoY. Heavy rainfall and strong IDR were the main causes of lower than expected earnings and have affected the entire coal sector during the same period.
- MACRO: the datapoint most are waiting for is tomorrow's annoucement of the August inflation data (1%MoM, 6.69%YoY forecasted) and the Central Bank's interest rate decision on Friday Sep 3rd. Meanwhile, the Rupiah has fallen back to below 9000 levels after having traded w/ an 8 handle for a month; allthough that currency move was also due to general USD strength.
- COAL: more 1H10 earnings are being released. And at face value they do fall a bit short of expectations. ADRO net -49%YoY, and BUMI net -30%YoY. Heavy rainfall and strong IDR were the main causes of lower than expected earnings and have affected the entire coal sector during the same period.
- MACRO: the datapoint most are waiting for is tomorrow's annoucement of the August inflation data (1%MoM, 6.69%YoY forecasted) and the Central Bank's interest rate decision on Friday Sep 3rd. Meanwhile, the Rupiah has fallen back to below 9000 levels after having traded w/ an 8 handle for a month; allthough that currency move was also due to general USD strength.
NISP Timah multiplies net income by 8 times (TINS, Rp2,425)
· Timah net income soared to Rp322.3bn, 652.6% higher from Rp42.8bn last year. Although revenue only rose by 5.9% YoY to Rp3.75tn from Rp3.54tn, lower cost of goods sold enabled the company to book higher operating profit by 140.1%. However these results came below expectation as net income and sales figure only accounted for 29.0% and 44.5% of consensus full year expectation.
· The company suppressed interest expense and forex losses to only Rp 9.2bn and Rp22.8bn compared to Rp34.4bn and Rp95.7bn in the previous period, making bottom line higher.
· On a quarterly basis, cost of goods sold showed signs of increase as gross profit contracted by 13.7% to Rp 319.3bn in contrast to higher revenue by 4.3% to Rp1.91tn. As such gross and operating margins declined by 3.5% and 4.8% to only 16.7% and 8.7%.
· TINS is trading at 2011F consensus PER of 9.1x and EV/EBITDA of 5.1x.
· The company suppressed interest expense and forex losses to only Rp 9.2bn and Rp22.8bn compared to Rp34.4bn and Rp95.7bn in the previous period, making bottom line higher.
· On a quarterly basis, cost of goods sold showed signs of increase as gross profit contracted by 13.7% to Rp 319.3bn in contrast to higher revenue by 4.3% to Rp1.91tn. As such gross and operating margins declined by 3.5% and 4.8% to only 16.7% and 8.7%.
· TINS is trading at 2011F consensus PER of 9.1x and EV/EBITDA of 5.1x.
NISP Antam posts superb performance in 1H10 (ANTM, Rp2,050, Buy)
· Antam posted 238.0% YoY growth in net income to Rp756.3bn compared to Rp223.8bn a year earlier. The result may exceed our full year expectation as it came in 60.9% to our 2010F net income estimate at Rp1.2tn while consensus expects Rp1.3tn of full year net income.
· Such increase was largely due to Antam’s ability to improve its profitability where operating margin rose to 32.6% in 1H10 from 10.2% a year earlier. This was a result from the company’s recovery in nickel business in 1H10. During the period Antam sold 52.1% YoY higher ferronickel at 6,082 tons with 70.2% YoY increase on ASP at US$9.4/lb from as low as US$5.5/lb a year earlier.
· Despite such higher volume, COGS was lower at Rp2.9tn, 26.5% YoY lower from Rp4.0tn in 1H09. This was due to small contribution from gold trading business and also stronger Rupiah exchange rate.
· On quarterly basis, revenue leapt by 60.7% QoQ due to delay shipment in 1Q10 that booked in 2Q10 period.
· In all, Antam managed to deliver a positive surprise in 1H10 period. Currently the company is trading at 2011F PER of 11.0x and EV/EBITDA of 5.7x, Buy.
· Such increase was largely due to Antam’s ability to improve its profitability where operating margin rose to 32.6% in 1H10 from 10.2% a year earlier. This was a result from the company’s recovery in nickel business in 1H10. During the period Antam sold 52.1% YoY higher ferronickel at 6,082 tons with 70.2% YoY increase on ASP at US$9.4/lb from as low as US$5.5/lb a year earlier.
· Despite such higher volume, COGS was lower at Rp2.9tn, 26.5% YoY lower from Rp4.0tn in 1H09. This was due to small contribution from gold trading business and also stronger Rupiah exchange rate.
· On quarterly basis, revenue leapt by 60.7% QoQ due to delay shipment in 1Q10 that booked in 2Q10 period.
· In all, Antam managed to deliver a positive surprise in 1H10 period. Currently the company is trading at 2011F PER of 11.0x and EV/EBITDA of 5.7x, Buy.
NISP Bumi Resources managed to deliver satisfying 1H10 results (BUMI, Rp1,710, Buy)
· During 1H10, Bumi Resources managed to become the largest coal producer to post a positive growth in its operating income at US$531.8mn, 5.4% YoY higher from US$504.6mn a year earlier. In addition, all of the coal producers in our coverage posted negative growth during the period, due to lower selling price and higher direct cost. Bumi’s result came in inline with our expectation as 1H10 operating income came in at 45.2% to our and consensus’ full year expectation.
· However, as the company kept improving its tax policy in order to cope with recent issue, the company deducts its tax payables that caused a higher effective tax at 48.6% compared to 40.9% in 1H109. Hence, bottom line decreased by 30.0% YoY to US$134.6mn from US$192.3mn. The company’s tax payable position in 1H10 decreased to US$249.0mn from US$590.2mn a year earlier.
· Operational wise, revenue grew by 25.1% YoY on the back of higher sales volume and stronger ASP in 1H10. This improvement managed to overcome stronger COGS as the company boosted its production during 1H10.
· On quarterly basis, the company also managed to demonstrate positive performance on the back of stable sales volume and 14.2% QoQ increase in ASP.
· In all, Bumi Resources managed to post strong results in 1H10 and we foresee it will continue in 2H10 due to stable high selling price as the company is about to deliver another 10mn tons – 12mn tons at US$104/ton to Japan in the next three quarters.
· Currently the company is trading at 2011F PER of 10.9x and EV/EBITDA of 5.1x, Buy.
· However, as the company kept improving its tax policy in order to cope with recent issue, the company deducts its tax payables that caused a higher effective tax at 48.6% compared to 40.9% in 1H109. Hence, bottom line decreased by 30.0% YoY to US$134.6mn from US$192.3mn. The company’s tax payable position in 1H10 decreased to US$249.0mn from US$590.2mn a year earlier.
· Operational wise, revenue grew by 25.1% YoY on the back of higher sales volume and stronger ASP in 1H10. This improvement managed to overcome stronger COGS as the company boosted its production during 1H10.
· On quarterly basis, the company also managed to demonstrate positive performance on the back of stable sales volume and 14.2% QoQ increase in ASP.
· In all, Bumi Resources managed to post strong results in 1H10 and we foresee it will continue in 2H10 due to stable high selling price as the company is about to deliver another 10mn tons – 12mn tons at US$104/ton to Japan in the next three quarters.
· Currently the company is trading at 2011F PER of 10.9x and EV/EBITDA of 5.1x, Buy.
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