Mansek Bank Rakyat Indonesia a takeaway from a company visit (BBRI,Rp10,600, Buy,Rp12,000)

We have just visited BRI and below are the highlights:
The increase in primary reserves will lower the bank ’s interest income by around Rp200bn, however there has yet intention from the bank to increase the lending rate.The bank plans to maintain its LDR below 100% and above 78%hence will not be required to have additional RR by Mar11 (at end Jun10,LDR recorded at 88.9%).

There is no firm statement on whether Bukopin will be taken over by BRI.So far BRI has yet appointed advisor for this possible transaction or conducted internal due diligence for such transaction.However,a possibility remains even though in the short term it might affect the bank ’s performance negatively due to Bukopin ’s much lower NIM and ROAE.

Until Aug10 there has yet significant improvement in terms of medium size NPL (recorded at 14.9%at end Jun10).The management still focused on efforts to settle the NPL rather than performing aggressive write off.

At current price,BRI is trading at 2011P/BV of 3.0x and PER of 10.2x.We still like BRI for its ability to generate higher than average NIM and ROAE.

Mansek AALI:Key Takeaway from company visit (AALI,Rp20,950,SELL,TP:Rp18,000)

AALI estimate FY11F CPO production equals to FY10 CPO production (no growth in CPO production)due to its old plantation.Currently,we estimate CPO production in FY11F will be grow by 1.8%YoY from 1,060,589 ton in FY10F to 1,079,386 ton in FY11F.
AALI indicated Sep ’10 CPO production will be around 90 thousand ton (increase around 15%from Sep ’09 CPO production of 78 thousand ton).
Currently,AALI is trading at PER FY10F and FY11F of 17.5x and 17.4x.

NISP Bank Mandiri hints of 36.4% YoY growth (BMRI, Rp7,000)

· Bank Mandiri shared that it expects to book Rp6.30tn of net income in 3Q10, or 36.4% YoY increase from Rp4.62tn in 3Q09. If realized, this means that the bank’s net income is higher by 24.8% QoQ from Rp4.03tn in 1H10. Full year market expectation is Rp8.73tn.

· While the bank’s credit target is expected to have exceeded Rp203.0tn or 21.0% YoY higher from 3Q09. The bank has revised its credit target from 15-18% growth to 18.0-20%, and expected to continue next year.

· Mandiri has agreed to postpone its rights issue to next year for the benefit of BNI (BBNI, Rp3,700) .If BNI’s own process proceeds on schedule this year, Mandiri expects its rights issue process will be completed by the first week of February.

· BMRI is trading at 2011F consensus PER of 14.3x and PBV of 3.0x.

Mandiri Sekuritas AALI: Sales volume in August grow by 20.6% MoM (AALI, Rp21,250, Sell, TP: Rp18,000)

􀂄 AALI recorded sales volume in August grew by 20.6%MoM from 96.0k ton in July to 115.8k ton in August.
􀂄 YTD CPO sales volume still decrease by 0.8% yoy from 694.8k ton in 8M09 to 689.4k ton in 8M10.
􀂄 YTD CPO sales volume of 689.4k ton represented 65.0% (within our expectation) of our FY10F sales volume of 1,060.6k ton.
􀂄 Currently, AALI trades at PER FY10F and FY11F 17.7x and 17.6x, respectively.

Mandiri Sekuritas ASII: Key Takeaway from lunch meeting with Investor relation (ASII, Rp54,500, BUY, TP: Rp58,000)

􀂄 ASII said current buyer of 4W are people who really need 4W and people who take advantage of current low interest rate.
􀂄 ASII expect interest rate will increase next year, therefore the buyer in next year is people who really need 4W. ASII estimate 4W sales volume will decrease in 2011F around 5% up to 10% yoy. This is below our expectation. Currently, we estimate 4W sales volume will grow by 3.2% yoy in 2011F.
􀂄 ASII expect 2W sales volume will grow by 10% yoy in 2011F. This is within our expectation. Currently, we estimate 2W sales volume will grow by 10.0% yoy in 2011F.
􀂄 We will revisit our assumptions.
􀂄 Currently, ASII trades at PER 2010F and 2011F at 17.4x and 15.9x.

Mandiri Sekuritas Telkom will divest some of its ‘minority ownership’ subsidiaries (TLKM, Rp9,250, Buy, TP:R12,000)

Telkom plans to divest its ‘minority ownership’ subsidiaries as part of the business consolidation strategy. Hence, in the future Telkom will only own subsidiaries which it has majority ownership. Currently, Telkom is in the process to divest its 40% ownership in PT Petrakom and 25% ownership in PT Citra Sari Makmur (CSM).

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.

NISP Astra Agro Lestari expects a flat growth in revenue (AALI, Rp20,000)

• AAL expects its 2010F revenue to come at around its 2009’s at Rp7.42tn. The company explained that higher CPO price will help AAL’s performance despite its sales volume is expected to come slightly lower at 1mn tons (-0.1% YoY).

• AAL added that its current action in replanting its estate will improve its harvest despite the impact is not imminent. The company plans to spend Rp1.40tn this year to replant almost 10% of its total plantation.

• We view that AAL’s solid net cash position will enable the company to flexibly nurture its estates and to easily obtain loans should it aims for an expansion.

• AALI is trading at 2011F PER of 16.0x and EV/EBITDA of 8.6x.

NISP BNI green shoe shares to be sold today (BBNI, Rp3,000)

The government will sell its existing BNI green shoe shares today at a minimum price of Rp2,900. It has appointed Bahana Securities, Macquarie, Danareksa and Mandiri Sekuritas as underwriters of this action.

The government owns 473.8mn shares or 3.1% out of total BNI shares as green shoe shares from the bank’s secondary offering in 2007, at the price of Rp2,050. This makes total potential revenue from the sales to reach Rp1.37tn.

However, the Minister of SOE stated that the shares could be sold at a slight discount.

BBNI is trading at 2010F consensus PER of 12.2x and PBV of 2.1x.

Mansek Telkom:net income 1H10 in line with ours and consensus estimates (TLKM,Rp8,450,Buy,TP:Rp12,000)

Revenue 1H10 at Rp32.6tn (+5.0%yoy,6.4%QoQ)in line with our and consensus.Revenue from cellular up by 3.1%yoy (contributes 42.0%of revenue),data revenue up by 18.0%yoy (contributes 29.9%of revenue);meanwhile fixed line down 10.2%yoy (contributes 19.5%of revenue)

Operating profit slightly declined due to increase in maintenance expenses by 20%yoy and depreciation expense by 11%yoy as a result of higher capex.At the non-operating level,TLKM booked gain on foreign exchange at Rp111.3bn (-79.8%yoy)

Net income at Rp6.0tn (-0.7%yoy,+16.2%QoQ),in line with our estimates and consensus.

On subscriber numbers;cellular subscribers at 88.3mn (+16.2%yoy,7.6%qoq)ARPU Rp43k vs Rp47k (yoy);fixed line subscribers at 24.3mn (+9.4%yoy,0%q0q)and broadband subscribers (speedy)at 1.4mn (+73.6%yoy,9%yoy)

TLKM trades at PER10F of 14.3x,we currently have a buy on Telkom.

Mandiri Sekuritas Lautan Luas: 1H10 results are inline with ours and consensus estimate (LTLS, Rp800, Buy, TP: Rp1,000)

􀂄 LTLS posted 1H10 net income of Rp45bn (-9%yoy, -17%qoq), which is inline with ours and consensus estimate.
􀂄 The decline in net profit was mainly due to strengthening Rupiah.
􀂄 We have Buy recommendation on LTLS which currently is trading at PER10-11F of 6.5-5.3x.

Mandiri Sekuritas Gudang Garam: 1H10 results are inline with ours and consensus estimate (GGRM, Rp35,100, Neutral, TP: Rp35,000)

􀂄 GGRM posted 1H10 net income of Rp1.8tn (+24%yoy, -8%%qoq), which is inline with ours and consensus estimate.
􀂄 Net profit decline was due to increase in selling expense (World Cup ads) by 104% qoq and yoy. Excluding it, the company performed well on qoq basis.
􀂄 We have Neutral recommendation on GGRM which currently is trading at PER10-11F of 16.9-14.8x.

Mandiri Sekuritas Unilever: 1H10 results are inline with ours and consensus estimate (UNVR, Rp17,150, Buy, TP: Rp13,000)

􀂄 UNVR posted 1H10 net income of Rp1.8tn (+18%yoy, -18%qoq), which is inline with ours and consensus estimate.
􀂄 Net profit qoq decline was mainly due to increase in selling expense by 16%qoq and 28%yoy.
􀂄 We have Buy recommendation on UNVR which currently is trading at PER10-11F of 38.7-32.9x.

Mandiri Sekuritas Mayora: 1H10 results are inline with ours and consensus estimate (MYOR, Rp8,400, Buy, TP: Rp9,000)

􀂄 MYOR posted 1H10 net income of Rp211bn (+29%yoy, -22%qoq), which is inline with ours and consensus estimate.
􀂄 The decline in net profit was due to heavy ads expense in 2Q10 that increased by 73%qoq and 75%yoy. Considering seasonality effect, we expect the company will be better in 2H10.
􀂄 We have Buy recommendation on MYOR which currently is trading at PER10-11F of 13.1-11.3x.

Mandiri Sekuritas Bank Rakyat Indonesia: 1H10 results below our expectation and consensus estimates (BBRI, Rp10,050 Buy, Rp12,000)

􀂄 Bank Rakyat Indonesia recorded a net profit of Rp4.3tn (+22.8% yoy) in 1H10, which was below our expectation and consensus estimates.
􀂄 The bank reported higher than expected provisioning/impairment expenses as its NPL increased to 4.3% at end Jun10 from 4.1% at end Mar10.
􀂄 The bank’s loan growth remained strong at 8.6% qoq or 24.0% yoy to Rp230.5tn, thus bringing its LDR to 88.4% at end Jun10 vs 87.0% at end Mar10.
􀂄 At present, BRI is trading at 2010F P/BV of 2.8x and PER of 9.4x. We maintained our buy recommendation on the counter.

Indopremier SMGR (BUY TP Rp 10000)

Inline Result
Despite a typical slow revenue growth, Semen Gresik Group was able to record superb profitability in 1Q10, thanks to strengthening Rupiah and cost efficiency program. All in all, the 1Q10 financial performances were inline with our forecast, in which the company revenue and net profit fulfilled 19% and 21% of our full year estimates, respectively. Semen Gresik Group dominates domestic market share, has a strong balance sheet while still conducting favorable valuations. We maintain our BUY rating for this stock with fair value Rp 10,000 which reflects 15.6x-4.83x PE-PBV FY10F valuation.

Still dominate domestic market
Semen Gresik Group (SGG) registered a 12.4% YoY growth in sales volume to 4.24 million tones during the 1Q10 period, the lowest growth compared to its competitors. Consequently, the company market share has plunged from 45.7% in 1Q09 to 43.6% in 1Q10. Loss of market share was expropriated by competitors Indocement and Holcim because of their spare utilization capacity of 25% and 19%, respectively. Nonetheless, worth to point that SGG dominates domestic market share by significant percentage points over its competitors as a result of its sales area diversification strategy.

Recorded superb profitability
Although the 1Q10 revenue only registered a slightly increase (0.6% YoY), SGG was able to record superb profitability, thanks to strengthening Rupiah and cost efficiency program through the use of a low-calorie coal and an alternative fuel development as well as synergy resulted from raw materials supplied from within the group.

Expansion Update
Besides the optimization of SGG production capacity through the construction of 2 new cement plants with total capacity of 5 million tones p.a. and additional capacity of 500k tones, SGG also plans to build 4 packaging plants this year which is aimed to anticipate strong domestic demand for the next 5 years and cost saving in transportation and distribution.

Maintain BUY - fair value at Rp 10,000
All in all, the 1Q10 figures were in-line with our forecast, in which revenue and net profit represent 19% and 21% of our full year estimates, respectively. We maintain our FY10 forecast for Semen Gresik, and at yesterday closing price, the counter is traded at 12.87x-3.98x PE-PBV FY10, still provide attractive valuation in cement sector universe. Hence, we maintain our BUY recommendation with fair value at Rp 10,000 which offers 21% upside potential.

Mandiri Sekuritas Mayora Indah: 1Q10 net profit of Rp119bn, above ours and consensus estimates (MYOR, Rp5,000, Buy, TP: Rp5,000)

􀂄 MYOR posted 1Q10 net income of Rp119bn (+67%yoy, +14%qoq), slightly above ours and consensus FY10F estimates.

􀂄 Net income growth was mainly due to revenue growth of 27%yoy and 26%qoq. Lower qoq margin was mainly due to rising sugar price (+8.9%qoq) that constitute 25% of the company’s COGS. While higher yoy margin was due to Rupiah sharp appreciation.

􀂄 1Q10 net income even surpassed 3Q09 net income where most consumer goods companies reached its peak quarterly profit due to Moslem festive.

􀂄 We still maintain Buy recommendation on MYOR which currently is trading at PER10-11F of 9.5-8.8x, respectively.

Mandiri Sekuritas Telkom: 1Q10 net income in line with ours and consensus (TLKM, Rp7,850, Buy, TP: Rp12,000)

Telkom reported 1Q10 net earnings of Rp2.8tn (+13%yoy) which came in-line with ours and consensus estimates. 1Q10 revenues totaled Rp16.6tn (+6%yoy). Revenue breakdown as follows: 40% cellular, 30% data, internet, IT, 20% fixed lines, 6% interconnection and the remainder for other services. Main revenue driver came from data, internet and IT services which grew by 25%yoy. However what’s noticeable was the slowdown in net cellular ads of only 400k (from 4Q09) to 82mn subscriber as of 1Q10, the lowest among major GSM players. EBITDA margin was about 54.5%, which also slightly declined from 56.7% in 4Q09. Our concern stems on Telkom’s ability to raise subscriber base (though still a runaway market leader with about 50% of the GSM market) despite the healthy growth comings from its content services segment. We currently have a buy on the stock, which trades at about PER10F 14.5x.

Mandiri Sekuritas Gudang Garam: 1Q10 net income was inline with our forecast and consensus (GGRM, Rp27,600, Buy, TP: Rp30,000)

􀂄 Gudang Garam posted 1Q10 net income of Rp928bn (+18.9%yoy, -5.4%qoq). This result is inline with our and consensus FY10F estimate

􀂄 Lower QoQ performance was due to high base seasonality effect in 4Q09, while yoy improvement was due to the effect of full consolidation of distribution arm.

􀂄 We expect company’s performance in the rest quarters in 2010 will be more or less the same with 1Q10 as ASP increase is limited due to strong competition.

􀂄 We have Buy recommendation on GGRM which currently is trading at PER10-11F of 13.3-11.7x.

Mandiri Sekuritas Lautan Luas: 1Q10 net income was inline with our forecast (LTLS, Rp830, Buy, TP: Rp1,000)

􀂄 Lautan Luas posted 1Q10 net income of Rp24bn (+14.3%yoy, -1.5%qoq), which is inline with our FY10F forecast.

􀂄 Revenues in Rp declined by 8.1%yoy and 16.2%qoq due to strengthening Rp. It also results in lower gross margin. However, the company booked forex loss reversal so that net margin showed improvement.

􀂄 We have Buy recommendation on LTLS which currently is trading at PER10-11F of 5.8-3.6x.