NISP Adaro keeps its subsidiary (ADRO, Rp2,025, Buy)

Adaro cancels its plan to offer its subsidiary, Saptaindra Sejati (SIS), to public.
Adaro sees no advantage to sell SIS as the company currently holds a majority
position (97%) in this mining contracting company.

For its business expansion, Adaro prepared US$430mn to support its project,
including its conveyor system. This facility will also be supported by 2x30 MW
independent power plant to support the activities.

Separately, Adaro proposes to supply coal to Pemalang and Kalsel Power Plants,
which could consume up to 7mn tons of coal per annum.

We view the commencement of conveyor will lower the company’s fuel cost.
Initially, Adaro foresees it may save US$3/ton of cash cost from conveyor system
compared to diesel based transportation.

Currently ADRO is trading at 2010F PER of 17.2x and EV/EBITDA of 7.7x, Buy.

Mandiri Sekuritas BNI: takeaway from a company visit (BBNI, Rp2,025, Buy, TP: Rp2,300)

We met with Yap Tjay Soen, the CFO of BNI, yesterday and found out some
interesting highlights:,

􀂄 NPL will remain a challenge until the next two years (max). Therefore, the bank will continue building up its provisioning coverage to cover the possibility of higher NPL in the future (coverage ratio = 120% at end Dec09). Such NPL will mainly come from medium segment as around 15% of the medium-sized loans are basically restructured loans (=Rp6.7tn, of which Rp2.7tn belong to NPL).

􀂄 However, as loans is expected to grow higher this year (+15% yoy vs 8.0% yoy in 2009), the NPL will likely maintain below 5% by end of this year (vs. 4.7% at end Dec09).

􀂄 BNI’s Cost to Income Ratio will likely maintain at around 50-52% as the bank plans to refurbish its branches in order to keep the loyalty of its customers.

􀂄 At current price, the stock is trading at 2010F P/BV of 1.5x and PER of 9.0x. Despite concerns over rising NPL, we see the management’s serious efforts to improve the current loan underwriting process (please note that majority of additional NPL are coming from the legacy loans). We therefore maintain our buy recommendation on the counter.

Credit Suisse - Medco Energi (MEDC.JK, Rp2,025, N, TP Rp2,000) - Lower oil price assumptions, with cut in earnings estimates

Medco Energi (MEDC.JK, Rp2,025, N, TP Rp2,000) - Lower oil price assumptions, with cut in earnings estimates

· The Credit Suisse global oil team has revised down its oil price assumptions, as the recovery in oil price is likely to take longer than previously expected. We have now assumed a WTI oil price of US$50/bbl (barrel) for 2009E, down from US$60/bbl; and US$60/bbl for 2010E, down from US$80/bbl. Our long-term oil price assumption is now US$70/bbl, down 30% from US$100/bbl.

· In addition to the oil price assumption change, we have also assumed a 15% cut in Medco’s capital expenditure for likely difficulties in getting financing. Consequently, we have reduced our 2009E net profit estimate by around 33% to US$38 mn and our 2010E estimate 38% to US$35 mn. 2009E and 2010E EPS are revised down around 33% and 38%, respectively.

· Medco has always traded at discount to its valuation. Therefore, we retain our target price of Rp2,000, as it reflects an implied oil price of US$42/bbl. We believe in the long-term potential upside of Medco, but retain our NEUTRAL rating, as we expect a fall in earnings this year on lower oil prices and oil/gas output.