Mansek BUMI :Preemptive issuance below the company plans (BUMI,Rp2,250,Buy,TP:Rp3,665)

„ Reuters reported BUMI has scaled back the size of non preemptive rights issue to $362mn,priced at Rp2,366 per share. BUMI will disclose the buyers two days before the listing on October 5 of the new shares.

„ The size implied a 7%(from planned 10%)non preemptive rights issue.Initial reaction would be that BUMI can not find enough buyers to subscribe the rights which is priced higher than yesterday market close of Rp2,250 per share.The confirmation, unfortunately, may not be known immediately.If BUMI can find other source of funds especially new debts or asset sale,low preemptive take up might be the step taken to reduce earnings dilution.At Rp2,250 BUMI is trading at 10.9x PER11F of Mandiri estimates and 9.3x PER11F of Blomberg consensus.

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 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).

Deutsche United Tractors - July update: heavy rain continued Reiterate Buy rating with TP Rp22,250

July heavy equipment sales: +50% YoY; -8% MoM
Komatsu sales in July reached 468 units, as improvements were dominated by commodity-related sectors (mining, agriculture, forestry) with double digit increases, while construction division remained stable. Overall, Komatsu sales are in line with our forecast with sales reaching 3,200 units (+87% YTD), accounting 63% of our 2010 target of 5,050 units.

Mining contracting had flat MoM performance
In July, Pama Persada's coal delivery and overburden posted a slight YoY increase (+3% and +2%) and flat MoM of 6.3 mn tons and 53.7m bcm. To date, Pama's sales reached 44mn tons and 368.2m bcm, accounting 54% and 51% for coal removal and overburden, respectively.

Coal sales continued to show MoM improvements
Despite the continuous heavy rain, United Tractor's coal mining division recorded further sales improvements reaching 219k tons (-6% YoY; +29% MoM; excl. Tuah Turangga Agung (TTA)) due to smoother delivery processes. Coal sales are expected to continue improving, as currently TTA's small contribution has not been accounted yet. Up to July, coal business reached 36% of our full-year target of 4mn tons translating to 1.42mn tons or +2% YTD.

Reiterate Buy rating with TP Rp22,250
United Tractors' good corporate governance and strong earnings prospects are sustained by buoyant commodity prices, esp. palm oil and Indonesian coal mines' expansion. Faster realization of infrastructure projects and coal price of more than US$85/ton provide upside catalysts.

Mansek Semen Gresik:1H10 net profit grew 7.5%yoy,inline with consensus estimates (SMGR,Rp9,250,Neutral,TP:Rp9,400)

SMGR ’s 1H10 net profit grew 7.5%yoy,despite of lower revenue compared with 1H09 (-1.6%yoy)to only Rp6.7tn.In 1H10,domestic sales figure only grew by 4.0%yoy,whilst export dropped significantly,which brings total production growth of only 0.5%yoy.Given the fact,it suggests that there was no increase in the domestic average selling price.

Better gross margin due to several cost efficiencies amplify its bottom line level. Overall,SMGR ’s 1H10 result was still in-line with our and consensus estimates.SMGR is currently trading at PER10F of 14.7x (vs average peers of 14.8x)and EV/ton of US$295 (vs average peers of US$296).

Mansek Astra Agro Lestari:takeaway from a company visit (AALI,Rp21,250,BUY,TP:Rp24,500)

Although its 1H10 CPO production decreased by 5.7%yoy,AALI still maintains its FY10F CPO production similar to that recorded in FY09.

AALI indicated that its COGS in 1H10 increased by 6%yoy,which we believe was due to newly matured plantation (please note that newly matured plantation was recorded at 12,882 ha in 1Q10 (an increase of 9.2%from FY09).

The cost (fertilizer,maintenance,etc)of newly matured plantation is charged to income statement (while for immature plantation it is capitalized).Meanwhile,the productivity of newly mature plantation is still low around 10 ton FFB/ha compared to its average productivity of 22 ton FFB/ha.

We estimate AALI ’s 1H10 net income will decrease by around 6%-10%yoy.
Currently,AALI trades at PE FY10F and FY11F of 15.3x and 13.1x.

Mansek AALI:6M10 CPO sales volume reach 45%of our FY10F assumption (AALI, Rp20,250,BUY,TP:Rp24,500)

AALI ’s 6M10 CPO sales volume decreased by 3.3%yoy from 494,018 ton in 6M09 to 477,639 ton in 6M10.This 6M10 CPO sales volume represents 45.0%of our FY10F assumption.We will maintain our CPO sales volume assumption.

AALI ’s 6M10 CPO sales price increased by 3.2%yoy from Rp6,386/kg in 6M09 to Rp6,590/kg in 6M10.

Currently,AALI trades at FY10F and FY11F PE of 14.6x and 12.5x, respectively.

NISP Bumi may post positive performance in 1Q10 (BUMI, Rp2,250, Buy)

• Bumi Resources has yet to release its 1Q10 financial result however we foresee that the company will post a positive growth in its 1Q10 results amid higher sales volume booked during the quarter.

• During 1Q10, the company sold around 16.0mn tons of coal or 41.6% YoY higher compared to 11.3mn tons in 1Q09. This higher sales volume is likely to help revenue amid a possibility of lower selling price.

• We view the company’s average selling price in 1Q10 is relatively stable compared to 4Q09, hence we expect Bumi’s 1Q10 revenue to come around US$880mn or 16% YoY higher compared to 1Q09’s revenue of US$752.9mn.

• For its bottom line, the company is likely to implement a normal effective tax rate in 1Q10 and may adjust its 1Q09 net income due to higher tax rate implementation. The company’s 2009 effective tax rate was at 45% compared to 1Q09 rate of 13.8%. Thus it is likely Bumi had adjusted its 1Q09 tax expense in 1Q10 reporting period. The quarterly performance is likely to be robust as the company expensed its deferred stripping expense in 4Q09.

• Currently the company is trading at 2010F PER of 17.7x and EV/EBITDA of 7.1x and Bumi’s market cap / coal reserve of US$1.6/ton is one of the lowest as compared to other domestic coal companies, Buy.

Mandiri Sekuritas Semen Gresik: To acquire cement producer in Southeast Asia (SMGR, Rp8,250, Buy, TP: Rp9,400)

SMGR plans to acquire cement producer, which located in Southeast Asia region in order to increase its capacity. Rumor said that they are eyeing Cement Industries of Malaysia Berhad (CIMA). They budgeted around US$300mn to acquire cement producer which has 2-3mn tons of capacity. Note that CIMA has total cement production capacity of 3.4mn tons, thus the US$300mn acquisition is equal to EV/ton of US$88, assuming they have no debt. Should realized, this will bring positive outcome to SMGR as they will have an additional capacity without having to wait its new plant in which currently under construction. SMGR is currently trading at PER10F of 13.1x and the lowest EV/ton of US$249.

Mandiri Sekuritas Semen Gresik plans to acquire a regional cement producer (SMGR, Rp8,250, Buy)

• Semen Gresik (SMGR) plans to acquire a regional cement producer with 2-3mn tons production capacity to boosts its annual capacity and to expand its market coverage. The management stated that they have prepared US$300mn investment cost to execute this plan slated for this year. However, they did not give further details regarding the targeted company’s profile.

• In the meantime, the company also cited another alternative is to acquire a domestic cement company, namely Semen Baturaja in Sumatera with annual capacity of 1.2mn tons. We believe that acquiring a domestic cement company would be wiser for Semen Gresik rather than striving to be a regional player as domestic cement demand still offers ample growth with higher profitability also.

• Currently SMGR is trading at 2010F PER of 12.9x and EV/EBITDA of 7.9x, Buy.

NISP Government bought 1.25% Semen Gresik’s shares from Rajawali Group (SMGR, Rp8,250, Buy)

• The Government on 30 April, has bought 1.25% Semen Gresik’s (SMGR) shares from Rajawali Group with total transaction value of Rp516.9bn. This transaction was settled through Perusahaan Pengelola Aset (PPA) and Danareksa.

• Currently SMGR is trading at 2010F PER of 12.9x and EV/EBITDA of 7.9x, Buy.

Mandiri Sekuritas Astra Agro Lestari: 1Q10 net income below our estimate and consensus (AALI, Rp23,250, Buy, TP: Rp29,000/share)

􀂄 AALI posted 1Q10 revenues of Rp1.63tn (16.0%yoy, -16.7%qoq). This translates to net income of Rp272bn (+24.9%yoy, -34.1%qoq)

􀂄 Revenues decreased by 34.1%qoq due to a decrease in CPO sales volume by 22.5% qoq from 288,289 ton in 4Q09 to 223,308 ton in 1Q10 and a decrease in kernel sales volume by 32.7% qoq, which partially offset by increase in CPO sales price by 9.3% from Rp5,985/kg in 4Q09 to Rp6,544/kg in 1Q10.

􀂄 1Q10 CPO sales volume of 223,308 ton represents 20.4% of our FY10E CPO sales volume. In the last 3 years, average 1Q sales volume represented 23.1% of full year sales volume.

􀂄 Our concern is on cost pressure which caused profit margin squeeze from 4Q09 to 1Q10 when CPO sales price increased in the same period.

􀂄 Currently the counter trades at PER10-11F of 14.7-13.2x. We are in process of reviewing our assumptions with possible downgrade.

Mandiri Sekuritas Indika Energy: FY09 net earnings at seen at Rp725bn, slightly below our targets (INDY, Rp2,250, Buy TP: 2,750)

􀂄 The company indicated that FY09 net income is expected as some Rp725bn (-33%yoy) which came slightly below our forecast of Rp761bn and consensus of Rp842bn. However, on operating level, the company improved with revenues of Rp2.5tn (+7%yoy) and operating income of Rp191bn (+55%yoy). Likewise, income from associated companies jumped by 44% to Rp1.5tn, primarily due to the contribution from its 46% coal unit Kideco, which generated FY09 net profit of US$288mn, which came in 8% higher than our targets. We suspect higher interest and one-off charges were the main reason for the drop in bottom-line.

􀂄 We remain a buyer on the company with FY10F net earnings seen at Rp855bn (+18%yoy) on the back of (a) higher coal production (b) better contribution from operating units Petrosea and Tripatra as a result of thicker order book. Currently, the stock trades at PER10F of 13.7x.

Mandiri Sekuritas Perusahaan Gas : Cancels its plan to ration gas among Indonesian industries (PGAS, Rp4,250, Buy, TP:Rp4,350)

􀂄 Following the government’s intervention, state-owned gas company Perusahaan Gas Negara (PGAS) has backed down from a plan to reduce the amount of natural gas it allocates to domestic industry and to charge them drastically higher prices if they wanted to buy more than their allotted amount. Benny Wahyudi, director general of agriculture and chemical industries at the Industry Ministry, said on Saturday that PGAS would not proceed with a plan to cut the allocation to domestic industry by 20% and to charge industrial buyers three times more than the regular price if they wanted more gas than they were allocated, he said

􀂄 Domestic industrial buyers are due to sign two-year gas-supply contracts with PGAS today. Late on Thursday, the gas distributor announced it was cutting the allocations and pushing up prices, provoking a widespread outcry from industrial buyers. The reason for PGAS’s announcement is that the gas distributor is itself facing a gas shortfall. Two of its suppliers — PT Pertamina Hulu Energi and ConocoPhillips — are having difficulties securing enough gas to meet their supply contracts with PGN.

􀂄 PGAS said last week that ConocoPhillips might only be able to deliver 250 MMSCFD this year from its South Sumatra field, well below the 390 MMSCFD it was contracted to provide. PLN primary energy director Nur Pamudji said that Muara Karang power plant gas supply had dropped from 200 million cubic feet per day to 100 million cubic feet per day since March 1.The government has arranged for PGAS to secure additional gas from Pertamina Hulu Energi, a unit of state oil and gas company PT Pertamina, by extending a contract up to June 2010. Pertamina Hulu Energi spokesman
Ali Mundakir told that the contract, originally set to expire this month, was extended until June. (Jakarta Globe & various)

􀂄 Net tally a deficit of 75MMSCFD, to be compensated by price increase. The supply cut came from the expiration of ONWJ (-45 MMSCFD) and fall in ConocoPhillips supply (-140MMSCFD, contracted 390 MMSCFD, current supply 250MMSCFD). The solutions are ONWJ (+20MMSCFD, extended until June 2010), and Medco Singa field (+50MMSCFD), and ConocoPhillips pledge (+40 MMSCFD, to 290 MMSCF). Net deficit is 75 MMSCFD. Our FY0F distribution flow estimate is 893MMSCFD (deficit is 8.3% of our FY09 estimate).

􀂄 Deficit of 75 MMSCFD, a 18.5% drop in net profit, and 18.1% in operating profit. Running at 53% EBITDA margin impact on profitability around double the drop in volume assuming everything else remain the same. Our current forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively. Hence therefore we expect minimal changes to our forecast as we only assume a 5% price increase for 2010. At Rp4,250/share, PGAS is trading at 17.9x 2010F PER, and 18.6x 2011F PER.

BASML BDMN: raised PxT to Rp 4,250

BDMN: raised PxT to Rp 4,250
Our 2nd favorite name in Indonesia as BDMN is well positioned to benefit from declining interest rate thanks to its hefty time deposits (73% of total) and high LDR (87%). Arief raised PxT by 16% to Rp4,250 to reflect: (1) a 26% increase in our 2009 earnings (we keep 2010 unchanged) and (2) a 1ppt reduction in WACC to 17% as we expect macroeconomic headwinds to decrease. On concern over its remaining F/X forward contract, we believe BDMN has made enough provisions (US$73mn) for the balance. The net notional amount of its F/X contract has declined 84% to US$230mn. Separately, Bloomberg reported BDMN plans to raise ~Rp4tn in rights issue, priced at ~45% discount. We view the pricing as attractive if done based on / below current share price given the stock is now trading at depressed 5.3x '09 P/E and 0.9x '09 P/BV, or 50% disc to our fair P/BV of 1.8x.