NISP Indo Tambangraya Megah aims for 23mn tons coal production (ITMG, Rp40,350, Hold)

· ITM is currently chasing for 23mn tons coal production for 2010 by optimizing its water management to support production amid heavy rainfall season. The company elaborated that it will optimize water pump facility and avoid catchment area through developing drainage system.

· This 23mn tons is inline with the company’s previous guidance, however, we foresee that the company will face challenge on its way to achieve another 12mn tons in 2H10. During 1H10 the company produced 11mn tons of coal where its 2Q10 was only 5mn tons or a bit lower than 6mn tons in 1Q10 due to rainfall season.

· Its high stripping ratio characteristic would also become a challenge in this unusually wet season, where this was already spotted in the company’s 2Q10 cash cost per ton, which rose by 16.1% QoQ.

· Currently ITMG is trading at 2011F PER of 14.3x and EV/EBITDA of 8.6x, Hold.

Mandiri Sekuritas BFI Finance Indonesia: Takeaway from Analyst Meeting (BFIN, Rp2,350, Not Rated)

􀂄 During the analyst meeting yesterday, BFI Finance highlighted 1H10 results whereby net profit grew by 29% yoy to Rp177bn despite a decline in revenue by 6% yoy to Rp441bn. This was mainly enabled by lower operating expenses (-27% yoy to Rp208bn) as the company did not allocate provisioning for bad debt in 1H10 vs Rp41 bn in 1H09.

􀂄 The company's new booking was actually quite strong at Rp1.8 tn in H10 from Rp838bn in 1H09, however tighter competition and lower interest rate environment caused yield to decline which affecting revenue. The company targets new booking to reach Rp3.5 tn this year (+70% yoy) as it see strong demand across all business segment including demand for heavy equipment leased in 2H10.

􀂄 At current price, BFI is trading at 2010F PER of 5.0x and P/BV of 1.1x. We have no rating on this counter.

Mandiri Sekuritas Indofood: 1H10 net income exceeds ours and consensus expectation (INDF, Rp4,350, Buy, TP: Rp4,500)

􀂄 INDF posted 1H10 net income of Rp1.4tn (+76%yoy, +23%qoq), which is above ours and consensus estimates. The net income yoy growth was mainly due to increase in noodle selling price.

􀂄 Looking at segmental performance, CBP division performed well with 8.3%yoy growth that compensated revenues contraction from wheat flour segment. Agribusiness segment posted flat growth yoy.

􀂄 INDF is currently trading at PER10-11F consensus of 17.1-14.8x.

NISP TB Bukit Asam obtains new partner for Banko Tengah (PTBA, Rp16,350, Buy)

TB Bukit Asam is reported to have obtained a partner for its 4x600 MW mine mouth power plant project at Banko Tengah. The partner is Lanco Infratec, one of the largest infrastructure companies in India. Despite no confirmation, PTBA admits that it is currently planning to develop a US$3.0bn power plant project in Tanjung Enim.

Previously, the project is in Power Purchase Agreement (PPA) phase, with PLN acting as buyer for this 12mn tons annual coal consumption project. Current partners are China Huadian, PLN, Truba and local government.

We still wait for the update of this project, as along with Banjarsari mine mouth power plant and new railway projects, the project will be the key driver for TB Bukit Asam’s growth in the future.

Currently PTBA is trading at 2011F PER of 12.9x and EV/EBITDA of 11.4x, Buy.

Mansek Bank Danamon:1H10 results above our expectation,yet inline with consensus estimates (BDMN,Rp5,350,Neutral,TP:Rp,4,900)

Bank Danamon reported net profit of Rp1.4tn in 1H10,above our expectation,yet inline with consensus estimates.The bank reported lower than expected provisioning expenses enabled by improvement in NPL.In terms of Pre-provision operating profit (PPOP),the bank ’s financial result was actually in line with our expectation.

The bank ’s loans improved by 10%qoq in 2Q10 to Rp71.1tn with wholesale and massmarket segment posted the highest loan growth of 14%qoq and 12%qoq respectively.Despite srong growth in wholesale segment,mass market still dominated the total loans (56%of total loans at end Jun10). This allowed the bank to maintain a high NIM of 11.6%in 1H10,the highest in the sector.

The bank targets loans to grow by 20%yoy this year and believed that it will be achieved.

At the current price,the stock is trading at 2011F P/BV of 2.3x and PER of 13.0x,We are currently reviewing our forecast on the bank.

Mansek Bukit Asam : New JV with Lanco Infratech – Unlikely to realize ((PTBA, Rp16,350,Buy,TP:Rp18,750)

Investor Daily quoting Business Standard reporting that Lanco Infractech is ready to develop 600MW coal fired power plant in Muara Enim,South Sumatera through a BOT (Build,Operate,Transfer)with PLN, with investment of US$751.3mn in a JV with Bukit Asam.We deemed it is unlikely. Bukit Asam has already a plan to build 4x600MW US$3bn power plant with China Huandian Corp.The problem with its 4x600MW is no take- up in demand in South Sumatera.PLN firstly need to build connecting cable to link Sumatera grid with Java grid,where most of the demand is located.Until the grid plan is developed it is unlikely for the project to start.

At Rp16,360,PTBA is trading at PER10F,and PER11F of 16.9x,and 11.7x, respectively with EV/EBITDA10F and EV/EBITDA11F of 11.1x,and 7.3x, respectively.

NISP Indocement revises up capex to US$100mn (INTP, Rp15,350, Buy)

• Indocement is boosting its 2010F capex budget from US$75mn to US$100mn. Around 60% of the amount will be used for general expenditures, while the remaining budget will be used to finance its new cement mill construction in Citeureup. As for now, the company will use its internal cash to finance the capex as the company currently has Rp2.7tn cash position.

• In the meantime, Indocement’s shareholder has approved Rp225/share cash dividend for 2009 net profit or translates for only 30% payout ratio, relatively inline with our expectation. We understand that the company needs to conserve its cash as for the next 4 years the company might need around US$750mn to finance its expansion plans.

• Besides its plan to build 2 new cement mills with annual capacity of 2mn tons, the company also plans to build a coal-fired power plant worth US$100-150mn in Citeureup which is slated for 2011F. For longer term, the company is planning to build new cement plant worth US$450mn with 2-3mn tons annual capacity to anticipate domestic cement demand boom in the next 4 years.

• Currently INTP is trading at 2010F PER of 13.4x and EV/EBITDA of 7.8x, buy.

Mandiri Sekuritas Indocement: To build 2mn tons cement mills (INTP, Rp15,350, Neutral, TP: Rp16,600)

􀂄 Aside from the new 1.5mn tons cement mill which will start operating this May, they will build another cement mill with a capacity of 2mn tons. This is sooner than their previous plan, given unexpectedly strong demand. They budgeted around US$100mn for FY10 capex, from previously US$70mn.

􀂄 Other than that, the company will give out cash dividend of around Rp828bn, or equal to Rp225/share. It reflects a dividend yield of 1.5%. The payout ratio of around 30% is inline with our expectation. Cum dividend date will be on 21 June 2010, and it will be distributed 7 July 2010. On valuation basis, the company is currently trading at PER10F of 16.9x.

NISP Holcim books Rp205bn net profit in 1Q10 from a net loss in 1Q09 (SMCB, Rp2,350, Under Review)

• Holcim Indonesia booked a turnaround on its 1Q10 net profit as the company posted Rp205bn net profit compared to Rp91bn net loss in 1Q09 on the back of a turnaround on its forex gain account. While on the revenue side, the company booked 8.1% YoY growth to reach Rp1.37tn vs Rp1.26tn in 1Q10. This figure was relatively in-line with our expectation as the company’s revenue and bottom line accounted for 21.8% and 22.7% of our full year estimate.

• While on quarterly basis, the company’s 1Q10 result was weaker as revenue and net profit was down by 23.3% YoY and 37.7% YoY due to lower sales volume in 1Q10.

• The company also booked a 24.3% YoY growth on domestic sales volume which reached 1.3mn tons, while becoming the only cement player that booked growth on its export sales as it grew by 12.9% YoY to reach 395k tons.

• It is interesting to note that on quarterly basis, the company’s margins deteriorated as operating and net margin was down by 5% and 3% to only 22.8% and 15.0%, respectively.

• We are currently still evaluating our recommendation on Holcim as it current price had exceed our target price of Rp2,100. In the meantime, Holcim is trading at 2010F PER of 19.9x and EV/EBITDA of 10.0x.

Mandiri Sekuritas Bukit Asam: Bukit Asam : Conclude the EPC agreement with China Railway (PTBA, Rp16,350, Buy, TP:Rp18,750)

􀂄 China Railway Group said on Thursday that it had won an Indonesian coal transport contract worth US$4.8bn. China Railways will be responsible for the design, construction and maintenance of the South Sumatra project, with design and construction priced at US$1.3bn and maintenance at US$3.5 bn. The contract with Indonesia's Bhakta Hill Pan Pacific Railway Corporation includes four years of construction with an operational period of 20 years, the company said. (Reuters)

􀂄 We will further seek information from Bukit Asam regarding the contract, proposed financing, and the existence of Bhakta Hill Pan Pacific. Previously it was understood that Transpacific, PTBA partners in the project would team up with Prayogo Pangestu from Barito Pacific. We consider the appointment of EPC contractor, is a positive step forward in the long awaited progress on the deal. The project calls for construction of a 300- kilometer railway from Bukit Asam’s Banko coal concession in South Sumatra to Srengsem Port in Lampung. It has been stalled since 2007, when Bukit Asam, Transpacific Railways and China Railway Engineering formed a
joint venture company named PT Bukit Asam Transpacific Railway to develop the project. It finally approved by the Transportation Ministry in October 2009. In its full capacity, the railway could carry 20Mtpa of coal, an increase from PTBA 2009 production of 11.6Mt. At Rp16,350, PTBA is traded at PER10F and PER11F of 12.8x, and 11.6x, respectively.