NISP Indofood net income jumps by 76.4% YoY (INDF, Rp4,350)

• Indofood booked net income of Rp1.41tn in 1H10, 76.4% YoY higher from Rp799.7bn last year. Revenue was flat with Rp18.12tn. Sales figure was adequate, making up 45.1% of consensus FY expectation, however the net income surpassed expectation with the company already making 63.3% of expectation.

• Profitability was strong as gross and operating margin rose to 32.5% and 17.2%, on the back of lower cost of goods.

• Sales actually declined in 2Q10 to only Rp8.81tn compared to Rp9.31tn. However again, lower cost of goods sold made gross profit rise by 10.4% to Rp3.09tn making net income increase by 23.2% QoQ to Rp778.6bn.

• INDF is trading at 2011F consensus PER of 14.8x and EV/EBITDA of 7.2x.

NISP Indocement production to reach 17.6 mn tons (INTP, Rp17,350)

Indocement will add 1.5mn tons capacity this year as production from its Cirebon plant starts next month. The new plant has a full capacity of 4mn tons per year.

The company has total capacity of 18.6mn tons however only expects production this year to reach 17.6mn tons. Indocement holds 31.5% market share until 7M10, where total demand reaches 41.5mn tons.

Althought cement sales were strong in 1H10 where growth reached 15.2% YoY, management is pessimistic that it can continue this performance, where growth in the second half is only expected to reach 10.7%.

Indocement plans to increase the number of cement grinding plant in this third quarter, with expected cost to reach US$70mn.

INTP is trading at 2011F PER of 15.2x and EV/EBITDA of 7.4x.

NISP Danamon net income boosted by 64.7% YoY (BDMN, Rp5,350)

• In 1H10, Bank Danamon’s net income was boosted by 64.7 % to Rp1.43tn. This satisfied consensus as it accounted for 50.6% of 2010F full year expectation. The company’s operating income was up by 20.5% to Rp6.42tn from Rp5.33tn. This year, Danamon did not book any provisions and cost of unwinding foreign exchange transactions, in contrast to last year where Rp152.0bn was deducted from net profit after tax.

• Total loans grew by 15.4% YoY to Rp 71.07tn boosted by strong growth in mass market segment (28.0% YoY). The mass market segment’s biggest contributor, Adira Finance, grew by 43.4% YoY thanks to growth in 4W and 2W financing, with total loans reaching Rp24.18tn in 1H10. While Danamon Simpan Pinjam, which targets market traders, grew at a healty19.9%% to Rp13.74tn.

• Management managed to raise total CASA by 31% to account for 39% of total deposits. As a result, the company’s Net Interest Margin showed good performance by increasing to 11.6% from 10.0% in 1H09, while Cost to Income Ratio improved to 49.2%. Gross NPL was flat at 3.4% from 3.5% a year ago.

• On a quarterly basis, loans grew 10.3% in the second quarter, making YTD growth of 12.0%. The bank believes it can achieve its full year target for loans growth at 20.0% for this year, as domestic economic growth positively affects its main target which are self-employed and SME.

• BDMN is trading at 2011F consensus PER of 12.7x and PBV of 2.3x.

Mandiri Sekuritas ANTAM: 1Q10 net profits jumps 125%yoy, still trails expectations (ANTM, Rp2,500, Neutral, TP: Rp2,350)

With the improvement in nickel prices and a shift in revenue mix favoring higher margin nickel over gold trading, the company posted net income of Rp202bn, up by 125%yoy, but only equated to some 19% and 17% of our and consensus FY10F. Understandably, with gold trading having less contribution on top-line, revenues fell by 37%yoy to Rp1.6tn, with nickel contributing about 51% (versus 15% in 1Q09), while gold contributed 46%, the remaining 3% came from other resources such as bauxite, etc. Ferronickel sales amounted to 1,663mt with selling price growing by 99% to US$9.38/lb or US$20,680/t. Ferronickel sales would have been higher as well as earnings as about 4,177 tons remained in transit by end of 1Q. Thus. effectively production of ferronickel should have been about 5,840 tons or some 30% of our FY10F forecast. We maintain neutral on the stock, which now trades at PER10F of 23.6x

Mandiri Sekuritas Aneka Tambang: mulls rights issue to fund projects (ANTM, Rp2,575, Neutral, TP: Rp2,350)

Antam’s President Directors was quoted as saying that it is taking a look at a rights issue as one of its options to funds its future projects. This year the company has allotted capex of Rp2.35tn from Rp594bn last year. The substantial spike is bought about by the US$400mn Tayan chemical grade alumina project, which Antam has a 65% stake (remainder is owned by Showa Denko and Marubeni of Japan). Other future project includes a US$300mn power plant in Pomalaa (20% stake), Feni Halmaherea worth US$1.2bn and smelter grade alumina project worth US$900mn in collaboration with Hangzou Jinjiang Group of China. We have yet to incorporate these future projects in our forecasts. Additionally, company mentioned that it has yet to approach government with regards to the rights issue as an option for fund raising. We remain neutral on the stock, currently trading at PER10F of 24.3x.

Mandiri Sekuritas Antam: FY09 net income falls 56%yoy, though higher than expected (ANTM, Rp2,200, Neutral, Rp2,350)

􀂄 As expected, lower FY09 earnings, but above ours and consensus. With lower demand and price of nickel and a focus towards low-margin gold trading, Antam’s FY09 revenues slid by 9% yoy to Rp8.7tn. About 55% sales came from gold production and trading, 44% from ferronickel and nickel ore (25% and 19% respectively), and the balance from bauxite and silver. As a consequence of more emphasis toward gold trading and coupled by a 29%yoy drop in ferronickel production and 33%yoy slide in average price, net income fell to Rp604bn, though beating ours and consensus expectation.

􀂄 Optimistic on 2010 earnings. As LME price continues to rise as well as better ferronickel production, we see Antam’s FY10F to reach some Rp1tn (+67%yoy). Potential upside could come from the stabilization of LME nickel prices, which is currently trading at 13% premium over our nickel price assumption for 2010 of US$9/lb. We maintain neutral as the stock trades at PER10F of 20.8x.

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.

Mandiri Sekuritas Perusahaan Gas : Supply cut, short term bad, long term good (PGAS, Rp4,050, Buy, TP:Rp4,350)

􀂄 Economic Ministers yesterday and today will continue to discuss the gas supply shortage. PGAS is also discussing with the government on how to maintain the delivery from South Sumatera Gas Fields in the level that they received in January of this year, which was more than 370 MMscfd average for the month. PGAS reported that gas flow from Conoco Philips now averaging 250-260 MMSCFD. PGAS is demanding Conoco Phillips (CoPhi) to supply gas to its agreed amount of 396-412 MMSCFD.

􀂄 Bisnis Indonesia reported supply from CoPhi is diverted to Chevron for oil lifting. Chevron initially plan to have a supply of 322 MMSCFD in 2010 (2009 Chevron got 402 MMSCFD from CoPhi). Because of this supply to Muara Karang power plant was reduced by 50 MMSCFD. Another story was CoPhi diverting its gas to Singapore, due to lack of gas flow frow CoPhi fields in South Jambi. Total flow diverted to Singapore was 40MMSCFD. However, it was denied by Director General for Oil and Gas, Evita Legowo, According to Evita, the decline was due to under delivery from Pagardewa (Pertamina field) (- 70MMSCFD).

􀂄 We conclude that the decline could be somewhat in the range of 70-90 MMSCFD or 10% of our distributed 2010 PGAS volume of 890MMSCFD. However on the positive note : (1) this could help PGAS raise prices as Singapore paid US$12.5/MMBTU for South Jambi, (2) pressure to government for approve Suban III for domestic. PGAS has not changed its volume forecast for 2010 (between 800-900MMSCD) but acknowledge there could be an increase in average cost of gas, the amount of which has not been determined.

􀂄 We currently have a Buy recommendation with Rp4,350 target price. At Rp4050, PGAS 17.0x and 17.7x PER10F and PER11F, respectively. We are maintaining our current forecast of FY10E and FY11E net income of Rp5,393bn and Rp5,198bn, respectively, Our forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively.