NISP XL Axiata aims for second largest position (EXCL, Rp5,400)

· XL Axiata is optimistic it will book 40mn of total subscribers, which will make it hold the second largest position in Indonesia. The company has increased its target from its original expectation of 36mn subs as the company’s 9M10 data showed total subscribers of 38.5mn.

· The company has allocated US$450mn for 2010F capex in order to boost its subscribers where the company is currently supported by 21,650 units of BTS to serve its consumers.

· EXCL is trading at 2011F consensus PER of 13.7x and EV/EBITDA of 5.8x.

NISP Flat growth for Japfa Comfeed (JPFA, Rp4,400)

· Japfa Comfeed revenue declined by only 3.3% YoY to Rp6.69tn in 1H10, and net income only increased by 3.8% YoY to Rp264.9bn in 1H10.
· The company’s gross profit was actually up by 10.2% YoY to Rp1.27tn thanks to a decline in cost of goods, however higher G&A expenses made operating profit decline by 10.0% YoY. The company was saved by lower tax expenses making net profit relatively flat.
· However on a quarterly basis, net income slumped by 40.8% QoQ as derivative losses of Rp37.7bn took a chunk out of operating income which was relatively flat with Rp248.8bn in 2Q10.

Mansek ISAT:1H10 results hurt by higher financing cost and lower forex gains (ISAT,Rp4,625,Buy,TP:Rp5,400)

As we reported last week,ISAT ’s net profit fell to Rp287bn (-72%yoy)even though operationally the results were in-line on revenue and operating levels.The rise in financing costs (+22%yoy)to Rp1.1tn and lower forex gain due to Rupiah strengthening (-49%yoy)of Rp370bn led to the shortfall in net earnings way below consensus and ours.Additionally, 1H10 subscribers were at 37.8mn (+35%yoy),however this is lower than the subscriber base in 1Q10 of 39.1mn.

Apparently,among the 3 major telco operators,only Indosat registered a qoq decline on subscribers as of 1H10.On the bright-side,despite the drop in subscriber numbers,its cellular revenues grew the highest qoq at 7.7%versus EXCL and Telkomsel ’ s 4.2%and 5.7% growth respectively.Among the big 3 operator ’s revenue market share of ISAT stood at 18% and continues to trail Telkom (66%revenue market share)but is still ahead of EXCL (which accounted for 16%revenue market share among the 3 operators).Currently the stock trades at PER10F 15.4x.

Mansek Semen Gresik:Thoroughly consider to increase its selling price (SMGR, Rp8,950,Neutral,TP:Rp9,400)

In yesterday ’s analyst meeting,SMGR indicated its attempt to slightly increase selling price in the past several months.Yet,they have to adjust back to its previous level given it lowered their market share.In other way, such upward adjustment was not followed by its competitors,in our view.

In terms of the de-bottlenecking process,the progress was still inline with their schedule.Considerably low sales volume in 1H10 was due to several maintenances activities.In 2H10,they could again increase its production level.Such bottlenecking and maintenances will reduce its cost/ton in near future.Despite the above mentioned condition,we view that selling price could still go up next year,once new electricity tariffs start to have an affect to all cement companies.Even without such increase,we believe margin could still be maintained or slightly increases due to the efficiencies
programs undertaken.The company is currently trading at PER10-11F of 14.2x-12.3x.

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 Indosat:has issued US$650mn bonds (ISAT, Rp4,950,Buy,TP:Rp5,400)

Indosat Palapa Company BV,a subsidiary of ISAT has issued a 10 years Guaranteed Senior Notes amounting to US$650mn;callable after 5 years and guaranteed by ISAT.The bond got Ba1 rating from Moody ’s,BB from Standard and Poors and BBB-from Fitch rating agency.The bonds priced at 99.478%and provide yield at 7.45%and will be listed in SGX-ST,Singapore.The bond proceed will be used for debt refinancing.

ISAT will allocate capex FY10 totaling US$550-700mn,which around 70%will be used for networking and equipment. The company aims,subscribers to reach 39.1mn by end 1H10,compared with 33.1mn by end 2009.ISAT trades at PER10F of 16.1x,we have a Buy recommendation.

Mansek Jasa Marga:1H10 net profit up by 63.7%yoy (JSMR,Rp2,175,Buy,TP:Rp2,400)

Revenue 1H10 recorded at Rp2.1tn (+23.5%yoy).This is in line with ours and consensus estimates.Net income was at Rp648bn (+63.7%yoy)in line with our estimates and above consensus.

Traffic volume in 1H10 increase by 3.3%yoy to 464.7mn vehicles.

The highest traffic growth occurred in Cipularang,which grew by 10.8%yoy.JORR contributes the biggest revenue around 20.3%of toll road revenues.Meanwhile,the highest traffic was contributed by JIRR toll road,which captured 19.9%of total traffic.

We have a Buy recommendation on JSMR,it trades at PER10F-11F of 12.5x and 11.3x,respectively.

Mansek Semen Gresik:1H10 net profit may grow 10-15%yoy (SMGR,Rp9,100, Neutral,TP:Rp9,400)

SMGR 1H10 net profit may grow 10-15%yoy following higher revenue of 7-9%yoy.SMGR ’s president director also reported that production volume increases by 4-5%yoy.The indicated top and bottom line figures reflect 1H10 revenue and net profit of Rp7.2-7.4tn and Rp1.66-1.74tn,respectively.

It also indicates that average selling price is slightly increased,thus reflecting better margins.It is inline with our forecast as it represents around 45-46%from FY10 target.The company is currently trading at PER10-11F of 14.5x-12.5x vs average industry of 17.0-14.4x.

Mandiri Sekuritas Jasa Marga eyeing a majority shares on Trans Jawa Corporation (JSMR, Rp1,990, Buy, TP: Rp2,400)

􀂄 JSMR declared that they are ready to become the majority shareholder of a holding company called Trans Jawa Corporation (consisting of companies holding concession agreement of Trans Java Toll Road project) if this holding company is eventually set up the government. At end 2009, the government announced that it will form a holding company to supervise Trans Java toll road projects. Trans Java toll road is scheduled to be completed by 2014, whereas 300Km of total 882Km of length are owned by JSMR.

􀂄 JSMR is currently conducting due diligence to increase its stake in Aloha (Waru)-Tanjung Perak toll road in Surabaya, East Java, from 2.5% to 55%. The toll road development halted, as PT Margaraya Jalan Tol (MJT) as the toll road holder concession, has financial difficulties due to cost overruns.

􀂄 Currently, JSMR trades at PE’10F of11.4x and PB’10F of 1.7x

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: 1Q10 net profit grew 17.8% yoy, inline with consensus estimates (SMGR, Rp8,200, Buy, TP: Rp9,400)

SMGR booked a relatively flat growth in the top line level, of only 0.6% yoy. This is lower than its sales volume growth of 7.1% yoy. It thus suggests that there was no increase in the domestic average selling price. This is inline with our and consensus estimates, as historically 1Q-to-FY figure stood around 21%. Despite relatively flat ASP, the company was able to booked better margins. Thus bottom line growth is higher of some 21.6% yoy. SMGR is currently trading at the cheapest EV/ton of US$247. That said, we maintain our Buy recommendation with a price target of Rp9,400/share.

Mandiri Sekuritas JASA MARGA: 1Q10 net profit up by 54% yoy to Rp303bn (JSMR, Rp2,075, Buy, TP: Rp2,400)

JSMR booked 1Q10 revenue of Rp1.0tn (+21.4%yoy), in line with ours and consensus estimates. The revenue growth was boost by higher traffic volume and increasing tariff in Sep-09. Traffic volume in 1Q10 reached 226.5mn (+3.1%yoy); meanwhile limited growth on operating expenses has boosted operating margin resulting net profit of Rp303bn
(+54.2%yoy). Currently, it trades at PE10F of 11.9x, maintain Buy.

Mandiri Sekuritas Bank Rakyat Indonesia: BBRI Net Profit 1Q2010 Perk Up (BBRI, Rp8,650, Neutral, TP: Rp9,400)

􀂄 BBRI posted an increase 25.1% in net profit for its 1Q2010 result to Rp2,151, which in line with our expectation and consensus estimates.

􀂄 The bank’s Net Interest Income increased by 24.1%, as the bank maintained to push the credit growth by 27.7% yoy, to arrive its interest income surge by 15.4%, supported by sustainable interest expense. NPL of the bank stood at 4.1%, led the bank to book provisioning expenses Rp1,420 bn (vs. Rp886 bn FY09). However, the strong Net Interest Income, as well as flat operating expenses, assisted the bank to post sound net profit figure.

􀂄 BBRI booked gross loan at Rp212,230 bn (+3.3% qoq). However its deposits declined by 4%, due to seasonality at the beginning of the year, resulting LDR up to 86.5% (vs. 81.4%). ROAE remained strong at 33.6% (vs 33.7% FY09) as well as CAR at 15.4% (vs. 14.9%).

􀂄 BBRI currently trades at P/BV10 3.1x and PER10 11.8x. We have Neutral recommendation on the counter.

Mandiri Sekuritas Bank Central Asia: 1Q2010 net profit increased 18.3% yoy (BBCA, Rp5,450, Buy, TP: Rp5,400)

􀂄 BBCA reported increase in net profit for its 1Q2010 by 18.3%yoy, to reach Rp1,93 bn, which slightly below our expectation (-5.4%) but in line with consensus estimates (-4.4%).

􀂄 BBCA’s Net Interest Income dropped by 26.8% yoy to Rp2,867bn this quarter. However, the decline occurred, mainly due to SBIs’ income re-classification, which based on the newly PSAK 50-55 implementation, it is posted under Non-Interest Income, led the account jumped by 83.2% yoy to Rp1,903bn, on which SBIs income contributed Rp665 bn. The bank posted net provisioning reversal of Rp303bn, much resulted from repayment on impaired loans, assisted the operating income arrived at Rp2,393bn (+29.8% yoy). YTD NIM stood at 5.5% (vs 5.8% 1Q09), mainly due to lower yield where as in line with market trend.

􀂄 BBCA booked gross loan of Rp120.9bn, a slight decline by 2.5%, where cyclicality took major role, despite marginal growth in the corporate sector as top tier corporate issued bonds over the period. However, consumer sector continued to be the front-liner growth of the bank, thanks to lower interest rates that boosted the bank’s mortgage lending (48.4% of total consumer lending). 1Q2010 LDR posted at 49.6% (vs. 50.3% FY09), while NPL 0.8%, CAR 17.5% and ROE 30.9% (vs. 0.7%, 15.3% and 31.8% FY09, respectively).

􀂄 The bank is currently trading at P/BV10 4.2x and PER10 17.1x. We still call Buy on the counter.

Mandiri Sekuritas ISAT: 1Q10 net income up 139%yoy, but lags behind expectations (ISAT, Rp6,050, Buy, TP: Rp5,400)

1Q10 net income was up by 139%yoy to Rp286bn, despite the jump, this fell below expectation as it represented only 18% and 16% our and consensus FY10F. Net adds in 1Q from 4Q09 was about 5.98mn (vs 4.4mn if 3Q09-4Q09), thus bringing its total cellular subscribers to some 39.1mn. With this, operating revenues grew by 2.5%yoy to Rp4.7tn, while EBITDA also grew by 3.3%yoy to Rp2.24, while maintaining a margin of 47%. The complete results and 1Q financial statements shall be released by May 10, 2010. We currently are reviewing our estimates and assumptions on Indosat, which trades at PER10F of 20.1x.x

Mandiri Sekuritas Tariff of 3 toll roads will increase in this year (JSMR, Rp1,980, Buy, TP: Rp2,400)

Government will increase tariff of 3 toll roads: (1) Waru-Juanda, (12.8Km,
operated by CMNP), (2) Jakarta-Cikampek (72.5Km, operated by JSMR) and
(3) Sedyatmo (68Km, operayed by JSMR). Tariff toll in Indonesia will increase
every 2 years with incremental based on inflation on the last 2 years; this
scheme was regulated by Law No.34/2004 concerning road and
Government Regulation No.15/2005 concerning toll roads. JSMR expects
the increasing is around 10%. Currently, its trades at PE10F of 12.7x and
PBV10F of 1.7x, maintain Buy on JSMR.

Mandiri Sekuritas Bank Central Asia: FY09 results in line with our expectation and consensus (BBCA, Rp5,700, Neutral, TP: Rp5,400)

􀂄 Bank Central Asia recorded a net profit of Rp6.8tn (+17.9% yoy) in FY09, which was inline with our expectation and consensus estimates.

􀂄 The bank actually recorded higher than expected operating expenses, however as it booked lower provisioning expenses, the bottom line is about in line with our expectation.

􀂄 It is worth noting that the bank recorded strong loan growth in 4Q09 of 9.9% qoq, with loans to commercial segment posted the highest growth of 13.1% yoy. Coupled with the decline in absolute amount of NPL in 4Q09 (-36.7% qoq), such strong growth in loans supported the decline in NPL to 0.7% at end Dec09 from 1.3% at end Sep09.

􀂄 At present, Bank Central Asia is trading at 2010F P/BV of 4.2x and PER of 16.7x. As the bank’s share price has already exceeded our target price, we changed our recommendation to neutral.

Mandiri Sekuritas Indocement TP: FY09 slightly above consensus expectation (INTP, Rp14,000, Buy, TP Rp15,400)

􀂄 In 2009, Indocement posted lower domestic sales volume compare with 2008 (-3.8% yoy). Yet price tag was higher (around 15% yoy). That explains why FY09 transportation and selling expense drop 10.7% yoy. Other than that, cash position of some Rp2.6tn (vs Rp790 in 2008) doubled interest income figure to Rp78bn. It resulted into moderate growth in the top line level of 8.1%, while bottom line growth reaches 57.4% yoy. Overall, FY09 result is slightly above consensus estimates, yet inline with ours.

􀂄 Assessing from February 2010 sales volume data, where domestic consumption shoots up 19.1% yoy, while export continues on declining, we believe that earnings upgrade is possible. This suggests that margins would increase further. Note that consensus estimates only projected 15.3% yoy and 24.5% yoy growth for FY10 top line and bottom line level. Currently INTP is trading at EV/ton and PER10 of US$263 and 18.1x, respectively.

Mandiri Sekuritas Bumi Resources : Winning the Newmont bid (BUMI, Rp1,800, Buy, TP:Rp2,400)

A consortium of three local governments in Indonesia have appointed PT Multicapital, reportedly to be 100% owned by Bumi Resources, to help finance the purchase of a 10% stake in a unit of Newmont Mining Corp a local mining official The governments of West Nusa Tenggara province, West Sumbawa regency and Sumbawa regency, the three areas where the mine is located, and Multicapital would form a joint venture company to negotiate a price with Newmont, Heryadi Rachmat, the head of West Nusa Tenggara provincial mining office, said. There was an initial agreement for the local governments and Multicapital to split revenue 25% and 75% respectively. In late March, an arbitration court ordered the foreign owners of Newmont Nusa Tenggara (NNT) to sell a 17% stake to the Indonesian government within six months, of which a 10% stake should go to the local governments. The foreign owners began offering NNT shares for sale in 2006, initially offering a 3% stake for $109mn. The following year they offered a 7% stake worth $282mn, and another 7 percent stake worth $426mn in 2008. Newmont has valued the whole of NNT at $4.9bn and has started negotiations with the government over the price. The government said it planned to use an independent appraiser to value the unit. (Reuters).

Newmont’s Batu Hijau mine is located on the island of Sumbawa, approximately 950 miles (1,529 kilometers) east of Jakarta. Batu Hijau is a porphyry copper/gold deposit. In 2008, copper sales were 289.7 mn pounds (130.4 mn equity pounds), while gold sales were 298,900 ounces (134,500 equity ounces). At December 31, 2008, it reported 3,950mn equity pounds of copper reserves and 4.1mn equity ounces of gold reserves at Batu Hijau. The Comp Newmont Corp. owned 45% of the Batu Hijau mine through the Nusa Tenggara Partnership (NTP) with an affiliate of Sumitomo Corporation of Japan. The Company has a 56.25% interest in NTP and the Sumitomo affiliate holds the remaining 43.75%. NTP in turn owns 80% of Newmont Nusa Tenggara (NNT), the Indonesian subsidiary that owns Batu Hijau. The remaining 20% interest in NNT is owned by Pukuafu Indah (PTPI). Newmont is the operator of the Batu Hijau mine (Reuters).

In 2009, NNT plans to produce 455mn pounds of copper and 485,531 ounces of gold. The revenue from copper and gold sales following deduction of concentrate smelting and refinery costs substraction is US$1.149bn or Rp12tn. Expenditures for production costs, shipment costs, royalties, interest expenses, etc. are $657.57mn or Rp6.89tn. As a result, NNT in 2009 is estimated to earn pre-tax profit of $491.92mn or Rp5.16tn. After-tax net profit is expected at approx. $316.95mn or Rp3.32 tn. (newmont.co.id)

Based on US$391mn acquisition price for 7.5% stake, the acquisition will be valued at 10.6x PE09E, much cheaper than Freeport Mc Moran PE09E according to Bloomberg consensus of 32.6x. We have a Buy on Bumi with Rp2,400 target price. At Friday closing price of Rp1,800/share, Bumi is traded at 8.2x and 7.5x, PER09F, and PER10F, respectively.

Mandiri Sekuritas Adaro: Green Signal (ADRO,Rp1,180, Buy, TP: Rp1,400)

Reduction in WACC. We have reduced our WACC estimate from 16.4% to 9.9% as a result of lower risk-free rate assumption and market risk premium given better market condition. The benefit of lower WACC has however been partially offset by lower exchange rate. We keep our key assumptions constant, aside from fine-tuning our long term production numbers and increasing our fuel price. After composite adjustments, our DCF derived equity value rises from Rp1,150/share to Rp1,400/share.

Re-negotiation is only a short-term benefit. ADRO renegotiated rices for coal sold under legacy contract in FY09 but as the price increase upset ADRO’s customers, ADRO will recoup this short-term gain in later years by adjusting prices of long-term contracts accordingly.

Orchard Maritime (OML) acquisition should be beneficial. ADRO has acquired OML, which is a coal barging company and its affiliate. Acquisition is not cheap yet fair as the acquisition price of US$78.5mn implies about 5-6x Enterprise’s liabilities are however not less, with outstanding debt of US$135mn. The benefit of the acquisition includes amongst others - 1) Other income from selling extra barging service and transshipment service in the spot market 2) Lower demurrage cost.

Production at Wara mine to stream-line. ADRO has signed three new contracts out of which one contract relates to Wara coal (about 3900kcal), implying that production at wara mine will soon stream-line and that its ASP will lower in future.

Buy call. Our TP of Rp1,400/share implies PER09F of 10.4x and EV/Reserves of 4.8x. Its 18.6% upside to current price so we maintain our Buy call.