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 Bank Danamon: notes from company visit (BDMN, Rp4,575, Sell, TP: Rp4,000)

􀂄 Our latest visit to the bank highlighted flat loan growth recorded in 2Q09, yet the bank still expect the bottom line to improve on quarterly basis. Such flat loan growth was as a result of tighter underwriting criteria adopted since the beginning of the year due to uncertainties in the macro economic condition.
􀂄 However, new booking for mass market businesses has shown improvement from Rp170bn in May09 to Rp250bn in Jun09. Overall, the bank expects its mass market loans to grow by over 20% yoy this year from its Dec08’s figures of Rp13.1tn.
􀂄 Up to May09, NPL was recorded at 3.5%, yet concerns remain on the bank’s exposure to CMM (Consumer Mass Market) segment due to increasing possibility of employees being laid off.
􀂄 At current price, Bank Danamon is trading at 2009F P/BV of 2.4x and PER of 20.3x. Even though Bank Danamon will benefit most from the declining SBI rates as its funding are biased toward high cost deposits, we still believe that the current valuation is already high. We therefore have a sell recommendation on the stock.