NISP Astra International to conclude acquisition on General Electric Services (ASII, Rp49,750, Buy)

• Astra International to complete acquisition over General Electric Services (GES) from General Electric Capital Corporation (GECC) in September 2010. With this acquisition, Astra will own 100% ownership in GES, hence 47% GES ownership in Astra Sedaya Finance. Astra also plans to acquire GECC’s 47% ownership at Sedaya Pratama, which will make Astra as the sole owner in Sedaya Pratama.

• With this acquisition, Astra ownership on ASF will increase to 100% from current position at 53%. However, as ASF is already consolidated in Astra’s book, this acquisition has no impact to profit and loss.

• Astra will employ its internal cash to finance this acquisition where the company’s cash stood at Rp11.80tn in 1H10.

• Currently, ASII is trading at 2011F PER of 14.5x and EV/EBITDA of 10.5x, Buy.

Mansek Astra International:plans to increase vehicle production capacity (ASII, Rp48,750,Buy,TP:50,500)

Due to the robust demand for 4-wheelers,ASII plans to spend some Rp1tn to increase Daihatsu ’s production capacity to 400k units p.a.from 211k units currently.In light of a strong demand pull due to affordable financing schemes,domestic wholesale sales for 7M10 is seen to reach close to 442k units (+75%yoy),with an reported highest monthly sales in July of 72k units,so far this year.Thus,with the current trend,car sales by year end could comfortably breach 700k units mark.ASII ’s Daihatsu in particular has been enjoying strong growth with units ’ sales of 54k units (+58%yoy)for
1H10,with about 15%market share.We currently have a buy on the stock currently trading at PER10-11F 16.8x and 14.7x,respectively.

Mansek Excelcomindo :1H10 net income up 87%yoy,above ours and consensus (EXCL,Rp4,750,Buy,TP:Rp4,300)

XL Axiata posted in-line top-line of Rp8.33tn,while overachieving on the bottom-line to Rp1.32tn (+87%yoy).There were some cost improvements;the growth in operating costs was only at 8%yoy while top-line grew by 35%yoy.On operating statistics,1H10 subscriber base grew to 35.2mn (+43%yoy, +7%qoq),ARPU at Rp34,000 (6%yoy,-3%qoq).Due to higher than expected performance,we are currently reviewing our forecasts and price objective with an imminent upward bias. Currently,the stock trades at PER10F-11F of 18.2x and 14.1x.

Mandiri Sekuritas Astra International: 1H10 results are inline with ours and consensus estimate (ASII, Rp52,750, Buy, TP: Rp50,500)

􀂄 ASII posted 1H10 net income of Rp6.5tn (+51.8%yoy, +13.7%qoq), which is inline with ours and consensus estimate.
􀂄 Operating profit growth mainly came from automotives (+46%yoy) and financial services division (+43%yoy), while agribusiness contracted 17%yoy.
􀂄 We have a Buy recommendation on ASII which currently trades at PER10-11F of 18.2-15.9x.

Mandiri Sekuritas Medco Energi: LNG buyer give more time to the consortium (Rp2,750, Neutral, TP: Rp3,700)

Quoting from Bisnis Indonesia, Chubu Electric Power Co and Kansai Electric Power Co (which act as a buyer for LNG) have agreed to give more time for MEDC and Pertamina consortium to further negotiate with the government, in regards to supply gas to DSLNG. The Japanese buyer did not give the exact deadline for the negotiation process.

MEDC believes that there are 3 reasons why the government should agree with the consortium in supplying its gas to DSLNG; 1) the upstream scheme will give out optimum income for the government, 2) around 17% (or 70 mmscfd) of its total production will be allocated to fertilizer plant in Indonesia, and 3) a decent gas selling price of around US$6.2/mmbtu at US$70 oil price and LNG price of around
US$10.9/mmbtu.

Apart from that, PLN’s Planning and Technology Director announced that they have not agreed the selling price of geothermal with MEDC yet. Previously there was news which stated that PT Perusahaan Listrik Negara has agreed the selling price of geothermal power plant in Sarulla of US$6 cents per kWH (30% upward adjustment from previously US$4.6 cents). As MEDC is currently still in a negotiation process with
PLN, we therefore have not factored in future income from this project in our forecast. Thus project realization will provide an upside to our current valuation.

The construction will be in 3 phases over the next 5 years, and the project will start up 2012. Assuming the plant running at its full capacity of 330MW thus, MEDC may obtain an extra income of around US$170mn per year. The company announced that they will out dividend around US$50mn or Rp157/share (assuming Rp10,500/US$). It reflects a divided yield of 5.7%. MEDC is currently trading at EV/2P of US$1.9/boe,
including its contingent reserves.

BASML BBRI Upgrade TP;5,750

We upgrade BBRI PxT by 16% to Rp 5,750. Indonesian banks are relatively free from global toxic, and in addition here we have gov't expansionary fiscal policy and monetary easing; All Indonesian banks should benefit! Elsewhere Daisy highlights her warns about BUMI FY08

Upgrade BBRI
Arief raised his PxT for Bank Rakyat (BBRI IJ) by 16% to Rp 5,750 due to stronger loan growth forecasts & lower loan loss provisions. Management has hinted that they have seen little impact from the current financial meltdown given their heavy exposure to micro lending (33% of loans) and are officially guiding for +15-20% growth in loans in 2009 with +20-25% growth in micro lending. Rakyat trades on a price/book multiple of 2.1x 09 which is at a 40% premium to the sector but this is justified by the bank's ROE of above 26% and its unrivalled micro banking franchise. Arief forecasts EPS growth of +14.5% and +16.1% for 09 and 10 respectively and it trades on PE multiples of 8.9x 2009 and 7.6x 2010. His PxT derived from a Gordon Growth Model and assumes a sustainable RoE of 26%, dividend payout of 30%, WACC rate of 16% and terminal growth rate of 10.4%, and reflects 2.8x forward P/BV. No exposure to Lithuania, no CDOs, nothing toxic, just simple basic lending in an emerging economy that is set to be biggest than Germany's within 5 years.