Mansek TINS:negative impact from La Nina (TINS,Rp2,800,Neutral,TP:Rp2,800)

Weighing the effect between rising tin price and the impact of La Nina,we view that Timah,on overall,will be adversely impacted:

In term of volume,La Nina will impede offshore mining so that sales volume target could be unachievable.Note that 1H10 sales volume only represented 41.2%of our FY10F.We doubt that the company could catch up the sales volume target in 2H10,considering weather in 2H10 is worse than 1H10.The impact will continue at least until 1H11F.

In term of cost,lower mining quantity means higher cost/unit due to big portion of fixed cost in offshore mining.At the same time,onshore sourcing also becomes very costly as suppliers speculate on further rise in tin ore price and ask for a substantial tin ore price increase to the company.

Considering the above factor,we are currently reviewing our forecasts of TINS.At this point we still have Neutral recommendation on TINS which is trading at PER10-11F of 17.0-11.2x.

NISP United Tractors post lower sales volume last month (UNTR, Rp18,800, Hold)

• During July 2010, UT’s sales volume stood at 468 units or 7.7% MoM lower from 507 units a month earlier. However, as the figure is still above the average monthly sales volume during January – June 2010 of 455 units, we view this condition is relatively normal.

• With this July figure, during 7M10 UT has sold 3,200 units of heavy equipment, which is on track with the company’s target of 5,000 units this year. This target translates into 1,800 units still needed to be sold in August – December, or equal to an average monthly sales volume of 360 units.

• The company has not given further details on its July operational data, where we need to see its production volume on mining contracting and coal mining business during heavy rainfall condition as this may affect profitability in 3Q10.

• Currently, UNTR is trading at 2011F PER of 12.9x and EV/EBITDA of 6.8x, Hold.

NISP Astra Agro books Rp4.00tn sales in 7M10 (AALI, Rp19,800, Buy)

Astra Agro Lestari (AALI) until 7M10 has booked Rp4.00tn of revenue or slightly up by 1.5% YoY from Rp3.94tn in 7M09. This is mainly due to lower CPO and kernel sales volume in 7M10 which are down by 2% YoY and 14.6% YoY to only 573.6k tons and 71.4k tons, respectively.

The company’s CPO and kernel selling price was up by 3.0% YoY and 32.0% YoY in 7M10 to reach Rp6,563/kg and Rp3,430/kg, respectively.

Currently, AALI is trading at 2011F PER of 11.8x and EV/EBITDA of 7.5x, Buy.

Mansek Indotambang :1H10 net income 46.8%of our FY10F,and 41.7%of consensus (ITMG, Rp38,800,Neutral,TP: Rp34,920)

1H10 achievements was 46.8%of our FY10 net income estimate.Despite stronger operating margin in 2Q10 (25.6%)Vs 1Q10 of 22.9%,derivative losses of US$13.4mn eased the gain,with 2Q net income equally match the achievement of 1Q10.ITMG has contracted 18.4Mt of their coal,with revenue of US$1.34bn and ASP of 72.8/ton.Another 14%is contracted priced to index-linked,and 6%spot.The contracted volume was 81%of our forecast and 82.7%of nominal value.Our FY10 volume assumption is 22.7Mt with ASP of US$71.7/ton.At Rp38,800,ITMG is trading at 16.4x,and 13.6x PER10F and PER11F,respectively,with EV/EBITDA10F and 11F of 8.7x and 7.0x 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.

CLSA BBCA downgrade to UPF (from OPF), TP maintained at 2,800

Our versatile banking guru Nico Oentung, finally downgrades his favorite bank: Bank Central Asia (BBCA IJ) to UPF. This could well be Nico’s last report with CLSA. If you would like to know what his next plans are, then have “a quiet word” with him. Hint: he is crossing over to the enlightened side and taking real responsibility now, after spending 5 years in the dark side of the force.

Back to BBCA, for sure this is a bank with a great franchise, very well managed, and great CG. But at 3x 09 P/B, BBCA valuations are steep and upside looks limited. Plus, the trend is not our friend:

NIM under pressure, expect NIM to decline from current 6.8% to 6.1% by year end.
Loans growth moderated: from 37% YoY in 4Q08 to 27% in 1Q09.
Provisioning remains high: due to NPL risks.
NPL ticking, higher than expectation at 1.6% (from 0.6% in 4Q08) mainly driven by downgrades from the corp segment.

BASML BMRI raised PO 17% to Rp 2,800

Bank Mandiri
Bank Mandiri (BMRI IJ) is now Arief’s top pick out of Indonesia. He raised PO 17% to Rp 2,800 and lifts 2009-10 forecast bottom line by 12-29%. BMRI has successfully revolutionized its operation, strengthened risk management, and cleaned up loan portfolio over the last 4 years and these structural changes are set to deliver sustainable improvement in earnings and RoE. As Indonesia implements easing monetary and expansionary fiscal policies, Arief see 2009-10 earnings benefits from higher NIM, better than anticipated loan growth, and resilient economic growth hence lower loan loss provisions. Stock trades on 6.3x EPS and 1.1x P/BV '09. Arief thinks the bank worth 1.7x BV when market realize fears about relaps restructured loan in BMRI is out of place.