NISP Semen Gresik chooses debt to finance project (SMGR, Rp9,800)

· Semen Gresik prefers to optimize loans from banks of up to Rp3.54tn in order to finance its Tonasa V project. This project will bear 2.5mn tons/year of installed production capacity and will be supported by 2x35 MW power plants.
· Semen Gresik aims to complete this US$412mn project somewhere in 4Q11, and hence, to enjoy the contribution in the following years. From total of US$412mn, US$300mn of which is allocated for cement plant and the remaining US$112 for the power plant.
· Beside Tonasa V, Semen Gresik is also aims to complete Tuban IV project in 2012, this project holds same capacity with Tonasa V with total investment cost reaching US$712mn.
· Semen Gresik stands a at net cash position that enables the company to optimize external financing to finance its projects. Currently SMGR is trading at 2011F PER of 14.5x and EV/EBITDA of 8.6x.

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 Timah has pessimistic outlook for production target (TINS, Rp2,800)

· Timah management shared its pessimism that it can achieve 50,000 tons of production this year due to high rainfall that disrupts production. In addition, the company’s sources are depleting as several mining areas have not obtained permit from the Ministry of Forestry.

· The company aims production to at least equal last year’s production of 45,086 tons. Rp800.0bn of capex will still be spent this year as planned.

· The company’s ambition this year to enter the coal business have also been stalled as the two mines in Kalimantan that it has been targeting have not passed qualification. It has since diverted its attention to other mines in Sumatra, with 1.5mn tons production capacity per year. As much as US$30.0mn is budgeted for this purpose.

· TINS is trading at 2011F PER of 11.5x and EV/EBITDA of 6.2x.

NISP Telkom cooperation with Jasa Marga takes step further (JSMR, Rp3,050; TLKM, Rp 8,800)

· As a follow up to Jasa Marga’s announcement to enter the business in fiber optics, Telkom, which is the company’s partner, has begun to valuate its assets.
· Until last August, Telkom has invested as much as Rp1.70tn in the business. Rp1.10tn will be used to develop new fiber optic lines in Java-Kalimantan, while the remaining Rp600.0bn will be used to install lines in Makassar-Kupang.
· The two companies have not discussed the specifics of their cooperation, which could be in the form of a joint venture or a consortium. Telkom CEO, Mr. Rinaldi Firmansyah, states that this cooperation will not add significant revenue to Telkom, however installment of fiber optics in Jasa Marga toll roads will support the existing Telkom network.
· JSMR is trading at 2011F PER of 16.0x and EV/EBITDA of 10.7x. TLKM is trading at 2011F consensus PER of 12.6x and EV/EBITDA of 4.7x.

Mandiri Sekuritas Timah: short term positive impact from La Nina (TINS, Rp2,825, Neutral, TP: Rp2,800)

􀂄 Indonesian tin miners have had a very short peak season for production this year, as a late-ending monsoon in 2Q10 has been followed by the early onset of a new rainy season from late August. Adverse weather will negatively impact tin production as tin miners have to pump out water from onshore mining and they find difficulty in exploiting deeper seas for offshore mining. The positive side is strong tin price as Indonesian tin export is predicted to fall by around 20%yoy (note that Indonesia is the biggest tin exporter in the world).
􀂄 Our tin price assumption for 2010-2011 is US$17.5k-18.4k/ton while actual current price is US$23.5k/ton, leading to ytd average of US$15.5k/ton.
􀂄 We estimate the net impact for Timah is an estimated strong result in 2H10 as the company has enough inventories to take advantage of rising tin price. However, should this rainy season prolonged, tin production in 4Q10 could fall considerably and at the same time purchased tin ore cost from independent small miners could rise following the rise in global tin price. We still have to reassess long term impact (year of 2011) from this phenomenon.
􀂄 Currently we have Neutral recommendation on TINS which currently is trading at PER10-11F of 17.1-11.3x.

Mansek Timah:1H10 results were below our and consensus estimates (TINS,Rp2,425,Neutral,TP:Rp2,800)

TINS reported 1H10 net income of Rp322bn (+652.6%yoy),represented 27.3%of our FY forecast and and 28.9%of consensus estimates.These results were below our and consensus expectation.The main reason of below expectation result was a decrease in production volume from 17,588 ton in 1H09 to 10,191 in 1H10,which resulted a decrease in sales volume from 19,760 ton in 1H09 to 9,990 ton in 1H10.Decrease in production volume due to bad weather.
At current price,TINS is trading at 2010F and 2011F PER of 14.7x and 9.7x.We maintain our NEUTRAL recommendation on the counter.

NISP Indocement cancels external financing (INTP, Rp17,800)

• Indocement canceled its plan to raise Rp630.0bn loans to finance its new two cement mills projects. As such, the company erases expectations of additional 1.5mn tons per year capacity from these mills. However, the company had finished its new mill in Cirebon with 1.5mn tons annual capacity. Thus, it foresees sales volume will manage to post growth despite in a moderate manner.

• The company foresees its sales volume to grow by 8% YoY this year to 17.6mn tons on the commencement of Cirebon mill. The company aims to boost its capacity to 20.6mn tons in 2012 or 10.8% higher from its current output level.

• Currently INTP is trading at 2011F PER of 15.6x and EV/EBITDA of 9.2x.

Mansek Timah:1H10 indicative net income of Rp314bn (TINS,Rp2,425,Neutral,TP: Rp2,800)

Bisnis Indonesia reported Timah ’s 1H10 net profit indication of Rp314bn (+21%qoq,+630%yoy),however,the company ’s management did not give any comment on it.

Should this figure be correct,1H10 result will represents 38%and 31%of ours and consensus FY10F estimates.Assuming FY10F LME tin price stays the same at recent price of around US$19k/ton,we view the company ’s FY10 net profit could reach our estimate of
Rp830bn,but still difficult to reach consensus estimate of Rp1tn.

We have Neutral recommendation on TINS which currently is trading at PER10-11F of 14.7-9.7x.

Mansek Timah:tin output in Indonesia may miss target (TINS,Rp2,400,Neutral,TP: Rp2,800)

According to Ministry of Energy and Mineral Resources,tin output from Indonesia may plunge about 20%this year due to prolonged rainy season. However,lower output from Indonesia has supported strong LME tin price. Our tin price assumption for FY10F is US$17.5k/ton,which is the same with ytd average LME price.However,yesterday LME tin price reached US$19.9k/ton.

Should the price is sustainable until year end;tin price could be 7%above our estimates.Our sensitivity analysis shows that 20%output decline and 7%higher selling price will reduce net profit by 22%.Currently,we have Neutral recommendation on TINS which is trading at 14.6-9.6x PER10-11F.

Mandiri Sekuritas Timah: potentially benefited by lower Indonesia tin plate supply (TINS, Rp2,200, Neutral, TP: Rp2,800)

Ministry of Forestry is considering revoking location permit of Koba Tin, the second largest tin producer in Indonesia. Koba Tin is a subsidiary of Malaysia Smelting Corporation, the largest tin smelter in Malaysia, 3’rd largest in ASEAN. Koba Tin annually produces around 8k tons of tin, around 15% of Timah’s production. During the last several years, Koba Tin has been accused of various illegal mining activities, its mining permit will end in 2013. We view this will give positive impact to Timah as Indonesia tin supply could decline, therefore, support global tin price. Currently, we have Neutral recommendation on TINS which is trading at PER10-11F of 13.3- .8x.

Mandiri Sekuritas Adaro Energy: Revenue FY09 in line with our estimates and consensus (ADRO, Rp1,910, Neutral, TP: Rp1,800)

􀂄 Adaro managed to increase its margins. Gross margin, operating margin, and net margins are improving significantly.

􀂄 Adaro recorded gain on foreign exchange of Rp100bn compare with loss of Rp455bn in previous year, meanwhile interest expenses up by 49%yoy. Hence, net income was at Rp4.4tn (+392%yoy), below our expectation but in line with consensus.

􀂄 We will review our estimation due to the results. Maintain Buy.

Mandiri Sekuritas Key takeaways from our visit (UNTR, Rp5,000, Buy, TP: Rp7,800)

Here are some key takeaways from our visit to United Tractors (UNTR), yesterday:
1. Komatsu Japan allows UNTR to return some of its heavy equipment inventory at cost. This will help company’s working capital management.
2. Company renewed its contract with Kideco for ten years in Jan09. For FY09F, contract for mining contractors is secure as next contract expiry would be in 2010F on which amounting to 5.2mn tons of coal (about 8.8% of FY08 total production).
3. UNTR indicated that Feb09 coal extraction and coal production would be poor as weather remains unfriendly. However, management is still optimistic to catch up their annual target in second and third quarter.

Now trading at PER09F of 6.3x, we remain a buyer for UNTR as mining contracting would show steady performance with support of higher fee as stripping ratio to remain at 7.5x. Key risks to our valuation remain on unfriendly weather, price war among heavy equipment sellers, and coal price drops below cost of production (cash cost of
UNTR clients is US$35-40/ton on average).