Mandiri Sekuritas XL Axiata increase frequency capacity to 2x10MHz 3G (EXCL, Buy, Rp5,550, Buy, TP: Rp5,900)

According to news released by EXCL’s investor relations, the company has received an approval from minister of communication and telecommunication for its second 3G carrier. With this approval, XL will obtained consecutive 2x10MHz 3G carrier (1960-1970 MHz /2150-2160 MHz), EXCL only had 2x5 MHz 3G previously. In accordance with Decree No. 322/KEP/M.KOMINFO/09/2010, XL should pay an upfront fee in the amount of Rp327.6bn while the annual fee will be Rp.160 billion. Under the payment scheme configured, the upfront fee will be charged on this year and will be amortize for 10 years, meanwhile annual fee for the first year only charged 20% or around Rp32bn.

Mandiri Sekuritas XL Axiata obtained Rp2.5tn debt (EXCL, Rp5,600, Buy, TP: Rp5,900)

EXCL obtained Rp2.5tn worth of debt from Bank Mandiri that will be used to refinance debt and to finance working capital. The 5 years debt carried interest rate of 1.4% above JIBOR. EXCL will pay its debt from Export Kredit Namden (EKN) worth US$265.2mn. In 1H10 EXCL had repaid its debt worth US$219mn and Rp900bn using its internal cash. EXCL has debt amounting to Rp11.4tn at end Jun10.

NISP Perusahaan Gas Negara sets 2011F capex at US$600mn (PGAS, Rp3,900)

· Perusahaan Gas Negara is budgeting US$600mn or Rp5.58tn for capex in 2011. This is almost 3 times of the capex this year, which ranges between US$200-250mn.
· PGN CEO, Mr.Hendi Prio Santoso, states that the budget includes acquisition cost for an oil and gas block of US$350mn in response to the growing demand. In addition the company will acquire a gas tank costing US$50mn.
· Capex will 30% be financed from internal cash. The company has currently Rp9.53tn in cash. The balance will be sourced externally however no details have been shared.
· PGAS is trading at 2011F PER of 12.3x and EV/EBITDA of 7.4x.

Mansek Bank Danamon:1H10 results above our expectation,yet inline with consensus estimates (BDMN,Rp5,350,Neutral,TP:Rp,4,900)

Bank Danamon reported net profit of Rp1.4tn in 1H10,above our expectation,yet inline with consensus estimates.The bank reported lower than expected provisioning expenses enabled by improvement in NPL.In terms of Pre-provision operating profit (PPOP),the bank ’s financial result was actually in line with our expectation.

The bank ’s loans improved by 10%qoq in 2Q10 to Rp71.1tn with wholesale and massmarket segment posted the highest loan growth of 14%qoq and 12%qoq respectively.Despite srong growth in wholesale segment,mass market still dominated the total loans (56%of total loans at end Jun10). This allowed the bank to maintain a high NIM of 11.6%in 1H10,the highest in the sector.

The bank targets loans to grow by 20%yoy this year and believed that it will be achieved.

At the current price,the stock is trading at 2011F P/BV of 2.3x and PER of 13.0x,We are currently reviewing our forecast on the bank.

Credit Suisse Indosat (ISAT IJ, BUY, TP IDR 5,900)

Pricing in low expectations
Indosat is scheduled to report its consolidated Q2 2010 results on August 19 and we expect a recovery in revenue growth as Indosat monetizes the strong growth in net subscriber additions acquired in Q1 (+36% QoQ) by cross-selling data and other services to its subscribers. Coupled with cost and capex discipline initiatives to improve operating efficiencies, we expect Indosat to yield margin improvement in the coming quarters. In addition, Indosat has begun to increase its presence in selected non-Java markets and this is also expected to contribute to top-line growth. The market in pricing in low expectations for the restructuring at Indosat and we expect increasing signs of a sustainable operational turnaround at the quarterly results as a key catalyst for the stock.


Upgrade to BUY
The share price of Indosat has corrected over 20% since we downgraded the stock in May. We are upgrading Indosat to a BUY recommendation due to the attractive valuations. We maintain our view on Indosat being a restructuring story and forecast EBITDA margin to reach 46.5% in FY 2010 before improving further to 48% in FY 2011. We maintain our HOLT-derived 12M target price of IDR 5,900, implying an undemanding one-year forward P/E of 13 and trading at a discount to its peers and the broad market.

Mansek International Nickel:1H10 net income above ours and consensus estimates (INCO,Rp4,125,BUY,TP:Rp5,900)

INCO reported 1H10 net income of US$219mn (+61.1%yoy),represented 66.3%of our FY forecast and 63.4%of consensus estimates.
Actual average HSFO (High Sulphur Fuel Oil)price of US$76.79 per barrel in 2Q10 and US$76.03 per barrel in 1Q10 was lower than our average HSFO price assumption of US$95.00 per barrel.
The company ’s 1H10 sales grew by 27.8%yoy.2Q10 sales was higher than in 1Q10 of,42.3%qoq,margin reached 47.4%,which increase from 41.2%in 1H09 (vs our target for FY10 of 41.6%)
At current price,INCO is trading at 2010F and 2011F PER of 13.8x and 9.4x.We maintain our BUY recommendation on the counter.

Mandiri Sekuritas Bank Negara Indonesia: results of the AGM (BBNI, Rp2,450, Buy, TP: Rp2,900)

BNI held its AGM on Wednesday, 12 May 2010 and announced some changes in its BOD and BOD composition. Key persons (Gatot M Suwondo as the President Director and Yap Tjay Soen as the CFO) maintained and four new directors were appointed:. Honggo Widjojo Kangmasto, Darmadi Sutanto, Adi Setianto and Sutanto. Honggo was formerly the Managing
Director of Bank Permata and ever worked for Indofood, Mandiri (as commercial director), BCA and BII, while Darmadi Sutanto was formerly Director of RBS Indonesia. The other two directors came from internal.

The AGM also approved the distribution of cash dividend amounted to Rp47.48/share, or translating into around 2.0% dividend yield. This is equivalent to 35% dividend payout.

Currently, BNI is trading at 2010F P/BV of 1.8x and PER of 10.6x. We maintained our buy recommendation on the bank with TP: Rp2,900 as our TP.

Mandiri Sekuritas Inco: 1Q10 net earnings up by 344%yoy, in-line with ours but slightly above consensus (INCO, Rp4,475, Buy, TP:Rp5,900)

􀂄 Yesterday, Inco reported net income of US$76mn, up by more than 3-folds yoy on the back of sharp recovery of nickel prices and higher sales volumes. ASP for 1Q10 grew by 71%yoy to US$14,182/t, while nickel in matte sales volume improved by 23%yoy. The company was also able to pare down costs as well in areas of supplies, contracts and services which further contributed to its much improved margins. We maintain buy on the stock, currently having a 32% upside to our TP and trading at PER10F of 15.1x.

Mandiri Sekuritas Kalbe Farma: a takeaway from a plant visit (KLBF, Rp1,970, Buy, TP: Rp1,900)

We visited Kalbe Farma’s pharma plant at Cikarang and powder milk plant at Cikampek yesterday and found out some interesting highlights.

􀂄 The plant has consistently met the current GMP (Good Manufacturing Practices) requirement as the company put a great concern about the quality of the product.

􀂄 The pharma plant has 10 lines and majority of them is running at full capacity. There is a dedicated and fully utilized line for Promag and Procold OTC products, which has become the company’s blockbuster products).

􀂄 The powder milk plant runs at 50-60% utilization under the Chil Kid/Chil School brand. The company’s new milk powder products, Zee, is produced at third party manufacturers (toll out).he company’s M&A process is still underway, no definite
timeline yet when it will be completed.

􀂄 At the current price, the stock is trading at 2010F PER of 16.6x and EV/EBITDA of 6.6x. We are currently reviewing our recommendation on the company as the share price has already exceeded our TP of Rp1,900/share.

Mandiri Sekuritas Sampoerna Agro: 1Q10 net income grew by 219.4% YoY (SGRO, Rp2,700, NEUTRAL, TP: Rp2,900)

�� SGRO posted 1Q10 revenues of Rp302bn (93.7%yoy, -52.0%qoq). This translates to net income of Rp43bn (+219.4%yoy, - 44.9%qoq)

�� Revenues decreased by 52.0%qoq mainly due to a decrease in CPO sales volume by 59.5% qoq, which partially offset by an increase in CPO sales price by 11.8%. Revenues increased by 93.7%yoy mainly due to an increase in CPO sales volume by 53.3% yoy and CPO ASP by 23.6% yoy.

�� CPO sales volume decreased by 59.5% qoq due to a decrease in FFB production by 49.4%qoq which translate to a decrease in CPO production by 51.3% qoq.

�� 1Q10 CPO production volume of 190,821 ton represents 13.7% of our FY10E CPO production volume due to 1Q10 FFB production volume represents only 14.9% of our FY10E FFB production volume. In the last 4 years, 1Q FFB production volume represented 10.3%-23.1% of full year FFB production volume.

�� Considering historical production pattern and due to the management of SGRO still confident in achieving its CPO production target, we will maintain our FY2010E CPO production volume.

􀂄 Currently the counter trade at PER10-11F of 13.0-10.9x. We maintain our Neutral Recommendation with TP of Rp2,900.

Mandiri Sekuritas Bank Negara Indonesia: BBNI 1Q2010 results perk up (BBNI, Rp2,550, Buy, TP: Rp2,900)

􀂄 BBNI posted a net profit of Rp1,026 bn in 1Q2010 result, an increase by 62% yoy, which above our expectation (+16.7%) and consensus estimate (+22.5%).

􀂄 BBNI’s 1Q2010 result seems to enjoy the benefit from the newly implementation of PSAK 50-55 that given surge to their Non-Interest Income by 43% yoy (1Q10 - Rp1,740bn), led the operating income to arrive at Rp4,636 (+16%). As the improvement of its NPL to 4,6% (vs. 5.6% 1Q09), the bank also applies a moderate provision expenses of Rp1,174 bn (-20% yoy), which assisted the jump of the net profit figure.

􀂄 The bank’s gross loan slipped by 1.6% qoq to Rp118.856 bn. However this was resulted from the loan write-off by Rp906 bn, as the bank’s commitment to continuously improve its asset quality, despite the slow market trend on loan disbursement in this first quarter. As a result, coverage ratio maintained at 121.8% (vs 120.1% FY09). In the mean time ROE is figured at 25.4%, ROA 2.5% and LDR 67.2% (vs. 16.4%, 1.7% and 67.2% FY09, respectively).

􀂄 Based on the result, we can see initial evidence from the management on its commitment to continuously improving its asset quality, as promised in our last tea meeting, thus we believe the bank’s consistent performance until the end of the year. BBNI currently trades at P/BV10 1.8x and PER10 10.4x, we still call buy on the counter.

Mandiri Sekuritas BDMN 1Q2010 results ahead of our expectation (BDMN, Rp5,500 , Neutral, TP: Rp4,900)

􀂄 Bank Danamon reported 1Q2010 earnings of Rp701 bn, a significant 78% yoy increase, led the result to above our expectation and within consensus estimates.

􀂄 The strong bottom line figure, mainly contributed by strong increase of Net-Interest Income, which jumped to Rp2.923 bn (+26.6% yoy), as higher portion of mass market loan that gives better margin for the bank, led the operating income to Rp3,088 bn (+24% yoy).

􀂄 The bank’s gross loan increased by only 1.5% qoq in the 1Q2010, as this came as the result of the slow market trend especially in wholesale (-2% qoq) and retail segments (-4%qoq). However, this is offset by the mass market loan that reached to Rp35,765 bn(+5% qoq), driven by automotive and micro lending business. Mass market currently covers 56% of total loan, versus 44% on 1Q09. As a result of higher growth in mass market loans, NIM is figured at 14.0% (vs. 10.0% 1Q09), while on the other hand ROAA is posted at 2.9%, ROAE 16.4% and CAR 21.5% (vs. 1.5%, 14.6% and 16.9% 1Q09, respectively). The bank aims to have a double growth in loans (20% yoy) by the end of the year, while provisioning is maintained at low figure.

􀂄 At present, BDMN is trading at 2010F P/BV of 2.6x and PER 16.6x. We still call Neutral on the counter.