Mansek Bank Rakyat Indonesia a takeaway from a company visit (BBRI,Rp10,600, Buy,Rp12,000)

We have just visited BRI and below are the highlights:
The increase in primary reserves will lower the bank ’s interest income by around Rp200bn, however there has yet intention from the bank to increase the lending rate.The bank plans to maintain its LDR below 100% and above 78%hence will not be required to have additional RR by Mar11 (at end Jun10,LDR recorded at 88.9%).

There is no firm statement on whether Bukopin will be taken over by BRI.So far BRI has yet appointed advisor for this possible transaction or conducted internal due diligence for such transaction.However,a possibility remains even though in the short term it might affect the bank ’s performance negatively due to Bukopin ’s much lower NIM and ROAE.

Until Aug10 there has yet significant improvement in terms of medium size NPL (recorded at 14.9%at end Jun10).The management still focused on efforts to settle the NPL rather than performing aggressive write off.

At current price,BRI is trading at 2011P/BV of 3.0x and PER of 10.2x.We still like BRI for its ability to generate higher than average NIM and ROAE.

Mansek UNTR:Slower growth (UNTR,Rp20,200,Buy,TP:Rp21,700)

Komatsu sales volume in Aug ’10 increased by 49.0%YoY from Aug ’10.This slower growth dragged down YoY growth from 87.1%in 7M10 to 81.4%in 8M10.8M10 komatsu sales volume of 3,653 units represented 73.4%of our FY10F of 4,978 units.This is still within our expectation due to we expect slower YoY growth up to end of year.

Overburden removal and coal production in Aug ’10 also recorded slower growth.8M10 Overburden removal represented 79.8%of our FY10F estimate,meanwhile 8M10 coal production represented 71.3%of our FY10F estimate. These are still within our expectation as we expect slower YoY growth in overburden removal and coal production up to end of year due to mining activities usually slower in 4Q.

Currently,UNTR is trading at PER10F and PER11F of 15.5x and 14.6x,respectively.

Mansek Jasa Marga bonds oversubscribed (JSMR,Rp3,100,Buy,TP:Rp3,200)

Jasa Marga will issue a new bond which tranched into a 10 year bond,Rp1tn,with an interest of 9.35%.pa;and 3 years zero coupon bonds,under Jasa Marga I series JM-10,amounting to Rp500bn with an interest rate of 9.1%pa.Following book building period,the bonds experienced oversubscribed up to 4.5 times.The fund proceeds from bonds issuance will be used to:45%for debt repayment,27%for capex,25%for non-toll road business development,and the remaining 5%for working capital.

We estimates JSMR ’s FY10F revenue reached Rp4.3tn (+17.1%yoy)and net profit up to Rp1.3tn (+34.2%yoy);due to increasing tariff in September 2009.Currently,JSMR trades at PER11F of 14.0x.

Mansek BUMI :Preemptive issuance below the company plans (BUMI,Rp2,250,Buy,TP:Rp3,665)

„ Reuters reported BUMI has scaled back the size of non preemptive rights issue to $362mn,priced at Rp2,366 per share. BUMI will disclose the buyers two days before the listing on October 5 of the new shares.

„ The size implied a 7%(from planned 10%)non preemptive rights issue.Initial reaction would be that BUMI can not find enough buyers to subscribe the rights which is priced higher than yesterday market close of Rp2,250 per share.The confirmation, unfortunately, may not be known immediately.If BUMI can find other source of funds especially new debts or asset sale,low preemptive take up might be the step taken to reduce earnings dilution.At Rp2,250 BUMI is trading at 10.9x PER11F of Mandiri estimates and 9.3x PER11F of Blomberg consensus.

Mandiri Sekuritas Bank Negara Indonesia: update from a company visit (BBNI, Rp3,475, Buy, Rp3,500)

􀂄 Our visit to BNI yesterday affirmed the bank’s additional RR of Rp5tn as a result of new RR ruling. The bank expects to grow its loans faster next year to be able to reach the minimum LDR of 78% by Mar11. Assuming 15% yoy loan growth this year, the bank need to book additional loans of Rp6tn for Jan-Feb next year (with total deposit maintained at the Jun10’s level). We believe this will be difficult to achieve as loans tended to decline every 1Q.

􀂄 The management also indicated that they will likely maintain its lending rate at the current level and prefer to enhance efficiency in respond to lower yield obtained from additional placement in RR.

􀂄 There is no comment from the management regarding the rights issue. They still expect it to be finalized by end of this year to bring its Tier I capital to around 14-15% from the Jun10’s level of 11.0%. However, the Commission XI - House of Representatives is reported to have given approval on the rights issue raising around Rp9-10 tn of fresh fund (or around 3.37 bn new shares). Following this decision, a meeting will be held between Commission XI, State Owned Ministry and Finance Ministry and the result of the meeting will be brought to the Parliament Assembly. So far, there is no problem at the Parliament Assembly if the Commission has approved one corporate action, so we expect the process will be smooth.

􀂄 At current price, BNI is trading at 2011F P/BV of 2.1x and PER of 10.0x .We are likely downgrading our recommendation to neutral as the potential upside is now limited.

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 ASII: Key Takeaway from lunch meeting with Investor relation (ASII, Rp54,500, BUY, TP: Rp58,000)

􀂄 ASII said current buyer of 4W are people who really need 4W and people who take advantage of current low interest rate.
􀂄 ASII expect interest rate will increase next year, therefore the buyer in next year is people who really need 4W. ASII estimate 4W sales volume will decrease in 2011F around 5% up to 10% yoy. This is below our expectation. Currently, we estimate 4W sales volume will grow by 3.2% yoy in 2011F.
􀂄 ASII expect 2W sales volume will grow by 10% yoy in 2011F. This is within our expectation. Currently, we estimate 2W sales volume will grow by 10.0% yoy in 2011F.
􀂄 We will revisit our assumptions.
􀂄 Currently, ASII trades at PER 2010F and 2011F at 17.4x and 15.9x.

Mandiri Sekuritas Telkom will divest some of its ‘minority ownership’ subsidiaries (TLKM, Rp9,250, Buy, TP:R12,000)

Telkom plans to divest its ‘minority ownership’ subsidiaries as part of the business consolidation strategy. Hence, in the future Telkom will only own subsidiaries which it has majority ownership. Currently, Telkom is in the process to divest its 40% ownership in PT Petrakom and 25% ownership in PT Citra Sari Makmur (CSM).

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.

Mandiri Sekuritas Kawasan Jababeka: Blessing in Disguise for KIJA’s Cikarang Dry Port as the main road collapses in North Jakarta (KIJA, Rp124, Buy, R

􀂄 The collapse of a section of Jl. RE Martadinata in Tanjung Priok, North Jakarta, more than 100 meters, which is the artery road that connects area getting to Tanjung Priok Port should be perceived as a blessing in disguise condition for the newly Cikarang Port owned by KIJA.
􀂄 We view the recovery of the road collapse would take for at least 3 months, which hamper the running businesses in Tanjung Priok that lead them. The prospective investors may look for an alternative area, hence comes to the benefit of KIJA’s Cikarang Dry Port as the only alternative place. Yet, in addition, the about to complete railway connection on Cikarang Dry Port to Tanjung Priok, which expected to be at end of November, might also add some thoughts for the movement consideration.
􀂄 Cikarang Dry Port serves as an extension of Tanjung Priok, located on 10ha area of land with 150k TEUs capacity, extendable up to 150ha. Upon reaching TEUs of 276k throughput units by 2012, net income contribution from the dryport is expected to be about US$5mn/year. We call a buy for KIJA, currently trading at 74% discount to our NAV.

Mandiri Sekuritas Medco Energi: Government will extend 3 PSCs (MEDC, Rp3,100, Buy, TP Rp3,500)

􀂄 Head of BP Migas mentioned that the government through Ministry of Energy and Natural Resources has approved the PSC (Production Sharing Contract) extension for 3 MEDC’s asset, namely Block A, Block South Sumatera Extension (SSE) and Block Bawean. Note that PSC for both Block A and Bawean blocks will end in 2011 while SSE block in 2013.

􀂄 Aside from that, BP Migas has also allocated the domestic portion on gas from Donggi-Senoro block (28% from total) to PLN (as much as 60bbtud) and Panca Amara (as much as 55bbtud). We view that such news will bring positive sentiment to MEDC as this will give more conviction on the sustainability of company’s future key projects.

Mandiri Sekuritas Energi Mega Persada: Signed gas agreement at US$4.9/mmbtu (ENRG, Rp88, Buy, TP: Rp200)

􀂄 The company reported that its Malacca Strait asset has signed a gas sales agreement (GSA) with BOB PT BSP – Pertamina Hulu Energi. ENRG is expected to sell 9mmsfcd to BOB at a price of US$4.9/mmbtu (with an escalation term of 3% per annum) from 2H12 to 2020. Total contracted volume of gas within the agreement is 25bcf of gas.

􀂄 Note that up to 1H10, Malacca Strait produces around 11.9mmscfd, in which 4.5mmscfd is flared, while the remaining is used as fuel for the company’s pump and power generator.

􀂄 We view this contract will give a positive impact to company as no more gas would be flared in such asset, and the contracted gas selling price will boost current average gas selling price of only US$2.5/mmbtu. Note that volume for such agreement reflected around 15.5% of FY10F daily gas production of 58mmscfd.

Mandiri Sekuritas KIJA : Ministry of Transportation to follow up railway connection construction on Cikarang Dry Port (KIJA, Rp115, Buy, TP idr 265)

􀂄 Following Hatta Rajasa, the coordinating minister for the economy, suggestion earlier this week, on the urge to construct railway connection on Cikarang Dry Port to Tanjung Priok, the Ministry of Transportation followed up with asking PT Kereta Api (KA) to imply the same proposal as this purposed to accelerate container deliverables which currently accommodated through road way. The government expects the construction to be completed within 3 months.

􀂄 The construction is believed will give positive impact to KIJA as the owner of Cikarang Dry Port. Cikarang Dry Port serves as an extension of Tanjung Priok, located on 10ha area of land with 150k TEUs capacity, extendable up to 150ha. Upon reaching TEUs of 276k throughput units by 2012, net income contribution from the dryport is expected to be about US$5mn/year. Note that our TP of Rp265 excludes any contribution from the dry port which we see as an additional catalyst in the 2-3 years. We maintain buy, trading at 75% discount to NAV10.

Mandiri Sekuritas Perusahaan Gas : 1H10 Above ours, within consensus (PGAS, Rp4,000, Buy, TP: Rp5,260)

􀂄 PGAS 1H10 result announcement showed a net income which already has been reported in newspaper weeks before. Based on full result reported, differences in our forecast lies in our cost assumptions. Therefore we have make cost adjustments. We also do volume upgrade to our forecasts. In his comment to Bloomberg, PGAS CEO, Hendy P. Santoso, hinted 2011 revenue will be flat as no additional supply indicated. This also has been our view that although still attractive, PGAS lacks catalyst, as no new supply is seen until the completion of its Floating Storage Regasification Terminal in 2012.
􀂄 Our new forecast resulted in an upgrade of target price from currently Rp4,650/share to Rp5,260/share. At Rp4,000/share, PGAS is trading at FY10F PER of 14.2x and FY11F PER of 14.0x, with EV/EBITDA 10F and 11F of 8.6x, and 7.6x, respectively.

Mansek Bumi Resources :1H10 within our estimates (BUMI,Rp1,710,Buy,TP:Rp3,665)

Discussing BUMI is not about discussing its operational performance.Their operational performances are inline with our expectation with a positive bias toward 2H10.However debt is still worrying.BUMI recorded a US$89.9mn (vs 1H09 : US$17.3mn)contribution in equity net income of associated companies,less than additional burden taken from ballooning debt and rising interest payment from US$4,189.8mn debt.BUMI paid US$257.4mn in financial charges (vs 1H09 :US$47.9mn).Therefore main concern is the state of its financial burden.In 1H10,BUMI increase its asset sales to US$171.7mn (1Q10:US$93.7mn),balancing the interest payment.Bumi also suffered US$60mn in derivative book losses. The derivative losses according to the company is in relation with its options contract for its convertible bonds issuance.

Mansek ADRO:net profit below our and consensus estimates (ADRO,Rp1,980,Buy, TP:Rp2,600)

1H10 net profit at Rp1.2tn (-48.7%yoy,-66.1%QoQ)below ours and consensus estimates.
ADRO booked revenue 1H10 at Rp12.0tn (-7.1%yoy,-9.1%QoQ)below our and consensus estimates.
In US dollar basis,revenue was at US$1.3bn (+11.9%yoy),due to increased production and sales volume.Production volume increased 20.2%yoy and sales volume increase 22.0%yoy.
The strong US dollar revenue had been offset by strengthening of rupiah against US dollar;in the first 6 months in 2010,average rupiah/US$ exchange rate strengthened 17%to Rp9,189/US$compare with Rp11,067/US$.
Cost of revenues increased by 7.9%yoy,due to increasing stripping ratio and increasing production volume.ADRO ’s cash cost (excluding royalties)increased 6%yoy,dragging down operating margin and net margin.
ADRO trades at PER10F-11F of 16.0x and 11.8x,respectively,maintain Buy.

Mansek Adaro:targets production 80Mt by 2015 (ADRO,Rp2,050,Buy,TP: idr2,600)

ADRO targets coal production reach 80Mt by 2015,almost double than target production FY10 of 45-46Mt.To support the target,the company plans to build 68 Km length of landed conveyor belt in stages and also to build 2x30MW capacity of power plant located in mouth of the mining site. The conveyer belt is scheduled to be start built in earlier 2011 with initial capacity of 40Mt,and expected to contribute saving cost amounting to US$1.5/ton to production cost.In 1H10,ADRO produced 21.6Mt or 47%to FY10 target.ADRO trades at PER10F-11F of 16.5x and 12.2x,respectively, maintain Buy.

Mansek Kawasan Jababeka:More visibility on Dry Port prospects (KIJA,Rp116, Buy,TP:Rp265)

Hatta Rajasa,the coordinating minister for the economy,said on Saturday that the first phase of construction railway connecting Cikarang Dry Port, owned by KIJA which brokeground last Saturday,August 28,2010, with Tanjung Priok Port could be completed within three months.The completed railway is expected to increase industry productivity and capacity having faster delivery.Additionally,the public works ministry set to complete construction of the flyover connecting the main high-way straight to the main dry-port hub by end of this year.

Cikarang Dry Port serves as an extension of Tanjung Priok,located on 10ha area of land with 150k TEUs capacity,extendable up to 150ha.Upon reaching TEUs of 276k throughput units by 2012,net income contribution from the dryport is expected to be about US$5mn/year.Note that our TP of Rp265 excludes any contribution from the dry port which we see as an additional catalyst in the 2-3 years.We maintain buy,trading at 74% discount to NAV10.

Mandiri Sekuritas Indofood: 1H10 net income exceeds ours and consensus expectation (INDF, Rp4,350, Buy, TP: Rp4,500)

􀂄 INDF posted 1H10 net income of Rp1.4tn (+76%yoy, +23%qoq), which is above ours and consensus estimates. The net income yoy growth was mainly due to increase in noodle selling price.

􀂄 Looking at segmental performance, CBP division performed well with 8.3%yoy growth that compensated revenues contraction from wheat flour segment. Agribusiness segment posted flat growth yoy.

􀂄 INDF is currently trading at PER10-11F consensus of 17.1-14.8x.

Mandiri Sekuritas Wijaya Karya: 1H10 net profit grew 50.8% yoy, better than expectations (WIKA, Rp590, Buy, TP:Rp570)

􀂄 Despite lower revenue (-15.2% yoy) of Rp2.5tn as per 1H10, gross profit was up 7.7% yoy, on the back of better quality projects which provide higher margin as well as higher gain from joint operation projects. The figure is above our and consensus estimates. Yet on the operating level, we noticed that the company posted higher general and administration expense (+33.1% yoy), which resulted in lower operating profit (-1.7% yoy).

􀂄 Going further down, the company booked lower loss from forex (-92.9% yoy) as well as interest expense (-84.7% yoy). Furthermore WIKA booked gain in the extraordinary account as much as Rp33.5bn, which boosted net profit by 50.8% yoy. Excluding such account, core net profit still grew 22.3% yoy. In general, such result is above our and consensus estimates. WIKA is currently trading at PER10F of 12.8x.