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.

NISP Bank Rakyat Indonesia underlines plan to acquire Bukopin (BBRI, Rp10,100; BBKP, Rp720)

· BRI cited that the bank is underlining its plan to acquire Bank Bukopin as part of its long term strategy and will consolidate it along with Bank Agro (AGRO, Rp185). However, BRI has not given any proposal to Bukopin regarding the price despite that Rp2.00tn in cash has been prepared to acquire this targeted bank.
· BRI added that this acquisition will strengthen the bank’s target to increase its position in MSME loans, which also served by Bukopin.
· BRI aims to conclude the price within two weeks at the most, as it is currently in intensive negotiation with Bukopin.
· BBRI is trading at 2011F consensus PER of 11.5x and PBV of 3.0x, BBKP trading at 2011F consensus PER of 8.4x and PBV of 1.4x.

Mandiri Sekuritas Bank Rakyat Indonesia: 1H10 results below our expectation and consensus estimates (BBRI, Rp10,050 Buy, Rp12,000)

􀂄 Bank Rakyat Indonesia recorded a net profit of Rp4.3tn (+22.8% yoy) in 1H10, which was below our expectation and consensus estimates.
􀂄 The bank reported higher than expected provisioning/impairment expenses as its NPL increased to 4.3% at end Jun10 from 4.1% at end Mar10.
􀂄 The bank’s loan growth remained strong at 8.6% qoq or 24.0% yoy to Rp230.5tn, thus bringing its LDR to 88.4% at end Jun10 vs 87.0% at end Mar10.
􀂄 At present, BRI is trading at 2010F P/BV of 2.8x and PER of 9.4x. We maintained our buy recommendation on the counter.

Mandiri Sekuritas United Tractors: Good 5M09 operational performance. (UNTR, Rp10,050, Buy, TP: Rp13,000)

Here is a short update on United Tractors 5M09 performance, which was well for construction machinery & mining contracting. However, coal sales were again below than expectation with the company downgrading their FY09F target from 4.0mn tons to 2.5mn tons. Below are the details on each business segment:

Construction Machinery: 5M09 unit sales were within with our expectation, with positive sign of demand recovery in various sectors. 5M09 unit sales were 1,140 units (-42.6% yoy) and in May09 unit sales were 303 units (+45.0% mom or - 27.3%yoy). We believe that May09 unit sales could be an early sign of recovery since its bottom in Dec08 unit sales. Monthly unit sales from each sector reached its year-to-date highest as commodity prices remain at favorable level and leasing rates fell. Sales to Pamapersada were steady at 21% of total sales (ytd Pamapersada contribution was 16% to sales, due to low delivery of 13.8% to Pama in Mar09). We continue to remain comfortable with our FY09F forecast and deem likely for upside to our forecast, should the unit sales continue to accelerate. In addition, spare part sales growth remains similar to 1Q09, which is positive.

Mining Contracting: 5M09 coal production was inline, with stripping ratio at its highest since 2006. 5M09 coal production was on track with our estimates at 24.4mn tons while overburden was higher at 218.2mn bcm, translating to 8.9x stripping ratio. Rainfall in the mining sites has eased down in May09 but problems in the mining site caused delay in coal production. As result, UNTR focused more on extracting overburden so that coal production can be easily upped when needed. UNTR mentioned that there were stockpile problem in Adaro site and new operation in East Block of Indominco site that caused more overburden than production. For FY09F, we still believe that our forecast can be comfortably achieved while stripping ratio could be above our expectation of 7.5x.

Coal Sales: UNTR downgraded its FY09F coal sales target to 2.5mn tons, below our target of 3.0mn tons. 5M09 coal sales showed poor results again as Glencore and Nobel delayed their shipping due to high fixedpurchase- price. As result, ytd coal sales were -40.1% yoy and UNTR downgraded their FY09F target to 2.5mn tons, below ours of 3.0mn tons. Based on current condition, it looks tough to achieve our FY09F target. However, should coal price continue to improve and start to match with average fixed-selling-price of US$82/ton, it is possible for Glencore and Nobel would start sending their shipments on time and improve UNTR’s coal sales. Note that coal sales contributed a small chunk to total EBITDA before elimination in 1Q09, at about 7.7%.

With 5M09 performance going well, we believe that we can achieve our FY09F earnings outlook comfortably. Thus, we remain a buyer for UNTR with target price of Rp13,000/share that implies to PER09F of 13.4x or P/BV09F of 2.5x. We expect EPS growth of 9.8% in FY09F and 34.0% in FY10F.