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.

NISP Indocement production to reach 17.6 mn tons (INTP, Rp17,350)

Indocement will add 1.5mn tons capacity this year as production from its Cirebon plant starts next month. The new plant has a full capacity of 4mn tons per year.

The company has total capacity of 18.6mn tons however only expects production this year to reach 17.6mn tons. Indocement holds 31.5% market share until 7M10, where total demand reaches 41.5mn tons.

Althought cement sales were strong in 1H10 where growth reached 15.2% YoY, management is pessimistic that it can continue this performance, where growth in the second half is only expected to reach 10.7%.

Indocement plans to increase the number of cement grinding plant in this third quarter, with expected cost to reach US$70mn.

INTP is trading at 2011F PER of 15.2x and EV/EBITDA of 7.4x.

Mandiri Sekuritas Unilever: 1H10 results are inline with ours and consensus estimate (UNVR, Rp17,150, Buy, TP: Rp13,000)

􀂄 UNVR posted 1H10 net income of Rp1.8tn (+18%yoy, -18%qoq), which is inline with ours and consensus estimate.
􀂄 Net profit qoq decline was mainly due to increase in selling expense by 16%qoq and 28%yoy.
􀂄 We have Buy recommendation on UNVR which currently is trading at PER10-11F of 38.7-32.9x.

NISP TB Bukit Asam has received loans commitment (PTBA, Rp17,900, Buy)

• TB Bukit Asam’s has received loans commitment to support its plan on Banko Tengah mine mouth power plant project. The company said that currently one overseas bank from China has agreed to support this US$3bn project and ready to provide up to 70% of funding.

• With this support, the company still has one more agreement that needs to be settled, which is the power purchase agreement to PLN.

• The company aims to commence the project in 2014 which will contribute an additional 12mn tons of coal sales per annum. As such, the company’s coal sales volume in 2014 would reach more than 40 mn tons, supported by the existing railway capacity of 22.7mn tons, the commencement of new railway of 7mn tons and this mine mouth power plant.

• TB Bukit Asam also has another mine mouth power plant project, which is Banjarsari, with coal consumption of 1mn tons per year. This project is also in negotiation phase with PLN regarding the electricity tariff.

• All in all, TB Bukit Asam has the driver to boost sales volume and also backed by healthy financial structure and favorable cash turnover. Thus, with current 2010F valuation PER of 17.8x and EV/EBITDA of 15.4x, we still maintain Buy.

NISP TB Bukit Asam prepares Rp560.0bn for acquisition (PTBA, Rp17,950, Buy)

• TB Bukit Asam will allocate 40% of its Rp1.40tn capex or equal to Rp560.0bn for acquisition purpose. The company is currently eyeing a coal site in Kalimantan and cites that it has finished the due diligence process. The company added that another site that is still under the feasibility study.

• The company prefers to acquire a greenfield mine and will use its huge internal cash to support the acquisition plan.

• Separately, the company said its sales volume this year will reach 15.5mn tons despite a few setbacks in 1Q10 that dragged the company’s sales volume to 3.2mn tons compared to 3.8mn tons in 4Q09.

• We view the company has ample capability in term of funding and will provide TB Bukit Asam with larger opportunities to expand its business through acquisition and running its existing project at the same time. The company currently has Rp5.5tn of cash which would provide adequate support for the company’s plan.

• Currently PTBA is trading at 2010F PER of 17.8x and EV/EBITDA of 15.4x, Buy.

Mandiri Sekuritas Bukit Asam : Bukit Asam, China Private Equity Funds in Talks on Sumatra Railway (PTBA, Rp17,900, Buy, TP: Rp18,750)

􀂄 PTBA on Wednesday said two China-based private equity funds were in talks about partly funding a $1.3 billion coal railway in Sumatra. Last month, PTBA signed contracts for a total of $4.8 billion for a new rail project to transport its coal to a port in Sumatra, a deal that is expected to increase PTBA’s coal-transportation capacity significantly. The deal consisted of a US$1.3bn contract for the construction of a new rail line and an operation and maintenance contract worth US$3.5bn over 20 years, both with China Railway Engineering Corp. The project involves the construction of a 307- kilometer railway from Bukit Asam’s Banko coal mine in South Sumatra to the port of Srengsem in Lampung province. Together with the
improvement in existing railways, PTBA expects to produce 48Mt in 2014 compared to their 2010 estimate production of 15.5Mt

􀂄 PTBA’s CEO Sukrisno said the railway consortium was in talks with private equity funds including two China-based investors — Beijing-based Hopu Investment Management and a private equity unit of China Development Bank — for the $1.3 billion project. China Export-Import Bank has been chosen as the main financier for the project, he said.

􀂄 The consortium had agreed to increase the debt portion of the project to 85% from 70 %, China Railway said it needed six months for design and therefore project construction is estimated to start in 1H2011. Privately owned PT Trans¬pacific Railway Infrastructure owns 80%, while Bukit Asam and China Railway Engineering Corp. each own 10%. (Jakarta Globe)

􀂄 PTBA is also planning to pay a dividend of Rp466/share in June 15, as final dividend for 2009 result, as previously they have paid Rp67/share. Total dividend payout is 45%. PTBA expect a weaker than 1Q09 revenue achievement in 1Q10 due to lower price. PLN paid PTBA Rp685k/ton for 5.5Mt coal delivery in 2010, 22.5% lower than price they paid in 2009 for 6.1Mt. PTBA booked Rp2.3tn of revenue in 1Q09. We are forecasting Rp10.2tn revenue for FY10 (FY09A: Rp8.9tn). We are expecting prices to recover in the following quarters and a 23% increase in the sales volume to 14.8Mt. At Rp17,900/share, PTBA is trading at 14.0x and 12.7x PERFY10F and PERFY11F, respectively.

Mandiri Sekuritas United Tractors: heavy equipment sales continue to surge up 16%mom in Feb10 (UNTR, Rp17,400, Buy, TP:Rp19,600)

United Tractor reported heavy equipment sales in the month of February of 394 units (+16%mom), thus, the highest posted monthly sales since Sep08. Once again, Feb10 demand was dominated by mining sector which accounted for 54% of unit sales. As of 2M10, heavy equipment sales have totaled 733 units (63%yoy) and are running ahead of our FY10 target of 3,500 (equivalent to about 21% of FY10F targets). We maintain buy for the stock which currently trades at PER10F 14.5x. while posing a 13% upside to our price objective.