NISP BEI allows Bumi Resource Mineral to go public this year (BUMI, Rp2,200, Buy)

· Indonesia Stock Exchange (BEI) has concluded its process on evaluating Bumi Resource Mineral (BRM) IPO plan. The bourse will give the result to BRM this week and the company could continue the process to Bapepam in order to obtain pre-effective statement, which enables BRM to IPO this year.

· We still wait for the progress on this plan as the impact will be positive for Bumi Resources in support of the company’s debt reduction plan. This also will enable BRM to utilize its assets as it will hold Bumi’s non coal assets, including Newmont and Herald.

· Currently, BUMI is trading at 2011F PER of 14.4x and EV/EBITDA of 5.8x, Buy.

NISP Bumi Resources sold its non pre-emptive to Credit Suisse and RZB (BUMI, Rp2,200, Buy)

· Bumi Resources disclosed its counterparts on non pre-emptive issuance where Credit Suisse and Raiffeisen Zentralbank Osterreich AG (RZB-Austria) stood as counterparties. Credit Suisse bought 608.6mn or 44% of the issuance while the remaining 56% bought by RZB.

· The lock up period is one year starting October 5, 2010 and these new shares will be listing today. Thus, Bumi’s outstanding shares will reach 20.8bn shares.

· Bumi plans to use all the cash to retire some of its debt. Currently BUMI is trading at 2011F PER of 14.0x and EV/EBITDA of 5.9x, Buy.

NISP Bumi Resources appoints three underwriter for bonds issuance (BUMI, Rp2,100, Buy)

· It is reported that Bumi Resources has appointed three underwriters to help the company in issuing US$ bonds. This news is in response to Bumi’s US$430mn bonds that will mature this year.
· The company holds US$300.0mn of convertible bonds II that is puttable starting in 25 November 2010 with put price at 100.77%. The price will be higher if the company exercises its option on its next agreed schedule on 25 May 2012 (102.01%) and 25 November 2014 (104.33%)
· Bumi has not given further details or confirmation on this news; however, we foresee the company will refinance these bonds with other non conventional issuance.
· Furthermore, we are currently waiting for Bumi’s plan on its non pre-emptive right issuance as the company said this action will be done no later than 30 September 2010.
· Currently, BUMI is trading at 2011F PER of 13.4x and EV/EBITDA of 5.7x, Buy.

Mansek Gajah Tunggal:points from annual public expose (GJTL,Rp2,075,Not-rated)

1H10 revenue was Rp4.8tn (+27.3%yoy)and net profit was Rp415bn (+188.2%yoy)
Sales volume in 1H10: radial tire was 5.1mn unit(+54.5%yoy),bias tire was 2.1mn unit(+31.3%yoy)and motorcycle tire was 10.1mn unit(+23.2%yoy).
Production capacity by 1H10:radial tire was 37,000tire/day (utilization rate:77%),bias tire was 13,600tire/day (utilization: 87%),motorcycle tire was 67,000tire/day (utilization:85%),synthetic rubber was 60,000ton/yr (utilization:55%)and tire cord was 36,000ton/yr (utilization:66%)
GJTL plans to increase production capacity for radial tire gradually to become 40.000tire/day and 45,000tire/day by end 2010 and 2011,respectively;and motorcycle tire will expand gradually to become 75,000tire/day,95,000tire/day and 105,000tire/day by end 2010,2011 and 2012,respectively.
The radial tire capacity expansion is supported by increasing demand from Michelin.In FY09 tire sales to Michelin reached 1.9mn unit.This year tire demand from Michelin totaling 3mn unit and become 4mn unit and 5mn unit in 2011 and 2012,respectively.
Capex allocated in FY10F amounting to US$40mn,around US$20mn is allocated for expansion and the remaining is for maintenance and working capital.
Currently,we do not cover GJTL.Based on Bloomberg estimates,it is trading at PE11F of 7.8x.

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.

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.

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 Kalbe Farma to build new production facility in Pulo Gadung (KLBF, Rp2,650, Buy)

· Kalbe Farma will build a new production facility in pharmaceutical prescription drugs next year. It is estimated that it will take 1.5 years to build. The company will complete the concept and design construction this October.
· Production cost will be around Rp100.0-150.0bn from total capex budget of Rp500.0bn. In addition the company will also plan to buy new equipment with cost between Rp50.0-Rp100.0bn and open several outlets.
· We believe that this plan is positive to the company’s outlook as prescription pharmaceuticals offers the highest gross margin at 65.7% compared to other segments of the company’s business. With cash balance at Rp1.47tn and gearing at 0.1x, the company is more than able to finance such expansion. Currently the company is currently trading at 2011F PER of 15.7x and EV/EBITDA of 8.9x, Buy.

NISP Bumi Resources declares objection on stock exchange’s stern warning (BUMI, Rp2,150, Buy)

· Bumi Resources shared its objection on BEI’s stern warning on the company’s 2009 financial report. The Bourse put its warning due to the mismatch on Bumi’s COGS with Darma Henwa’s (DEWA, Rp76) revenue.
· The issue popped out in July 2010 where differences are seen between Bumi’s COGS and Darma Henwa’s of US$455.6mn, which did not match with Darma Henwa’s revenue of US$156.6mn from Bumi.
· Bumi defended its case, stating it had explained in early 2H10 that the mismatch was due to a problem in spread sheet, hence, resulting wrong accounting record. Bumi added that the US$314.35mn of the COGS recorded on Darma Henwa is an allocation for Thiess, Bumi’s other coal contractor. Thus, COGS allocation for Darma Henwa was only US$141.27mn. Bumi had also revised its 2009’s COGS and there were no changes in the company’s total COGS amount.
· In the flip side, BEI received the objection and said it will collaborate with Bapepam on this matter.
· We view this is a non event for the company’s fundamental where Bumi had explained the difference back in July 2010.
· Currently, BUMI is trading at 2011F PER of 13.7x and EV/EBITDA of 5.8x, Buy.

NISP Jinchuan will absorb Antam’s nickel (ANTM, Rp2,300, Buy)

· Following recent news on cooperation possibility between Jinchuan Group and Antam, the group said it is ready to deploy up to US$2.00bn for nickel facility development in Halmahera and currently is studying feasibilities on this project.
· As a return, Jinchuan Group will absorb the facility’s output considering that this third world largest mining company requires nickel as the raw material for its stainless steel product.
· There are no further details on this plan; however, the facility in Halmahera will open access to Antam’s nickel reserves and is inline with the company’s plan.
· Currently ANTM is trading at 2011F PER of 10.4x and EV/EBITDA of 5.1x, Buy.

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.

NISP Antam starts Chemical Grade Alumina project next year (ANTM, Rp2,075, Buy)

· Antam will start its CGA project next year as the company has signed the engineering, procurement and construction (EPC) agreement yesterday. This US$450mn project involves Wijaya Karya (WIKA, Rp590), Nusea, Tsukishima Kikai Co. Ltd., and Indonesia Chemical alumina (owned by Antam and Showa Denko).
· The construction is scheduled to start in 1Q11 and the facility is expected to commence in 1Q14. The project will bear 300k ton CGA production capacity, 200k tons of which is exclusive for Showa Denko and will be shipped to Japan . Meanwhile, the balance will be allocated for domestic market.
· The progress is positive for Antam despite the impact would not be imminent.
· Currently ANTM is trading at 2011F PER of 11.2x and EV/EBITDA of 5.8x, Buy.

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.

Mansek Aneka Tambang:1H10 net profits of Rp756bn up by more than 2-folds yoy;above ours and consensus (ANTM, Rp2,050,Neutral,TP:Rp2,500)

Due to the switch in revenue contribution from low-margin gold trading last year to higher margin nickel this year as well the improvement in selling prices of the latter,Antam ’ s 1H10 net income improved by 238%yoy to Rp756bn,despite a relatively flat top-line of Rp4.3tn(-2.1%yoy),thus running ahead of ours and consensus estimates.Additionally on the production side,the divisional production remains within FY10F target with nickel and gold production rates achieving 50%and 54%of FY10F.Currently,the stock trades at PER10F 16.7x.Additional upside would come from the appreciation of nickel prices (at US$20.6k/t as of 1H10)which runs at par with our FY10F price assumption of about US$21k/ton.

NISP Timah multiplies net income by 8 times (TINS, Rp2,425)

· Timah net income soared to Rp322.3bn, 652.6% higher from Rp42.8bn last year. Although revenue only rose by 5.9% YoY to Rp3.75tn from Rp3.54tn, lower cost of goods sold enabled the company to book higher operating profit by 140.1%. However these results came below expectation as net income and sales figure only accounted for 29.0% and 44.5% of consensus full year expectation.

· The company suppressed interest expense and forex losses to only Rp 9.2bn and Rp22.8bn compared to Rp34.4bn and Rp95.7bn in the previous period, making bottom line higher.

· On a quarterly basis, cost of goods sold showed signs of increase as gross profit contracted by 13.7% to Rp 319.3bn in contrast to higher revenue by 4.3% to Rp1.91tn. As such gross and operating margins declined by 3.5% and 4.8% to only 16.7% and 8.7%.

· TINS is trading at 2011F consensus PER of 9.1x and EV/EBITDA of 5.1x.

NISP Antam posts superb performance in 1H10 (ANTM, Rp2,050, Buy)

· Antam posted 238.0% YoY growth in net income to Rp756.3bn compared to Rp223.8bn a year earlier. The result may exceed our full year expectation as it came in 60.9% to our 2010F net income estimate at Rp1.2tn while consensus expects Rp1.3tn of full year net income.

· Such increase was largely due to Antam’s ability to improve its profitability where operating margin rose to 32.6% in 1H10 from 10.2% a year earlier. This was a result from the company’s recovery in nickel business in 1H10. During the period Antam sold 52.1% YoY higher ferronickel at 6,082 tons with 70.2% YoY increase on ASP at US$9.4/lb from as low as US$5.5/lb a year earlier.

· Despite such higher volume, COGS was lower at Rp2.9tn, 26.5% YoY lower from Rp4.0tn in 1H09. This was due to small contribution from gold trading business and also stronger Rupiah exchange rate.

· On quarterly basis, revenue leapt by 60.7% QoQ due to delay shipment in 1Q10 that booked in 2Q10 period.

· In all, Antam managed to deliver a positive surprise in 1H10 period. Currently the company is trading at 2011F PER of 11.0x and EV/EBITDA of 5.7x, Buy.

NISP Antam has no interest for NNT’s IPO (ANTM, Rp2,050, Buy)

· Despite its previous bid in the divestment program, Antam said that the company has no interest in acquiring ownership in Newmont, including in Newmont Nusa Tenggara’s IPO plan in 1Q11. Antam preferred to put more focus on its existing projects, which are Cibaliung gold mine, chemical grade alumina and FeNI IV.

· This statement erases possibilities that Antam may stand as a bidder in Newmont’s IPO where previously the Ministry of SOE encourages the company to bid Newmont.

· There is no impact on this news as we foresee that Antam also views Newmont’s IPO price may double from the previous offer in the divestment program.

· Currently, ANTM is trading at 2011F PER of 11.0x and EV/EBITDA of 5.7x, Buy.

NISP Kalbe Farma reduces revenue target on Kageo sale (KLBF, Rp2,325, Buy)

· Kalbe Farma reduced its target a percentage from previously 13.0%-15% to only 12%-14% YoY growth from Rp9.09tn last year. This is due to the decreased revenue from Kageo Igar, which is part of its packaging division. Net income target is unchanged at Rp1.20-1.30tn, or 29.2%-39.9% YoY growth from Rp929.0bn in 2009.

· The packaging division as a whole only contributes 4% to total sales. The company believes that the divestment will allow them to focus on its core business.

· This is expected by us as the company’s distribution business is more of revenue driver than its packaging sub-division. In addition the Kageo sale will improve the company’s profitability ratio as the packaging division has low margins. Currently KLBF is trading at 2011F PER of 13.8x and EV/EBITDA of 7.7x, 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.

Mandiri Sekuritas BFI Finance Indonesia: Takeaway from Analyst Meeting (BFIN, Rp2,350, Not Rated)

􀂄 During the analyst meeting yesterday, BFI Finance highlighted 1H10 results whereby net profit grew by 29% yoy to Rp177bn despite a decline in revenue by 6% yoy to Rp441bn. This was mainly enabled by lower operating expenses (-27% yoy to Rp208bn) as the company did not allocate provisioning for bad debt in 1H10 vs Rp41 bn in 1H09.

􀂄 The company's new booking was actually quite strong at Rp1.8 tn in H10 from Rp838bn in 1H09, however tighter competition and lower interest rate environment caused yield to decline which affecting revenue. The company targets new booking to reach Rp3.5 tn this year (+70% yoy) as it see strong demand across all business segment including demand for heavy equipment leased in 2H10.

􀂄 At current price, BFI is trading at 2010F PER of 5.0x and P/BV of 1.1x. We have no rating on this counter.