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.

Mansek Timah:1H10 indicative net income of Rp314bn (TINS,Rp2,425,Neutral,TP: Rp2,800)

Bisnis Indonesia reported Timah ’s 1H10 net profit indication of Rp314bn (+21%qoq,+630%yoy),however,the company ’s management did not give any comment on it.

Should this figure be correct,1H10 result will represents 38%and 31%of ours and consensus FY10F estimates.Assuming FY10F LME tin price stays the same at recent price of around US$19k/ton,we view the company ’s FY10 net profit could reach our estimate of
Rp830bn,but still difficult to reach consensus estimate of Rp1tn.

We have Neutral recommendation on TINS which currently is trading at PER10-11F of 14.7-9.7x.

Mansek Timah:tin output in Indonesia may miss target (TINS,Rp2,400,Neutral,TP: Rp2,800)

According to Ministry of Energy and Mineral Resources,tin output from Indonesia may plunge about 20%this year due to prolonged rainy season. However,lower output from Indonesia has supported strong LME tin price. Our tin price assumption for FY10F is US$17.5k/ton,which is the same with ytd average LME price.However,yesterday LME tin price reached US$19.9k/ton.

Should the price is sustainable until year end;tin price could be 7%above our estimates.Our sensitivity analysis shows that 20%output decline and 7%higher selling price will reduce net profit by 22%.Currently,we have Neutral recommendation on TINS which is trading at 14.6-9.6x PER10-11F.

Mandiri Sekuritas Timah: potentially benefited by lower Indonesia tin plate supply (TINS, Rp2,200, Neutral, TP: Rp2,800)

Ministry of Forestry is considering revoking location permit of Koba Tin, the second largest tin producer in Indonesia. Koba Tin is a subsidiary of Malaysia Smelting Corporation, the largest tin smelter in Malaysia, 3’rd largest in ASEAN. Koba Tin annually produces around 8k tons of tin, around 15% of Timah’s production. During the last several years, Koba Tin has been accused of various illegal mining activities, its mining permit will end in 2013. We view this will give positive impact to Timah as Indonesia tin supply could decline, therefore, support global tin price. Currently, we have Neutral recommendation on TINS which is trading at PER10-11F of 13.3- .8x.

Mandiri Sekuritas Jasa Marga eyeing a majority shares on Trans Jawa Corporation (JSMR, Rp1,990, Buy, TP: Rp2,400)

􀂄 JSMR declared that they are ready to become the majority shareholder of a holding company called Trans Jawa Corporation (consisting of companies holding concession agreement of Trans Java Toll Road project) if this holding company is eventually set up the government. At end 2009, the government announced that it will form a holding company to supervise Trans Java toll road projects. Trans Java toll road is scheduled to be completed by 2014, whereas 300Km of total 882Km of length are owned by JSMR.

􀂄 JSMR is currently conducting due diligence to increase its stake in Aloha (Waru)-Tanjung Perak toll road in Surabaya, East Java, from 2.5% to 55%. The toll road development halted, as PT Margaraya Jalan Tol (MJT) as the toll road holder concession, has financial difficulties due to cost overruns.

􀂄 Currently, JSMR trades at PE’10F of11.4x and PB’10F of 1.7x

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 Holcim Indonesia: The government to reevaluate its limestone mining agreement (SMCB, Rp2,150, Neutral, TP: Rp2,500)

Minister of Forestry together with Minister of Law and Human Rights plans to reevaluate Holcim’s limestone mining license in Nusakambangan and Jeruklegi, Cilacap. The government has formed a team to evaluate and analyze the contract. On the other hand, Holcim believes that they have abided the regulation for their exploitation activities. Furthermore, they just utilize the land of only 112 ha from 1,000 ha concession license. Should the government revoke the license, it will have a negative impact to Holcim Indonesia. Currently, SMCB is trading at EV/ton of US$234, which still below than average peers of US$271.

Mandiri Sekuritas Indika Energy: 1Q10 net income above ours and consensus (INDY, Rp3,050, Buy, TP: Rp2,750)

Indika posted net earnings of Rp292bn, a 35% drop yoy, which was mainly due to the added interest burden coming from its US$255mn bonds issue late last year. Despite the drop, net income was above ours and consensus estimates.

There were significant improvements at operating level (non coal production) with operating income growing 7-folds (albeit a low base in 09), with the full contribution of Petrosea as well as that of Tripatra. We have reason to believe that Indy’s operating performance can improve further with a thicker order book from Tripatra, which is seen to jump over US$800mn spread over until 2014. Possible upgrade likely due to better operating performance rather than an upside on coal production. Currently the stock trades at PER10F of 18.6x.

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 JASA MARGA: 1Q10 net profit up by 54% yoy to Rp303bn (JSMR, Rp2,075, Buy, TP: Rp2,400)

JSMR booked 1Q10 revenue of Rp1.0tn (+21.4%yoy), in line with ours and consensus estimates. The revenue growth was boost by higher traffic volume and increasing tariff in Sep-09. Traffic volume in 1Q10 reached 226.5mn (+3.1%yoy); meanwhile limited growth on operating expenses has boosted operating margin resulting net profit of Rp303bn
(+54.2%yoy). Currently, it trades at PE10F of 11.9x, maintain Buy.

Mandiri Sekuritas ANTAM: 1Q10 net profits jumps 125%yoy, still trails expectations (ANTM, Rp2,500, Neutral, TP: Rp2,350)

With the improvement in nickel prices and a shift in revenue mix favoring higher margin nickel over gold trading, the company posted net income of Rp202bn, up by 125%yoy, but only equated to some 19% and 17% of our and consensus FY10F. Understandably, with gold trading having less contribution on top-line, revenues fell by 37%yoy to Rp1.6tn, with nickel contributing about 51% (versus 15% in 1Q09), while gold contributed 46%, the remaining 3% came from other resources such as bauxite, etc. Ferronickel sales amounted to 1,663mt with selling price growing by 99% to US$9.38/lb or US$20,680/t. Ferronickel sales would have been higher as well as earnings as about 4,177 tons remained in transit by end of 1Q. Thus. effectively production of ferronickel should have been about 5,840 tons or some 30% of our FY10F forecast. We maintain neutral on the stock, which now trades at PER10F of 23.6x

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 Aneka Tambang: mulls rights issue to fund projects (ANTM, Rp2,575, Neutral, TP: Rp2,350)

Antam’s President Directors was quoted as saying that it is taking a look at a rights issue as one of its options to funds its future projects. This year the company has allotted capex of Rp2.35tn from Rp594bn last year. The substantial spike is bought about by the US$400mn Tayan chemical grade alumina project, which Antam has a 65% stake (remainder is owned by Showa Denko and Marubeni of Japan). Other future project includes a US$300mn power plant in Pomalaa (20% stake), Feni Halmaherea worth US$1.2bn and smelter grade alumina project worth US$900mn in collaboration with Hangzou Jinjiang Group of China. We have yet to incorporate these future projects in our forecasts. Additionally, company mentioned that it has yet to approach government with regards to the rights issue as an option for fund raising. We remain neutral on the stock, currently trading at PER10F of 24.3x.

Mandiri Sekuritas Tariff of 3 toll roads will increase in this year (JSMR, Rp1,980, Buy, TP: Rp2,400)

Government will increase tariff of 3 toll roads: (1) Waru-Juanda, (12.8Km,
operated by CMNP), (2) Jakarta-Cikampek (72.5Km, operated by JSMR) and
(3) Sedyatmo (68Km, operayed by JSMR). Tariff toll in Indonesia will increase
every 2 years with incremental based on inflation on the last 2 years; this
scheme was regulated by Law No.34/2004 concerning road and
Government Regulation No.15/2005 concerning toll roads. JSMR expects
the increasing is around 10%. Currently, its trades at PE10F of 12.7x and
PBV10F of 1.7x, maintain Buy on JSMR.

Mandiri Sekuritas Medco Energi: Has been appointed to be the operator in Libya (MEDC, Rp2,550, Neutral, TP: Rp2,650)

Bisnis Indonesia reported that MEDC through Medco International Ventures Limited has been appointed by Great Socialist People Libyan Arab Jamahiriya – General People’s Committee (GPC) to be the operator in area 47, Libya. MEDC replaces Verenex as the previous operator. Other than that, GPC has also given 1 year extension of exploration period, starting April 2010. This means MEDC could perform drilling for another 3 exploration wells, thus will improve their chances to obtain commercialization approval
from NOC. Once approved, MEDC could convert its contingent reserves in Libya of around 176 mmboe to 2P reserves. As per FY09, MEDC has 2P reserves of 277mmboe. This will have a positive impact to MEDC. Note that MEDC expect production to reach 50,000 bpd to 100,000 bpd in 2014 for its Libyan asset. MEDC is currently trading at EV/2P of US$3.4/boe.

Mandiri Sekuritas Jasa Marga: strong FY09 results, above our estimate and consensus: (JSMR, Rp1,780, Buy, TP: Rp2,100)

􀂄 JSMR reported revenue FY09 of Rp3.7tn (+10%yoy) due to higher traffic and an increasing tariff in Sep-09. This figure is slightly above our expectation and consensus. Traffic volume in 2009 grew by 4.1%yoy reached 916.0mn of vehicles.

􀂄 The company booked extraordinary income of Rp124bn, boosted net margin to 27% compared with 21% in previous year, meanwhile operating margin and pre-tax margin relatively constant. Consequently, net income was Rp993bn (+40%yoy), above our estimate and consensus.

􀂄 Therefore, with traffic growth targeted 7.0%yoy, JSMR targets revenue FY10F may reach Rp4.3tn (+16.2%).

􀂄 Currently, JSMR is trading at P/E10F of 9.0x and P/B10F of 1.5x. Maintain Buy.

Mandiri Sekuritas Medco Energi: FY09 net profit fell 48.0% yoy, lower than consensus estimates (MEDC, Rp2,600, Neutral, TP: Rp2,650)

􀂄 MEDC’s FY09 revenue drop 48.0% yoy to US$668mn. This is inline with ours yet below consensus estimates, as it only represents 83.6% from consensus’ FY09F estimates. Lower top line is due to significantly lower net oil and gas sales (-
44.1% yoy), chemical and other petroleum products (-77.9% yoy) since there was no more income from drilling operation. The company reported that hydrocarbon lifting falls 16.7% yoy to 52.8 mboepd, as well as average realized selling price of crude oil by 36.6% yoy to US$64/bbl and gas price by 26.1% yoy to US$3.1/mmbtu.

􀂄 Gross margin was slightly down to 34.3% in FY09 compare with FY08 of 38.8%. Down to operating, the company was not able to lower its expenses (+1.6%), thus margin is less half of FY08. The company reported net profit of US$19mn, which is above ours yet below consensus estimates of some US$38mn. It is higher than our estimates as we did not factored in several irregular items in our forecast, namely net gain on disposal of subsidiaries of US$30.6mn, gain on short term investment of US$24.1mn, and gain from derivative transaction of US$6.7mn. MEDC is currently trading at EV/2P of US$3.4/boe, as it transfers some of its contingent reserves to 2P (+45% yoy).

Mandiri Sekuritas BNI: takeaway from a company visit (BBNI, Rp2,025, Buy, TP: Rp2,300)

We met with Yap Tjay Soen, the CFO of BNI, yesterday and found out some
interesting highlights:,

􀂄 NPL will remain a challenge until the next two years (max). Therefore, the bank will continue building up its provisioning coverage to cover the possibility of higher NPL in the future (coverage ratio = 120% at end Dec09). Such NPL will mainly come from medium segment as around 15% of the medium-sized loans are basically restructured loans (=Rp6.7tn, of which Rp2.7tn belong to NPL).

􀂄 However, as loans is expected to grow higher this year (+15% yoy vs 8.0% yoy in 2009), the NPL will likely maintain below 5% by end of this year (vs. 4.7% at end Dec09).

􀂄 BNI’s Cost to Income Ratio will likely maintain at around 50-52% as the bank plans to refurbish its branches in order to keep the loyalty of its customers.

􀂄 At current price, the stock is trading at 2010F P/BV of 1.5x and PER of 9.0x. Despite concerns over rising NPL, we see the management’s serious efforts to improve the current loan underwriting process (please note that majority of additional NPL are coming from the legacy loans). We therefore maintain our buy recommendation on the counter.

Mandiri Sekuritas Aneka Tambang: increases stake in gold project (ANTM, Rp2,000, Neutral, TP: Rp2,200)

The company has increased its stakes in the Gold Cibaliung project from 5% to 100%after the shareholders of Arc Exploration (ex owners of the gold project) approved its full divestment. Antam acquired the 95% additional stake for US$8mn from internal cash while another US$40mn has been set aside for project development costs. Exploitation is targeted by second half 2010. Estimated reserves is currently at 12.8ton (thus equivalent acquisition cost, excluding development cost is US$0.625/t), while expected production upon commercial operations will be 500kg (2010) and 2,000kg (2011-onwards). We deem this the development as positive as Antam eventually shifts towards gold mining from lower margin gold sales trading despite mine life being relatively short of less than 5 years based on ANTM’s 2008 gold production. In 2008, the company produced 2,833kg of gold while gold sales were at 9,820kg coming mostly from gold trading with third parties. Currently, we have neutral stance on the stock which now trades at PER09-10F of 55.3x and 29.9x, respectively.

Mandiri Sekuritas Bayan: Red Signal (BYAN, Rp5,650, Sell, TP: Rp2,100)

We have downgraded our WACC estimate drastically from 16.4% to 9.6%, taking into account the reductions in (1) risk-free rate assumption from 11.0% to 6.2% (2) Market risk premium from 7.2% to 5% and (3) Beta estimate of 1.4x to 1.1x.

The benefit of lower WACC has however been offset by our lower exchange rate assumption. Besides this, we also fine-tune our assumptions for production and fuel rate. After all changes, our DCFderived target price fell from Rp2,400/share to Rp2,100/share.

Market has seen a rally in last 2 months with JCI up by about 50%ytd, but BYAN’s share price outperformed the market, rising by 511%ytd. As our DCF-derived target price is 62.8% lower than the current price, we affirm our Sell call on BYAN.

Long term catalyst for the stock is the BYAN plans to upgrade majority of its coal from 4,217 kcal coal to 6,263 kcal. However, in the absence of complete information we have not considered the impact of upgradation in our DCF derived target price.