Reuters Oil holds above $47 on OPEC meeting, U.S. data

SINGAPORE (Reuters) - Oil held above $47 a barrel on Tuesday, as dealers mulled the possibility of deeper OPEC output cuts at a meeting this weekend and ahead of weekly U.S. stocks data expected to show another fall in crude inventories.

OPEC's largest member, Saudi Arabia, notified Asian customers of largely steady cuts in supplies for April from March, traders said on Tuesday, a day after a Saudi-owned newspaper reported that the world's top exporter wanted stricter compliance with existing curbs before considering more cuts.

U.S. light crude for April delivery rose 25 cents a barrel to $47.32 by 10:28 p.m. EDT, having gained more than 3 percent on Monday on OPEC hints of further cuts and after a naval incident between the United States and China.

London Brent crude gained 31 cents to $44.44.

"A lot of people were expecting Saudi Arabia to deepen the cuts ahead of the meeting. It looks like demand is going to fall further and OPEC will have to cut again," said Tony Nunan, risk management manager at Tokyo-based Mitsubishi Corp.

Saudi Arabia planned to lower supplies to at least one European oil company in April, a trading source said on Monday. more...

CNBC China Consumer Prices Fall for First Time in 6 Years

China dipped into deflation at the consumer level in February for the first time in more than six years, giving the central bank scope to cut interest rates further if it needs to boost the economy.

The consumer price index (CPI) fell 1.6 percent in the year to February, bang in line with forecasts, but both the government and a number of private economists played down the risk of a protracted period of falling prices.

The lurch lower in February was largely because of the high base of comparison: in the 12 months to February 2008, consumer prices were up 8.7 percent, near a 12-year peak, as the cost of food, oil and imported raw materials soared.

"Deflation, though a real concern, is expected to be a temporary phenomenon," said Jing Ulrich, chairman of China equities at J.P Morgan in Hong Kong.

"That being said, we believe that the government may take additional steps to avoid an extended period of deflation. Further interest rate cuts and required reserve ratio adjustments may be made, and additional measures to stimulate consumption could be introduced," she said in a note.

The year-on-year drop in the CPI was the first since December 2002. more...

CIMB Astra Internasional Cloudy Outlook

Astra Internasional Quick takes - Cloudy outlook - by Erwan Teguh
(ASII IJ / ASII.JK, UNDERPERFORM - Maintained, Rp11,250 - Tgt. Rp10,650, Automobiles and Parts)

Weak demand and a weak currency had forced Astra to cut inventory aggressively in 4Q08, at the expense of margins, and boosted provisioning for nearly all business units. The auto business remains highly uncertain, admitted management, despite a somewhat resilient first two months of the year. With 60% earnings contributed by the auto unit in FY08, this unit remains key to its FY09 performance. We remain bearish on the auto business and maintain our Underperform rating and target price of Rp10,650, which is at a 15% discount to sum-of-the-parts valuation, implying 8x and 6.3x CY09-10 earnings.

MacQ Adaro: buying a barging business?

Adam Worthington (analyst) is hearing that Adaro may soon purchase a barging company from the founding shareholders. Deal size is going to be more than US$100mn vs, market cap of US$2.0bn. Strategically this appears sensible as owning more of your supply chain is better than less. However, he feels that investors (without minority approval) will treat the stock with contempt if the valuation is unreasonable. As a rough guide we understand that in 2008 that the replacement cost for a tug and barge (standard 300ft/8000t capacity) was about US$2.4. With steel prices coming under pressure, we would expect this replacement cost to be lower in current markets. Macquarie rates the stock as Outperform on 4.7x ’09 P/E, 2.5x ’09 EV/EBITDA, and Rp1,000/share DCF.

MacQ Astra International: Still too early to turn positive

Astra International: Still too early to turn positive

Kenneth Yap (analyst) attended Astra’s analyst meeting last Friday. He upgraded ’09 and’10 EPS by 8% and 3% (’09 P/E of 7.5x with 13% growth in ‘10), to factor-in estimate upgrades by Sunaina Dhanuka on Astra Agro Lestari (AALI IJ, Rp11,850, U/P, TP: Rp7,800). The implied P/E of the auto and motorcycle business is now 4.7x 2009E earnings, which are at the bottom end of the 4–9x historical trading range. But Macquarie is bearish on CPO price and CPO stocks, while Ken sees no imminent positive catalysts on Astra. No change to Underperform rating.

Within the Astra group, we prefer United Tractors: strong pricing power, increasing coal contracting market share, better inventory management, cheap on 6.2x 2009E P/E..

Key points:
(1) Wholesale unit shipments for auto & motorcycles rose MoM in February 2009. The pick-up was due to inventory restocking with end-market sales remaining flat MoM in February.
(2) 7% general price increase in auto & motorycle in January to reflect Rp10,800/US$1 exchange rate (now Rp12,050, so Astra would need another 5-10% price increase just to sustain margins).
(3) Downshifts to cheaper (and less profitable) models in the light of the challenging economy.