CIMB Perusahaan Gas Negara Result note - On track for growth

(PGAS IJ / PGAS.JK, OUTPERFORM - Maintained, Rp2,500 - Tgt. Rp3,200, Utilities)

PGAS announced both FY08 and 1Q09 results. Its FY08 results announcement had been delayed by accounting issues associated with forex loss translation. For 1Q09, PGAS posted a profit of Rp1.35tr, up 76% yoy, and 42% qoq. The results are 16% above our forecast, and 10% higher than market expectations due to higher sales and better margins. With the good 1Q09 results and strong outlook, we have raised our EPS forecasts by 7-8% for FY09-11 on higher sales volume and margin assumptions. We also raise our DCF-based target price to Rp3,200 (from Rp2,800) after our EPS upgrade Maintain Outperform for its strong earnings growth.

J.P.Morgan Asia Pacific Equity Research - Do not sell in May; Why valuations, seasonality and history help

Emerging Asia and Pacific ex-Japan are up 9% and 2.4%, respectively, year to date. Cyclicals have outperformed defensive companies – the J.P.

Morgan Strategy Team defensive stock list has underperformed the regional index by 8% YTD. The major EM Asia markets of China, India, Korea, and Taiwan have outperformed. The question now is do we continue to maintain our positive view on equities and preference for early cyclicals? We do, and we believe investors should.

In this report we review valuations and previous post crash rallies. Our
conclusions are:
Today’s EPS is below trend EPS;
Markets are cheap;
Positive returns are the norm post a sharp recovery;
Valuations in EM trend rather than mean revert;
Sell in May works 50:50.

The key risks to our view are China’s growth recovery fades and/or the
stabilization in US retail sales proves temporary.

Credit Suisse - Indo 1Q09: Above - PGAS BBRI BBNI INTP ANTM, In line- INDF CTRA, Below- PNBN SGRO MPPA

PERUSAHAAN GAS (PGAS): Above expectation 1Q09 (Below FY08)- reit Buy!
Ami Tantri (Daily): Perusahaan Gas Negara (PGAS) reported a net profit of Rp1,220bn in 1Q09, up 114% YoY and slightly better than expected. This was a significant increase in earnings after a net loss of Rp1,409bn in 4Q08 owing to the impact of the forex translation loss. There was a strong pick-up in distribution volumes, which rose to 721 MMcfd (million cubic feet per day) in 1Q09, up 37% YoY and 17% QoQ (vs our FY09E volume target of 730 MMcfd).

Perusahaan Gas Negara (PGAS) reported a net profit of Rp634bn in FY08, down 46% YoY, significantly lower than market expectation due to a Rp2.5 tn foreign exchange translation loss on its USD and JPY borrowings, and the hedging on USD/JPY. Core net profit rose 54% YoY to Rp2,710 bn.

BANK RAKYAT INDONESIA (BBRI): Above expectation 1Q09- Upgrade EPS- reit Buy
Teddy Oetomo (Daily): BBRI reported 1Q09 net income of Rp1.7 tn, up 22% YoY but flat QoQ, 35% of our FY09E and 27% of consensus estimates due to higher-than-expected fee income and lower-than-expected provision expense. BBRI’s NPL grew 19% in 1Q09 vs 23% in 1Q08. Provision coverage remained sufficient at 167% in 1Q09 with 5.3% cumulated provisions for loans.

We increase our earnings forecasts for BBRI by 25% in FY09E and 18.5% in FY10E as deterioration in BBRI’s performance has not been as bad as we had expected. We increase our target price from Rp5,300 to Rp6,450 given higher earnings estimates, based on a Gordon growth model, implying 3x FY09E P/B, 2.6x FY10E P/B, 13x FY09E P/E and 11.6x FY10E P/E. We maintain our OUTPEFORM rating on BBRI as the counter is still trading at the lower end of the historical trading range.

BANK NEGARA INDONESIA (BBNI):Above expectation 1Q, lowest CAR- upgrade EPS
Teddy Oetomo (Daily): BBNI reported Rp635 bn of net income, up 63% QoQ, 54% of our FY09E and 34% of consensus, given lower non-interest operating expense (-3% YoY and -16% QoQ). BBNI’s NPLs grew 15%, higher than historical average (1Q08 NPLs grew 5% and 1Q07 NPLs grew 4%), but remain at a manageable level, in our view, with 1Q09 provision coverage of 107%.

We increase our FY09-10E earnings estimates for BBNI by 25%-47%, respectively, given its structural improvements. We increase our target price from Rp470 to Rp680 given higher earnings estimates implying 0.54x FY09E P/B and 0.5x FY10E P/B. However, we maintain our UNDERPERFORM rating given: 1) it is trading at 29% and 12% premiums to MSCI NJA Banks and MSCI Indonesia, respectively, and 2) it has one of the lowest tier 1 ratios of all Indonesian banks under our coverage.

INDOCEMENT (INTP): Above expectation 1Q- due to strong ASP & easing cost- Buy
Arief Wana (Daily): Indocement’s 1Q09 net profit jumped 33% YoY and came in better than our forecasts. The key reasons are a combination of: 1) higher ASPs (+45% YoY and 8% QoQ) – a situation we witnessed in other cement players as well, and 2) easing cost pressure. Costs pressure is also easing, despite contracted coal prices keeping the energy-related costs still up 28% YoY, although, it only increased by 3% QoQ. Meanwhile, transportation costs (15% of total COGS and opex) dropped by 12% YoY, thanks to the declining domestic gasoline prices.

ANEKA TAMBANG (ANTM): Above expectation 1Q09 despite -87% EPS- Take Profit
Ami Tantri (Daily): Antam reported a net profit of Rp90 bn in 1Q09, down 87% YoY, primarily due to low nickel prices and high material cost from gold trading activities. Revenue, however, rose 26% YoY to Rp2,642 bn, thanks to more contribution from gold trading. Gold sales volumes rose 211% YoY to 6,005 kg in 1Q09, however, ferronickel sales volumes dropped 8 % YoY to 1,161 tonnes. The average selling price of gold was US$926/oz in 1Q09, up 1% YoY. however, nickel prices fell to US$4.72/lb in 1Q09, down -63% YoY.

We retain our NEUTRAL rating on the stock and recommend profit taking as we do not expect any significant improvement in nickel prices in the near term.

INDOFOOD SUKSES (INDF): In line 1Q09 operational but Net Gearing 1.8x- reit Buy
Arief Wana (Daily): Indofood’s 1Q09 net profit dropped by 71% YoY and came in below our expectations, largely due to a forex loss on its high unhedged USD debt position. Stripping out the forex element, net would have been flat YoY and QoQ. Operationally, the company performed largely in line but still down 8% YoY. While we are still waiting for full details on the results, we believe softening profit was due to the CPO price decline in the agri business. Noodle and Indolakto should offset operating profit.
The biggest risk in investing in Indofood is its high net gearing at 1.8x. We will review our earnings and target price once we get more details on the results.

CIPUTRA DEVELOPMENT (CTRA): In line 1Q09, signs of bottom- reit Value Buy
Teddy Oetomo (Daily): In line with our expectation, CTRA reported non-even (lagging to marketing sales) 1Q09 net income of Rp53.8 bn, 46% YoY, -62% QoQ and 26.5% of our and 29% of consensus full-year forecasts. We believe that CTRA’s marketing sales may have found the bottom, with March 2009 marketing sales exhibiting a slight recovery on a MoM basis (even after excluding sales from new launches).

CTRA is currently trading at a wider discount to RNAV than its historical range. Our target price is based on a 45% discount to 2009E RNAV of Rp1108/share.We maintain our OUTPERFORM rating on CTRA with a target price of Rp610. CTRA is currently trading at a 58% discount to 2009E RNAV, versus the regional average of a 25% discount.

PANIN BANK (PNBN): Below expectation 1Q09 due to rising Cost of Fund- reit Sell
Teddy Oetomo (Daily): PNBN reported Rp131 bn 1Q09 net income, -36% YoY. The reported figures constitute 22% of our and 18% of consensus full-year estimates. The softer quarter was in line with our expectation and was largely driven by an increase in cost of funds.

PNBN is trading at a comparable P/B to its 2004-06 trading range, but at the lower end of the 2007-08 P/B range, largely because PNBN was trading at takeover premium valuations then. We maintain our UNDERPERFORM rating on PNBN with a target price of Rp400, based on a Gordon’s growth model, implying a 0.92x and 0.85x FY09E and FY10E P/B and 13.6x and 10.8x FY09E and FY10E P/E, respectively.

SAMPOERNA AGRO (SGRO): Below expectation 1Q as production -64%- retain Buy
Teddy Oetomo (Daily): SGRO reported Rp13 bn 1Q09 net income, 4% of our and 5% of consensus full-year estimates. SGRO’s disappointing 1Q09 results were due to heavy rainfall, which hampered the company’s ability to harvest. We believe that, like in 2007, SGRO’s production will be more skewed towards 2H09.

We believe SGRO’s valuations remain undemanding, and the stock is trading at the lowest 2009E P/Es and one of the lowest 2010E P/Es of all plantation companies under our coverage. We maintain our OUTPERFORM rating with a target price of Rp2,000, based on 11x 2009E P/E, at a 15% discount to 2009E target P/E for LSIP, given SGRO’s higher reliance on plasma, smaller plantation size and lower earning visibility.

MATAHARI (MPPA): Below expectation 1Q due to higher Opex – downgrade to Sell
Teddy Oetomo (Daily): We downgrade MPPA from Neutral to UNDERPERFORM given soft fundamentals and stretched valuations. MPPA reported Rp36 bn 1Q09 earnings, up 101% YoY given Rp75 bn forex gain (vs a Rp60 bn loss in 1Q08). Operating income dropped 45% YoY, 12% of our old FY09 forecast (vs 16% for FY08). Excluding the forex gain, pre-tax loss was Rp53.4 bn.

We cut our FY09E earnings by 10% and FY10E earnings by 9% to reflect higher interest expense, which jumped 87% YoY. We cut our target price from Rp530 to Rp480, based on 17x FY09E P/E, in line with MPPA’s market implied historical P/E.

Citigroup Global Equity Strategist

The Twilight Zone: A Playbook

Twilight Zone — This is the phase in a global earnings recession where share prices start to rise despite further falls in corporate earnings. The beginning of the Twilight Zone is associated with sector rotation out of defensives into cyclicals.

This Could Be It — The latest equity market rebound has occurred against a backdrop of cheap valuations, stabilising lead economic indicators and tightening credit spreads. All have been associated with previous Twilight Zones.

Market Strategy: More To Go For — The recent 25% rebound in global equities represents the fastest ever start to a Twilight Zone and suggests that some consolidation may be appropriate. However, an average performance of 45% through previous global Twilight Zones suggests that investors should buy equities into any weakness

Sector Strategy: Don’t Chase It — Recent rotation towards cyclical sectors is already as large as seen in other Twilight Zones. This suggests that it may already be too late to make the switch.

CLSA BUMI 1Q'09

Bumi Resources posted a net profit of US$m125m in 1Q09, up by 21% YoY while representing around 27% of our full year 2009 forecasts.
The result was not that encouraging, in our view, particularly since 1Q09 net profit was actually down by 20% QoQ, with Bumi coal ASP fell by 6% QoQ. Bumi was the only Indonesian coal company posting quarterly profit decline.
Profit in 1Q09 was helped by lower than assumed tax rate.
Production volume was down by 9% YoY and 24% QoQ in 1Q09.
Cash cost in 1Q09 was down by 11% YoY and 17% QoQ, a reflection of the sharp decline in fuel costs.
Little evidences of profit contribution coming from the two recently acquired assets.
We calculated that even assuming a flat QoQ ASP in 2Q09, there is 3% to 5% downside risk to our assumed ASP in FY09, hence 11% to 18% risk on earnings.

Bumi Resources is the one with the most leverage to coal price, hence a play on commodity price recovery. Selling pressure on the name seems to have abated as well with group debt restructuring gradually progressing. Nonetheless, the recent operating and financial results were not encouraging while Bumi continue to be affected by significant balance sheet risk and governance issue. Bumi is trading at PER09 of 6.0, almost at par with domestic peers, despite the higher risks.

We retain our SELL rating.