According to Global Competitiveness Report 2009-2010, Indonesia ranks the 96th among 133 developing countries in infrastructure competitiveness far below Thailand in the 41st, Malaysia the 27th and C! hina the 66th. Based on data at Bappenas, the budget for infrastructure which considered as ideal is 5%-6% of the GDP while currently Indonesia's infrastructure budget is around 3.25% of GDP. The budget ratio is expected to rise to 5% in 2014. Bappenas estimated Rp1,429tn (US$159bn) will be required within 2010-2014 of which government can only absorb 31%, with the rest to be financed through Public Private Partnership (PPP) programs. Undeniably potentials for construction companies such as Wijaya Karya (WIKA), Adhi Karya (ADHI) are huge, and so does the requirement of ! basic mate rials such as cement from Indocement (INTP), Semen Gresik (SMGR), and Holcim (SMCB).
Old story, is it any different now. There are signs of improvements. President has set up Special Team to Fast Track Reform Program headed by Kuntoro Mangkusubroto. Decrees has been issued, notably Government Regulation 15/2010 on the implementation of spatial management, Regulation 13/2010 on Cooperation between Government and Private for infrastructure procurements, Regulation 10/2010 regarding procedures for changing the allocation and function of forest areas, and Regulation 24/ 2010 regarding the use of forest area. The new regulations was made to break regulatory overlapping regarding the use of forestry areas for mining and infrastructure projects such as geothermal power plants, and roads.
Establishment of government sponsored companies. Government together with World Bank and Asia Development Bank is setting up SMI (Sarana Multi Infrastruktur) which with private sectors will finance high risk infrastructure projects, PII (Penjaminan Infrastruktur Indonesia) to guarantee sovereign risk of the project, and IIF (Indonesia Infrastructure Finance), a subsidiary of SMI to finance infrastructure projects.
What next. Government currently is preparing draft law for land clearing, which is now in interdepartmental consolidation. The new law will strengthen Presidential Regulation 65/2006 on Land procurement for development of public usage. Government expects the new law to be passed within 2010.
Senin, 26 April 2010
CLSA Antam – 1Q10 results – Looking good
• The company posted net profit of Rp202bn in 1Q09, up by 125% YoY though down by 35% QoQ.
• Net profit in 1Q10 was around 19% of our full year estimate, while operating profit has accounted for 27% of full year forecast, hence strong.
• The main drivers for the jump in profits YoY were 1) doubling nickel price to US$9.4/lb, 2) better production for nickel ore and ferronickel, up by 49% YoY and 34% YoY, respectively. These have more than offset lower gold productions, higher energy costs, and appreciating Rupiah year to date.
• We are reviewing our earnings forecast and recommendation for Antam.
• Net profit in 1Q10 was around 19% of our full year estimate, while operating profit has accounted for 27% of full year forecast, hence strong.
• The main drivers for the jump in profits YoY were 1) doubling nickel price to US$9.4/lb, 2) better production for nickel ore and ferronickel, up by 49% YoY and 34% YoY, respectively. These have more than offset lower gold productions, higher energy costs, and appreciating Rupiah year to date.
• We are reviewing our earnings forecast and recommendation for Antam.
CLSA Bank Mandiri Preview
Bank Mandiri is going to report its 1Q10 financial results at the close of business
today.
• We think the numbers will be strong on a YoY basis, but expect QoQ contraction in loans and deposits due to seasonality. Key will be the numbers for the month of March, a period where lending and deposit generation tend to pick up. In our view, earnings will likely be boosted by lower provisions, cost of funds improvements and lower non interest expenses. We note that gross NPL's have decreased by 300bps from
1Q09-4Q09.
• Our forecast for full year 2010 stands at Rp8.3tn and EPS of Rp391 per share. We believe earnings of Rp1.6tn or Rp79 per share would represent very strong results.
• This would follow the trend for slower loan and deposit growth being supported by improved funding costs, lower provisioning and an improvement in expenses across the earnings we have seen to date.
• Generally speaking, after 1Q we will have to tweak our estimates higher to reflect the improved credit metrics that have been reported.
• OWT the banks our top picks are Bank Mandiri, BCA and BTN
Additional takeaways:
The banks shareholders meeting is scheduled for May 4, 2010, we expect Agus Martowardojo (Pres. Director and CEO) to remain at the helm.
We believe with the BP Migas guideline for foreign production companies to use state owned banks that BMRI and BNI could see significant positive impacts to their fee income in 2011 and possibly 2H10. Any agreements announced with Chevron or Total would be a tremendous coup for the banks as we calculate that they are the two largest foreign players.
today.
• We think the numbers will be strong on a YoY basis, but expect QoQ contraction in loans and deposits due to seasonality. Key will be the numbers for the month of March, a period where lending and deposit generation tend to pick up. In our view, earnings will likely be boosted by lower provisions, cost of funds improvements and lower non interest expenses. We note that gross NPL's have decreased by 300bps from
1Q09-4Q09.
• Our forecast for full year 2010 stands at Rp8.3tn and EPS of Rp391 per share. We believe earnings of Rp1.6tn or Rp79 per share would represent very strong results.
• This would follow the trend for slower loan and deposit growth being supported by improved funding costs, lower provisioning and an improvement in expenses across the earnings we have seen to date.
• Generally speaking, after 1Q we will have to tweak our estimates higher to reflect the improved credit metrics that have been reported.
• OWT the banks our top picks are Bank Mandiri, BCA and BTN
Additional takeaways:
The banks shareholders meeting is scheduled for May 4, 2010, we expect Agus Martowardojo (Pres. Director and CEO) to remain at the helm.
We believe with the BP Migas guideline for foreign production companies to use state owned banks that BMRI and BNI could see significant positive impacts to their fee income in 2011 and possibly 2H10. Any agreements announced with Chevron or Total would be a tremendous coup for the banks as we calculate that they are the two largest foreign players.
CLSA BNI earnings review
Bank Negara Indonesia reported headline earnings of Rp1.0tn (Rp67 per share) in 1Q10, an increase of 60% YoY. This is a very impressive number prior to any adjustments. The headline number reflects 30% of consensus estimates. ROA and ROE were reported at 2.5% and 25.4% respectively.
Financial results will be released this morning, only the presentation occurred yesterday.
The better than anticipated earnings were driven by non interest income of Rp1.8tn. Nearly 700bn of this is attributed to a reversal on the allowance for loan losses, a non recurring revenue stream. The reversal reflects improving credit trends, which we viewed as a positive development.
If we back out the reversal from the allowance for loan losses, bottom line figures declined YoY, as the lower provision does not offset higher expenses.
Noninterest expenses increased by 31% YoY. The bank announced a strategic plan going forward to improve productivity and revenues per employee. BNI is rationalizing 1,000 positions (@5% of the workforce) and will hire 600 new employees, primarily executives with that can help with the cultural transition the board is attempting to employ. They are working to employ a more incentive based pay scheme for employees, but it appears that could be a few years away.
Coverage ratio continues to rise and currently is at 121.8% a YoY increase of 1600bps. NPL's improved to 4.6% from 4.7% in 4Q09. Credit is improving, primarily as the bank is increasing its NCO’s.
The CAR decreased by 40bps to 13.3% QoQ. However, with the implementation of operational risk (the first 5%) impacted the CAR further. Including operational risk the CAR is 13.1%. This will continue to drag CAR lower as it is employed throughout the next 15 months. Operational Risk implementation schedule: 5% in 1H10, 10% in 2H10 and the full 15% in 1H11.
We expect further reversals to boost fee income throughout the year if the bank continues to see improvements in credit (as expected). The reported numbers represent impressive results when including the non-recurring figures.
Financial results will be released this morning, only the presentation occurred yesterday.
The better than anticipated earnings were driven by non interest income of Rp1.8tn. Nearly 700bn of this is attributed to a reversal on the allowance for loan losses, a non recurring revenue stream. The reversal reflects improving credit trends, which we viewed as a positive development.
If we back out the reversal from the allowance for loan losses, bottom line figures declined YoY, as the lower provision does not offset higher expenses.
Noninterest expenses increased by 31% YoY. The bank announced a strategic plan going forward to improve productivity and revenues per employee. BNI is rationalizing 1,000 positions (@5% of the workforce) and will hire 600 new employees, primarily executives with that can help with the cultural transition the board is attempting to employ. They are working to employ a more incentive based pay scheme for employees, but it appears that could be a few years away.
Coverage ratio continues to rise and currently is at 121.8% a YoY increase of 1600bps. NPL's improved to 4.6% from 4.7% in 4Q09. Credit is improving, primarily as the bank is increasing its NCO’s.
The CAR decreased by 40bps to 13.3% QoQ. However, with the implementation of operational risk (the first 5%) impacted the CAR further. Including operational risk the CAR is 13.1%. This will continue to drag CAR lower as it is employed throughout the next 15 months. Operational Risk implementation schedule: 5% in 1H10, 10% in 2H10 and the full 15% in 1H11.
We expect further reversals to boost fee income throughout the year if the bank continues to see improvements in credit (as expected). The reported numbers represent impressive results when including the non-recurring figures.
CLSA Geothermal energy to ramp up in Indonesia
What’s new?
Indonesia has the potential to produce more than 27GW electricity generated from geothermal or 40% of the world’s potential since the country lies on the Pacific Ring of Fires.
The country is promoting geothermal power project, issuing a series of regulations and planning to have 3,977 MW geothermal power by 2015, about three times current capacity.
New favourable regulations have been issued by the government but implementation has always been our main concern.
Pertamina and some private companies like Star Energy and Medco are all looking to add or build new capacity, rapidly.
Primary beneficiaries this geothermal potential would include those with geothermal project such as Medco (MEDC IJ) and oil and gas services companies like Elnusa (ELSA IJ) and Apexindo (APEX IJ).
Secondary beneficiaries include heavy equipment distributors, cement companies, and consumer goods.
Indonesia has the potential to produce more than 27GW electricity generated from geothermal or 40% of the world’s potential since the country lies on the Pacific Ring of Fires.
The country is promoting geothermal power project, issuing a series of regulations and planning to have 3,977 MW geothermal power by 2015, about three times current capacity.
New favourable regulations have been issued by the government but implementation has always been our main concern.
Pertamina and some private companies like Star Energy and Medco are all looking to add or build new capacity, rapidly.
Primary beneficiaries this geothermal potential would include those with geothermal project such as Medco (MEDC IJ) and oil and gas services companies like Elnusa (ELSA IJ) and Apexindo (APEX IJ).
Secondary beneficiaries include heavy equipment distributors, cement companies, and consumer goods.
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