BI's announcement of preliminary August loans data, has seen growth accelerating from corporate and commercial segments. Working capital loans grew +21% yoy and +16% ytd, implying a 54% ytd growth contribution.
Investment loans too has grown at a robust +29% yoy, +22% ytd. Both segments outpaced industry growth of +21% yoy and +14% ytd. This latest development has reaffirmed our top picks for the banking sector.
We have seen growing investment confidence, as indicated by rising investment contribution to GDP from 17% in 2003 to 28% in 2009. Some manufacturing relocations to Indonesia should also help future investment activities. Beneficiaries of expanding loan pie will be banks with strong deposit franchise and low cost of deposit. BI's latest announcement places BNI (TP Rp5,000), Mandiri (TP Rp7,100) and BCA (TP Rp7,000) as our top picks in Indonesian banking sector.
Jumat, 08 Oktober 2010
Danareksa Tempo Scan Pacific (TSPC IJ, Rp1,600 BUY) Strong OTC player
Reinitiate coverage with BUY, TP of Rp2,050
Tempo Scan Pacific (TSPC), a well-known over-the-counter (OTC) drugs manufacturer, should see earnings grow by a healthy 18% CAGR in FY09-12F, supported by faster growth in the OTC segment of 12.5% (vs. only 10% for ethical products in FY10F). Its star products include Bodrex, Bodrexin, and Hemaviton, and sales should continue to remain firm given their strong brand equity. Improving purchasing power among middle income earners is another catalyst for growth, we believe, ultimately translating into margins expansion in the consumer products and cosmetics (CPC) division. Note that the gross margin for the CPC division was an excellent 54.1% in 1H10, its highest level since 2002. Other positives are the generous dividend payout and improving cash management. With such a promising outlook we place a BUY on the stock with a DCF based TP of Rp2,050 (WACC: 12.3%, TG: 5.0%), implying 19.4-16.7x PER10-11F. The company’s track record is good and sales have grown 18% CAGR over the past 3 years. This is implying 3.4x of GDP growth during the same period and also exceeds the sales growth of Kalbe Farma (KLBF) of 14%.
Supported by a growing middle class
TSPC’s consumer products and cosmetics (CPC) division stands to benefit from a burgeoning middle class which is enjoying improving purchasing power. Gross margins are already high and reached an excellent 54.1% in 1H10, their highest level since 2002, supported by rupiah strength since 90% of the costs are dollar related. Thanks also to the company’s strong brand equity, this margin should be sustained into 2H10, we feel, if not improving further. Price increase, though relatively moderate, should also help. According to the Nielsen survey, the number of middle income consumers – with average spending of Rp1.5mn to above Rp3mn per month – surged 26% YoY in FY09. A larger middle class - which is estimated to total 30mn people - should mean hearty sales growth and margins sustainability, we believe. Note that this division has managed to deliver average sales growth of near 25% over the past 3 years compared to only 13% for the pharmaceutical division.
Better inventory management
TSPC has continued to make supply chain management efficiencies. Hence, the company’s inventory days fell to below 70 days in 1H10, its lowest ever level. We feel confident that such a figure (70-72 days) can be sustained until at least YE11, an improvement from YE09’s 75 days. By comparison, note that Kalbe Farma, as the largest listed pharmaceutical company, has much longer inventory days of 120-125 days. Coupled with rupiah appreciation, operating margin should edge up to 11.2% this year from 9.9% in FY09. This underpins our expectation of brisk core profits growth in FY10F-11F of 27.8-15.2%. The PEG11F is only 0.9x, or lower than the consumer average of 1.2x.
To make acquisitions or go private?
The company is sitting on a very large amount of cash (Rp1.4tn as of June 2010 or 40% of its total assets). This gives TSPC plenty of options in how it enhances its business portfolio – either through new product development or by making acquisitions. Although the company retains acquisition plans, the management defends its conservative acquisitions stance on the grounds of synergy uncertainties. Rather, Bogamulia Nagadi as the major shareholder has gradually picked up TSPC shares lifting its shareholding to 95.15% in June 2010 from 95.1% in FY08. Thus, the likelihood of a complete takeover in the future is quite high, we believe. Notwithstanding the corporate actions, the company should better utilize its cash, we think, either through higher capex spending or simply by returning the cash to its shareholders. Capex spending has been relatively low at around 2.6% of sales over the past 3 years with the dividend payout ratio reaching a fairly generous 40-60%.
Tempo Scan Pacific (TSPC), a well-known over-the-counter (OTC) drugs manufacturer, should see earnings grow by a healthy 18% CAGR in FY09-12F, supported by faster growth in the OTC segment of 12.5% (vs. only 10% for ethical products in FY10F). Its star products include Bodrex, Bodrexin, and Hemaviton, and sales should continue to remain firm given their strong brand equity. Improving purchasing power among middle income earners is another catalyst for growth, we believe, ultimately translating into margins expansion in the consumer products and cosmetics (CPC) division. Note that the gross margin for the CPC division was an excellent 54.1% in 1H10, its highest level since 2002. Other positives are the generous dividend payout and improving cash management. With such a promising outlook we place a BUY on the stock with a DCF based TP of Rp2,050 (WACC: 12.3%, TG: 5.0%), implying 19.4-16.7x PER10-11F. The company’s track record is good and sales have grown 18% CAGR over the past 3 years. This is implying 3.4x of GDP growth during the same period and also exceeds the sales growth of Kalbe Farma (KLBF) of 14%.
Supported by a growing middle class
TSPC’s consumer products and cosmetics (CPC) division stands to benefit from a burgeoning middle class which is enjoying improving purchasing power. Gross margins are already high and reached an excellent 54.1% in 1H10, their highest level since 2002, supported by rupiah strength since 90% of the costs are dollar related. Thanks also to the company’s strong brand equity, this margin should be sustained into 2H10, we feel, if not improving further. Price increase, though relatively moderate, should also help. According to the Nielsen survey, the number of middle income consumers – with average spending of Rp1.5mn to above Rp3mn per month – surged 26% YoY in FY09. A larger middle class - which is estimated to total 30mn people - should mean hearty sales growth and margins sustainability, we believe. Note that this division has managed to deliver average sales growth of near 25% over the past 3 years compared to only 13% for the pharmaceutical division.
Better inventory management
TSPC has continued to make supply chain management efficiencies. Hence, the company’s inventory days fell to below 70 days in 1H10, its lowest ever level. We feel confident that such a figure (70-72 days) can be sustained until at least YE11, an improvement from YE09’s 75 days. By comparison, note that Kalbe Farma, as the largest listed pharmaceutical company, has much longer inventory days of 120-125 days. Coupled with rupiah appreciation, operating margin should edge up to 11.2% this year from 9.9% in FY09. This underpins our expectation of brisk core profits growth in FY10F-11F of 27.8-15.2%. The PEG11F is only 0.9x, or lower than the consumer average of 1.2x.
To make acquisitions or go private?
The company is sitting on a very large amount of cash (Rp1.4tn as of June 2010 or 40% of its total assets). This gives TSPC plenty of options in how it enhances its business portfolio – either through new product development or by making acquisitions. Although the company retains acquisition plans, the management defends its conservative acquisitions stance on the grounds of synergy uncertainties. Rather, Bogamulia Nagadi as the major shareholder has gradually picked up TSPC shares lifting its shareholding to 95.15% in June 2010 from 95.1% in FY08. Thus, the likelihood of a complete takeover in the future is quite high, we believe. Notwithstanding the corporate actions, the company should better utilize its cash, we think, either through higher capex spending or simply by returning the cash to its shareholders. Capex spending has been relatively low at around 2.6% of sales over the past 3 years with the dividend payout ratio reaching a fairly generous 40-60%.
Credit Suisse BANK NEGARA INDONESIA (BBNI): Further transformation stage/upside- Buy
Our Top-Picks in the Banking sector are BMRI, BBNI, BBRI while maintaining Hold on BBCA due to its premium valuation!
· Teddy Oetomo (Daily attached): We believe BBNI is now entering a new stage of transformation. After completing its book restructuring and upgrading top management quality, BBNI is now entering into a phase of operational transformations.
· BBRI and BMRI have delivered similar transformations. Historical records of BBRI and BMRI’s transformations indicate the potential upside that may be available for BBNI, subject to its execution ability to deliver the ongoing transformations.
· We believe BBNI is well positioned to repeat the success delivered by BBRI and BMRI. However, currently, BBNI needs to further strengthen the alignment of interest between management and shareholders, and appropriately offer incentives to management to minimise execution risk.
· We believe BBNI provides significant upside potential, subject to its ability to complete the transformation. We maintain our OUTPERFORM rating on BBNI and target price of Rp4400, implying 2.42x 11E P/B and 14.5x 11E P/E.
· Teddy Oetomo (Daily attached): We believe BBNI is now entering a new stage of transformation. After completing its book restructuring and upgrading top management quality, BBNI is now entering into a phase of operational transformations.
· BBRI and BMRI have delivered similar transformations. Historical records of BBRI and BMRI’s transformations indicate the potential upside that may be available for BBNI, subject to its execution ability to deliver the ongoing transformations.
· We believe BBNI is well positioned to repeat the success delivered by BBRI and BMRI. However, currently, BBNI needs to further strengthen the alignment of interest between management and shareholders, and appropriately offer incentives to management to minimise execution risk.
· We believe BBNI provides significant upside potential, subject to its ability to complete the transformation. We maintain our OUTPERFORM rating on BBNI and target price of Rp4400, implying 2.42x 11E P/B and 14.5x 11E P/E.
Credit Suisse Indofood CBP listing today, Buy BNI on further transformation
Joint-Book Runners 2011 EPS estimate is Rp288. Its Parents INDF (Restricted) at Rp5,650 is trading on 18.1x IBES consensus 2011 PER. The peers comparison are currently: 1) circa 24x 2011 PER for HK-listed F&B companies, 2) Gudang Garam (GGRM) @Rp52,250- 21.3x 2011F PER, 3) Unilever Indonesia (UNVR) @Rp17,400- 26.8x 2011F PER, 4) Nestle Malaysia @MYR43.90- 24.4x 2011 PER.
If we use JBRs’ 2011 EPS estimate of Rp288 and assign a mid valuation of 22x 2011 PER, we will arrive at Rp6336. If we use 24x instead, the number would be Rp6912.
ICBP IJ STARTS TRADING TODAY (10:30 HK time), IPO priced at Rp 5395/share. Deal size; USD 700.62 million or 1,166,191,000 shares Market Cap; ~USD 3.5 billion.
If we use JBRs’ 2011 EPS estimate of Rp288 and assign a mid valuation of 22x 2011 PER, we will arrive at Rp6336. If we use 24x instead, the number would be Rp6912.
ICBP IJ STARTS TRADING TODAY (10:30 HK time), IPO priced at Rp 5395/share. Deal size; USD 700.62 million or 1,166,191,000 shares Market Cap; ~USD 3.5 billion.
CIMB Initiating Coverage – Indofood CBP – Premium meal
Initiate with TRADING BUY and target price of Rp6,500 for FY11. ICBP benefits from robust market appetite for consumer stocks and strong expected 3Q results, which provide near-term buffers. In the mid term, ICBP may supplement sub par organic growth with acquisitions. Therein lie risks, as the group has proven to be a fearless acquirer, willing to pay significant premiums. Its premium valuations, despite it being effectively just a manufacturing unit of Indofood, are justifiable only if it produces above average growth, in our view. We initiate coverage on ICBP with a TRADING BUY call and an FY11 DCF-based target price of Rp6,500 (WACC 12%, LTG 5%), implying earnings of 22x for FY11 and 21x for FY12 and EV/EBITDA of 11x for FY11 and 12x for FY12.
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