Sunday, March 20, 2011

PT Astra International Tbk (ASII)

by Samuel Securities

Three threats on auto sales

 Progressive tax impact should be minimal 2M11. Implementation of progressive tax do not give a significant impact to car sales volume until 2M11 in Jakarta. That is because we believe; 1) many people do not realize the implementation of this tax, 2) for some people the tax value is not too high compared to their purchasing power, 3) consumers can avoid progressive tax for purchasing the second car and so on by using another name (not using subject or family of subject), and 4) the prestigious status of car ownership in Jakarta. Our concern is in point one, because when many people realize their car is charged additional tax every year that may lower buying interest.

 New registration of ownership tax strike car sales in Surabaya. In new registration of ownership tax (PBBN-KB), the maximum limit was raised to 20% from 10% (effective since 2011). Surabaya is one the areas that has implemented PBBN-KB as a result car sales volume in 1M11 fell by 20%-25% MoM. We are concerned that the new PBBN-KB will be implemented in areas with high population such as Jakarta, West Java & Banten, and Central Java.

 Price increase is still at tolerable level. We prefer that is premium price is increased by Rp500 per liter from Rp4,500 per liter (+11%) (from three options that offered by governmnet). We we are not too worried about it, because when premium price rose 33% to Rp6,000 per liter on May 2008, car and motorcycle sales had increased 40.3% YoY and 32.5% YoY respectively, higher than the previous year.

 Maintain Hold. We still maintain the Hold recommendation for ASII at target price Rp54,000 (reflect PE’11 15.1x and EV/EBITDA 11.6x). We see the assumptions that we use in auto sales growth was still in line despite the challenges mentioned above. But, if PBBN - KB will be implemented in high population and intolerable increase of oil price, our assumption of automotive sales will be lowered. Maintain Hold

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