by DBS Securities
• Expect strong recovery of 4W sales in 2H
• Ample share price catalysts
• Maintain Buy; TP raised to Rp80,000
Pending recovery of 4W market. ASII’s 1H11 4W sales grew a healthy 10% yoy to 229K units despite the supply disruption. More positively, latest channel checks confirm ASII dealers’ inventories have returned to normal, led by the rapid recovery of production at Toyota and Daihatsu. It is now poised to ride on the strongest seasonal period of the year (3Q) and pent up demand accumulated over the past few months. In view of the improving supply-side dynamics, pent-up demand, and seasonal factors, we expect the underlying developments to further improve investment sentiment towards the stock.
Ample catalysts. ASII offers several thematic plays: (1) it is the main beneficiary of Indonesia’s consumer-driven growth, (2) it has an urban orientation, and will benefit from rising electricity consumption; this will raise coal demand and benefit United Tractors, where ASII is the largest shareholder with 60% stake, and (3) continued re-rating of the broad JCI.
TP raised to Rp80,000; reiterate BUY. Given ASII’s robust earnings momentum relative to its size (+21% yoy in FY11F), well-hedged business model, transparent governance, and high dividend payout policy, its current valuations (on a blended FY11/12) at 15.8x P/E and 4.2x P/BV (29% ROE) is reasonable. Near term catalysts are strong 4W sales in 3Q11, and possibly stronger Rupiah. Our sum-of-parts TP is raised to Rp80,000 , offering 15% upside (including an c.3% dividend yield). The uptick is due to our earnings upgrade and rolling over of our valuation base to blended FY11/12 earnings.