Indonesian Stock

Bank Victoria International Tbk.

2012-01-20T01:11:00.000-08:00

by OSK

In 3Q11, issuers print a profit increase of +140.7%, compared to the same period before her.

The increase in net profit was partly due to the increase in Earning before tax growth companies 2X compared to 3Q10. Meanwhile BVIC plans utuk Bonds issued Rp500 billion. at least 200 billion of bond proceeds will be used to pay off some bonds that will mature next year.

As for subdebt, he added, will be used to maintain a capital adequacy ratio (capital adequacy ratio / CAR) of at least at the level of 16%.

Currently issuers traded in the low price, with 3.6x PER and 0.7x PBV. This level is still well below the industry average PER of 12.6x and 1.6x PBV.

AKR Corporindo.Tbk - Keep Improving its infrastructure

2012-01-20T01:06:00.001-08:00

by Samuel Securities

• FY11 indication. Based on meetings with management AKRA, the company gives an indication of its sales target for 2011 can be reached Rp18.6 trillion, up 52% YoY while net income basis is estimated at Rp610 billion, grew 96% YoY (in-line with our estimates). The increase in performance is supported by growth in volume of distribution of petroleum during 2011 a significant approximately 47% YoY to reach 2 million KL.

• Additional Tanks Will be operational by mid-year. This year, AKRA estimates that some tanks for petroleum and chemical terminals are being built to operate in mid 2012. Thus, the company's terminal tank capacity increased by about 76.500 to 619.150 KL KL.

• Budgeted FY12 capex of Rp1.2 Bn. This year capex allocated AKRA around Rp1.24 trillion from internal cash. We estimate the company's internal cash reached Rp1.4 trillion. The Company will use these funds for the purchase of ships such as barges and SPOB, and includes the cost of capex for tank terminals and upgrading coal hauling road in Borneo (Tapin & Estuary Teweh).

• Update on Coal Business. At present, the contribution of coal mines AKRA only estimated 5 billion in FY11 with an estimated production of around 7,000 tonnes (300 thousand tons below expectations). This year, coal production expected to reach 1 million tons. In addition, the infrastructure for coal mining in Kalimantan, such as coal hauling road and coal terminal in the Gulf Timbau targeted to operate in 2013.

• Outlook 2012. Management also indicated that revenue in 2012 is estimated to reach Rp24.9 trillion while net profit is estimated at Rp735 billion. While the volume of distribution of petroleum expected to reach 2.5 million KL in line with the addition of tank terminal capacity in the middle of this year. We see the limitation of subsidized fuel that will be implemented this year did not significantly impact on the company because of the limitation is only intended for private cars while the contribution from the sale of subsidized fuel is only about 5% of total sales volume.

• Action & Recommendation. We still maintain our recommendation and Target Price as we look at the target company's relatively conservative compared with our estimate while the growth potential of petroleum and coal logistics are still promising. Currently, trading at 12.3x PE'12F AKRA. Our Price Target is at Rp3, 600 reflecting PE'12F 13.9x with 14% upside. BUY

BBNI fr BAHANA SEC (DX):: Recommendation and valuation: Strong BUY on deep discount While many challenges Remain, BBNI is set to stay on course with its recent progress in our view. That said, We believe BBNI's recent share price under performance (exhibit 4) is unjustified. BBNI As We expect to perform better than the industry's performance this year, We reiterate BUY on the stock with target price of IDR5, 300, reflecting 42% discount to the sector's 2.8X P / BV.

Buana Listya Tama Tbk - Company Update

2012-01-20T01:00:00.000-08:00

by Etrading : BULL

Expansion Plan

The addition of six ships from ships leased from the parent company (BLTA) as of January 2011, and re-operation of FPSO / FSO after experiencing the process of upgrading and conversion in 2010, became the driving company revenue in 2011. We estimate the company's revenue growth in 2011 could reach 78% compared to 2010. However some BULL expansion plans in 2011 was little resistance due to some technical issues, including changes to specifications by the charterer on a tender boat which followed. This resulted in not obtaining the procurement of new ships, so that the various development plans BULL become a little stagnant and accumulated for the year 2012.

Ditahun 2012, the company will continue to actively participate in various tenders, especially procurement VLGC ships, FPSO, LNG, FSO, and Floating Offshore Coal Terminal and Storage. Some of the tender which was followed almost finalized and the company has a substantial chance to win the tender.

Meanwhile, the company has prepared for the purposes of conversion to Floating Offshore Coal Terminal and Storage and negotiations with the charterer has entered the final stage. Floating offshore coal terminal and storage will operate at a coal mine located in South Sumatra. Furthermore Floating Coal Terminal will be a good alternative in the mining industry due to great savings and do not take a long time. Operation of Offshore Floating Coal Terminal and Storage This will encourage the growth of corporate earnings.

Use of IPO Proceeds

Company shares began trading on the secondary market on May 23, 2011. Based on the results of a public offering, the company managed to collect Rp trillion 1:03. Net funds received after deducting the cost of a public offering is $ 966.19 billion. Until 9M11, the company had executed the use of funds amounting to Rp. 958.7 billion with the remaining unused funds amounting to Rp 7.5 billion.

Valuation

Based on our calculations using the DCF method, assuming a WACC 9.94% to 2% terminal growth and the risk free rate of 7.5% then the fair price of the company's stock is $ 177/saham, but due to lack likuidnya factor shares in the market, then we set a target price for Rp 132, - or a 25% discount from the price reasonable. The target price reflects 2012F PER 6.83x with a potential upside of 32%. We recommend a BUY.

Harum Energy Tbk - HRUM is “Smell Good”

2012-01-20T00:56:00.001-08:00

by ‎Etrading

Impressive Volume Growth

HRUM is the 6th largest bituminous coal producer in Indonesia with volume production in 2010 totalling of 7.4 mn tonnes. HRUM recorded an impressive volume growth with 38% CAGR 2007‐2010 and we expect HRUM will record 29% CAGR 2011‐2014 backed by its solid infrastructure. Vertically Integrated operations HRUM has vertical integration of downstream infrastructure, its enable the company to increase its efficiency and Supply reliability. HRUM has dedicated barging and transhipment facilities through its subsidiary namely Layar Lintas Jaya (LLJ).

Healthy Balance Sheet

After IPO, HRUM has strong cash position and clean debt with negative net gearing ratio that enable the company to distribute high Dividend Payout Ratio (DPR). Moreover, we believe the strong cash position will give the company much room to expand its business by acquiring more mine concessions.

Coal Market View

We believe in 2012 will be a bumpy year for coal market price due to world economic slowdown. However, the expectation of China and India coal consumption is still very high. Moreover, the government step to use more coal to fire up the nation’s power plant will gradually improve domestic coal consumption. Therefore, even there would be a decline on demand in the short‐term, we still foresee a significant gain on demand in long‐term.

Valuation

Our Valuation based on DCF calculation with 13% of WACC and 0% of terminal growth rate, the company fair value is IDR 12,680. However, we set our Target Price at IDR 10,000 discount 21% from the fair value due to anticipate the bumpy coal price this year that will give negative sentiment to this sector. Our Target Price reflects PE13F of 10x and 37% potential upside.

Semen Gresik - Contender Strikes Back

2012-01-20T00:51:00.003-08:00

by ‎Etrading

Production capacity expansion boost future performance The capacity constrain has made the company loss its market share for 3 years in a row, this condition also benefited the under capacity company such as SMCB and INTP to gain market share. In the past, the company expands the capacity by debottlenecking or upgrading which only add slightly to its capacity, however due to strong cement demand, the Company will build new plants in Tuban, East Java and Tonasa, Sulawesi. This year we believe the company’s sales will grow 11.6% backing by 20% capacity expansion while the bottom line will grow to 20.5%.

Positive macroeconomic encouraging cement demand

The passing of the land reform bill in the end of last year and the investment grade rating for Indonesia will have positive impact in accelerating infrastructure project; these two factors are the answer in infrastructure development, land acquisition in one hand and financing in the others. Accelerating infrastructure developments encourage cement demand growth.

The company FY11 indicated performance in-line with our Forecast

Company sales and net profit for 2011 can reached 15 trillion IDR and 3.8 trillion IDR, this number in-line without estimation, we estimated the company’s sales increased by 10.6% to 15.8 Trillion last year and net profit increased by 2.3% reached 3.72 trillion. We are confidence with this year expanding production capacity can drive sales by 11.6% to 17.7 trillion and bottom line by 20.5% to 4,48 trillion.

The company FY11 indicated performance in-line with our forecast

We changed our risk free rate in our DCF calculation to 6.5% using 12 years Indonesia governments bond. We also changed our terminal growth from 5% to 4%, showing our more conservative view. We maintain buy recommendation with new target price 13,700/share or 16% potential upside from current price (11,800/share), reflecting PER2013e 16.167X.

Gozco Plantations Tbk. - Land Banks Under the Belt

2012-01-20T00:50:00.000-08:00

by Etrading

Left and right we are seeing plantations scrambling to acquire land to add on to their current land banks. In the midst of moratorium law and intense scrutiny from organization like WWO will escalate the fight for lands. Current land banks for GZCO relative to other much more established company is plenty enough to avoid any road bumps in the future resulting from the scarcer and scarcer lands and or difficult land clearing regulations that will hinder new plantings for future production growth.

Bottom Line Booster

Gains from associate company or in this case Indotruba had pretty much improved the bottom line for GZCO for the last consecutive quarters. The other booster comes from utilization of idle capacity from the new mill. Even if margin from manufacturing third party FFB instead of own nucleus FFB is smaller nevertheless it’s a relevant strategy adopted by GZCO to boost their bottom line.

Cost Efficiency will Fatten Up Margins

Gains from associate company and manufacturing margin from third party purchases is not enough to make GZCO looks attractive in the income statement. However we believe if GZCO can introduce cost efficiencies to any of their operating costs, it makes a big difference. With cost efficiencies, comes fatter margins, with fatter margins give off decent net income.

Our Call

GZCO is still a Hold with target price IDR 335 or 26.4% upside in our view from a growth stock

perspective. Ample land banks for future new plantings in a land-rarity environment, inorganic

growth from associate company namely Indotruba and manufacturing profit that nonetheless is still yielding out profits to be enjoyed by GZCO.

BW Plantation - Aggressive New Plantings

2012-01-15T19:16:00.001-08:00

by ‎Etrading : BWPT

In the midst of moratorium law and maturing palm plantation industry, BWPT is set for the next years to come with approximately 93,000 ha under their belt of which as of December 31st 2010, 52,060 ha is planted. Across the industry, BWPT in the last few years had implemented an aggressive policy of new plantings. A more established plantation with limited extra land bank will want to wait before they regenerate old trees with the new ones and as a result they did not plant new trees on such a big scale like BW Plantation did. Hacking down still producing trees albeit old ones is the same like plugging one of their cash flow, this is one of the main challenges that a more established plantation with limited new land banks have. We believe this will benefit BWPT for the next years to come when other more established plantations are experiencing a declining yield per Ha as a result of their maturing plantation age profile.

Creation of Economies of Scale with the Introduction of New Technology

New technology like the bin system for fresh fruit bunches collection has created a better economies of scale for BWPT that are reflected in the improving gross margin averaging on the 60% level from a previously a mere 29% gross margin for the year 2005. This is where we would like to applaud BWPT for successfully integrating new technology for greater efficiency in their estates. The strategic location of their estates that are located in Kalimantan may have been one of their influencing key point why they can so easily integrate technology to their harvesting process. Human labor are scarcer for Kalimantan compared to Sumatra. Integrating technology to estates in Sumatra is much more difficult as the existing workers are resistant to changes fearing for their job security.

Walking the Talk

With regards to new planting target, FFB production target, and cost efficiencies, BWPT has walked the talk and pretty much met our expectation for the year of 2011. We are seeing more third party buying of FFB at 2H 11 for filling up their idle capacity in their existing mills which is not a bad thing considering that the average price for CPO is relatively high in 2011 compared to 2010 and 2009. Added income from manufacturing fresh fruit bunches to CPO is very much welcome amid relatively higher CPO price ticker.

Our Call
We are seeing a leveling off CPO price for 2012 with price floor of USD 895 net of tax and or USD 1,050. We are recommending a Buy for BWPT in light of their growth profile with target price IDR 1,310 or an upside of 12.9% reflecting a PE 2012 of 12

Bakrie Sumatra Plantations Tbk - A Fully Integrated Plantation Company

2012-01-15T19:15:00.000-08:00

by Etrading : UNSP

Bakrie Sumatera Plantations (UNSP.JK) currently managing more than 125,000Ha planted area and operates 12 factories with combined capacity of 715,000MT per annum producing a combination of upstream and downstream products namely crude palm oil, palm kernel, rubber, and oleo chemicals. With the current export tax environment for Oil Palm products in Indonesia that is more conducive toward the downstream players, we believe that UNSP will be one of the beneficiaries trough its full integrated Oil Palm business. On top of it, UNSP has the opportunity to capture strategic synergy from the upstream production to the value-added manufacturing of downstream derivatives.

9m 11 Improving Operational Performance

For 9M 11 UNSP recorded 34% and 31% increased respectively for CPO and PK productions. The developments can be traced back to better fertilizer applications and advancement in UNSP’s age profile resulting in higher FFB yield per ha reaching 16t/Ha (annualized). We believe this positive trend to continue next year and expect FFB yield to gradually narrow the gap with industry average.

Growing Product Portfolio – Oleo chemicals added to the mix

We believe Asian demand for oleo products will continue to grow approximately at 5%-7% per annum. Oleo chemicals industry gives an estimated 40% value-added boost to the value of CPO and PKO. On top of the 15% gross manufacturing margin, Oleochemicals can also boost up earnings by saving on the tax incentives. CPO and PKO are under progressive tax policy with benchmark price above US$1250 taxed at the 22.5% tax bracket while refinery products with benchmark price above US$1250 is taxed between 10%-15% and no tax for Fatty Alcohol products.

The Largest Rubber-Exposed Listed Plantation
UNSP currently is Indonesian listed company with the largest rubber planted area of 18,477 ha.
Rubber production by UNSP in FY2010 is significantly higher or roughly about 62% higher than another company with rubber exposure in the industry. Rubber sales contributed about 26.7% of total sales for UNSP; second key revenue generator after palm oil in their sales breakdown. By being the largest rubber-exposed listed plantation in terms of planted area and production, UNSP does not miss the boat like some others do. Please note that average selling price for 9M 11 of rubber is USD 4,727/MT or a 61% increase from USD 2,932/MT.

UNSP Offers Attractive Valuations

UNSP is valued at a discount compared to peers currently in terms of revenue growth, price-tobook, and price to earnings ratio. The compounded annual rate growth for Bakrie Sumatera
Plantation for the last five years is 20.5% and its one-year revenue growth according to Bloomberg is 29.21% beating the industry average of 16.01% by quite a significant margin of 13.20%. Earning is under pressure because of the high gearing as they incurred additional debts in the process of acquiring smaller plantations and Oleochemicals assets in particular.

Remembering that land banks are getting few and far in recent years and the growing demands of oleo chemical products in future years, recent acquisitions of debt-ridden plantations and Oleochemicals may present a positive surprise for UNSP in the future. Considering that UNSP’s price-to-book ratio is valued at 0.44 compared to the 2.28 industry’s average PB ratio, we believe that UNSP is somewhat attractive even with the highest gearing across the plantation industry.

Surya Semesta Internusa: Company update - Raising 2012 Targets on Robust Demand

2012-01-15T19:08:00.000-08:00

by OSK Nusadana

2012 orderbook already exceeds our sales forecast.

With the recent additional purchase order from Isuzu for a 30ha industrial land, the company has bagged a total purchase order of 120ha at an ASP of USD83/sqm, thereby exceeding our sales forecast of 110ha. This has prompted us to raise our FY12 sales assumption to 150ha, which is achievable as SSIA would get additional orders for the remaining 11 months. Meanwhile, we maintain our ASP assumptions of USD90 and USD120 per sqm for 2012 and 2013 respectively. The companyâ€™s offer price for land is USD110/sqm in Jan 2012. We also raise our sales assumption for FY13 from 130ha to 160ha, as we expect the demand for industrial land to remain strong next year on robust investment (FDI and DDI) and manufacturing activities in the country. Manufacturing has been the backbone of Indonesiaâ€™s economy, comprising 24% of total GDP (see Exhibit 1).

New regulations to support long-term outlook.

Recently, the Finance Minister issued a new regulation on bonded-zone areas. This requires factories of less than 1ha in size that operate within the bonded areas to be relocated to industrial estates to improve the governmentâ€™s supervision on the use of tax and duty facilities. The Ministry of Finance harbours great concern over the abuse of bonded zones, which consist of more than 1,500 areas across the country, for smuggling activities or simply evading import duties and taxes. The government is giving a two-year grace period for the relocation of factories for those which still want to be entitled to such tax benefits. We have yet to include potential demand for land arising from this factory relocation requirement for SSIA.

Acquisition funding is not an issue.

Some investors raised questions on how SSIA will finance its plan to acquire an additional 1,300ha of land (300ha via normal acquisition and 1,000ha via land swap) located close to its industrial estate. For the 300ha acquisition, the total cost will come to around USD90m (IDR810bn) â€“ assuming a land price of USD10/sqm, with another USD20/sqm for development cost. This could be easily funded as the company sits on an IDR600bn cash pile as at end-Sept 2011, and still has a loan facility of IDR500bn from a local bank. It is now in discussions with Inhutani (a state-owned forestry company) to acquire the latterâ€™s 1,000ha land. Inhutani has requested to swap this land with a 2,000ha forestry area in the West Java province. We believe the total acquisition (swap) cost for this plot of land is much cheaper at USD20m (IDR180bn), assuming an acquisition cost of around USD1/sqm based on the typical Indonesian plantation area cost range of USD9,000-12,000/ha.

TP raised to IDR1,290 on upward earnings revisions.

We raised our target price for SSIA from IDR1,000 to IDR1,290, as we have: (i) revised up our FY12-13 earnings forecasts by 12%-17% on the back of higher land sales assumption mentioned earlier, and (ii) changed our valuation methodology from NAV to PE multiple to emphasize SSIAâ€™s strong earnings outlook for this year. We base our TP on 10x its 2012 earnings, which is attractive relative to its property peers which are now mostly trading at PERs of above 10x (KIJA: 12x, SMRA; 23x, ELTY: 34x and LPKR: 19x). Additionally, a PER of 10x implies a PEG of 0.06x or a 92% discount to broader marketâ€™s 0.8x. Maintain BUY.

ADHI KARYA – Keep Sustainable Ahead

2012-01-15T19:07:00.000-08:00

by Etrading Securities

Order book in FY11F boosts ADHI earnings.

Kinerja ADHI pada FY11F, kami memperkirakan pertambahan pendapatan yang signifikan dari 9M11-FY11F yaitu bertambah 123% menjadi Rp6.9 triliun pada FY11F. Dengan proyek terbesar berasal dari pemerintah yaitu proyek pertamina EPC RFCC berkapasitas 62 ribu BPSD di Cilacap senilai US$931.48 juta. Kami berekspektasi kedepannya ADHI tetap akan memperlihatkan pertumbuhan dengan proyek single-year maupun multi-year.

Huge new contract secured for 2012.

ADHI menarget kontrak baru sebesar 13.3 triliun pada akhir tahun 2011. Kami estimasikan sebesar 94% akan terealisasi pada tahun 2011. yaitu sebesar Rp12.5 triliun. Bertumbuh sebesar 54% dari perolehan kontrak baru sebelumnya pada FY10.

We expect 28.6% earnings CAGR in FY11F-13F.

Kami berestimasi laba bersih akan bertumbuh sebesar 28.6% (CAGR) sepanjang tahun FY11F-13F dari Rp185 miliar menjadi Rp306 miliar. Laba FY11F terlihat menurun tipis 2.33% menjadi Rp185 miliar dibanding FY10. Walaupun sempat pendapatan perseroan FY11F naik 23.19% dari FY10. Penurunan laba ini dampak dari peningkatan beban penyisihan penurunan nilai piutang atas proyek yang tidak terealisasi.

Buy recommendation, price target of Rp940.

Berdasarkan perhitungan kami harga wajar perseroan, dengan menggunakan metode DCF, dan WACC sebesar 11.92% dan terminal growth sebesar 2% adalah Rp. 940, harga ini merefleksikan PER 2012F 8.2x, potensi kenaikan harga 57%. Perhitungan kami belum memasukan faktor right issue di semester II 2012 sampai ada detail dari rencana tersebut.

PT SURYA SEMESTA INTERNUSA - TP 1,030/sh - Jewel of Land

2012-01-09T20:31:00.001-08:00

by Ciptadana : SSIA

We reinitiate our coverage on PT Surya Semesta Internusa Tbk (SSIA) with a Buy rating and 12-month SOTP based target price of Rp1,030. The surging industrial land demand, combined with skyrocketing industrial land price has put industrial estate player on a track to reap the fortune. We believe that SSIA has a brighter prospect than its industrial estate peers, given its most feasible land inventory replenishing plan. In addition, its sustainable construction business and stable cash fl ow stream from its hospitality business also add more to its NAV.

Sturdy Demand of Industrial Land. The latest upgrade of Indonesia’s investment rating by Fitch from BB+ to BBB-, putting the country into investment grade 14 years after the Asian financial crisis crippled the region. This has given a positive sentiment to business confi dence and lures more FDI into Indonesia. More FDI, especially in manufacturing sector, will give more boosts on demand of industrial land. Unfortunately, the strong uptake in industrial land sales could not be matched by the supply. As a result, the asking selling price of industrial land in Jakarta, Bogor, Bekasi and Karawang area has been growing rapidly from only US$81/sqm at the end of 2010 to US$ 129/sqm at 3Q of 2011.

More Land Bank on The Way. Although the Company still owns a vast available land bank for sale of 360ha, with current strong sales uptake, the land bank is only suffi cient for three years. Hence, the Company has prepared a plan to replenish its land bank inventory through acquisition 300ha of land bank adjacent to its current estate. In addition, the Company also reveals a plan to acquire a large land bank of 1,000ha on west side of its current estate.

Expanding Margin from Industrial Estate Segment. As the acquisition price of the new 300ha land is still low ~ US$9 /sqm and the expected selling price will surpass US$100/sqm level in

2012, these will boost SSIA’s profitability margin signifi cantly. From this sale of 90 ha land only, the Company estimates to record a net profi t of Rp400 billion in 2012F and boost its industrial estate segment gross profi t margin from 26% in 2011F to 60% in 2012F with ASP of US$83/sqm. Stable Growth on Construction Segment. This segment has been a major contributor to the group’s revenue with 60% - 70% of consolidated revenue in the past. Since its order book is dominated by non-infrastructure related projects, the Company plans to diversify its project portfolio to include infrastructure. Going forward, we conservatively forecast the Company to increase its new order book by 10% each year.

Hospitality Business to Provide Long Term Sustainability. As SSIA deems that hospitality business is still prospective, the Company intends to increase its ownership in SAI from 53.7%

to 80%. In our forecast, we expect occupancy rate on all of the Company’s hotels to be stable at current level and moderately increase the revenue per average room by 5% every year from

2012F onwards.

Valuation. We value SSIA using the combination of DCF and net asset value (NAV) of its subsidiaries or assets. We imply conglomerate discount of 20% to the fair value of equity to arrive at our target price of Rp 1,030/share. Our target price suggest a 26% upside potential from current price.

Risk. We identify several downside risks to our valuation, among others: regulation risk, decline in direct investment, delay in construction project and rising raw material prices.

PT INTERNATIONAL NICKEL INDONESIA - TP 3,700/sh - Cost efficient company on a gloomy nickel price outlook

2012-01-09T20:30:00.000-08:00

by Ciptadana Securities

We like International Nickel Indonesia (INCO) for its cost efficiency program through newly commenced hydro power plant and its growth expansion plan; nevertheless, we think the unexciting outlook of nickel price would hold back INCO’s performance.

In addition, due to the overhaul and rebuild program in late FY11 and continue in early this year, we expect INCO’s production will slow down during FY11-12F period but will recover in FY13F. We re-initiate our coverage on INCO with HOLD recommendation and target price of Rp3,700/share (rounded up).

New low cost power from Karebbe to ramp up production

On October 4, 2011, INCO inaugurated its third hydroelectric power facility called Karebbe plant which has 90MW of average capacity and consumed a total capital US$410mn. This will bring a total average capacity of 370MW from its hydro generating

facilities consists of Karebbe (90MW), Balambano (110MW), and Larona (170MW).

Previously, INCO would have to operate its fuel-based thermal power facility (about 70MW of total capacity) to support its production. With the commencement of Karebbe plant, INCO now has the capacity to ramp up its production using all hydro power which will strengthen its position as a low cost nickel producer.

Stalled short-term production but expect to surge in the following years INCO’s production faced challenges during FY11 which we expect to reach 66.5k metric tons (mt), down 12.5% yoy and in line with the Company’s revised target of 66.7k mt due to temporary shutdown as a result of earthquake in 1Q11 combined with its overhaul and rebuild program for two of its furnaces that started in late 4Q11 and is expected to complete in 1Q12. We estimate FY12F’s production to grow by 5.5% reaching 70.2k

mt and further by 10.3% into 77.4k mt for FY13F after the completion of its rebuild program.

Gloomy nickel price

We put LME benchmark nickel price at US$23,000/mt as our assumption for FY12F onwards, a decline by 6% as compared to our FY11F LME benchmark price at US$24,500/mt, as we expect nickel price will still be unfavorable this year given the prolonged concerns over European debt crisis coupled with a relatively high level of nickel inventory. On top of that, we expect nickel demand to reach moderate levels this year amid global economy uncertainties that would put pressure on nickel price.

Re-initiate with HOLD

We re-initiate our coverage on INCO with a HOLD recommendation and a target price of Rp3,700/share, implying 11.2X and 9.8X FY12 and 13F PE, respectively. We derived our

target price using a DCF valuation method assuming 12.3% of WACC and 3% of terminal growth. We identify several downside risks to our view, namely 1) significant correction in nickel price, 2) soaring oil price, 3) low rainfall, and 4) regulatory risk.

Telkom Indonesia - BUY Recommendation

2012-01-09T20:28:00.000-08:00

by Ciptadana Sec

We reinstate our coverage on Telekomunikasi Indonesia (TLKM) with a Buy recommendation and 12-month SOTP based target price of Rp9,000/sh. Against the backdrop of saturated telco industry, we see that TLKM still possess the strong defensive characteristic due to its dominant position in cellular market, strong financial firepower, its’ up-trending data and internet revenue, and the potential upside from unlocking its tower assets value through IPO.

Dominant Position in Cellular Market. Even though Telkomsel (TLKM’s subsidiary) has lost a tiny fraction of its aggregate market share from 57% in 1Q’05 to 54% in 2Q’11, it still leads the cellular market with 102 million subscribers at end of June 2011, leaving behind Indosat (ISAT), its closest peers, with a huge gap of 55 million subscriber and XL Axiata (EXCL) with 63 million subscriber. Going forward, we believe that Telkomsel’s strong market presence, widest coverage, and good brand image will help to maintain its leading position.

Strong Financial Firepower.

TLKM has the largest free cash flow among Indonesian telco companies with Rp9.6 trillion as of 1H’11, while ISAT and EXCL only booked Rp1.3 trillion and Rp1.6 trillion respectively. With its huge cash flow stream and underleveraged balance sheet, TLKM should be able to fund its expansion with ease.

Up-trending Data and Internet Revenue.

In 2008, data and internet only contributed 8% of the total revenue. But as of 1H’11, this segment has added its portion to 14% of total revenue. Therefore, with the dwindling prospect of its legacy business, we deem that declining revenue of legacy business could be mitigated by the rising income from data. Backed by the growth of mobile broadband, we forecast the data and internet will contribute 18% and 19% in 2012F and 2013F respectively.

Unlocking The Value of Tower Assets.

TLKM’s subsidiary PT Daya Mitra Telekomunikasi (Mitratel), which engaged in telco tower providing business, plans to go public in second semester of 2012. Mitratel targets to own 2,500 tower and operate 3,500 of Telkom Group’s tower by the end of 2011. As TLKM and Telkomsel agreed to gradually hand over their towers’ management to Mitratel and combined with its IPO plan, Mitratel has the potential to be the largest listed tower company in Indonesia. Should this plan goes well according to the expected scenario, TLKM could unlock its tower asset value which subsequently put an upside potential to TLKM’s valuation.

Valuation and Risks.

We reinstate our coverage on Telekomunikasi Indonesia with a Buy recommendation and 12-month SOTP based target price of Rp9,000/sh. We identify several downside risks to our call, namely: 1) irrational competition in wireless and broadband industry, 2) adverse change in regulatory environment, 3) poor and slow execution of strategy, 4) economic and political risk relating to Indonesia, 5) emergence of substitute for current wireless technology.

Ciptadana Sec : TLKM

Strong Financial Firepower.

Up-trending Data and Internet Revenue.

Unlocking The Value of Tower Assets.

Valuation and Risks.

Property Sectors - Upward Momentum

2012-01-09T20:26:00.000-08:00

by Batavia Prosperindo Securities

• Solid Domestic Economy

Indonesia is still on the track of positive economic development, with a stable current GDP growth of 6.5%. Driven mainly by strong domestic consumption, Indonesia has become an attractive investment destination. Foreign Direct Investment for nine month of 2011 stood at US$9.1 billion, and portfolio investment totaling to US$4.4 billion. Year on year inflation rate at November 2011 remain stable at 4.44%, meanwhile BI rate kept at 6%.

• Sector current facts

Adhere to domestic economy, property sector also experiencing positive growth. As the nation centre of economic growth, Jabodetabek region gave an appealing attraction for property companies to build more projects. Office space, residential, hotel, retail, and industrial estates are overriding projects in Jabodetabek region.

Bank Indonesia in its Property Survey for 3Q11 revealed that almost all property projects in Jabodetabek and Banten region rose in terms of occupancy / take up rate, supply, and rental / selling price.

Business expansion, new companies, lifestyle shifting, and high consumption rate are the key factors which drove the property sector increment in Jabodetabek region. Important note for retail (malls) was the moratorium of shopping centre development in DKI Jakarta, due to the overloaded supply in DKI Jakarta.

· Property Index

Property sector index has been able to keep up with JCI, as of December 12, 2011. The index tend to rise in the recent week, following the news of the land bill approval. We perceive this as a short term fluctutaion, and a good opprotunity for investing in property companies.

Companies Selection

We have gathered six property companies for our comparison. Among those companies, we picked KIJA (NAV/Shares Rp734), ELTY (NAV/Shares Rp341), and BKSL (NAV/Shares Rp405). These companies’s shares recently traded at cheap prices, and had interesting potential upside to their target prices. They also possess potential projects that could boost revenue in the future.

Conclusion

Solid economy and high consumption rate will bolster the property sector of Indonesia, as more property projects will be absorbed by the market. Recent upgrade of Indonesian credit rating by Fitch Ratings to BBB-, and greater possibility of foreigners to possess properties in Indonesia will be major points for property sector escalation.

PT. Elnusa Tbk at Glance

2012-01-06T01:35:00.001-08:00

by Etrading Securities

PT Elnusa Tbk merupakan perseroan yang bergerak pada bidang minyak dan gas. Perseroan, melalui anak perusahaannya menawarkan jasa yang mencangkup geophysical data, drilling, dan jasa oilfield. Elnusa juga memberikan jasa informasi teknologi kepada industri minyak layaknya perusahaan lain. Dengan kepemilikan terbesar yaitu PT Pertamina (Persero) sebesar 41.67%, selanjutnya dipegang oleh PT Benakat Petroleoum Energy sebesar 37.67%, Lucy Sycilia selaku Direksi sebesar 0.01% dan sisanya dimiliki public sebesar 21.76%.

Key Issue 2011&2012

Perseroan memproyeksi Rugi bersih untuk tahun 2011 sebesar Rp55 miliar atau turun 185 persen dibanding laba bersih tahun 2010 sebesar Rp64 miliar akibat penerapan standar akuntansi yang baru yaitu International Financial Reporting Standard (IFRS) sebagai pengganti dari Pernyataan Standar Akuntansi Keuangan (PSAK). Kinerja perseroan tahun ini terjadi penurunan oleh sejumlah kendala, di antaranya beberapa proyek besar yang ditunda dan tidak direalisasikan oleh kontraktor migas. Beberapa proyek itu antara lain di Sumatera, Kalimantan, Natuna dan Papua yang berkontribusi negatif pada laba bersih perseroan. Pada tahun 2012 Perseroan akan meningkatkan profitabilitas dengan lebih memprioritaskan segmen

oilfield services dibandingkan jasa seismic yang bermargin lebih kecil. Investasi pada oilfield tahun 2012 didukung dengan capex sebesar US$ 34.6 million.

Elnusa Estimates its Performance in 2011F

Dalam paparan Public Expo Elnusa pada Desember 2011. Perkiraan kinerja Elnusa di akhir tahun 2011 memperlihatkan hasil dibawah ekspektasi walau sempat pada 9M11 persero mencatat laba bersih sebesar Rp49 miliar. Dapat dilihat melalui grafik bar dibawah ini, menujukkan laba bersih di 2011F merosot tajam yaitu turun 185.94 persen menjadi Rp-55 miliar dibandingkan FY2010. Walaupun pendapatan terlihat naik dari Rp4,211 miliar menjadi Rp4,610 miliar pada 2011F, kenaikan ini diikuti pula dengan kenaikan harga pokok penjualan. Bisa dilihat dari penurunan laba kotor sebesar 9.51 persen yaitu menjadi Rp371 miliar pada 2011F dari Rp 410 miliar pada FY2010. Disusul dengan biaya operasi yang meningkat dan tingkat utilisasi alat operasi yang rendah berakibat pada laba operasi yang turun signifikan pada level 37.31 persen mejadi Rp84 miliar dibanding periode sebelumnya yaitu Rp134 miliar. Konvergensi dari PSAK menjadi IFRS, hal tersebut berdampak pada kenerja profitabilitas perseroan yang tercermin pada rugi bersih sebesar Rp55 miliar, yang merupakan penyisihan kerugian yang harus dibebankan akibat adanya beberapa kontrak yang tertunda dan tidak adanya realisasi dari kontraktor Migas.

Our View (Target Price Rp 250,-)

Kondisi perekonomian yang baik tidak banyak membantu kondisi perseroan, permasalahan penurunan kinerja persero lebih diakibatkan kinerja produktivitas operasi yang kurang stabil. Selain pada penundaan dan tidak terealisasinya kontrak yang berdampak pada kerugian bersih hingga Rp 55 miliar, perseroan juga mengalami kekalahan sebesar 30% tender dari total tender yang diikuti dalam hal harga penawaran yang diajukan, peralatan teknis, dan kompetensi. Di tahun 2012 tidak adanya capex untuk pembiayaan geosciences services dan drilling services dikarenakan jasa ini belum optimal. Bisa dilihat dari gross margin yang menurun dari 9.74% pada FY2010 menjadi 8.05% pada 2011F akibat kontribusi negatif dari jasa seismic.

United Tractors - Unleashing Coal Business Potential

2012-01-06T01:32:00.001-08:00

by Ciptadana Sec

PT UNITED TRACTOR - TP 31,150/sh

We initiate our coverage on United Tractors (UNTR) with BUY recommendation on the back of 1) solid heavy equipment demand 2) sturdy coal mining activity from increasing production and 3) accelerating contribution from its coal mining business.

Our valuation of UNTR is based on DCF valuation method assuming a WACC of 12% and a terminal growth of 3%. We arrive at a target price of Rp31,150, at which UNTR is trading at 20.8X FY11F PF, 16.6X FY12F PE and 13.6X FY13F PE.

Outstanding 2011 Komatsu sales growth which is expected to keep growing 2011 has been an outstanding year for Komatsu heavy equipment sales which grew by 55% yoy as of 9M11 reaching 6,396 units or achieving 80% of UNTR FY11’s target. Mining sector was the main growth driver with 73.6% yoy increase followed by Construction sector (+48.6% yoy) and Agro sector (+28.2% yoy). Next year, we expect Komatsu sales volume to grow by 16%, reaching 9,501 units, supported by robust demand from mining, agri, and construction sector.

Tapping the opportunity from Indonesia rising coal production

Indonesia coal production has been growing at 12.5% FY05-10 CAGR and is expected to reach 327mn tons (+19% yoy) this year and 332 mn tons (1.5% yoy) next year according to the energy and mineral resources ministry. Meanwhile, Indonesian Coal Mining Association (APBI) estimates coal production to reach 340mn tons and 370mn tons for FY11 and FY12, an increase by 23.6% yoy and 8.8% yoy respectively. We believe the increase is driven by rising coal demands, both from domestic and export. As the market leader in mining contracting business, UNTR through its subsidiary PT Pamapersada Nusantara (Pama) will benefit from the growing coal production in Indonesia, especially from those of its clients. Thus, we estimate that next year Pama could achieve another 10% and 9% increase for coal production and overburden removal respectively.

More acquisition, more contribution

As of Sept-11, UNTR has about 254-369mn tones of coal reserves and targets to achieve 500mn tons of reserves through acquisition. It recently acquire 60% stake on Duta Sejahtera (DS) at US$11.5mn with an option to buy 60% stake in Duta Nurcahya mine.

Currently, UNTR is eyeing two coal mining concession in its pipeline and is conducting the due diligence process. Therefore, we believe UNTR is on its track to achieve its target of 500mn tons coal reserves and expect the contribution from coal mining business to reach 10% this year; further growing to 14% next year.

Buy with target price of Rp31,150

We initiate UNTR with BUY recommendation with a target price of Rp31,150, implying 20.8X FY11F PE, 16.6X FY12F PE and 13.6X FY13F PE; 19.6% upside from yesterday closing price. We value UNTR using DCF valuation method assuming 12% WACC and 3% terminal growth. Risks to our view include: 1) regulatory risk 2) volatility in commodity price 3) fluctuation in exchange rate 4) fierce competition 5) obstacles in acquisition.

Risk to our view

Regulatory risk

Coal mining business in Indonesia is exposed to several government law such as mining, forestry, and environmental regulation. Therefore any changes in government regulation will impact the industry.

Volatility in commodity prices

Given its strong dependency to commodity, especially coal, any volatility in the commodity prices will affect UNTR.

Fluctuation in exchange rate

All of UNTR’s revenue is denominated in USD and its financial is reported using IDR base, so any fluctuation in the currency will affect UNTR’s financial results.

Fierce competition from other heavy equipment brands

The growing demand for heavy equipment in Indonesia could invite other heavy equipment brands to enter the market. The aggressive pricing strategy that might be implemented from some Chinese brands could aff ect Komatsu’s market share.

Obstacle in acquiring new coal mines

The sustainability of UNTR’s coal mining business will depend on its ability to acquire new coal mining concession, thus UNTR will pose with risks for any difficulty in acquiring new mines in the future.

Favorable CPO Player

2012-01-06T01:25:00.001-08:00

by Indopremier Securities

BWPT remained favorable in local CPO universe. 9M11 yoy result stayed solid, but muted on quarterly basis. Long term sector outlook remains compelling since demand will outpace supply, despite recent volatility price caused by uncertain global economics condition. We maintain our BUY recommendation with target price of Rp1,330, as we could see an equivalent result between BWPT’s 9M11 overall margins with our full year forecast.

Strong yoy result, muted qoq

BWPT reported 9M11 earnings of Rp660.8m, up 57.9% yoy and formed 74.2% of our full-year forecast. On quarterly basis, earnings was down 39.6% qoq mostly due to CPO sales volume slackening by 35.1% (CPO formed 92.3% of 3Q11 total sales) combined with lower ASP (-4.8%). Superior cost structure prolonged. Total cost per ton of CPO was Rp3.108m/ton, down 6.5% on yearly basis.

Short term prices are flat with limited movement, but remains intact in the long term view

The average CPO price has fell around 6% qoq in 3Q11, this was in line with global trends and prospects of faltering global economy and serious concerns about the health of European banking system. We see CPO price flattens out, trailing slumping demand. Average price from beginning 4Q until now, is at US$1023/ton, not much difference with 3Q11 average price (US$1078/ton). CPO sales could go back uplifted when soybean oil price rises next year when South America experiencing the drought. Long term sector outlook remains compelling given ongoing global tight supply relative to consumption, with demand underpinned by population growth, rising GDP per capita in emerging economies which means greater consumption, and also biofuel mandates.

Maintain Buy; all-in-all is aligned with full-year forecast

Valuation unchanged, looking at 9M11 overall margins were pretty much in-line with our full-year forecast. With the remaining new mature acreage coming onstream, BWPT should benefit. YTD average price is US$1122/ton, thus we upgrade our full-year forecast at US$1100/ton from previous US$1000/ton. We are still calling BUY for BWPT with target price Rp1,330.

PT Jasa Marga Tbk - Entitled to Premium

2012-01-06T01:21:00.001-08:00

by Indopremier Securities

Entitled to Premium

JSMR reported 9M11 financials in-line with our estimates that goes for Rp1.45tn net profit and Rp4.8tn revenue this year. At yesterday’s closing price, JSMR is trading at 16X our FY12 estimates, above its regional peers, while at the favorable spot in terms of PEG ratio. In view of Indonesia’s resilient traffic on the back of its continued economic growth, we view the counter as defensive one with DCFderived target price of Rp4,800/share.

9M11 Figures

JSMR reported 9M11 revenue of Rp3.6tn (+12%, YoY), with operating profit of Rp1.8tn (+11.8%, YoY), and net profit of Rp1.05tn (+9.3%, YoY). Profitability is maintained at the same level YoY, with operating margin at 48.9% in 9M11 pretax margin at 38% in 9M11 (vs. 36.4% in 9M10), and net profit margin at 29.2% in 9M11 (vs. 29.9% in 9M10). Financials is backed by volume growth to an average of 2.92mn vehicles of daily traffic in 9M11, an increase of 13% YoY, from an average daily traffic of 2.58mn cars in 9M10.

Valuations

While relatively high in terms of earnings multiple, growth offered has placed JSMR in a favorable spot of PEG ratio among the highest capitalization toll road operator and investor players in the Asia. Indonesia’s government focus in infrastructure development will benefit JSMR years ahead and provide stability to its steady revenue model.

Recommendation

Current projects, which will see at least 40% additional length expansion in 2-3 years time, will sufficient to support earnings growth. We favor JSMR dominance in toll road business in Indonesia, commanding 73% market share and among listed companies with the highest market capitalization in Asia with favorable PEG ratio. With DCF method (WACC of 10.1% and LTG of 1%), we derived Rp4,800/share as JSMR’s target price. Maintain our BUY recommendation.

Astra Agro Lestari (AALI) - Hold on Premium

2012-01-06T01:20:00.000-08:00

by Indopremier Securities

Delayed in replanting scheme few years ago has made AALI lost its growth momentum. Declining FFB production signal continues surely caused by its aging plantation profile combined with insufficient unplanted landbank. Nonetheless, we are still calling Hold for AALI given its good management profile, liquid shares, and future expansion plans view to sugar industry and CPO downstream.

9M11/3Q11 Overview

AALI’s 9M11 sales was up 38.7% yoy, supported by CPO and Kernel selling price increase of 16.5% and 39.1% respectively. Third party buying of FFB to boost up CPO production, has increased 86.1% yoy and made up 16.8% of total FFB processed. This is largely because of the aging plantations profile. We are less satisfied by margins squeezed across the board. COGS has swelled 39.7% yoy compared to 9M10 and made gross profit margin depressed. An increase of 339% yoy in 9M11 from non operating income has contributed into 32.8% pre-tax margin and 23.4% net income margin.

Slackening CPO & Kernel Production

We also note that CPO and Kernel extraction rate were down 1.4% and 4% yoy respectively. This could indicate a slow delivery of FFB to the mill. AALI is improving the evacuation system from conventional to net system while accelerating new mills construction near its newly mature estate. Currently AALI operates 22 mills across its estate, and targeting 26 mills in the end of 2012.

Delayed Replanting is still an issue

The company has confirmed that they have fully planted the remaining land bank and is still searching for a suitable new land acquisition for palm and its plan on entering sugar business which has restrained for the past 2 years. Unfortunately, we foresee a declining of FFB production over the next decade given that the last 10-years mature area CAGR was only around 2.5% which happened due to deceleration of planting and replanting.

Valuation and Recommendation

Valuation remains expensive given 2012F PE of 15x, compared to 9.7 average sector PE. However we believe AALI deserves premium valuation on the back of : 1) its good management, 2) better long growth outlook given company’s plan on sugarcane and downstream expansion plans, 3) high liquidity characteristic due to its largest market cap status. We are still recommending Hold for AALI with target price Rp17,000.

Holcim Indonesia Tbk - Good Performance

2012-01-06T01:17:00.000-08:00

by Batavia Prosperindo Securities

• 9M-2011 financial report showing good result

The 9M-2011 financial report showed that SMCB recorded revenue of Rp. 5,408.08 bn, increasing 26.15% compared to the 9M-2010’s of Rp. 4,287.12 bn. As for the net income, SMCB managed to grab profit of Rp. 740.42 bn, growing 19.28% compared to the 9M-2010 net income of Rp. 620.75 bn. This good result was supported by increase in Indonesian cement demand and strong sales of Holcim brand cement. As per 9M-2011, SMCB revenue and net income growth is better than its peer such as INTP and SMGR.

• Fresh start after quasi reorganization

SMCB revalued its asset for quasi reorganization and hence was able to record a positive retained earnings (Rp. 505.15 bn). As a result of this new fresh start, SMCB is able to give dividend to its investors. In 2011, SMCB gives dividend of Rp. 352 bn, which is about 42.39% from the previous year net income.

• Building new plant

As there is expectation that Indonesian cement consumption will still grow in the future, SMCB plans to build new factory in Tuban, East Java. This new factory will add 1,7 million tones of cement production capacity to SMCB current production capacity of 8,3 milion tones. This new plant is expected to be completed in 2013 with capital expenditure of around US$ 450 – US$ 500 milion.

· Target Price and Recommendation

Using DCF model we attained target price of Rp. 2,325 for SMCB. With the current price at Rp 2,100 (29/12/11), there is a potensial upside of 10.71%, and hence we recommend ”BUY” for SMCB.

BW Plantation - Profitability Margins Remain Intact

2012-01-06T01:14:00.001-08:00

by AAA Securities

BWPTâ€™s performance remains intact in 9M11 with revenue jumped by 57.9% yoy and net profit by 65.3% yoy. Despite the drought, BWPT managed to maintain its high gross profit margin at 66.1% and net profit 35.6%. We however, adjusted down our revenue forecast and up our COGS forecast due to the lower FFB production and higher than expected third parties purchase of raw material in the 9M11. We recommend BUY with TP Rp1,300 which still gives potential upside of 16.1%.

Net Profit Growth Above 60%

BWPT booked an increase in revenue by 57.9% yoy to Rp660.8 bn and net profit 65.3 % yoy to Rp235.2 bn in 9M11. BPWT recorded an increase by 53% yoy in COGS to Rp224.2 bn in 9M11. 11% of the COGS in 9M11 were for third parties raw material purchase. As around 66% of BWPTâ€™s planted areas are still immature, third parties FFB purchase is required to optimize the mill capacity.

We believe that BWPT will still do this in 2012. Other expense in COGS that increase quite significantly was fertilizing cost, by 89% yoy to Rp68.2 bn. Interest expenses recorded also higher by 88.5% yoy higher to Rp50.8 bn in 9M11. BWPT has obtained Rp1.3 trillion credit facility from BRI in 3Q11 of which Rp530 bn 9M11. The credit facility was divided into Rp1.25 tn for capex (Rp1.03 trillion for expansion in plantation and Rp221.5 bn for building new CPO mill). The rest Rp46.5 bn was for working capital. Although interest expense and loans are increasing, we do not worry about this as the leverage ratio is still good at DER of 1.48x and interest coverage ratio of 6.09x.

New Mill With 30 tons FFB/hour Capacity Will be Ready Early 2012

BWPT will add another mill with capacity 30 tons of FFB/hour in early 2012. With that additional mill, BWPTâ€™s total mill capacity will become 135 tons of FBB/hour where the current capacity is 105 tons of FFB/hour. BWPT plans to increase the total capacity to around 195 tons of FFB/hour until 2014. The construction of the 60 tons of FFB/hour mill will start in 2013.

Sales to Wilmar more than 50%

Around 78.1% of BWPTâ€™s total sales (or Rp660.8 bn in 9M11) were sold to regular buyers. Sales to Wilmar group represents around 52.4% in 9M11, and about 25.5% to Sinar Mas.

Valuation

Our valuation is based on consideration that drought and high cost will put some pressure on BWPTâ€™s profitability for sometime to come. Thus, we downgrade our TP to Rp1,300 that still gives 16.1% potential upside. Our TP implies 15.5x roll forward 2012 PE.

Energi Mega Persada Tbk - ENRG - ONWJ acquisition a lucrative deal indeed

2012-01-06T01:13:00.000-08:00

by Mandiri Sekuritas

We recently met with the senior management of ENRG to learn more about the companyâ€™s move to acquire a majority stake in CNOOC ONWJ Ltd. Overall, the acquisition may lift proportionate EBITDA estimate by 38% and EPS by 29% for FY12E, based on conservative (zero growth) assumption for the newly acquired asset. With major EPS uplift in 1Q12 coming from the consolidation of CNOOC ONWJ Ltd, and another uplift in 3Q12 coming from the new gas flow from Kangean TSB field, FY12E is set to be a year of major turnaround for the company with a potential quadrupling of EBITDA and a ten-fold increase in EPS. The forecast and valuation table presented below has not accounted for the dealâ€™s EPS accretion that could place the stockâ€™s FY12E P/E at below 8x.

Buy.

A done deal with positive carry and EPS accretion. The deal has reached financial close with 100% debt financing that should repay itself in three years. The acquired asset yielded US$132mn of EBITDA and US$51mn of net profit in 9M11. Compared to the US$212mn price tag, the deal should give positive carry in terms of operating cash flow to ENRG, enhance its EPS, and improve its debt ratio.

Positive effects on income statement based on proforma analysis.

Had we consolidated CNOOC ONWJ Ltd on a 51% basis to ENRG since 1 January 2011, the 9M11 EBITDA would have been 100% bigger and net profit 360% higher, after taking into account the increased borrowing level and interest expense.

CNOOC ONWJ Ltd is selling its gas at around US$2.65 per mmbtu, currently.

Recently, the head of oil and gas regulator BPMigas urged all domestic gas exploration companies to renegotiate gas selling price upward while suggesting a minimum price of US$5.00/mmbtu.

Importantly, overall debt cost may come down as the deal improves debt service ratios. Based on 100% consolidation, the senior management expects the companyâ€™s net-debt-to-EBITDA to decline to around 3.3x from above 5x pre-deal.

Target Price : Rp 298,-

PT Indofood CBP Sukses Makmur Tbk - ICBP, a Cash Cow Well Posed for Growth

2011-12-28T21:54:00.000-08:00

by Ciptadana Securities

ICBP is initiated with a BUY recommendation backed by; 1) strong expected top line growth 2) solid long term prospect for its dairy and snacks businesses and 3) rapidly growing returns from its food seasonings business. Our valuation uses DCF method, with 12.73% WACC and 3% terminal growth rate assumptions. Target price is at Rp6,150, implying a potential upside of 20.59% from current price of Rp5,100. It implies a P/E ratio of 17.22 in 2012 and 15.48 in 2013.

Solid macro factors benefits incumbent’s top line

Indonesia’s resilient fundamental structure and consistent growth have been beneficial to all of ICBP’s line of businesses; noodle, dairy, snacks, food seasonings, nutrition and special foods. Each market sector experienced double digit CAGR from 1999 – 2009.

In 2011, we expect ICBP’s revenue to grow by 10.75% to Rp19.9 trillion; led by large revenue growth from its food seasonings business (36.97% YoY) and snacks business (21.51% YoY). Going forward, with most of its income domestic (low export sales), ICBP’s top side is well poised to benefit from higher food spending and Indonesia’s sustained growth. Revenue growth is forecast at a sustained double digit rate for 2012 (at 10.54%) and 2013 (at 11.10%).

Dairy, snacks, and food seasonings to lead top line growth in the long run

Higher disposable income and rising numbers of affluent, urban, middle class are expected to boost milk and snacks consumption. ICBP has a major position in sweetened condensed milk (SCM) which accounts for roughly 35% of milk consumption, and has a legacy brand (Indomilk) for the liquid segment. Its dairy business is expected to post an 8.58% top line growth in 2011 followed by faster growth of 12.25% in 2012 and 12.29% in 2013.

In addition to higher household spending on the back of rising disposable income, its snacks business also benefits from rapidly growing urban population and modern retail outlets (especially convenience stores). ICBP’s snacks revenue is expected to grow at 21.51% in 2011 to Rp1.19 trillion followed by a forecasted sustained double digits annual growth of 18.34% in 2012 and 2013.

ICBP’s food seasonings business enjoyed a 36.97% revenue growth in 2010, and is expected to sustain that rate for 2011. ICBP is a major player in the instant seasonings segment and is expected to enjoy strong growth expected by the segment.

RISK FACTORS

Volatility in commodity prices

ICBP’s COGS is highly aff ected by commodity prices, due to substantial amount of raw materials that are required to be imported; skimmed and whole milk powder, potatoes, wheat (indirect), amongst others. Changes in commodity prices due to global or other factors will have substantial impact on ICBP’s margins.

Three commodities will especially have signifi cant eff ects on ICBP due to its relatively large contribution to its COGS; wheat (indirect), CPO, and whole/skimmed milk powder. In which all three are currently relatively high from a historical point of view. For our base case valuation, we assume that ICBP will focus on maintaining margins (thus a historical reference to margins of each of its businesses is used), and declining margin projection for noodle due to saturating market.

Another note is that wheat will have an indirect eff ect on ICBP’s operation, subject to Bogasari’s discretion on its fl our selling price.

Softer growth due to global factors and saturating markets for several of its businesses Despite the resilience Indonesia has shown during the recent global turbulence and ICBP’s low export sales, without a doubt, probable worsening global/ regional/ domestic sentiment due to uncontrollable factors will drag down performance.

Additionally, several segments for ICBP’s products have shown indication of maturity with slowing growth; such as noodle and SCM. Saturation along with shifts towards substitute goods is probable, and material, risks to the specifi c segment’s growth.

Weakening Indonesian Rupiah

High exposure to foreign imported ingredients causes ICBP to be highly eff ected by fl uctuations in the IDR’s exchange rate. Weaker IDR will result in higher COGS and lower margin for ICBP. An approximation of COGS’s sensitivity to USD/IDR movement is 0.78 for the food industry as a whole. Meaning that for every 1% movements in USD/IDR exchange rate, COGS will move by 0.78% in the same direction of USD.

Toughening competition to depress margins

Regardless of ICBP’s tremendous advantage of brand equity in most of its segments, toughening competition will force ICBP to face depressed margin as it takes time to adjust its market share and profi tability; during which, temporary or permanent loss of return might occur. Continuous innovation and staying up to date will be a necessity, as is commonly required to stay on top of the consumer products industry. mines in the future.

BUY with Rp6,150 target price

Target price valuation uses DCF method with 12.73% WACC and 3% terminal growth rate, implying a 20.59% upside potential with nominal price of Rp6,150. Factors considered include; 1) increase in COGS due to higher imported raw materials price 2) slower growth due to global factors and saturating market for several of its businesses, such as noodle and SCM 3) weakening Indonesian Rupiah, and 4) toughening competition depressing margins.

Automotive - Tire Manufacture

2011-12-27T22:22:00.000-08:00

by Mandiri Securities

(CC)Tire Manufacture: PCR sales volume in 11M11 up by 3.7% yoy (MASA, Rp500, Neutral) (GJTL, Rp2,975, Buy, TP: Rp3,000)

Based on data from APBI (Indonesian Tire Manufacturer Association), 11M11 PCR (passenger car radial) sales volume reached 46.9mn units (+3.7%yoy) translating to 91.0% of FY target. APBI is targeting FY11F sales volume to reach 51.56mn (+4.0%yoy) vs. 49.6mn in 2010. An export sale was still the largest contributor, with contribution 70.1%, while replacement market and OEM (original equipment manufacturer) contributed 21.5% and 8.4%, respectively.

However, 11M11 PCR production reached 46.4mn units (+2.4%yoy) translating to 98.3% of FY target. APBI is targeting PCR production in FY11F to reach 47.2mn units, down by 5.3%yoy compared to 49.9mn units in FY10 since APBI recorded inventory from 2010 production reached 2.4mn units.

For MASA, we are targeting FY11F PCR sales volume to reach 6.7mn units (+21.7%yoy) and 2W to reach 4.5mn units (+80.4%yoy), while revenue is targeted to reach Rp2.7tn (+35.5%yoy). While for FY12F, PCR sales volume is targeted to reach 9.5mn units (+41.8%yoy), 2W to reach 5.0mn units (+12.5%yoy, and revenue of Rp4.0tn (+45.4%yoy). We have a Neutral recommendation on MASA, which is trading at PER12F of 17.4x.

For GJTL, we are targeting FY11F PCR sales volume to reach 12.8mn units (+23.9%yoy), while bias tire and 2W is targeted to reach 4.0mn units (-3.7%yoy) and 25.5mn units (+22.1%yoy), respectively. While for FY12F, PCR sales volume is targeted to reach 12.6mn units (-1.2%yoy), bias tire of 4.0mn units (+0.0%yoy), 2W of 29.8mn units (+16.7%yoy, and revenue of Rp13.0tn (+11.1%yoy). We have a Buy recommendation on GJTL which is trading at PER12F of 11.6x

Banking Sector - All eyes on liquidity measures

2011-12-27T22:19:00.000-08:00

by Bahana Securities

Globally, liquidity now takes center stage, and testimony to this was the Fed’s move to lower cost of dollar financing through swap arrangements in several countries, including USA, Canada, England, Europe, Swiss and Japan. Elsewhere, China has lowered its reserve requirement ratio by 50bps to support liquidity.

Closer to home, Indonesia’s central bank, to ensure liquidity, has cut its benchmark interest rate by 50bps to a record setting low of 6%, taking advantage of low inflation environment. Note that November 2011 inflation recorded at 4.15% y-y or 3.17% ytd.

Outlook: Higher LDR to lead to potential asset remix

Although we believe that there will be no quick fix for the Euro debt crisis, this recent move led by the Fed has provided some confidence on banks’ liquidity and currency price stability.

Domestically, BI has discouraged banks from carrying out foreign denominated lending facilities while aggressively promoting IDR loans by providing competitive interest rates under easing monetary condition.

However, the recent cut in the benchmark rate may arguably not become effective as LDR continues crawling up to 83% at end-Sep 2011 from 79% a year earlier while incorporating undisbursed loans worth IDR623t would raise LDR up to 107% (hypothetically). Stripping out BBCA, our calculation suggests LDR of 86.1% and 110%, including undisbursed loans.

It is interesting to note that aggregate industry loans only accounted for 69% of 9M11 earnings portfolio worth IDR2,109t, followed by liquid BI and government papers at 25.8%. This would provide flexibility for banks to remix their earnings assets portfolio, leaning towards high-yielding loans, while third-party funding should grow 15% on solid GDP growth.

Recommendation: Stay with liquid banks - BBNI, BBRI & BBCA

Liquidity could become a problem for banks as loans continue accelerating, growing at 24.8% y-y at end September 2011. Additionally, the widening spread between BI rate and LPS’ rate reflects the need for flexibility in pricing third-party funding. That said, we advise investors to stay with banks with ample liquidity, allowing for minimal margin pressures. Our top sector picks remains with BBNI, BBRI and BBCA.

Surya Semesta Internusa Tbk. - Growth is Abound

2011-12-23T00:08:00.000-08:00

by OSK Sec

Additional 300ha land bank boosts target price to IDR1,000/share.

We recently held a meeting with the CEO who revealed that Surya Semesa (SSIA) will acquire an additional land bank of 300ha, which is adjacent to its current industrial estate. The acquisition cost will be around USD10/sqm with another USD20/sqm for development cost, which could be easily funded as the company sits on a IDR600bn cash pile as at end-Sept 2011 and still has a loan facility of IDR500bn from a local bank. Assuming the acquisition process will take one year, this additional land bank will bump up the company’s land available for sale to 583ha by end-2012 and increase SSIA’s NAV by IDR350/share – which compelled us to increase our 12-month Target Price for SSIA to IDR1,000/share. We also revised up our earnings forecast for FY12 and FY13 to IDR542bn and IDR668bn respectively – mainly on the back of a higher margin assumption and higher land sales assumption of 110ha for FY12 and 130ha for FY13 with average selling prices (ASPs) at USD90/sqm (+100% y-o-y) and USD120/sqm (+33% y-o-y) respectively. SSIA’s industrial estate segment will roughly contribute up to 70% of its total net profit for FY12-13, while the remaining is forecast to come from hospitality and construction segments.

Another 1,000 ha land purchase seen.

In view of the tight industrial land supply for the next 2-3 years, the company is now in discussions with Inhutani (a state-owned forestry company) to acquire the latter’s 1,000ha land, which is also located close to SSIA’s estate. Inhutani has requested to swap this land with 2,000ha forestry/plantation area in the West Java province. We believe the acquisition cost for this land is much cheaper than the above mentioned 300ha land acquisition, as the acquisition cost of plantation (including trees) area in Indonesia is currently at USD9,000-12,000/ha or USD1-1.3/sqm. We have yet to include this potential acquisition into our NAV calculations.

Interesting site visit.

Last week, we also drove 53km to the Surya SSIA industrial estate from Jakarta. We found out that the driving time between SSIA to its peer estates in Jababeka and Cikarang (30-38km from Jakarta) is only 10-15 minutes. Furthermore, SSIA enjoys better direct access as the distance to the toll gate is only 1.3km. Along the way, we noticed several current big plants belonging to TVC (India’s motor bike brand), GS Astra (battery plant), Santos Jaya Abadi and (one of Indonesia’s largest coffee maker). We also saw the 121ha site for Astra Daihatsu Motor’s (ADM) plant whose construction is now at the land-flattening stage. SSIA’s strategy to attract ADM to become its biggest tenant is now proven to be wise, as its participation is followed by other Japanese automotive part suppliers.

Maintain our Buy rating.

Despite more than two-fold price jump since our initiation coverage in Mar-2011, we believe there is further room for SSIA’s share price to rise even higher, owing to attractive valuations and stronger earnings growth. SSIA is now trading at only 5.9x its 2012 earnings, which is underpinned by an earnings growth of 144%. This is relatively more attractive than LPCK and KIJA’s PER of 3.4x and 13.9x, which are only backed by earnings growth of 65% and 63% respectively, according to Bloomberg consensus. We maintain our BUY call on SSIA with a new TP of IDR1,000, which implies a PE multiple of only 8.7x its 2012 earnings. At the current share price, our TP gives a potential price upside of 59%.

Cement Sectors - Demand Decreased

2011-12-23T00:06:00.001-08:00

by Trimegah Securities: Cement

The monthly updates compiled from Indonesia Cement Association showed that the cement demand decreased 4.6% MoM in Nov'11. Ytd cement demand reached 43mn tons or increased 18% YoY, still above ASI expectation at 15% growth.

Bagged Cement Increased, INTP Gained Market Share

The retail held the decline in cement volume in Nov'11 by adding 4% MoM composition toward bulk to 81%. INTP gained market share in Indonesia, especially Java, its regional based. The INTP market share increased to 32.5% while the other peers, SMGR and SMCB slightly losing their market share as Bosowa cement moving through strengthening the Western Java part.

Bosowa Tried Papua

After tried Sumatra, Java, Kalimantan, Bosowa now is concentrating to supply the Papua. Its supply jumped 525% MoM to 12mn tons in Nov'11, grabbed SMGR market there so the SMGR market share shrink to 28%, vs 70% last months. Bosowa gained 59% market share in Papua, increased 35% MoM. However, as Papua accounted only 0.5% to total Indonesia demand, it will not affect much.

Valuation

The cement companies currently traded at 16.7 x forward PE, compared to JCI at 16.6 x PE. Considering the proxy to both domestic demand and infrastructure projects, the cement price already reflects the proxy. We prefer hold for SMGR, at our target price in Rp11000, prefer INTP for TP Rp18250

PT PP.Tbk - Size Does Matter

2011-12-23T00:05:00.000-08:00

by Etrading Securities:

Size Does Matter

Construction industry growth remains high in the country. This development is supported by solid growth in economics condition, and Government commitment to improve infrastructure development in the country Land acquisition Bill helps to fastening the progress of building infrastructure. For solving the land clearance issue, government plans to pass the land acquisition bill in the end of this month.

Change on contract structure on PTPP.

PTPP plans to enter on multi years contract in the future, this development will help to secure its revenue in longer period. Diversifying its business. PTPP enter into investment in infrastructure project this year, and also plans to spin of its property unit to single entity. This will drive down overhead cost, and possibly diversify company risk.

PTPP is solid in its financial performance.

In Q3 Revenue Increase 30.07% from last period. Construction contribute for the biggest percentage in revenue, as much as 93.43%. Furthermore, EPC contributes for 4% of total revenue, and Realty and property contribute for 1.28% and 1.29% respectively. Cost of contract counts for 89.21% from revenue in Q3 2011, lower than Q3 2010 at 91.47%.

Our estimates and valuation. We get the DCF valuation of PTPP at 550/share based on WACC of 10.80%. Moreover, the WACC consists of Cost of Equity at 14.35% and Cost of Debt after Tax at 9.66%. We also assume the terminal growth rate at 2%. Furthermore, this price implies potential upside of 21% from current price. Therefore, based on this valuation we give a Buy recommendation on PTPP

Timah Tbk - Declining Global Tin Prices + Sales Volume

2011-12-23T00:03:00.000-08:00

by Trimegah Securities

As described in our base metals sector outlook, global tin prices will temporary ignore the fundamental and focus more on global economic slowdown in 2012.

We’ve reduced our 2012 global tin price assumption by 4.0% to USD24,000/ton. On the other side, we believe that being the world’s largest tin exporters, TINS plays a vital role on global supplydemand balance. The company has joined other smelters in Bangka to temporary halt the spot exports until prices reach consensus of USD25,000/ ton, which we believe to drag down the company’s sales volume. Both of these combinations are definitely negative to company’s earnings going forward. Management is guiding for 35,500 tons of sales volume in 2011, which is 6.6% lower than our estimation. 9M11 sales reached 25,266 tons, declined 13.6% YoY. Refined tin production reached 28,532tons, down by 3.7% YoY. Inventory shoot up, with the stock of refined tin reached 5,848 tons, jumped 78.3% YoY, indicating the slower demand. We foresee sales volume to reach 35.3k tons in 2011 and 39.4k tons in 2012. Inventory days have reached 180 days in 9M11, near its peak level in 2006 and 2008. As we believe that the sales volume to remain slow going forward, management’s policy to gradually reduce inventory days from 3 months to 1 month will face significant hurdle and at the same time impose some risks to the bottom line due to the inventory lag.

Going Offshore Project to Continue

After disbursing low capex in 1H11 (25%-30% of total Rp1.3tr capex), management plans to boost its capex realization going forward, which most of it will be designated to strengthen it offshore fleets. Five suction vessels, which are expected to complete in early 2012. In parallel, the company will also modify five units of Bucket Wheel Dredges until 2014, one of which is due to finish by early of 2012. At the mean time until the project is finished, we think that the company’s dependency on the on-shore small scale miners would be relatively high. In 9M11, the portion from inland tin ores rose to 51.8% vs. 45.7% in 2010.

Downgrade to HOLD, TP of Rp2,100

We downgrade our call to HOLD on the back of our lower price target calculation along with our less sanguine outlook on base metals sector in 2012. We incorporate our new tin price assumption, which reduce our 2011-2012 ASP assumption by 4.3%-4.5%. We also cut our sales volume as well as margin due to more inland tin mined expectation. All of these revisions have reduced our FY12-FY13 EPS by 27.9% and 25.1%, respectively. Our new target price implies 8.2x 2012est PE ratio.

Key Risks: Fluctuation on global tin prices, delays on its offshore project, illegal mining activities and tin smuggling especially during the high tin prices.

Adaro Energy - Set to Growth

2011-12-15T20:32:00.000-08:00

by Trimegah Securities

ADRO managed to hit its highest quarterly production in 3Q11 by producing 12.5mn tons of coal on the back of normal dry weather and arrival of new and larger sized heavy equipments. As such, we are comfortable to maintain our assumption on 2011-2013 coal production at 47mn tons, 51.7mn tons, and 58.7mn tons, respectively. Envirocoal Wara sales also encouraging, with sales volume reached 4.1mn tons in 9M11, already representing 81.4% of our 2011 forecast. We foresee Wara’s sales volume to double next year, to reach 10.3mn tons in 2012.

Aggressive Acquisition to Meet MT Growth

In 2011, ADRO has conducted several acquisitions in order to meet its target to reach 80mn tons production in medium term. USD283.5mn and Rp200bn has been disbursed so far to enter the South Sumatra’s coal business by acquiring 75% stake in Mustika Indah Permai (MIP), 61.04% in Bukit Enim Energi (BEE), and 35% in Servo Meda Sejahtera (SMS). ADRO also made USD65.4mn investment on 10.2% interest in Bhakti Energi Persada. The SMS acquisition should address the market concern on ADRO’s ability to monetize its green field assets in South Sumatra because SMS provides an integrated coal logistic service in the region and owns 228km hauling road from Lahat to Tanjung Lago. On the flip side, we also highlighted the ongoing concession dispute with PTBA will provide negative sentiment in the near term.

Infrastructures Development Continued, More Efficiency to Come

OPCC development is still on track to meet its first commercial operation in 1Q13. Until 9M11, the physical construction progress already reached 28% of completion. OPCC is expected to reduce USD1.0-1.2/bcm compared to the existing use of trucking or USD34mn-40.8mn. The 2x30 MW mine mouth power plant also already reached 77% of completion and on track to meet the expectation of commercial operation in 1Q12. Kelanis river terminal expansion project to 70mn tons also progressing well and will become one of the supporting factors for ADRO to meet its MT growth. ADRO’s consortium on Pemalang Power Plant project also managed to sign a power purchase agreement with PLN in 3Q11.

Maintain BUY, Lower TP of Rp2,700

We maintain our BUY call on the counter on the back of company’s growth potential through its existing mine expansion and several acquisitions. ADRO has been proven for its ability to maintain the production growth despite of any economic fluctuation since its first commercial operation in 1992. We maintain our assumption on coal production while lowering the 2012-2013 ASP to reflect our new coal price assumption. As a result, FY12-FY13 EPS declined by 9.1% and 13.2%, respectively. It brings us to our new target price of Rp2,700, implying 13.2x 2012est PE ratio.

Key Risks: The continuation of MIP’s concession dispute with PTBA will create a negative sentiment to the market and drag the share price, delay in ADRO’s green-field development, which will impact on ADRO’s ability to meet its MT target, potential of the export ban on low rank coal, and the fluctuation on global coal prices.

Bank Central Asia - An Aggressive Aggressor

2011-12-15T20:27:00.000-08:00

by Trimegah Securities

Aggressively Invading the Loans Market

Under new president director Mr. Jahja Setiaatmadja, BCA puts more aggressive power/force on the loans market. The need to embrace higher yielding assets is imminent as the bonds market continually proceeds on a bullish stance, and BI rate cuts build added pressure on profitability given more intense competition on funding sources. BCA has increased its maximum deposit rate by 75bps to 6.25% so as to maintain stable market share of time deposits. We believe that similar policies need to be applied/ adopted on CASA sooner rather than later, since depressing (overall) Cost of Funds by cutting interest rates on CASA cannot be sustained over a longer period. Tight competition will push management to uphold its strategy of focusing on the loans market through a combination of aggressive pricing and network expansion. BCA’s mortgage promotion rate of 7.5% has become a tremendous success and is accompanied by strong growth in overall loans portfolio as BCA pushes rates at 100bps -200bps lower relative to other banks’ pricing.

Transactional Banking to Maintain Overall Profitability

Today, BCA faces increasingly tighter competition wherein competitors aggressively expand transactional banking capabilities. While BCA may no longer command the most extensive ATM and branch network, we believe the quality of its network reserves undisputed superiority, given that total transaction frequency of 1.5bn vs. 300mn of closest competitor Mandiri. These statistics suggest that customers use the BCA network 5-times more often relative to its competitors. We believe that the next shift in the transactional banking model favors electronic banking channel since total transaction frequency supported has surpassed that facilitated by conventional branch banking and total transaction value has increased 37% YoY for internet banking vs. 14% YoY for branch banking. This is indication that customers presently rely on internet banking feature for large-value transactions as they have begun to grow accustomed to its convenience and safety. We believe that transactional banking presence is crucial in safeguarding bank profitability. BCA transactional banking services could afford ~40% of operating expenses and serves as a cushion against slower loans demand. For a sound business model, we believe BCA is the only bank with capacity to secure a balance of profitability and coverage ratio going forward. We have seen some competitors starting to pull back on provisioning for the sake of profitability as supported by IFRS implementation. BCA, in contrast, continues to preserve profitability at 340% - 350% range while locking in ~26% ROE.

BCA Inc. to Kick In

We expect BCA ventures into new business segments will start to kick in some profit contribution within the next two years. One of the aggressive expansion initiatives is BCA Finance, the bank’s multi-finance subsidiary with focus on automotive financing. BCA Finance is eyeing for Rp19tr total financing in 2011 and expects total financing to reach Rp27tr in 2012. We believe such targets are attainable despite a global market downturn because the principal strategy rests on gaining market share instead of venturing into new growth areas/pockets. BCA is currently also grooming a motorcycle financing arm, as well as insurance and securities companies. The overall corporate strategy is to provide a comprehensive product offering with cross selling orientation to all customers, which comprise private businessmen and the nation’s largest corporations.

Maintain BUY, TP of 8250

Despite BBCA does not provide much upside potential to our TP, we continue to like BCA for its growth capacity, clear competitive advantage, and very strong management quality. Investors should consider this stock as a defensive play as BCA provide least downside risk both from fundamental and share prices perspectives during global market uncertainty. We believe BCA will continue to deliver satisfying investment return over a longer term period. Our TP of 8250 reflects 4.2x 2012 PBV and 18x 2012 PE (WACC 13.4%, 26% ROE, 11% growth

Bukit Asam Tbk - Defensive Coal Stock

2011-12-14T19:12:00.000-08:00

by Trimegah Securities

Advantages from Growing Domestic Demand

Despite of any concern on slowing global coal demand due to the macro headwinds, Indonesia’s coal demand is expected to remain strong, thanks to the completion of PLN’s 10,000 MW fast track program. Upon the completion, PLN coal demand will increase by 133.6% from 40.8mn tons in 2010 to become 95.3mn tons in 2014. Both PLN and PTBA have entered into an agreement to increase the supply volume up to 14.0mn tons by 2014, which indirectly places PTBA on responsibility for generating 14.7% of total national electricity in 2014.

Progress of the Railway Project Has Been Seen

Although it was delayed, PTKA has managed to deliver 12 new locomotives and 250 new wagons at the end of 3Q11. The delivery postponement has caused a weak production growth in 9M11 (+8% YoY), but we expect it to reverse in 4Q11 onward along with the new railway equipments and the completion of its double-track expansion. Looking at the historical disappointing zero progress, we see a significant milestone has been done to date. The government has finally realized the lack of infrastructures that we have and is committed to accelerate the development through economic master plan. BATR Project is listed as one of the government’s MP3EI projects

Spared from Any Policy Noises

We’ve recently heard many potential regulations to be implemented in order to conserve the national coal resources such as an export ban on low rank coal, limitation on foreign ownership, and export taxes. Compared to other coal miners, we believe that PTBA will get a less affect if such regulations are implemented.

Around 60% of the company’s sales are designated to the domestic market (68% in 9M11) and most of the sales are coming from its low to mid rank coal products, leaving the high rank coal (BA -70) for the overseas market.

Lower TP of Rp22,200, Maintain BUY

We maintain our BUY call for the counter (despite with the lower target price) on the back of its defensive characteristics. We also positively highlighted the progress on the company’s existing railway expansion. We adjust our 2012 and 2013 coal production volume to reflect the potential impact of delays in wagons and locomotives delivery and lower IPC output. We also incorporated our lower 2012 coal price assumption. As a result, FY12-FY13 EPS cut by 12.0% and 6.2%, respectively. Our TP implies 12.2x 2012est PE

Key Risks: Execution risk is become company’s main risk so far, prolonged delay in railway development will put PTBA’s organic growth on jeopardy, legal issue with regards to its concession in Lahat, and the fluctuation of global coal prices.

Ramayana Lestari Sentosa Tbk - Propelled by Domestic Demand

2011-12-14T19:11:00.001-08:00

Batavia Prosperindo Securities : RALS

• Good 9M11 result but FY11F sales revised down

The company (RALS) booked 9M11 sales of Rp 5.2 trillions or up by 8% yoy primarily due to SSG of about 5% in Java and 3.5% in outside Java. RALS is expected to open only 3 out of 6-8 planned new stores in this year due to government permit issue and limited infrastructure in the new locations.

This resulted in the company’s downward revision of its 2011 sales forecast from around Rp 6.85 trillions to around Rp 6.6 trillions. In the bottom line, net profit increased 8% yoy to Rp 343 billions. It accounts for 85% of our 2011 estimate or 83% of 2011 Bloomberg estimate. Due to seasonality whereby sales was usually much higher during Moslem holiday in 3Q11, we view this achievement is in-line with both estimates.

• Expected to open a least 5 new stores in 2012

The company plans to open 5-10 new stores next year, of which 5 stores have the highest chances of completion and are scheduled to open in 1H12. We view that, internally, the company has the capacity to grow, given its high cash and zero debt amount, besides its long experience and good track record. We are optimistic that sales will continue to rise propelled by domestic demand as the country’s GDP growth remains strong.

• Recommend Buy with TP of Rp 850

With dividend payout ratio of around 50% historically and 60% for FY2010, this can be a good dividend play stock. For valuation, we use discounted cashflow method with WACC of 11.0% and terminal growth of 2.5%, resulting in target price of Rp 850 per share or at 2012F PE of 12.9x. It reflects 44% of potential upside.

Indo Tambangraya Megah Tbk - More High CV Coal to Come

2011-12-14T19:09:00.001-08:00

by Trimegah Securities

2012 Outlook

We maintain our production outlook for the company, looking for 12.0% YoY growth on 2012 production, equals to 27.0mn tons and growing further by 15.9% YoY to reach 31.3mn tons in 2013. We cut our 2012-2013 ASP assumption by 2.8% and 1.3%, respectively, to reflect our lower 2012 coal price assumption. There’re still M&A potentials going forward even though we think it is unlikely to happen in the near term. As such, we’re still looking for 75% dividend payout ratio, equals to 5.9% of dividend yield, the highest among coal companies under our coverage.

Optimizing Its High Calorie Assets

Besides expanding its Indominco’s East Block, ITMG’s future growth will be driven by its high coal calorie assets. Kitadin Tanjung Mayang is expected to start its commercial production this year with production expectation at 0.4mn-0.5mn tons before gradually increase to around 2.0mn tons per annum. Moving inland, the company owns 2 high calorie coal concessions named Trubaindo and Bharinto (6,250-7,000 Kcal/kg range of coal products). Both concessions’ reserves reached 154mn tons, accounted for 46% of company’s total reserves. As such, we expect company’s blended CV to increase going forward, thus supporting the ASP.

Visiting Trubaindo Site, Expansion Project Is Running Well

Based on our recent mine site visit to Trubaindo in early Nov’11, we saw the expansion programs were going as well as planned. Production also looked encouraging with 7.3mn tons output in 2011, 4.1% higher than our estimate. Should the weather continue to be in normal state, there will be an upside potential to this management’s guidance. Mining activities will weigh more on the South Block of Trubaindo (15-30km hauling to the crushing plant) and move further to Bharinto (45km hauling to the crushing plant), which will used the same infrastructures with Trubaindo’s coal. The MT goal here is to produce 15mn tons of coal in 2015, 10.0mn tons of which will be coming from Trubaindo while the remaining 5.0mn tons will be Bharinto’s part. We’ve made a minor revision to raise the production output target at Trubaindo and Bharinto.

Maintain HOLD, TP of Rp47,100

We maintain our HOLD recommendation for the counter because of limited upside potential to our fair value calculation (+10.0%). We incorporate our lower 2012 coal price assumption, raise our assumption on Trubaindo and Bharinto’s production output after recent site visit to Trubaindo as well as higher stripping ratio adjustment. As a result, our FY12 EPS assumption declined by 11.2% while FY13 EPS assumption increased by 3.1%. Our DCF model suggests the target price of Rp47,100. It implies 9.6x 2012est PE.

Key Risks: Fluctuation on global coal prices, delays in Bharinto Project, depleting reserves will make potential higher production costs ahead in order to keep production volume.

Astra Agro Lestari (AALI) - Fully Optimizing Resources

2011-12-14T19:08:00.001-08:00

by Batavia Prosperindo Securities : AALI

· Above the monthly average

In 9M11, AALI produced 3,430,102 tons of Fresh Fruit Bunch (FFB), increased 13.5% y-o-y. In September 2011 alone, AALI booked the highest CPO production of 451,693 tons, above the average CPO production in 2011 of 381,122 tons. Total CPO production until end of September 2011 was 930,827 tons, increased 19.8% y-o-y. AALI recorded 9M11 CPO sales volume of 889,917 tons (+16.8% y-o-y), which 95.5% of it was sold to domestic market.

AALI booked Rp7.94 trillions of net sales, up by 38.7% y-o-y, due to increasing sales volume and Average Selling Price (ASP) of CPO products. ASP of CPO in 9M11 increased to Rp7,776 per kg (+16.5% y-o-y) while ASP for CPO derivative product such as Palm Kernel Oil (PKO) and Palm Kernel Expeller (PKE), are also increased by 54.8% and 100.2% respectively

· Additional 2 palm oil mills

AALI added 2 more palm oil mills during 9M11. Average palm oil mills utilization rates are 70%-71%, with the highest utilization rate is on Sumatra palm oil mills which is 80%. Next year, AALI will add two more palm oil mills in Sulawesi and Kalimantan with capacity of 45 tons FFB per hour for each mill.

AALI will allocate Rp1.7 trillion of capital expenditure in 2012 from internal. Capex will be used to add new planting area (in South Kalimantan, West Kalimantan and South Kalimantan), replant (3,000 ha) and build 2 palm oil mills.

· “HOLD” on target price Rp23,300

We see in next year, AALI CPO production and sales will not increase significantly due to limited new planting area. We predict production and sales growth will be the same as previous.

We expects commodity prices in the near future will not be in increasing trend, due to uncertainty in Europe and impact of tightening policy in China. We still assume average price of CPO next year is USD 1,050 per ton. Our DCF valuation model results in target price of Rp23,300, or at 12.4X FY12F PE. We recommend HOLD with 6.9% potential upside from the closing price (12/12) at Rp21,800

Mitra Adiperkasa.Tbk - Kingdom Growing Bigger

2011-12-14T19:06:00.000-08:00

by Trimegah Securities

Strong Earnings Growth to Continue.,

As we estimate FY11 earnings increase of 59%, we expect MAPI to forge ahead on this high growth trend over the next few years. For 2012, our forecast indicates earnings growth to reach 33%, supported by 17% top line growth and margin improvement. Bear in mind that we use a conservative forecast in comparison to management’s estimates, which provide target revenue growth of 20- 23% for the next year. In 2012, MAPI plans to add a maximum of 60,000sqm new retail space with total allocated capex of Rp550bn. We assumed a 55,000sqm expansion using Rp550bn capex and 10% SSG that would drive top line. Approximately 70% of the new expansion space, or equivalent to about 30,000sqm is located in two department stores in Jakarta. Mall moratorium that had been imposed by Jakarta’s regional government would not hinder the expansion plan since there are currently 13 new malls that have obtained required building permits.

Store Maturity and Pricing Power to Sustain Margin Improvement.

Margin improvement will remain to be the key catalyst for this stock. We forecast next year’s GPM to grow 70bps to 51.7% and 30bps in 2013 as more stores (particularly specialty and F&B) come to maturity. Moreover, the company’s good pricing power will allow it to maintain current margins by passing on increases in input costs to consumers. We have seen this approach successfully implemented this year when MAPI raised Starbucks prices by 7% to 8% due to higher coffee prices. Such pricing power will ease the risk of a weak(ening) IDR to a more manageable level for MAPI, since middle-up consumers can afford to accept price hikes without having to alter their lifestyle.

Deleveraging put on hold with the Expansion Mode.

We have seen MAPI deleverage its debt from Rp1.4tr in 2008 to Rp1tr in 3Q11 using its strong operational cash flow. Management will, however, abandon this strategy as MAPI shifts focus on aggressive expansion next year. As of Dec’12, MAPI will also need to refinance maturing bonds amounting Rp295(bn); hence, we expect the company to take up additional debt of equal amount in the middle of the year and incurring higher interest expense of Rp16bn in the next year compared to FY11.

Maintain BUY, higher TP of Rp5,650/shr.

We maintain our buy recommendation for MAPI with a higher DCF based target price of Rp5,650/shr (from Rp5,500/shr previously) on the back of higher margin expectation and revision for 5,000sqm additional expansion to our current assumption to 55,000sqm. Our valuation uses 13.2% WACC with 6% LT growth.

Trading at 20.6x Fy12 PE, MAPI’s demanding valuation becomes the main concern for investors. In our view, 43% CAGR earnings growth from 2010 to 2013 (0.5x PEG) still renders MAPI an attractive stock to invest in. Any deep correction is a good opportunity to buy.

Key Risks:

Losing principal relationship (weakening relationship with principals), new strong competitor(s), changes in purchasing power and weakening IDR are the risks for consideration with respect to investing in MAPI.

PT Indocement Tunggal Prakarsa Tbk - Keeping up with the rising demand

2011-12-14T19:04:00.001-08:00

by Batavia Prosperindo Securities

• High national cement demand

Along with the rising demand of national cement consumption, up to 9M-2011 INTP has booked a total sales volume of 11,434 thousand tones, rising 12% compared to the same period last year. Pushed by high demand, as per 3Q-2011 INTP has reported revenue of Rp. 9,779.6 billions, growing 20.6% from 3Q-2010. As for the net income, INTP recorded an increase of 8.75% compared to last year. Lower growth in the net income was caused by the rising energy costs since last quarter 2010, which could not be fully absorbed by the 3% and 1% increase in INTP cement price in October 2010 and in July 2011. But overall, INTP performance up to the 3Q-2011 is still inline with the consensus.

• Still have enough room to increase its cement production

Three cement factories of INTP (Citeureup plant, Palimanan plant & Tarjun Plant) utility currently are still below 90% of its full capacity, and the average utility is around 79.04%. This space will give INTP the ability to meet the future rising demand of cement consumption and maintain its current market share of Indonesian cement producer.

• Expecting more cement demand in the future

The rising trend of Indonesian cement demand is expected to continue in the future. Low interest rate can become a catalyst to boost the property sector, while the government is also trying to build more infrastructure to backed up the growth of economy. Anticipating this INTP is currently building a couple of new plants and increasing the old plants capacity.

· New Target Price with revised Recomendation

Considering all the point’s above we revise our recommendation from “HOLD” to “BUY”, with new TP of Rp. 18,000.

Bank Mandiri. Tbk - ATM Expansion Has Not Yet Driven ATM Utilization

2011-12-12T00:56:00.000-08:00

by Trimegah Securities

Mandiri aggressively expanded its network as this goliath tries to deepen its presence on transactional banking, positioning itself head-to-head with incumbent BCA. Mandiri opened 2488 new ATMs in the past six months. While we like such aggressive management attitude, we maintain a wary outlook on expansionary push, given its utilization is relatively low compared to BCA. Mandiri’s network of 8993 ATMs delivered a total of 184mn transactions with total transaction value of Rp145tr vs. BCA’s 8070 ATM network which scored 292mn transactions grossing Rp280tr of transaction value. The figures suggest that Mandiri’s expansion with 2488 new ATMs yielded 24mn incremental number of transactions worth Rp26tr in the past six months vs. BCA’s additional 32mn transactions with total value of Rp55tr from its 515 new ATMs over the same period. All in all, the utilization of Mandiri ATMs stands at about ~56% of its biggest competitor. Nonetheless, we believe the longer term prospect is robust for Mandiri, and there remain room for improvement for this particular aspect.

Strong Growth to Continue

Mandiri delivered strong loans expansion of 7.0% QoQ to Rp253tr as the bank’s loans portfolio booked a satisfactory level of growth. Growth rates for different customer segments are as follows: corporate loans grew 7.2% QoQ, commercial loans 6.6% QoQ, SME loans 7.0% QoQ, consumer loans 5.8% QoQ, and micro loans 12% QoQ. On the funding side, however, the growth profile is not as robust as its asset side, with total funding increasing 2.9% QoQ and LDR advancing to 79%. With CAR ratio at 16% post rights issue, we believe strong growth will continue going forward. Furthermore, expansion of network and branches has successfully gained for Mandiri approximately ~200 thousand new depositors and ~400 thousand new debtors, thereby generating 20% QoQ growth in administration fee income. AXA Mandiri, a new venture in the insurance sector, also posted extraordinary results, with Rp2.4tr net premium income and Rp10tr total assets. Management is confident that it could enhance shareholders’ value by ~Rp24tr based on the Appraised Value Method.

Strong Profitability Profile despite Easing NIM

Mandiri recorded net profit of Rp9.1tr despite its NIM easing to 5.1%. Contrary to positive growth profile of loans and LDR, which reached the statutory limits, hence increase earning asset proportion, NIM fell by 6bps QoQ. The NIM pressure comes after the benchmark rate standard alteration of variable rate government bonds from SBI to T-bills, mark to market of GIAA shares hold by Mandiri Sekuritas, and pawn broking fees of Bank Sharia Mandiri which is accounted as fee based income. Mandiri will continue to show high sensitivity toward movements in the bonds market as it retains Rp76tr of variable rate government bonds, or equivalent to 18% of earning asset. Hence, a 10bps of T-bill yield change will affect bottom line by ~Rp66bn.

Maintain BUY, TP of 9000

We maintain our Buy recommendation on Mandiri with TP of 9000, reflecting 2.9x 2012 PBV and 15.5x 2012 PE (WACC 13.7%, 22% ROE, 11% growth). Aggressive management and strong business growth remain the biggest catalysts for this stock performance. Amid global economic uncertainty, however, we should be aware that high corporate loans exposure might post some asset quality deterioration going forward.

Bank Rakyat Indonesia - Micro Loans Wonder

2011-12-12T00:55:00.003-08:00

by Trimegah Securities

Self Sustaining, Resilient Growth of Micro Loans

BRI delivered 4.0% QoQ loans growth as corporate and micro loans contribute 76% of the total growth. We believe micro loans are now even more important for BRI in order to sustain its profitability and growth profile in the face of global market uncertainty. Contrary to common belief, BRI has successfully proven that micro loans are generally resilient in crisis environment and could fund itself. BRI micro loans products continued to grow at 29% - 30% in the midst of 2009 global economic meltdown, while NPL remained stable at <2.0%. Its new Teras BRI has also become an overnight success with current operation of 1195 branches. Teras BRI was developed from scratch in 3Q09 and BRI’s unbeatable knowledge and experience in micro banking proved to be a critical advantage in supporting growth of this new channel. The aggressive development of Teras BRI has proofed to massively impact its competitor growth as BRI’s strong human capital, management experience, and brands show its strength.

Waiting for Capital Enhancement

BRI total CAR ratio of 13.4% in 3Q11 is only adequate to support growth at par with the industry average. BRI’s capital restriction, we believe, will soon improve as IFRS implementation takes into effect. Capital enhancement will come from two main sources (1) micro loans RWA weighting scale pulling back to 75% vs. 85% currently applicable (2) new Bank Indonesia regulation PBI 13/1/2011 on self risk assessment, which should induce a new trend of easing LLP expense/coverage in the banking sector or even writing back previous reserves. BRI, with its Rp18tr total reserves and 32% micro loans portfolio, should become one the main beneficiaries of this accounting regime changes. Decreasing RWA weight on micro loans should boost CAR ratio by 40bps.

Human Capital for Sustainable Growth

BRI places a strong emphasis on human capital development. We like the fact that 49% of its employees is between 20 – 30 years old and management aggressively recruits future leaders. BRI has doubled its employee recruitment efforts to (approximately) ~1000 new employees per annum since 2007. The figures show that BRI can continue to deliver strong performance going forward as younger bankers become more competent through experience. Continuous development is also reflected in the bank’s overall human capital management, comprising of in-house training, external training, and scholarships for higher education opportunities at top universities in the US, UK, or Australia. The bank offers employee benefits that also include performance-based bonus, customization of salary package between business and supporting units, and unlimited health coverage. Such superior compensation package, along with high management attention to sustainable personal development has significantly contributed to/supported its well-known low employee turnover ratio. We believe this is important to secure BRI’s competitive advantage going forward, particularly since banking is a people-oriented business, hence highly sensitive to HR dynamics.

Maintain BUY, TP of 7750

We maintain our Buy call for BRI with TP of 7750, reflecting 3.9x 2012 PBV and 14.8x 2012 PE (WACC 13.4%, 26% ROE, 12% growth). We like the prospect of this stock in 2012 as its high margin micro loans business continues to generate strong growth potential through network expansion, capital enhancement pending adoption of new accounting policies, and sustainable human capital programs.

BW Plantation - Superior Growth is More Than Enough

2011-12-12T00:52:00.000-08:00

by Trimegah Securities

Get Ready for a Strong Growth Ahead

We expect the company’s FFB production to reach 455.7k tons in 2011, increased 18.9% YoY. For 2012, we expect a further 30.7% growth (largest compared to its peers) to reach 595.6k tons. The superior growth is mainly driven by 8,000ha of new planting in 2008 (equivalent to 40.7% of current matured area), which is likely to become a mature plantation next year. We expect such trend to continue in medium term, implying 23.5% of the five-year CAGR of FFB production growth compared to 5.2% of average peers. In contrasts, because of the new young matured area has yet given the optimal production, we expect the company’s FFB yield to decline in the next 2-3 years.

On Track to Meet Its MT Sustainability

Until 9M11, BWPT has managed to add 5,565ha of planted area, consisting of 2,912ha nucleus and 2,653ha plasma. We understand that the number is only representing 53% of both our and management’s 2011 target. Nevertheless, if we compared it to other plantation companies among our coverage (2,000ha-3,000ha on average), such additional planted areas are acceptable. The company’s consistent new planting since 2007 would provide a medium term sustained growth by replacing the old 1998-2000 planting in the next five to six years. BWPT still owns more than 40,000ha of land bank, which is enough to feed the company’s expansion program until 2014.

Net Gearing Up, However It Still Within Management’s Target

Based on 9M11 financial statement, the company’s debt to equity ratio rose to 1.15x (the highest among our coverage), which was driven by the Rp530.9bn of new outstanding loan from BBRI. We understand as the newly developed company coupled with the aggressive expansion program, external funding is a main option. Based on our latest discussion with the management, BWPT’s capital structure policy is to keep its debt to equity ratio below 1.5x.

Maintain BUY, TP of Rp1,600

BWPT remains as our top pick on CPO sector, mainly driven by its outperforming growth potential as well as margins compared to its peers. We do believe that the growth prospect is what investors are looking for nowadays, particularly in the middle of soften CPO prices outlook. 9M11 results are mostly inline with our expectation but minor revisions were made to incorporate the company’s newly acquired loan from BBRI. We maintain our price multiple target of 14.3x forward PE, 10% premium to its peers justified by company’s superior EPS growth. It implies TP of Rp1,600.

Key Risks: CPO prices fluctuation, company’s rich valuation.

Harum Energy Tbk - Catching Up Production Target

2011-12-12T00:50:00.000-08:00

by Trimegah Securities

Accelerated 3Q11 Production

As a result of lower than expected production level in 1H11, HRUM 9M11 coal production (including Santan Batubara) was only representing 71% of our 2011 estimate. Nevertheless, 3Q11 production has showed a significant improvement, which was mainly driven by the normalized weather, additional mining equipment arrived in 2Q11, and the installation of new crushing plant and interconnecting conveyor.MSJ managed to ramp up its average monthly production of 758k tons in 3Q11 and it is expected to sustain in 4Q11. This should offset the lower production from Santan and the TBH’s delays, in our view. We raise MSJ production by 9,7% to become 7.9mn tons in 2011, cut Santan production to 2.0mn tons (in line with management’s guidance), and nullify TBH’s production due to the permit issue.

Going forward in 2012,

we maintain our forecast on MSJ production, as we believe that most of the infrastructures developments are already in place. The management has allocated USD30mn to finance expansion initiative this year (around 50% has been realized until 9M11), which will be used for hauling road development, buy more barges and tug boats, develop port in TBH, and build 4th coal crusher. The completion of the crusher will bring MSJ’s inbound capacity to 20.0mn tons/annum. For Santan, management guides that the additional equipment needed to support the production increase would be deliver in early 2012. As such, we decide to cut our forecast on Santan production by 20% to become 2.8mn in 2012. We also cut TBH production to 1.2mn tons to reflect our conservative view as the Land Use-Borrow Permit has not yet been issued. As a result, we are currently expecting total HRUM’s production volume (MSJ+TBH+Santan) at 13.0mn tons in 2012, 6.9% lower than our initial estimate.

Santan’s Exploration to Continue

Management revealed that the exploration on Uskap Block is expected to finish by the end of this year, followed by an announcement of JORC resources and reserves in 1Q12. Based on Indonesian Coal Book data, the initial drilling program conducted in 2004 by Australian based, MineConsult, showed that Uskap Block owned 231.1mn tons of resources and 8.1mn tons reserves. Should it managed to comply with the JORC Code, it will increase Santan Batubara’s amount of reserve by 47.6%.

Maintain HOLD, TP of Rp8,000

We maintain our HOLD recommendation for the counter, as we believe that the market has fully pricing in the company’s superior growth. We incorporate our lower coal price assumption, reduce our coal production outlook in TBH and Santan Batubara, and raise our cash cost assumption. All of these resulted in 14.2% and 0.3% lower in FY12-FY13, respectively. We continue to use P/E methodology to derive HRUM’s price target in order to catch up its near term growth. Our price target now is based on lower multiple target of 11x vs. 13x previously, to reflect the current macro uncertainty.

Key Risks:

Fluctuation of global coal prices, delays on TBH expansion due to the permit issue, and company’s low reserves live

Sampoerna Agro Tbk (SGRO) - Undemanding Valuation + Performances Improvement

2011-12-12T00:48:00.000-08:00

by Trimegah Securities

Surprising Production Recovery SGRO managed to produce 440k tons of FFB in 3Q11, making up1.3mn tons of FFB in 9M11, on the back of higher than expected plasma production. Plasma contributed 58% of total company’s FFB production in 9M11, higher than 2010 level. Despite of this surprising plasma recovery growth, we believe that nucleus portion to grow strongly against plasma going forward on the back of massive nucleus new planting since 2007. 9M11 FFB production formed 84.4% of our 2011 estimates. 4Q11 production should be similar with 3Q11 level at around 400k tons. Moving to 2012, despite of the high base in 2011 due to the production recovery, the survey conducted by the field operator shows that there’s still potential for production to grow further These lead us to raise our 2011-2013 FFB production by around 1.7%- 6.3%. We are still looking for 6.5% of 5-year CAGR on FFB production until 2015, making it the 2nd highest growth among our plantation coverage.

Latest Updates on Its Expansion Program

Until 9M11, SGRO only managed to plant 2,150ha of new planting. We revise our 2011 new planting assumption of 4,500ha, while keep maintaining our assumption for 2012 onwards as the management commit to catch up the new planting target of 50k ha until 2014. Land bank availability should not be an issue here as the company owns 59,841ha of land bank, sufficient to meet its medium term expansion program. With regards to its sago business, SGRO’s starch factory is expected to start its commercial operation in 4Q11 with 33,000tons of annual capacity. SGRO has signed a contract with several buyers with 100% purchase commitment. Indeed, the revenue contribution is minimal (around 4.0% of our 2012est by assuming USD425/ton of sago starch and production is running at full capacity), but if the sago business proven to run well it should ease the market concerns about its sago expansion.

Maintain BUY, TP of Rp4,100

We reiterate our BUY call on SGRO, mainly driven by its undemanding valuation.

On an asset valuation basis, SGRO is the cheapest plantation company among our coverage based on EV/planted area. Such valuation, we believe, is mainly driven by company’s high plasma portion compared to peers. However, it should reverse as we expect nucleus growth to outperform plasma (65%-35% in 2015).

We’ve revisited our model to adjust the higher than expected FFB production in 2011 and new CPO price assumption. We also incorporated higher export portion, which led to higher opex. As a result, our FY12 EPS increased by 9.5% while FY13 EPS trimmed by 4.2%. Our TP is derived from 11.7x Forward PE, a 10% discount to its plantation peers.

Key Risks: CPO prices fluctuation, high plasma portion to create a volatility on company’s FFB production, worse than expected upcoming La Nina should give an upside risk to our forecast.

International Nickel Indonesia Tbk - Weigh More on Nickel Prices

2011-12-12T00:46:00.000-08:00

by Trimegah Securities

Pressures on Nickel Prices

By only producing nickel in matte, INCO’s financial performance is highly sensitive to the nickel prices movement. Nickel price dipped by 39.3% from its Feb’11 peak recently amid global economic concern. As described in our sector outlook, we believe that nickel prices will get double pressures from macro headwind and its oversupply environment. As such, we cut our 2012-2013 nickel prices assumption by 6.8% and 11.4% to reach USD20,500/ton and USD19,500/ ton, respectively.

Weaker Production in 4Q11,

Expected to Recover in 2012 INCO will shut down its furnace no.2 for 21 weeks for maintenance within the end of this year and early next year, which will bring a declining YoY nickel in matte production. As such, we expect INCO production to decline by 8.4% YoY to reach 69.6k tons in 2011 and 71.3k tons in 2012. Besides the furnace maintenance, INCO will also conduct several projects in order to meet its medium term production target of 90mn tons in 2015. It will upgrade 2 generators of Larona hydro power plant in 2012, install a power demand stabilization system on Furnace no.4, and developing its 32,123ha of mining concessions in Bahodoppi, Central Sulawesi. INCO will build a road that will connect Bahodopi and Sorowako and also dryer facilities in the area.

Welcoming Karebbe Power Plant

INCO has officially operated its 3rd hydro power plant, Karebbe in the end of 3Q11. The 1x90MW installed capacity, together with INCO’s current 275MW installed hydro power plant in Larona and Balambano, is expected to relieve the company from thermal power plant usage in any operational activities. Before the operational of Karebbe, INCO’s two installed hydro power plants (275MW) are only sufficient to power 65,000 tons of production. It needed combined with the 1x78 MW diesels and gas fired thermal power plant, they are able to power INCO’s full production capacity of 77,000 ton. The thermal power plant will be used as a back up generator, depending on nickel price and water levels on its reservoir.

Downgrade to HOLD, Lower TP of Rp3,800

We downgrade our call to HOLD on the back of our lower DCF-based target price calculation along with our less sanguine outlook on base metals sector in 2012. We incorporate our new nickel price assumption, which reduce our 2011-2012 ASP assumption by 6.8%-11.4%. We maintain our 2011 nickel in matte production but slightly reduce our 2012 and 2013 volume by 2.6% and 5.0%, respectively, to be more conservative. Cost saving on Karebbe will not be enough to sustain margins due to the declining nickel prices, in our view. Our FY12-FY13 EPS is now 22.5% and 32.3% lower than our previous estimation. Our new target price implies 12.2x 2012 est PE ratio

Key Risks: Fluctuation on global nickel prices, permit and legal issue with local government with regards to the company’s Contract of Works obligation.

Ace Hardware Indonesia Tbk. - Biggest Bite in a Big Cake

2011-12-07T03:15:00.000-08:00

by Trimegah Securities

Promising Leading Indicator.

ACES continues to flourish on the back of robust property and auto sales this year. Lower mortgage rate from big banks and increased household income pushed marketing sales of property companies to exceed year opening targets. We believe this serves as a positive key indicator for ACES next year performance, as there is a 12 to 15 month time lag between marketing sales transaction and occupancy of property by owners. We expect a rosy outlook in property sales, supported by BI’s move for a 75bps cut in benchmark rate over the last three months. Furthermore, new car sales totaling 850,000 units this year similarly benefits ACES’ auto department, which generated 9.1% of total sales in 9M11.

Concerns over New Competitors.

PONG’s Do It Best is the first serious competitor for ACES in the home improvement retail business. We expect a continuous stream of bad news over the medium term as our sources confirmed rumors that IKEA will be establishing its first store in Indonesia, to be located in Alam Sutera.

We understand that IKEA is a closer competitor to Informa, ACES’ sister company. However, since ACES and Informa are usually placed under the same roof or in neighboring locations and IKEA also carries hardware in its product portfolio, we expect IKEA to capture a portion of ACES potential market.

Margin Contraction Eased with Robust Sales.

We expect ACES’ GPM to slow down next year after rising 300bps on a YoY basis during 9M11. The company doubled its A&P expenses and intensified discount and promotional programs in response to the entry of PONG’s Do It Best. The impact was clearly seen in 3Q11 results, in which top line grew 20% QoQ but GPM declined 150bps QoQ. Given a strong top line outlook and favorable industry prospects, we believe margin contraction would be eased by robust sales. We expect next year’s revenue to grow 30%, driven by a 35,000sqm expansion (including Toys kingdom) and 8% SSG.

Maintain BUY, higher TP of Rp4,550/shr.

We maintain our BUY recommendation with a higher target price at Rp4,550/shr on the back of upbeat expansion plans and SSG. Our DCF based TP uses 11.3% WACC and 7% LT growth assumptions. ACES currently trades at 18.7x FY12 est PE. Robust property sales, low interest rate, good execution rate underpin our bullish outlook on ACES. We expect ACES’ top line to continue outgrowing its peers with 30% CAGR until 2013.

Key Risks:

Increasing COGS on imports out of China and Thailand, slowdown in the property sector, tightening competition, changes in purchasing power are the main risks associated with investment in this stock.

Adaro Energy - Fundamental Stories

2011-12-07T01:30:00.000-08:00

by Trimegah Securities

Remain Intact Set to Growth ADRO managed to hit its highest quarterly production in 3Q11 by producing 12.5mn tons of coal on the back of normal dry weather and arrival of new and larger sized heavy equipments. As such, we are comfortable to maintain our assumption on 2011-2013 coal production at 47mn tons, 51.7mn tons, and 58.7mn tons, respectively. Envirocoal Wara sales also encouraging, with sales volume reached 4.1mn tons in 9M11, already representing 81.4% of our 2011 forecast. We foresee Wara’s sales volume to double next year, to reach 10.3mn tons in 2012.

Aggressive Acquisition to Meet MT Growth

Infrastructures Development Continued, More Efficiency to Come

Maintain BUY, Lower TP of Rp2,700

PT London Sumatra Plantation Tbk - Facing Better Productivity

2011-12-07T01:28:00.001-08:00

by Trimegah Securities

Favorable Growth Outlook…

LSIP’s FFB production in 9M11 was slightly ahead than our expectation. Both of plasma and nucleus produced 1.4mn tons of FFB, forming 80.0% of our 2011 estimate. Going forward, we expect 5.6% YoY increase on FFB production in 2012 to reach 1.9mn tons on the back of higher yield expected in South Sumatra and its relatively young plantation estate. In medium term, we are looking for 6.0% 5-year CAGR of FFB production. In contrasts, rubber production was surprisingly far below our expectation in 2011. As such, we cut our rubber production forecast to 15,400 tons in 2012 and 15,800 tons in 2013.

… Coupled with Favorable Estate Profile

LSIP estate has an average age of 11 years old as of 2010, which is an ideal level in our view. 34.8% of company’s CPO planted area in 2010 were still an immature and young age plantation (< 7 years old), which will become company’s source of growth in coming years. In 2011, management has implemented a new block management system for more effective control, which made the company’s statement of total planted area slightly decline to 99,338ha. Management stated that the re-measurement will not impact to any crop production going forward.

Intensifying the Infrastructures Development

Firstly established in 1995, South Sumatra estate currently accounts for 44.0% of total company’s planted area, higher than the properly-established estate in North Sumatra. Due to lack of infrastructures and historical values under investments, South Sumatra has a lower yield than North Sumatra, weighing down the company’s blended yield. Since its acquisition by Indofood, LSIP has aggressively funded infrastructure development in the region to improve the yield. After being halted in 2010 due to weather related issue, the management plans to accelerate its infrastructure development in 2011 and later, in South Sumatra estate. Better road transportation built along the housing construction would lead to better handling of FFB, hence improving the yield on the region. In Oct’11, LSIP has been awarded RSPO cerification for its 3 estates and 1 POM in South Sumatra.

Maintain BUY, TP of Rp3,000

We maintain our BUY call on the counter driven by its favorable growth outlook and yield improvement coming from its South Sumatra estate. We incorporate our higher FFB production estimate to reflect company’s better production in 9M11. Our 2011-2013 FFB production estimates now is 2.1%-3.8% higher. We also lower our costs assumption as a result of better company’s costs management, delivering a higher operating margin in FY12-FY13. As a result, our FY12-FY13 EPS increased by 14.3% and 19.9%, respectively. On the flip side, we cut our price multiple target to reflect the global macro uncertainty (similar with it peers) to 13x forward PE, implying our new TP of Rp3,000.

Key Risks: CPO prices fluctuation, worse than expected upcoming La Nina should give an upside risk to our forecast, the listing of four INDF’s agriculture related entities would provide risks for LSIP.

United Tractors - The Trident Is Getting Sharper

2011-12-07T01:26:00.000-08:00

by Trimegah Securities

Strong Heavy Equipment Sales to Continue

With an average monthly sale of 712 units this year, we lift our 2011 sales assumption to 8,000 units. Using the same growth rate assumption, we expect the company to sell 8,910 units in 2012. Despite of the global economic slowdown, we believe that our assumption will be fully achievable.

We think that it is least likely for 2009 case (when sales declined by 28.4% YoY) to reoccur because unlike the financial market, the real domestic commodities sector is still running with full steam. Major ramping up projects and green field expansions will create more demand on heavy equipment going forward. With more than 60% sales go to the mining sector, we believe this strong mining activities will be a good catalyst for Komatsu sales.

It is also worth noting that there’s an infrastructure boom potential going forward, especially if the LCA bills could be passed by the parliament in 4Q11. In the last 5 years, 10-15% of Komatsu sales are designated to the construction sector.

Stable Growth on Mining Contracting

Business, Margin Improved Until 9M11, Pama has succeeded to remove 585.2mn bcm of overburden and 63.3mn tons of coal, an increase of 22% and 11%, resp ectively. Higher stripping ratio (9.2x vs. 8.4x in 9M10) has directly shown us the aggressive expansion projects conducted by our coal miners recently. Protected by a LT coal contract, we foresee a 10% growth for both overburden removal and coal extraction in 2012, in line with the management target. Learning from the past, Pama’s overburden removal was still able to grow by 24.9% and 35.2% in 2008 and 2009 when the coal prices dipped. To complement such positive growth, we also expect Pama’s margin to improve on the back of normalized weather going forward. Pama’s margin depressed to 14.9% in 2010 because of the increasing weather-related costs. We estimate Pama’s margin to reach 16.6% and 19.3% in 2011 and 2012, respectively.

Completing Coal Assets Portfolio, Ready to Expand

Equipped with Rp2.7tr - Rp3.6tr allocation from its recent right issue, UNTR has added its coal basket with 20% stake on Bukit Enim Energi, additional 30% of Asmin Bara Bronang and Asmin Bara Jaan, and 60% of Duta Sejahtera (which will provide the option to acquire 60% of Duta Nurcahya). We understand that major of its acquisitions are green-field assets with 2-3 years of development phase needed. However, looking at Pama’s reputation and experience on developing the mine sites, we believe that those green-field assets are already on their right owner.

Maintain BUY, TP of Rp31,200

We maintain our BUY call for the counter on the back of our positive view on its 3 business lines. UNTR’s defensive business model will also make the stock more favorable in the middle of macro uncertain environment. We raise our Komatsu sales volume and coal production, adjust the Pama’s margin to reflect the normalized weather, and incorporate our new coal price assumption. As a result, our FY12-FY13 EPS are increased by 19.7% and 15.2%, respectively.

On the other hand, we also raise our market risk premium by 25bps to reflect the unfavorable macro situation. All of these revisions have led to our new TP of Rp31,200, implying 14.8x 2012est PE Ratio.

Key Risks: In-house mining contractors will reduce miners’ dependency on third party mining contractor services, delayed on the expansion of its green field assets, and company’s rich valuation.

PT Indocement Tunggal Prakarsa Tbk - Hegemony of The King

2011-12-07T01:23:00.001-08:00

by Trimegah Securities

Strongest Beneficiaries of Secular ID Growth

INTP, with 86% of its 18.6mn tons capacity located in Java, is the biggest beneficiary of the region’s strong growth. Currently at 86% capacity utilization, which is the lowest among competitors, INTP has the needed capacity to capture a larger portion of growing demand and subsequently push margin and top line growth going forward. Given adequate control over a strong brand and penetration, INTP is on top of customers’ mind for project developments in and around Java.

More Capacity to Come

As INTP lays a stronger foundation to further support growth, the company is currently undertaking installment of additional grinding machine capacity to eliminate bottleneck in production with total investment value of Rp120bn. When completed, the new grinding machines will support production capacity expansion, yielding an additional 2mn tons by 2013. The company is also in the final stages of preparing feasibility studies for two cement factories located in Central Java and Outside Java, with total investment budget of USD700mn.

Capacity Expansion at Low Risk

INTP has on hand Rp5.9tr cash and

INTP - PT Indonesia Tunggal Prakarsa Tbk. cash equivalent, representing 35% of total assets. With average annual operating cash flow of Rp3.5tr, we strongly believe that INTP expansion plans will be matched with its cash generation ability, thereby minimizing balance sheet risk arising from (obligations tied to) expansion activities. Current balance sheet risk is very low with D/E ratio of -0.4x and 741x interest rate coverage ratio, which should provide a large margin of safety in times of financial market volatility.

BUY, TP18250

We put Buy recommendation on INTP as INTP is the most ready cement producer with its lowest utilization rate and well-positioned in Java along with solid balance sheet. Our DCF based target price assumes WACC of 15.3% and LTg of 5.0%, reflects 15.8x 2012 PE.

Key Risks:

Faster growth in outer Java, delay in most Java infra projects.

PT. Bank Negara Indonesia. Tbk - Welcoming a New Growth Era

2011-12-07T01:16:00.000-08:00

by Trimegah Securities

Asset Quality Problem is a Thing of the Past BNI management confidently stated that its asset quality problem is a thing of the past. The bank’s performance has affirmed such confidence, given that NPL has shown adequate improvement across all segments, with the exception of Small segment. On an absolute basis, the NPL stands flat at Rp5.9tr while special mention loans fell by Rp87bn QoQ to Rp6.4tr. We expect manageable asset quality coupled with stronger loans growth will bring down NPL by another 30bps QoQ to ~3.5% in 4Q11. The CBRO (Business Risk Officer), which was formed with functions to guide/manage quality of growth, seems to run effectively with the stagnation of NPL figures and Rp1.5tr in total loan recovery. This new division is expected to yield better balance between growth and asset quality, hence securing profitability going forward.

Strong Growth Pushes Margin Forward

With manageable/improved asset quality, management proceeded to redirect focus on growth. BNI recorded loans growth of 5.1% QoQ as corporate and consumer loans grew 7.3% QoQ and 5.3% QoQ respectively.

We expect such growth will continue along with the industry average and NIM to remain stable at ~6.0%, while BBNI - PT Bank Negara Indonesia (Persero), Tbk.

ROE will rise to 16% - 17% in 2012 – 2013. LDR, which has reached statutory limit of 78%, should also improve, with the release of some liquidity formerly tied to additional reserve requirement in line with the revised RR-LDR regulation.

Strong Pricing Power in a Competitive Setting

We believe BNI’s average cost of fund of ~3.6% is its strongest advantage in a highly competitive environment going forward. With the second lowest cost of fund in the industry, BNI will afford a strong pricing power in the loans market, favorable ammunition to boost growth further. However, as stated in TRIM Bank Book: High Growth Era, we expect the sector to be challenged by higher competition in the funding side. The first sign of this impending environment is reflected on BCA management’s decision to increase limits on TD rates. And we believe, BNI as the fourth largest banks in the market, cannot escape the competitive pressure in the future. Hence, we expect its cost of fund to inch up to 3.9%. Despite expectations for rising cost of fund, we believe BNI margin expansion will be continued as it will subsequently penetrate deeper into the loans market.

Maintain BUY, TP of 5100

We maintain BNI as one of our top picks in the banking sector with TP of 5100, or reflecting 2.2x 2012 PBV and 14.7x 2012 (WACC 13.8%, 18% ROE, 11% growth).

We expect its restarting growth story to continue and re-rating will ultimately follow as current valuation of 1.8x 2012 PBV factors in a discount compared to 2.9x 2012 PBV average of our TRIM Banks Universe. Compelling valuation along with decreasing execution risk and stronger loans growth will become the key drivers for this stock’s price performance.

Astra Agro Lestari (AALI) - Limited Growth, Not Enough to Offset Lower CPO Prices

2011-12-07T00:46:00.001-08:00

by Trimegah Securities

Indeed, 2011 is expected to become superior year for any planter post prolonged wet season in 2010, which is actually good for palm trees fertility. As such, we expect 2011 as a high base for the company’s FFB production as we believe that AALI’s plantation profile will cap the growth further. We are looking for a 1.9% YoY substantial increase on FFB production in 2012 to reach 4.63mn tons. For a longer term basis, we estimate FFB production to grow by 2.8% CAGR in the next five years, the lowest in our plantation universe. The 69,214ha of new planting in 2006-2009 periods will contribute the growth, but it is not enough to offset the old estate in our view. Around 108,945ha (41% of total planted area) is already above 15 years old of age. This is compounded by the company’s limited ability to conduct a new planting.

Declining Margin Due to High 3rd Parties Fruit

9M11 third Parties FFB already reached 690.4k tons, significantly jumped by 86.1% YoY, representing 20.1% of total FFB harvested. The numbers already exceeded our 2011 estimation of 682.8k tons. As a result, company’s gross profit margin trimmed to 38.2% in 9M11 vs. 40.8% in FY10 and 41.8% of our FY11 estimate.

As the management will continue to optimize any potential for third parties purchase going forward, we expect the high volume to persist as well as the high raw material costs. This is leading us to revise our gross margin assumption to become 37.4% and 33.1% in FY12 and FY13, respectively.

Healthy Balance Sheet Provides Catalysts for Dividend and Acquisition The company’s cash balance reached its highest level in 9M11 at Rp1.6tr with debt free balance sheet, sufficient enough to maintain its high dividend payout ratio and conduct acquisition for inorganic growth. We are still looking for 65% dividend payout ratio in 2011, equivalent to Rp1,079 dividend per share or 5.0% dividend yield. With regards to the business line expansion, we’ve heard the recent news that AALI has a strategic plan to enter sugar plantation as it offered a lucrative outlook. AALI basically needs 20,000ha of estate and 3-year development to start the production. However the management admitted that it’s very hard to find 20k ha land now.

Maintain HOLD, with Lower TP of Rp23,700

We maintain our HOLD recommendation on AALI on the back of its limited growth outlook as well as the declining margin. We do believe that the growth prospect is what investors are looking for nowadays, particularly in the middle of soften CPO prices outlook. 9M11 results top line was in line with our expectation but bottom line came below our expectation due to the higher than expected 3rd parties’ FFB. We revise our model to incorporate those higher 3rd parties’ fruit, but higher CPO price assumption has raised our FY12-FY13 EPS by 5.4% and 24.4%, respectively. We slightly cut our price multiple targets to become 13x forward PE, implying TP of Rp23,700.

Key Risks: CPO prices fluctuation, worse than expected upcoming La Nina should give an upside risk to our forecast.

Bank Mandiri. Tbk - Goliath Grow Bigger

2011-12-07T00:44:00.000-08:00

Trimegah : BMRI

ATM Expansion Has Not Yet Driven ATM Utilization Mandiri aggressively expanded its network as this goliath tries to deepen its presence on transactional banking, positioning itself head-to-head with incumbent BCA. Mandiri opened 2488 new ATMs in the past six months. While we like such aggressive management attitude, we maintain a wary outlook on expansionary push, given its utilization is relatively low compared to BCA. Mandiri’s network of 8993 ATMs delivered a total of 184mn transactions with total transaction value of Rp145tr vs. BCA’s 8070 ATM network which scored 292mn transactions grossing Rp280tr of transaction value. The figures suggest that Mandiri’s expansion with 2488 new ATMs yielded 24mn incremental number of transactions worth Rp26tr in the past six months vs. BCA’s additional 32mn transactions with total value of Rp55tr from its 515 new ATMs over the same period. All in all, the utilization of Mandiri ATMs stands at about ~56% of its biggest competitor. Nonetheless, we believe the longer term prospect is robust for Mandiri, and there remain room for improvement for this particular aspect.

Strong Growth to Continue

Strong Profitability Profile despite Easing NIM

Maintain BUY, TP of 9000

Semen Gresik - updates

2011-12-07T00:42:00.001-08:00

by Batavia Prosperindo Sec

Waiting for Bigger Capacity

• Lower growth than competitor’s

Lack of capacity to match the Indonesian cement demand growth caused SMGR sales growth being outnumbered by its competitor’s (INTP & SMCB). Up to the 3Q-2011 SMGR has recorded sales worth of Rp. 11.61 bn, growing 12.81% compared than in 3Q-2010. Smaller than INTP (20.62%) and SMCB (26.15%). As for 9M-2011 net income, SMGR recorded an increase of 8.18% (Rp. 2.76 bn) compared to the same period last year (Rp. 2.55 bn). The maximum production capacity is still the main concern for SMGR as the new cement factory has not been completed yet.

• New factory on the way

The Tonasa V and Tuban IV cement plant project which have been started since 2009 are expected to complete in 2012. This will give SMGR the capacity to increase its cement production. Other ongoing project is the Tonasa power plant project. A 2 x 35 MW power plant is built to support the energy need of the cement plant in Tonasa.

• Still expecting growth in the Indonesian cement demand

As the government plan to push infrastructure in order to drive the Indonesian economy, we predicted that cement demand in 2012 will still grow. With new plant and bigger production capacity in 2012, SMGR is expected to be able to maintain its market share as the biggest cement producer in Indonesia.

• Upgraded Target Price with Revised Recommendation

Based on the ongoing new plant development and the expectation of the rising cement demand in 2012 we revise our recommendation from “HOLD” to “BUY” for SMGR. We also upgraded our target price from Rp. 9,900 to Rp. 10,800.

United Tractors - 9M11 RESULT – ABOVE EXPECTATION

2011-12-07T00:39:00.000-08:00

by Lauthandana Sec

HIGHLIGHT EVENTS

During the 9M11 periods, UNTR’s consolidated revenue and net profit grew by 42.9% YoY and 46.9% YoY, respectively, attaining to Rp 39.8 trillion and Rp 4.3 trillion. On quarterly basis, the company has recorded consolidated revenue of Rp 14.1 trillion (+9% QoQ) and net profit of Rp 1.8 trillion (+45.5% QoQ).

The total heavy equipment sales attained to 8,064 units (+55.7 % YoY, +7.7% QoQ) during the same period. Its mining contracting subsidiary, PT Pamapersada Nusantara (Pama), delivered coal extraction of 63 million tons (+11.1% YoY, +13.6% QoQ) and OB removal of 585 bcm (+21.9% YoY, +10.7% QoQ), while total coal sales volume reached to 3.2 million tons (+62.6% YoY, -16.3% QoQ).

COMMENTS

On quarterly basis, UNTR managed to improve its profitability in 3Q11, triggered by weakening Rupiah and an increase in mining service’s activity (through its subsidiary, Pama) supported by favorable weather condition (please refer to UNTR profitability appendix,

We noted that Pama successfully recorded 10.7% growth QoQ in overburden removal (219.5 bcm in 3Q11 vs 198.2 bcm in 2Q11), while its coal extraction has also increased by 13.6% QoQ reaching to 23.4 million tons in 3Q11. As the result, Pama’s gross margin has improved up by 400 bps from 14.1% in 2Q11 to 18.1% in 3Q11 with operating and EBITDA margin jumped by 360 bps and 60 bps attained at the level of 15.9% and 25.8%, respectively.

In its Construction Machinery division, Komatsu’s 3Q11 sales have slightly declined by 3% QoQ from 2,126 units in 2Q11 become 2,063 units. This was due to the Idul Fitri holiday in August, where most operations are normally limited. Nevertheless, it still showed better 3Q11 performance and profitability on the back of higher Komatsu’s selling price (US$ 265 thousand/unit in 3Q11 vs US$ 232 thousand/unit in 2Q11) and significant sale’s increase from UD Truck (+91.5% QoQ) and Nissan (+ 34.8% QoQ).

Meanwhile, Coal Mining's performance contracted in 3Q11 due to coal barging transportation disruption on the back of lack water debit at Barito’s river. However, 3Q11 coal mining’s gross margin remained stable at the level of 12.0% which was compensated by average selling price’s increase of 2.3% QoQ (US$138/ton in 3Q11 vs US$ 135/ton in 2Q11).

As of September 2011, UNTR has used Rp 4.3 trillion from its total cash proceeds from rights issue IV of Rp 6 trillion. Around 51% of its cash proceeds utilization was allocated to acquire 4 Green Field coal mines (with additional potential of coal reserves of 204 million tons to 319 million tons), i.e.:

1. Agung Bara Prima (ABP), Asmin Bara Bronang (ABB), Asmin Bara Jaan (ABJ) and Duta Sejahtera (DS) which are located close to TTA infrastructure in Central Kalimantan. ABP, ABB and ABJ mines are projected to commence operation at the end of 2012 or 2013 early;

2. Bukit Enim Energi, located in South Sumatera and is a joint venture between its subsidiaries, Pama and ADRO.

RECOMMENDATION – Adjustment of Target Price to Rp 33,300/share

We revised our assumptions for Construction Machinery and Coal Mining business for the year 2011-2012, following current UNTR’s guidance and the 9M11 result was above our expectation. We increased our 2011 Komatsu sales from 7,000 units to 8,500 units, while 2012 Komatsu sales is projected to reach 10,000 units (+17.6% YoY) which resulted in a revenue of Rp 24.9 trillion-Rp 29.6 trillion. We also increased coal sales volume from Coal Mining by 12.5% in 2011 and 28.6% in 2012, to become 4.5 million tons and 6.8 million tons. As the result, 2011F-2012F UNTR consolidated revenue and net profit increase by 8.1%-10.2% and 7.8%-4.9%, respectively.

Based on our new estimates, we published a new fair value of Rp 33,300/share (previously at Rp 32,550/share). We maintain our BUY recommendation since our fair value offered 35% upside potential from yesterday’s closing price, while the counter was trading at attractive valuation of 7.19x EV/EBITDA FY12 compared to the industry.

Alam Sutera Tbk - Maintaing BUY

2011-12-07T00:05:00.000-08:00

Kresna : ASRI

Investment Thesis

We maintain our BUY rating on ASRI with NAV TP of Rp550. Our positive view is underpinned by: 1) Superior profitability (margin and ROE) among others in the industry, 2) Upbeat marketing sales this year (+63.4% YoY), which will lead to robust revenue growth of 39.2% CAGR11-13, and 3) new revenue contribution from the opening of Mall @ Alam Sutera in 2Q12. Currently, the company is trading at FY12 PBV of 2.2x, the second highest in the sector after SMRA (2.6x). We believe such a multiple is justifiable given ASRI’s high asset quality as well as superior growth profile projected for 2012. This can be seen from ASRI’s FY12 PEG which only stood at 0.16x - the lowest amongst its peers in the sector. Worth to note: should rights issue plan materialize next year, our FY12 EPS forecast may decline by 9.1% to Rp43.0 while our NAV TP by 3.6% to Rp530.

Key Catalysts

Solid marketing sales growth in 10M11. The company recorded Rp198.5bn in marketing sales in Oct11. Hence, total marketing sales as of 10M11 have reached Rp2.5tr, up by 75.5% YoY. This has led the company to revise its sales target by 8.0% from Rp2.5tr to Rp2.7tr.

The premiere of Suvarna Padi. ASRI is now developing its 1,062ha undeveloped land bank in Pasar Kemis, by working on its second project: a residential complex with a golf view – named Suvarna Padi (85ha). The company has launched two initial clusters in late Oct11: Cempaka and Akasia (both of them cover 28ha area). It is reported that sales within the first week of premiere launch reached Rp89.9bn, or 45% of company’s FY11 target. With offering selling prices between Rp1.6m-Rp2.5m/sqm, gross margin may rise as high as 60.0%.

The inauguration of Mall @ Alam Sutera. The mall, which will entail a Rp500.0bn investment, has 78,000sqm gross floor area (GFA) with 68,000sqm net leasable area (NLA) and will commence operation in mid-2012. Revenue from this mall is projected to reach Rp56.4bn in 2012 and Rp126.7bn by 2013.

Rights issue: cushion amid economic uncertainty. During EGM on 25 Nov11, the company has acquired approval to carry out a non-preemptive rights issue for a maximum of 1.78bn shares, to be implemented within a 2-year period following the approval. Assuming minimum price of Rp399/share, the company may raise around Rp712.7bn in capital. However, management admitted that this is more of a precautionary measure and the least preferred alternative to initial debt financing.

Robust marketing sales lead to strong revenue growth. We forecast revenue in 2012/13 to grow by 51.3%/27.2% YoY to Rp2.1tr/Rp2.7tr, supported by strong marketing sales this year (+63.4% YoY to Rp2.6tr) and new revenue contribution from its first mall, estimated to reach Rp56.4bn/Rp126.7bn in 2012/13.

Margin to slide in 2013 – net income will continue growing rapidly. We expect company's gross margin in 2012 to stabilize around 52.4%, then declining slightly, by 0.7% to 51.7% in 2013, due to higher revenue recognition from Pasar Kemis projects, which has a relatively lower margin than Serpong. However, net income is still expected to grow robustly, by 56.5% YoY to Rp844.1bn in 2012 and 27.2% YoY to Rp1.0tr in 2013.

Rights issue scenario analysis: 1) our FY12 EPS forecast may decline by 9.1% to Rp43.0, 2) FY12 ROE will move downwards, from 24.9% to 20.9% (still the highest in the industry) and 3) our NAV TP is cut by 3.6% to Rp530, from a current Rp550.

Pressures on Nickel Prices

2011-12-07T00:02:00.000-08:00

by Trimegah Securities

69% of ANTM’s revenue is mainly contributed by selling ferro-nickel and nickel ore commodity. As such, ANTM’s financial performance will be highly sensitive to the nickel prices movement. Nickel price dipped by 39.3% from its Feb’11 peak recently amid global economic concern. As described in our sector outlook, we believe that nickel prices will get double pressures from macro headwind and its oversupply environment. As such, we cut our 2012-2013 nickel prices assumption by 6.8% and 11.4% to reach USD20,500/ton and USD19,500/ ton, respectively. On the other hand, we increase our gold price assumption as we believe that the commodity will outperform during the global macro uncertainty.

Good News from Its Projects Development

We understand that investors main concern on ANTM so far is stick around its ability to execute its several strategic projects. Compared to previous years, ANTM managed to record a significant progress in 2011 and it’s expected to continue further in 2012. CGA Tayan construction has already reached 34.15% as of 9M11. The factory with 300k tons of annual production capacity is planned to begin its commercial operation in Jan’14.

Next projects waiting to be done would be Pomalaa’s FeNi modernization and 4th FeNi development in Halmahera. ANTM has started to offer 2 series of bond worth a total of Rp1.5tr in Nov’11, 70% of which will be designated to finance those projects. Another significant progress on its FeNi Halmahera should provide a huge catalyst for the company as it would double the company’s installed ferronickel capacity. In the mean time, however, we believe that the unfavorable nickel prices outlook will play more dominant on company’s performances as production volume is expected to be flat.

Flat Production Level, Earnings Highly Depend on ASP

We largely maintain our 2012 production expectation, except for gold. We foresee a flat 18,000tons of ferronickel production due to the ongoing maintenance project on its 3 FeNis. Nickel ore production is expected to increase before its sales are prohibited in 2014. For nickel ore, we expect 8.0mn tons and 6.6mn tons of production and sales volume, respectively. Despite of the surging gold prices,

ANTM’s gold production is expected to only reach 3.0tons in 2011 because the company has yet to mine the planned gold veins in Cibaliung while Pongkor’s production continued to deplete due to the lower ore grade. We cut our gold production in 2011-2013 to reflect the delays on Cibaliung production. We are looking for 3.2 tons and 3.5 tons of gold production in 2012 and 2013.

Maintain HOLD, TP of Rp1,700

We maintain our HOLD recommendation with lower DCF-based target price driven by our lower nickel price assumption to reflect the unfavorable ST to MT nickel outlook. We do raise our gold price assumption, but due to its less contribution to company’s earnings, FY12-FY13 EPS still declined by 2.0% and 25.2%, respectively. Our price target is reflecting 9.1x 2012est PE ratio.

Key Risks: Execution risks on the company’s projects will become our main concern, along with fluctuation of global nickel prices.

Bumi Resources - Outperforming

2011-11-27T21:36:00.000-08:00

by Goldman Sachs : BUMI

Goldman Sachs ("GS") released the 'update' latest research on PT Bumi Resources, Tbk. yesterday to institutional investors in the world consumption. Following up on the latest quarter 3-2011 release by BUMI, here is the assessment of GS.

BUMI inform losses report of U.S. $ 46 jt alone for quarter 3-2011. The hole for the first 9 months 2011, net income claimed by the Earth who only reached 51% dr-year projection of a full-GS in 2011, and only 50% dr Bloomberg consensus.

BUMI posted a profit of U.S. $ 234jt 'one-off' or 'non-recurring' in 1-2011 semester who derive the majority of forex and derivative gains, then U.S. $ 99 mill from TSB profits disappear without trace swallowed losses during the quarter 3-2011. Even according to GS jk conditions improved beyond expectations siding for BUMI, GS still projecting net profit of U.S. $ 174jt principal during the first 9 months 2011 only 39% from GS projection in 2011.

Analyses resullt from business operations running below expectations. EBIT fell 11% QoQ half of BSR caused by rising production costs & TRN its production vol YTD. Earth has sold 46.4 MT for the first 9 months 2011, only 70% from GS 66 MT projection.

GS noted that BUMI has further capitalizes cash cost of U.S. $ 25jt products to 'deferred stripping costs' pd 3-2011 quarter, assuming 100% ownership in the mine KPC / Arutmiin. Total accumulation 'deferred stripping costs' pd the current balance sheet swelled to U.S. $ 699jt, who has same base 100% 52% from the shareholders' funds. GS noted that BUMI has erase U.S. $ 275 mill'deferred stripping costs' during FY09.

Base on GS analysis, cash flow from operations adjusted who powered on the post-stripping costs'deferred 'first 9 month was 2011 vs. U.S. $ 0.2 mill. EBITDA of U.S. $ 907 jt. GS predict negative impact as market reaction to financial report of quarter 3-2011 release by BUMI.

GS once maintain SELL recommendations and MSK to within CL-Conviction List augural highest level of confidence within a recommendation. price set the target GS for BUMI is Rp1.500

United Tractors - Perform Strong with Komatsu

2011-11-27T21:29:00.001-08:00

by Kresna Securities: UNTR

We reiterate our BUY rating on UNTR with TP of Rp30,000. October operational continued to perform strongly with Komatsu, OB removal, coal extraction and coal sales all growing, by 25.9%, 25.2%, 13.7% and 4.6% YoY, thus sending YTD numbers to 84.0% - 86.6% of our FY11E. For 2012, we project Komatsu, mining contracting and coal mining division to record 11.6%, 7.2% and 42.9% YoY volume growth, respectively, yielding a 22.4% YoY increase in net income, at Rp6.7tr.

Key Catalysts

Komatsu sales remained strong. Company managed to record another strong Komatsu sales period of 701 units in October, 25.9% YoY higher than the same period last year. Mining segment continued to become the prime contributor, accounting for 68.5% of total sales, followed by Agro (16.4%), Contruction (9.7%) and Forestry (5.4%). UNTR’s market share in Indonesia’s heavy equipment market still stood at a stellar 50%.

Pama: coal extraction hit a new record. Coal extraction volume reached a new high of 8.3mt in October, breaking the July record of 8.0mt. Meanwhile, overburden removal volume grew by 25.2% YoY to 76.4m bcm in October, implying a sustaining high strip ratio of 9.2x. This buoyant performance was mainly supported by very conducive weather throughout the month (rainy season phased in by the end of October).

Coal sales were flat. In October, coal sales only arrived at 321K tons, versus 298K tons in the previous month (and 307K tons for a comparable period the previous year). However, YTD achievement of 3.5mt still showed strong YoY growth figure of 54.8%.

Earnings Outlook

2011: all still conform to our expectations. 10M11 volume of Komatsu, overburden removal, coal extraction and coal sales have arrived at 84.5%, 86.6%, 84.5% and 84.0% of our FY11E, respectively, suggesting a slight outperformance compared to our FY11 targets. We expect the bold gross margin in 3Q11 to be carried over in 4Q11, on the back of sustaining strong US$ currency against Rupiah.

What’s the outlook for 2012? Management projects 10-15%YoY increase for Komatsu and Pama business division next year. Meanwhile, coal sales are targeted to record around a 50%YoY jump, mainly driven by the commencement of the new mine site at Agung Bara Prima and Duta Sejahtera. In our model, we assume 11.6% YoY growth volume for Komatsu, 7.2% for Pama output volume and 42.9% for coal sales.

We thus decided to maintain a conservative stance in view of lingering global economic uncertainty.

Banking Sector - Update

2011-11-26T00:21:00.000-08:00

by Samuel Sekuritas

Bank Rakyat Indonesia (BBRI) – Maintain Buy

Price: Rp6,800 – Target Price: Rp8,100

9M11 Results – Beat Estimates

BBRI posted net profit of Rp3.6 trillion at 3Q11, up 3.4% QoQ and brought 9M11 net profit Rp10.4 trillion, up 57%, above our estimate and the market.

We downgrade our assumption for loan growth and dividend payout as CAR slightly above BI standart.

NPL was booked 3.3% with Rp977 Bn write off in 3Q11 and recovery rate 59.6%.

Maintain Buy recommendation and upgrade target price with new Target Price of Rp8,100.

Bank BJB (BJBR) – Maintain Buy

Price: Rp1,020 – Target Price: Rp1,450

Attempting to Improve

BJBR posted net profit of Rp250 billion in 3Q11, which declined 12.3% QoQ, but still in line with our and market estimates.

In 3Q11, time deposits rose significantly by 19.1% QoQ and brought CASA position to 38% in 9M11.

In our opinion, the excess liquidity difficult to be converted to loan.

Maintain Buy recommendation and upgrade target price with new Target Price of Rp1,450.

Bank Central Asia (BBCA) – Upgrade to Hold

Price: Rp8,000 – Target Price: Rp8,300

9M11 Beats Estimates, yet Still Overvalued

Net profit grew by 25.3%YoY, above expectation.

New accounting standard reduce provisioning.

Loan grew above expectation, especially commercial and consumer loan.

BBCA is trading premium 60% compared to JCI vs BMRI and BBRI at discount.

Upgrade recommendation to HOLD with Target Price of Rp8,300.

Sampoerna Agro Tbk (SGRO) - Profit Growth 86%

2011-11-26T00:18:00.001-08:00

by Lauthandana Sec

HIGHLIGHT EVENTS

SGRO net profit until the third quarter 2011 amounted to Rp 462.1 billion, grew 86% YoY. Meanwhile, sales also posted a 84% YoY increase from Rp 1.4 trillion to Rp 2.5 trillion.

The increase in financial performance SGRO significant in the first nine months of 2011 driven by the impressive growth of TBS by 41% YoY due to improved weather conditions in the area of cultivation, the increase in CPO sales volume by 50% YoY, as well as increased average selling price of CPO +21% YoY and +38% kernel.

COMMENTS

SGRO sales until the third quarter-11 is 78.4% of our projected 2011 sales of Rp 3.2 trillion. Operating profit and net profit reached respectively 73% of our estimates to the end of the year, the operating profit of Rp 878 billion and net profit of Rp 636 billion.

FFB production in 9M11 1.07 million tonnes (+41% YoY), 71.4% of the projected production of FFB in 2011 where we predicted it would break the 1.5 million tons.

CPO sales volume up to September 2011 reached 260.518 tons (+50% YoY), 81.5% of the estimated total sales volume of our CPO until the end of this year reached 319.809 tons. We OER this year rose to 21.4% supported by the improving weather and palm trees age the company was at the peak yield.

SGRO will increase the focus on the business sago. Sago factory estimated to be completed in the fourth quarter of 2011. Later will be processed into sago starch to be sold to multinational companies. But until a few years, sago business revenue contribution has not been significant.

We forecast financial performance SGRO the next few years will increase triggered by: 1) increase in CPO sales volume 5-year CAGR of 13%; 2) the average selling price of CPO SGRO CAGR next 5 years we forecast to grow 7% with an average U.S. $ 984/metric tons; 3) palm trees at the peak phase of productive age (11 years).

Recommendation

We assume SGRO 2011 sales growth by 39% YoY to Rp 3.2 trillion and we are targeting net profit up 41% YoY to Rp 636 billion.

Our recommendation for the stock SGRO BUY with a target price of Rp 4.050 per share using the 10-year DCF with WACC assumption of 12.9%. TP provides a potential upside of 30%. TP value reflects the 2011F and 2012F PE of 12.0x and 7.7x and EV / ha 2011F and 2012F of U.S. $ 8.162 and U.S. $ 7.789. Based on the closing stock price yesterday SGRO, SGRO shares trading at 5.9x 2012F PE and EV / Ha 2012F of U.S. $ 5.966.

Astra Agro Lestari (AALI) - 51% Profit Growth

2011-11-26T00:17:00.000-08:00

by Lauthandana Sec

HIGHLIGHT EVENTS

Aali's net profit during the third quarter of 2011 reached Rp 1.9 trillion, grew 51% over the same period the previous year. Appreciation of the net profit bolstered by sales rise 39% YoY to Rp 7.9 trillion from the previous year only amounted to Rp 5.7 trillion.

Performance Aali positive until the third quarter-11 triggered the volume of FFB production rose 13% YoY to 3.4 million tonnes, CPO sales volume increased by 17% YoY to 889.917 tons, as well as the increase in average selling price of CPO 16% to $ 7.776 / kg and kernel is up 39% to $ 5.022 / kg.

Until 10M11, FFB and CPO production Aali respectively reached 3.9 million tons (+15% YoY) dan1.05 million tonnes (+17% YoY).

COMMENTS

Sales Aali 9M11 reflects 76% of our estimate for 2011 amounting to Rp 10.5 trillion. Operating profit was 77% of our target is around Rp 3.5 trillion and net profit 72% of our estimate for 2011 valued at Rp 2.6 trillion.

FFB production Aali 9M11 reached 3.4 million tonnes, reflecting an estimated 73% of our FFB production by the end of 2011 at the level of 4.7 million tonnes.

Aali CPO sales volume up to September 2011 approximately 889.917 tons, an estimated 77% of our total sales volume of CPO to the end of 2011, which reached 1.2 million tons.

The average age Aali palm trees has reached 14 years. For the next 2 years, our predictions will Aali trouble finding a new land-related moratorium. But Aali will optimize land management and rely on land planted immature to sustain growth. Aali still have immature land area of 25.576 ha at 2012F. Currently in phase survey Aali search of new land in Kalimantan and Sulawesi.

Aali will add four palm oil mills in the next 3 years with a total investment value of approximately U.S. $ 12-14 million, 2 built in East Kalimantan, South Kalimantan and one in Central Sulawesi.

We expect the financial performance of Aali will be stable until 2012 and further increased since 2013 is supported by: 1) increase in CPO sales volume of 5-year CAGR of 8%, 2) the average selling price of CPO Aali CAGR 5 years we grew 7%.

Recommendation

We assume Aali 2011 sales grew 18% YoY to Rp 10.5 trillion, and our net profit estimate will be up 29% YoY to Rp 2.6 trillion.

Our recommendation for the stock Aali HOLD with TP Rp 23.550 per share based on the method of 10-year DCF with WACC assumption of 12.9%. TP values provides a potential upside of about 7%. TP reflects the 2011F and 2012F PE of 14.3x and 10.8x and EV / ha 2011F and 2012F of U.S. $ 13.100 and U.S. $ 12.415. Based on the closing stock price yesterday, Aali shares traded at 10.1x 2012F PE and EV / Ha 2012F U.S. $ 11.476.

PT London Sumatra Plantation Tbk - Sales Grew

2011-11-26T00:13:00.000-08:00

by Lauthandana Sec

Net income LSIP along the first 9 months of 2011 amounting to Rp 1.3 trillion, up 104% compared to 9M2010 only Rp 642 billion. Furthermore, sales grew 47% YoY from Rp 2.4 trillion to Rp 3.5 trillion.

Increased net income LSIP supported by FFB production increased by 24% YoY, the improved productivity of TBS core of 12.2 tonnes / ha to 13.4 tonnes / ha, volume sales of palm oil products such as palm oil grown up 28% Toy, PK up 19%, and the seeds grow and 39% YoY increase in average selling price of CPO from Rp 7.576 / kg to Rp 9.108 / kg.

COMMENTS

Total sales reflect LSIP 9M2011 70.0% of our sales forecast for the period 2011 worth Rp 5 trillion. Operating profit of approximately 71.9% of our estimate for 2011 amounting to Rp 2.2 trillion and net profit of approximately 75.3% of the target until the end of our year to Rp 1.7 trillion.

FFB production until the third quarter-11 1.4 million tonnes, up 24% YoY. Achievement of production during the first nine months of 2011 equal to 81.4% of the estimated total production of FFB us in 2011. Rubber production fell 27% YoY to 10.931 tonnes as the reduction of plasma and the purchase of a third party. We forecast total TBS LSIP 2011 at 1.7 million tons and 17.026 tons of rubber.

3Q2011 CPO sales volume up to 309.8 thousand tons, equivalent to 80% of the predicted total sales volume of CPO 2011 at 389.3 thousand tons.

LSIP will add two palm oil mills in Kalimantan and South Sumatra in 2012 with a capacity of 40 metric tons per hour and improving infrastructure in the region of South Sumatra, which is targeted for completion in 2013 to facilitate the distribution of palm oil.

We are confident LSIP able to record positive growth in financial performance in the future driven by: 1) increase in CPO sales volume 2011F-2015F average of 6%; 2) the average selling price of CPO-2015F 2011F our prediction to U.S. $ 1.065 / metric ton; 3) the average age of palm trees in the productive phase (mean 12 years).

Recommendation

We estimate sales LSIP 2011 amounting to Rp 5 trillion, grew 40% compared to 2010 and our projections for this year's net profit LSIP worth Rp 1.7 trillion, an increase of 69% over the previous year. Decrease in income tax rates imposed from 25% to 20% because of the free float of 40% net profit LSIP help appreciated.

We recommend a BUY for the stock LSIP. The target price of USD 3.050 per share using the 10-year DCF with WACC assumption of 13.3%. TP gives 36% increase in space. TP values reflect 2011F PE of 12.0x and 9.9x for 2012F and EV / ha 2011F and 2012F worth U.S. $ 15.330 and U.S. $ 14.254. Based on the closing stock price yesterday LSIP, LSIP shares trading at 7.3x 2012F PE and EV / Ha 2012F of U.S. $ 9.656.

Semen Gresik - Waiting for Bigger Capacity

2011-11-26T00:11:00.000-08:00

by Batavia Prosperindo Sec : SMGR

Lower growth than competitor’s

Lack of capacity to match the Indonesian cement demand growth caused SMGR sales growth being outnumbered by its competitor’s (INTP & SMCB).

Up to the 3Q-2011 SMGR has recorded sales worth of Rp. 11.61 bn, growing 12.81% compared than in 3Q-2010. Smaller than INTP (20.62%) and SMCB (26.15%). As for 9M-2011 net income, SMGR recorded an increase of 8.18% (Rp. 2.76 bn) compared to the same period last year (Rp. 2.55 bn). The maximum production capacity is still the main concern for SMGR as the new cement factory has not been completed yet.

New factory on the way

Still expecting growth in the Indonesian cement demand

Upgraded Target Price with Revised Recommendation

Plantation Sector

2011-11-25T23:12:00.001-08:00

by Lauthandana Sec

INDUSTRY OUTLOOK

Positive outlook for CPO industry

CPO is a product of the most popular vegetable oils to be consumed. We are optimistic positive growth for the plantation sector as the trend of increasing production and consumption of global vegetable oil. Growth in global CPO production this year is predicted at 8.5% and consumption by 5.1% compared to 2010.

Trend of strong demand and supply

World population growth and rising purchasing power of the community will be the main drivers of increasing demand for CPO in the future. Despite the current global conditions are still volatile, we believe demand for palm oil will remain high because approximately 80% of palm oil products used as raw material products of basic human needs.

The moratorium does not have much impact

Moratorium policy set forth in Instruction No.. 10 of 2011 does not have much impact for producers of CPO. Broadly speaking, the Instruction states delay the conversion of primary forests and peatlands for 2 years in the framework of nature conservation. LSIP and SGRO already has sufficient land for expansion up to 2 years. Meanwhile, Aali will perform optimization on the existing land for nearly 100% of land has been planted Aali.

CPO price assumption of positive

We are optimistic that the average price reasonable for the global CPO in 2011 will be at the level of U.S. $ 1.080 / metric ton and 2012 amounted to U.S. $ 1.160 / metric ton of crude palm oil underpinned by high global demand and the impact of the moratorium will support the increase in CPO prices.

9M11 The performance is satisfactory

9M-2011 performance of issuers that we cover CPO experiencing positive growth. Sales up to September 2011 rose by an average of 56% YoY, gross profit grew by an average of 62% YoY, operating earnings increased on average by 71% YoY, and net income rose an average of 81% YoY.

Stock options: Rp 3.050 LSIP TP, TP SGRO Rp 4.050, Aali TP Rp 23.550

Our main stock options is Rp 3.050 LSIP with TP offers the upside gain is highest, the highest net profit until the third quarter-11, the margin above the competitors, the highest OER than SGRO and Aali, a large market cap so that more liquid, as well as tax rates only income tax subject to 20%. The next choice is SGRO very exciting to be collected for the long term with TP to Rp 4.050 following the age profile in the phase of productive plants, green fields of the largest land bank in order to boost production increases, CPO sales volume growth potential 5-year CAGR to 13%, offer upside gain of 30% , as well as attractive valuations. The final choice is Aali with TP Rp 23.550 with a potential upside gain of 7%.

Risk plantation sector

Some of the risks overshadowing the plantation sector are: 1) the global economic slowdown is feared to put a halt to CPO demand, 2) decrease in CPO prices, and 3) substitution products will replace the CPO, such as soya oil.

Gozco Plantations Tbk. - Slackening Production (GZCO)

2011-11-25T23:11:00.000-08:00

by Etrading : GZCO

Production of FFB Nucleus for 3Q 11 has grown 12.5% from 2Q 11 (QoQ) and increased slightly at 4.7% for 9M 11 compared to 9M 10 (YoY). However, if we look more into it, production in 3Q 11 has re-gressed 21.7% compared to production in 3Q 10. GZCO’s 9M 11 FFB nucleus production had only made up about 59.3% of our 2011 fore-cast. Even if contribution by 3rd party FFB purchases had more than fill in the blank left, margins are squeezed. Volume-wise CPO sales for the 9M 11 has made up about 71% of full year 2010’s sales, mainly boosted by 3rd party FFB purchases.

Margin Squeeze

Margins across the board are squeezed out of their juices in the 3Q 11. Gross margin, operating margin, and net margin fall 14.6%, 15.0%, and 17.4% respectively in 3Q 11 compared to 3Q 10 margins. For 9M 11, net margin increased a slight 1.8% but gross and operat-ing margins declined 6.2% and 6.1% respectively.

We have looked into it and determined that gross margin are hit in the 2Q 11 by a spike in maintenance cost, harvest cost and pur-chased of 3rd party FFB which are 152.7%, 119.6%, and 114.8% on a YoY basis as compared to 2Q 10. This spiked in cost is prolonged al-beit not as much in the 3Q 11 with maintenance cost and purchased of 3rd party FFB for 48.0% and 115.2% accordingly on a YoY basis as compared to 3Q 10. Those two factors are main contributors that drove up total cost of goods sold in the 3Q 11 to 50.6% YoY as com-pared to 3Q 10. Please kindly take note that in the last two quarters, purchase of 3rd Party FFB has been the common denominator to the swelling cost. It is good to have 3rd Party FFB to fill up idle capacity in your factory but on the whole picture, it’s always better to fill up your capacity with own nucleus. Own nucleus production is trans-lated into better FFA content which can be used as leverage for the producer to demand higher prices and higher profit margins per ton production.

Saved by Associate Company – Indotruba

On an annual basis, we have been seeing less and less organic growth from Gozco Plantations. In other words, gross profit and operating profit growth for the last consecutive reporting quarters has been marginal. The boost in the bot-tom line is pretty much driven by Indotruba. This is a good thing if they periodically improved their upper margins by upping the ante for own productions and doing efficiency measures in terms of operating expenses.

Our View

We conclude that we will revise down our initial target price from RP 450 to RP 335, a 15% upside from current price. Valuation is based on DCF calculation with 11.99% WACC, 4% terminal growth, and discount factor of 20% due to the illiquidity of the stock. Company fair value of RP 335 per share will reflect PE12F of 7.71, relatively cheap compared to peers. We still call a Hold for this particular stock mainly because of their large land banks, young age profile for the plantation which means future growth, and their valuation itself is still cheap compared to other peers in the plantation industry.

Bukit Asam Tbk - BATR signed funding deal from China Bank

2011-11-25T22:38:00.001-08:00

by Mandiri Securities : PTBA

Bukit Asam Transpacific Railway (BATR) announced it has signed financing deal for the construction of 307-km railway project with China Development Bank and China Railways Group Ltd during the East Asia Summit (EAS) in Nusa Dua, Bali last week.

There is no detail yet on the financing framework agreement from the company. But this is a positive signal for the running setup of the JV between PTBA, Rajawali Group and China Railway Engineering as it has become top priority for Goverment of Indonesia (GoI) in MP3EI (Master Plan for Acceleration and Expansion of Indonesia Economic Development). In a parallel discussion, company is still waiting a good progress on the goverment efforts to resolve regulatory problems that holding up the JV setup in term of presidential decree or goverment decree.

We still have buy rating on the counter, PTBA trades at 12.6x-9.9x PER11F-12F.

Bumi Resources Minerals Tbk - .Green light for Dairi ?

2011-11-25T22:36:00.000-08:00

by Etrading Securities

News on exploitation permit. According to the BRMS management, it has received word that the permission to borrow wear exploitation (principle) has been signed by the government (EMR). However BRMS itself has not received an official statement permit. Permits are expected to be formally accepted by the BRMS before the end of November 2011.

Review from the Forestry Ministry. After obtaining permission of exploitation, the Department of Forestry will conduct a review during the first 2 years to ensure the permit is used according to the company's plan. If the review goes well, then the company will earn the right to mine at that location for 20 years.

What's next? When BRMS received permission to borrow wear exploitation (principle), then the process of underground mining at Dairi project can be started with an estimated 18 months to production. Initial production is targeted in 2013 from the Black Dog as much as 115 thousand tons for zinc and 60 thousand tons for Lead. Based on our estimates, the contribution of the Dairi revenues in 2013 amounted to Rp3.5 trillion (81% of total revenue).

Production from Mauritania. In addition to the Dairi project, BRMS will also start production of DSO iron ore from Mauritania in 2012 with initial production target of 600 thousand tonnes of DSO iron ore until 2013. After 2013, production from Mauritania expected to reach 1.2 million tons / year. We estimate the contribution of revenues in 2012 amounting to Rp645 billion (80% of total revenue) and Rp659 billion (15% of total revenue) in 2013.

Action & Recommendation. Currently we are still waiting for 9M11 financial reports and official statements from the company regarding the exploitation permit (principles) for the Dairi project. So we maintain our TP and recommendations for the progress of the Dairi and Mauritania have been factored in our model calculations. We see the BRMS positive outlook in the future because we believe the exploitation permit is only a matter of time. Maintain BUY

PT London Sumatra Plantation Tbk - Revenue Driven by Higher Volume

2011-11-25T22:20:00.000-08:00

by Batavia Prosperindo Securities

· Best Performance in 9M11

LSIP recorded excellent financial performance in 9M11. Net sales grew by 46.6% y-o-y to Rp3.52 trillion driven by higher sales volume of palm product and “SumBio” oil palm seeds as well as higher palm product and rubber prices. Sales volume of CPO rose by 28% y-o-y to 309,801 tons while sales of “SumBio” seeds was up to 17.6 million seeds (+39% y-o-y). Around 94% of the total CPO sales volume was sold to PT SIMP as its parent company.

ASP of CPO in 9M11 increased by 17.4% y-o-y from Rp6,635.7 per kg to Rp7,786.3 per kg. LSIP recorded 21.1% y-o-y higher sales of rubber to Rp472.2 billions, although production and sales volume were down by 27.1% and 20.5% respectively due to less crop purchased from plasma and 3rd parties.

Until September 2011, LSIP produced Rp1.3 trillions of net profit or increased by 104.5% y-o-y along with increased net sales. Net profit until that period is reflecting 84% of our full year 2011 estimate. In operation side, in 9M11, LSIP processed 1.38 millions of FFB (+24.3% yo-y) and produced 318,197 tons of CPO or up by 24.3% y-o-y with 23.1% CPO extraction rate. LSIP produced 10,931 tons rubber or decreased by 27.1% y-o-y.

· Recommend BUY at Target Price of Rp3,000

We predict that growth performance during the 9-month period of 2011 represents the peak of achievement for the full year 2011, considering external factors such as the start of the rainy season in the 4th quarter of 2011, which will impact on crop and plant production.

We also expect commodity prices in the near future will not be in increasing trend, due to ongoing financial crisis in Euro zone and impact of tightening policy in China. In our valuation, we assume average price of CPO (Palm CIF Rotterdam) for the year 2011 and 2012 are respectively USD 1,100 and USD 1.050 per MT.

Our DCF valuation model with WACC of 11.2% result in target price of Rp3,000, 12X FY12F PE. We recommend BUY with 31.9% potential upside from the closing price (11/15) Rp2,275.

PT Unilever Indonesia Tbk - Positive bias

2011-11-25T22:18:00.000-08:00

by Kresna Securities

We maintain our positive bias on UNVR with a BUY rating and a 12-month DCF TP of Rp17,400, especially during a period as jittery as the present. During a luncheon gathering on 14 Nov11, UNVR management proudly introduced us to its state-of-the-art research and consumer solution centre, the "Indonesia Collaboration Centre" (ICC) and new liquid detergent “Rinso Molto”. Such initiatives should be able to maintain company's market share amid increasing competition, especially that from P&G. In the event, management also explained that the increasing role of modern trade should pose an immaterial impact on margins, as discounts and promotions frequently given by the stores have actually been allocated in company's marketing expense budget.

UNVR is currently trading at FY12 P/E of 25.4x. Historically, the counter was trading at a figure as high as 30.1x in 2006, 29.6x in 2007, 25.5x in 2008, 30.1x in 2009, 42.1x in 2010 and 33.0x in YTD 2011. It is also still trading at 4.5% - 29.6% discount to average regional P/E of 26.6x, Unilever India’s 34.0x, Colgate Palmolive India’s 31.5x and P&G India’s 36.1x.

Key Catalysts

· Hoping for a stronger boost from ICC. It is a facility that combines company's knowledge of consumer behaviour and sales data to stimulate higher demand as well as find problems and propose solutions to UNVR's retail arms. ICC is divided into 4 chambers: knowledge centre, interactive data centre, virtual reality suite and retail lab.

· Modern trade (MT) Stores: opportunities or threats? MT contributes around 40% of company revenue. According to Euromonitor data, sales in convenience stores grew by 35.9% CAGR5Y, while hypermarket sales rose 22.4% CAGR5Y. The ratio of sales of convenience stores to total sales in MT also rose, from 18.2% in 2004 to 32.1% in 2009, while hypermarkets hovered at 40%-43%.

· Rinso Molto Liquid: high growth and lucrative margin. Weaker competition in the liquid detergent market allows the company to take higher margin, compared to that yielded by the crowded powder detergent market. UNVR still dominates the laundry care products segment with 45.3% market share, with its main competitor as Wings Corp at 35.3%.

Earnings Outlook

Prospect of FY12 EPS growth of 17.8% YoY is still intact. We still maintain our high conviction on company's earnings prospects next year, mainly supported by strong revenue growth in Food and Beverages (F&B) segment (+20.0% YoY) and improving gross margin (50.8% in 2011E vs 51.3% in 2012F), on the back of growing high-margin products and price increase in several product categories.

Indo Tambangraya Megah Tbk - ITMG

2011-11-16T23:26:00.000-08:00

by Kresna Securities : ITMG

We maintain HOLD rating on ITMG and introduce our new TP of Rp48,400 as we roll over our base year to 2012 and set P/E target at 10.9x. The 9M11 results, top to bottom, outperformed our expectations, arriving 77.7% - 81.4% of our FY11E. Production achievement was on track, arriving at 75.7% of our FY11E of 23.5mt, while ASP was 4.7% higher than our FY11E assumption of US$90.3/mt. Costs remain a concern as 3Q11 cast cost was still higher than our FY11E assumption of US$44.5/mt. Hence, we make several adjustments in our model, resulting to a 7.3% upward revision in FY11E net income to US$476.2m. We maintain our FY12 net income forecast at US$555.8m, assuming production volume of 26.0mt, ASP of US$92.4/mt and cash cost of US$44.0/mt.

Key Catalysts

Production grew 17.2% QoQ to 6.8mt. Company managed to record strong production volume in 3Q11, mainly supported by a dry weather and additional capacity from mining contractors, particularly at Indominco and Trubaindo mines.

Strong ASP realization. 3Q11 average selling price (ASP) remained robust, growing by 1.1% QoQ to US$98.4/ton, yielding 9M11 figure to hit an average of US$94.6/ton. For the remaining quarter, as prices for all volume to be sold in 2011 have been sealed, ASP is expected to remain high in 4Q11 with FY11E ASP to approximately reach US$97/ton.

Cash cost remained high. Despite declining oil price in the spot market and drier condition in the sites, ITMG’s cash costs still stood at a high US$49.2/ton in 3Q11 (vs US$50.7/ton in 2Q11 and 41.5/ton in 1Q11). This is because the company unfortunately hedged its oil purchase while strip ratio in Trubaindo experienced increase (11.9x in 2Q11 to 14.1x in 3Q11).

What’s 2012 target? Company will allocate around US$223m capex (fully financed from internal cash) to develop infrastructures and facilities, primarily in Trubaindo (hauling roads) and Indominco (washing plant). With these, ITMG aims to increase production by 14.9% YoY to 27mt in 2012

Earnings Outlook

Outperforming 9M11 results. The 9M11 results, top to bottom, outperformed our expectations, arriving 77.7% - 81.4% of our FY11E. Production achievement was on track, arriving at 75.7% of our FY11E of 23.5mt, while ASP was 4.7% higher than our FY11E assumption of US$90.3/mt.

Maintain production assumption. We continue to maintain our production assumption of 23.5mt in FY11E. We anticipate that, the rainy seasons which have started in mid-October, will delay the commencing production at Tandung Mayang and Bharinto sites, from previously planned in 4Q11 to 1Q12.

ASP: Upgrade the FY11E, but maintain for FY12F. Due to better-than-expected realization in 9M11, we decide to upgrade our FY11E ASP by 6.5% to US$96.2/ton.

For 2012, we prefer to conservatively maintain our assumption at US$92.4/ton given recent weakness in the thermal coal price benchmark (this will apply to the new contract, starting by 1Q12).

Increases cash cost assumption. We believe cash cost in 4Q11 will remain high, attributed to the oil hedging activity and rising strip ratio in Trubaindo mine. As such, we decide to slightly increase our FY11E cash cost assumption by 5.4% to US$46.9/ton. Meanwhile, we believe FY12F cash cost will decrease along with the increasing contribution from East Block of Indominco (low strip ratio) and subsiding contribution from West Block of Indominco (high strip ratio) at the same time.

Sampoerna Agro Tbk - Thanks to Conducive Weather

2011-11-16T23:22:00.000-08:00

by Batavia Prosperindo Securities

• In-line 9M11 result

The company (SGRO) booked 9M11 revenue of Rp 2,517 billions or up by 84% yoy, on the back of 24% increase of ASP and 42% increase of FFB production, contributed partially by the relatively dry weather. CPO production rose 46% yoy. In the bottom line, net profit was up by 86% yoy to Rp 469 billions. This reflects 78% of our 2011 estimation and 76% of Bloomberg’s 2011 estimation.

• Future outlook

The currently-constructed sago starch factory is expected to start production in 2012. We expect little or less than 5% contribution from sago starch to the total revenue in the next few years. In the near future, we see some risk in CPO price movement due to global slowdown. However, the relatively high proportion of FFB production from plasma may help maintain its profit margin, as the government-determined FFB purchase price also follows international price. Besides, we see possible increase in export tax expense in the future as export grows and the government is pushing towards downstream CPO product development.

• Recommend Buy with TP of Rp 3,650

Despite the above-mentioned risks, our DCF valuation with WACC of 12.5% and terminal growth rate of 4.5% leads to target price of Rp 3,650 or at 11.4x 2012 PE. We recommend BUY this stock with potential upside of 17.7% from the current price of Rp 3,100.

BW Plantation - Right on the Dot

2011-11-16T23:19:00.001-08:00

by Etrading Securities

In Line Earnings

BW Plantation has pretty much meet all our expectations for the year of 2011 at least during the 9M 11. Sales 9M 11 increased as much as 57.9% YoY (year on year) compared to 9M 10 and made up about 76.8% of our full year 2011 forecast (FY2011F). Operating profit and net profit increased 69.2% and 65.3% YoY compared to 9M 10. BW Plantation’s net profit for 9M 11 made up of 77.7% of our FY2011F. Please refer to table 1.1 - Consol-idated Profit and loss on page two (2).

Level Off Production

While production for fresh fruit bunches (FFB) in 3Q 11 compared to 2Q 11 declined as much as 26.5% QoQ (quarter on quarter) and plasma produc-tion has a slight increase of about 4.3% QoQ compared to 2Q 11. We see that for the year of 2011, production for BW Plantation has peaked on the 2nd quarter specifically during April – Jun 2011 period. Across the palm in-dustry, we have been noticing a decreasing trend of FFB production in the 2H 11. Their FFB nucleus, CPO, and Palm Kernel production for 9M 11 are pretty much in line with our FY2011F. Please refer to table 1.2 – Production Review

Third Party Buying

Starting from May 2011, BW Plantation has started to buy FFB from a third party to boost up production of CPO. Third party buying made up about an average of 11% of the total FFB production (Nucleus & Plasma) by BW Plan-tation. As you can see in table 1.1 below, gross margin in 3Q 11 is 59.3% which is lower by 7.5% QoQ and 15.5% YoY compared respectively to 2Q 11 and 3Q 10 margin. Accumulatively however, 9M 11 margin has a slight in-crease of 1.2% compared to 9M 10. Likewise, their 3Q 11 operating margin suffers a decline of 14.4% (QoQ) and 16.1% (YoY). We assume this must be because of the third party purchases of FFB to fill up their idle capacity in the factory because of their regressing FFB production in the third quarter.

Our View

Palm oil price is still higher QoQ and YoY- wise. Ytd 2011 Palm oil price is also higher than last year. Viewing that palm oil price has leveled off and there are signs of a strong price floor, we are still on target for BWPT’s FY 2011 earnings. We are still recommending Buy for BWPT with target price Rp 1,450 reflecting a PE12 of 15.

Holcim Indonesia Tbk

2011-11-16T23:17:00.001-08:00

by Kresna Securities

Investment Thesis

We reiterate our BUY recommendation with 12-month TP of Rp2,200. From top to bottom, 9M11 results were still in line with our projection, and accounted for 74.4%-75.8% of our full year forecast. Hence we maintain our forecast at the moment. Adding weight to our recommendation was its performance during 3Q11; SMCB was the sole company under our coverage that recorded positive domestic sales volume, up by 1.3% QoQ to 1.9m tons, while both SMGR and INTP posted negative growth of 1.0% QoQ.

Key Catalysts

· Flat revenue in 3Q11. The company booked 3Q11 revenue growth of 0.6% QoQ to Rp1.9tr, mainly driven by a 1.5% QoQ growth in domestic cement sales to Rp1.6tr and a 200.9% QoQ jump in export cement sales to Rp30.0bn. For concrete & aggregate products, sales dropped by 10.7% QoQ to Rp275.0bn in 3Q11. Year to date, revenue has risen by 26.1% YoY to Rp5.4tr in 9M11, attributable to strong domestic cement sales growth of 33.6% YoY to 5.4m tons amid flat domestic cement price growth of 0.2% YoY to Rp825/kg.

· Improving margin in 3Q11. Lower COGS per unit in 3Q11 has made gross margin expand by 2.8% QoQ to 38.2%, bringing gross profit to a figure of Rp714.1bn, 8.4% higher compared to previous quarter. Lower distribution cost per unit by 3.7% in 3Q11 also led operating margin up by 2.2% QoQ to 23.4%, taking operating profit to Rp437.0bn (+10.8% QoQ). Net margin in 3Q11 advanced by 1.0% QoQ, causing net profit to grow by 8.1% QoQ to Rp268.0bn.

· Domestic sales volume outperforms the industry. In 3Q11, SMCB was the only listed cement company that recorded positive domestic sales volume growth, up by 1.3% QoQ to 1.9m tons vs SMGR and INTP, which both posted negative growth of 1.0% QoQ, and nationally, which posted a decline of 0.8% QoQ. SMCB posted highest sales growth in Sulawesi (+86.9% QoQ), Sumatra (+5.5% QoQ) and Java (+0.5% QoQ).

Earnings Outlook

9M11 results came in as expected. 9M11 revenue and net income of Rp1.9tr and Rp267.8bn were in line with our forecast, accounting for 74.4%-75.8% of our FY11 estimates. The company benefits the most from robust domestic cement demand this year; for 9M11, domestic cement volume jumped by 33.6% YoY, 2x higher than the industry growth of 16.3% YoY and also INTP, its nearest competitor (+16.7% YoY).

Having said that, we maintain our BUY recommendation on the company with a 12-month TP of Rp2,200.

PT Jasa Marga Tbk

2011-11-16T23:16:00.000-08:00

by Kresna Securities

Investment Thesis

We reiterate our BUY recommendation with higher 12-month TP of Rp4,825. In 3Q11, the company booked Rp1.23tr in revenue, ticked up by 2.5% QoQ, while operating profit and net income fell by 15.3% QoQ and 21.5% QoQ to Rp530.0bn and Rp297.0bn, respectively, attributable to higher opex from bonuses and compensation recognition during Muslim New Year, as well as higher net interest expenses. However, 9M11 results were still in line; from top to bottom, they formed 71.1%-73.3% of our full-year estimate. We also upgrade our 12-months TP by 12.2% to Rp4,825, after we switch our base year to 2012 and raise FY12/13 earnings by 5.5%/3.6% to Rp1.7tr/Rp1.9tr, respectively.

Key Catalysts

· Revenue ticks up 2.5% QoQ. The company recorded a 2.5% QoQ increase in revenue to Rp1.2tr in 3Q11 on the back of higher traffic volume by 2.4% QoQ to 275.0m vehicles, bringing 9M11 revenue to rise by 12% YoY to Rp3.6tr, from Rp3.2tr in 9M10. Revenue from toll roads of Rp3.5tr (+10.8% YoY) in 9M11 accounted for 97.5% of total revenue, while miscellaneous revenue of Rp89.2bn (+88.0% YoY) accounted for 2.5% of total revenue.

· Operating profit falls by 15.3% QoQ. Operating profit was recorded at Rp530.0bn in 3Q11, falling 15.3% QoQ from Rp625.9bn in 2Q11, as operating expenses rose by 21.8% QoQ to Rp705.6bn. A jump in 3Q11 opex, we believe, was mainly attributable to bonuses and compensation for Idul Fitri (THR). However, operating profit in 9M11 still rose by 11.8% YoY to Rp1.8tr, from Rp1.6tr in 9M10.

· Net income drops by 21.5% QoQ. Higher opex in 3Q11, coupled with rising net interest expenses (21.1% QoQ) has dragged net income down by 21.5% QoQ in 3Q11 to Rp297.0bn vs Rp379.0bn in 2Q11.

· Better performance in 4Q11. Revenue in 4Q11 will accelerate due to higher traffic volume as well as higher tariff imposed early this month on 11 of JSMR's toll roads.

The new tariffs are 5.9%-25% higher than the previous ones, with the highest increase taking place in Pondok Aren-Ulujami (+25.0%) and Surabaya-Gempol (+16.7%), and the lowest in Palimanan-Kanci (+5.9%). The operation of the new Waru-Sepanjang toll road in early Sep11 will also add weight to performance in 4Q11.

Earnings Outlook

· We upgrade our forecast for 2012. From top to bottom, 9M11 results were in line and accounted for 71.1%-73.3% of our full-year estimate; therefore, we maintain our estimate for FY11 projection. However, we raise our earnings forecast by 5.5%/3.6% to Rp1.7tr/Rp1.9tr in 2012/13, respectively, after taking into account several efficiency programs initiated by the company, namely: the implementation of e-toll cards and consistent efforts to maintain its number of employees constant, despite an increase in toll road length.

· Reiterate BUY recommendation with higher TP. Following our earnings upgrades in 2012/13 as well as rolling our base year to 2012, we raise our 12-month TP by 12.2% to Rp4,825.

Semen Gresik

2011-11-16T23:15:00.001-08:00

by Kresna Securities

Investment Thesis

We cut our 12-month TP to Rp10,500 - still with a BUY recommendation, following SMGR’s disappointing 9M11 performance and fierce competition outlook in 2012. Despite still posting a 9.6% YoY net profit increase in 9M11, SMGR shows declining performance on a QoQ basis as limitation in increasing selling prices (due to competition issue) amid increasing costs environment have caused gross margin continued to trim. Sadly, we believe this condition will continue to persist in the next following quarters, hence forces us to tone down our EPS forecast by 7.2% in 2011 and 8.5%/8.7% in 2012/13. Currently, the counter is trading at FY12 P/E of 13.8x (vs INTP 15.5x and SMCB 14.3x), and PEG of 4.2x (vs INTP 4.6x and SMCB 2.0x)

Key Catalysts

· Revenue down on sour sales volume. 3Q11 revenue slid 1.2% QoQ to Rp4.0tr along with declining sales volume of 1.2% QoQ to 4.8m tons while selling prices only increased by a meager 0.4% QoQ to Rp820/kg. Non cement revenue (i.e: cement bags, industrial real estate, blasting service and land rental) also experienced a decline in 3Q11, plunging by 29.4% QoQ to Rp42.2bn.

· Margins under pressure as costs continue to increase. Increasing production cost (+2.0% QoQ) amid flattening selling prices (+0.4% QoQ) have pushed gross margin to the south, declining from 45.7% in 2Q11 to 44.6% in 3Q11, thus resulting gross profit in the quarter to decline by 3.5% QoQ, from Rp1.9tr to Rp1.8tr. Moving down to operating level, significant increase in community development (+171.6% QoQ) and other general and administration expenses (+24.6% QoQ) have increased pressure on the cost side, thus resulting 3Q11 operating profit to fall deeper, down by 7.0 QoQ to Rp1.1tr.

· Declining non operating income and rising taxes add pressure to the bottom line. Non operating income declined by 22.9% QoQ to Rp50.4bn as forex gain of Rp1.0bn in 2Q11 has turned to loss of Rp3.3bn in 3Q11 while other non operating income (net) also plunged by 64.1% QoQ, from Rp12.3bn in 2Q11 to Rp4.4bn in 3Q11. Other pressure also came from the tax side whereas the effective rates have increased from 21.9% in 2Q11 to 25.6% in 3Q11.

Earnings Outlook

· Results below our expectations. 9M11 net profit only achieves 68.4% of our FY11E of Rp4.0tr given underperformance in sales volume (72.3% of FY11E of 19.4m tons), selling prices (-1.3% to FY11E of Rp825/kg), gross margin (-0.6% to FY11E of 46.1%), net interest income (47.4% of FY11E of Rp300.0bn) and effective tax rate (+1.3% to FY11E of 22.0%).

· Cut earnings by 7.2% - 8.7%, downgrade TP to Rp10,500. Aligning the above assumptions in our model, we cut our net profit estimate by 7.2% to Rp3.8tr in 2011, 8.5% to Rp3.9tr in 2012 and 8.7% to Rp4.5tr in 2013; thus resulting lower DCF TP of Rp10,500.

Bank Rakyat Indonesia - Growth Driven By Micro and SME Segment

2011-11-16T23:12:00.001-08:00

by Batavia Prosperindo Sec

· Still dominated by micro and SME segment

As per 9M11, BBRI’s loan disbursement was still dominated by the micro and SME segment. BBRI booked Rp276.32 trillions of total outstanding loan (+20.8% y-o-y), in which 59.4% was disbursed in micro and SME segment, which increased by 15.22% to Rp164.1 trillions. In corporate credit segment, 61.4% of total corporate loan was disbursed to state-owned enterprises (SOE).

SOE lending provides benefits to BBRI due to its lower risk. In future, we believe BBRI will still focus on micro and SME lending segment, even though its corporate loan is increasing significantly.

· Significant rise in net profit

BBRI booked Rp26.7 trillions of net interest income, rose by 27% y-o-y. 9M11 net profit increased quite significantly by 56.7% to Rp10.4 trillions. Increase in net interest income and net profit are partially due to reduction in cost of fund by 12bps to 4.78%. BBRI NIM rose by 74bps from 9.5% to 10.2% in 9M11. Meanwhile, ROE increased to 39.9% with total CAR of 14.84%

• BUY with TP of Rp8,100

We view that BBRI will be able to maintain loan growth above 20% and NIM around 10.4%, on the back of potential decline in interest rate due to declining of BI rate. We recommend BUY with target price of Rp8,100 (at 3.4X 2012F PBV). There is 23.7% potential upside from the last closing price of Rp6,550.

Adaro Energy - Production still on Track

2011-11-16T23:11:00.001-08:00

by Batavia Prosperindo Sec

• In-line 9M11 result

In 9M11, the company (ADRO)’s revenue rose 41% yoy to Rp 25,430 billions on the back of 25% increase of ASP and 18% increase of sales volume, despite a 6% increase of cash cost due to rising strip ratio. In non operating income, there was a one-off customer claim of US$ 153 millions (or Rp 1,329 billions) related to repricing of the company’s contracts. In the bottom line, net profit was up by 92% yoy to Rp 3,262 billions. This accounts for 74% of our 2011 estimate and 73% of Bloomberg’s 2011 consensus estimate.

• Solid production growth

We view that the company is still on track with its medium-term goal of 80 millions tonnes of production, which is to accomplish through organic and non-organic growth. Production in 2011 is predicted to reach 48 millions tonnes with 6-yr CAGR of 10.3%. The overburden crushing and conveying system powered by an internal power plant is expected to finish by 2013 and will be able to decrease dependency on oil and reduce production cost.

• Currently-lagging stock price offers attractive valuation

We believe the company has strong fundamentals, reflected through its solid production growth and earnings growth. Future risk includes the lowering of global coal price that may be driven by global economic slowdown. Our DCF valuation with WACC of 12.7% and terminal growth of 1.5% results in the target price of Rp 2,400(2012 PE of 13.0x), relatively similar to our previous target price of Rp 2,360. We recommend Buy with potential upside of 17% from current price.

PT Unilever Indonesia Tbk

2011-11-16T23:08:00.001-08:00

by Kresna Securities

Investment Thesis

We have upgraded our recommendation to BUY, with a new 12-month TP of Rp17,400. 9M11 performance is still on track with our expectations, having formed 74.5%-75.6% of our full year estimate. We thus maintain our net profit projection for 2011, but bump a slight upgrade, by 0.8%/3.6% for 2012/13, incorporating company’s expansion and increased production capacity. New loan facility of Rp1.2tr from UFI is also positive for UNVR, as it reduces company’s WACC by 0.9% to 10.9%.

Key Catalysts

Revenue up by 1.1% QoQ. Revenue growth in 3Q11 was contributed mainly by Food & Beverages (F&B) division, which posted growth of 4.2% QoQ to Rp1.7tr, while Home & Personal Care (HPC) division posted flat sales of Rp4.2tr in the respective quarter. In 9M11, UNVR’s consolidated revenue rose 18.0% YoY to Rp17.3tr from Rp14.7tr the previous year.

Margin is sliding in 3Q11. Higher COGS (+3.4% QoQ) have thinned gross margin in 3Q11 by 1.1% QoQ to 50.8%, while aggressive promotion (+9.2% QoQ) cut into operating margin by 2.2% QoQ to 22.2%. Hence, 3Q11 gross, operating and net profit suffered a decline of 1.1%, 7.9% and 10.7% QoQ to Rp3.0tr, Rp1.3tr and Rp957.0bn, respectively.

New support from affiliated company. Unilever Finance International (UFI) has inked an agreement to provide a loan facility up to Rp1.2tr to Unilever Indonesia (UNVR) at a very attractive interest rate of 7.35% p.a. On October 18th, 2011, the company drew down US$22.0m from the facility, possibly to be used to accelerate the construction of its new state-of-the-art personal care factory as well as to expand production capacity. The objective is to enable the company to stimulate higher demand and/or mitigate increasing competition through new product launches. However, a negative consequence is the possibility the company will lower its dividend payout ratio.

Earnings Outlook

No surprise in 9M11 figures. From top to bottom, 9M11 results are on track with our expectations: Revenue reached 75.6% of our FY11E of Rp22.9tr while gross, operating and net profit mark 76.3%, 74.8% and 74.5% of our FY11E of Rp11.6tr, Rp5.4tr and Rp4.1tr, respectively; we therefore continue to maintain our FY11 projection.

Upgrade FY12/13 earnings, re-rate to BUY with new TP of RpRp17,400. For 2012/13, we have upgraded our net profit forecast by 0.8%/3.6% to Rp4.8tr/Rp5.6tr as we incorporate the expansion into our model (bringing our new FY12/13 revenue higher by 1.4%/2.6%). This, coupled with a lower WACC of 10.9%, (the positive impact of the new loan from UFI) and a new base year of 2012 have yielded higher DCF TP to Rp17,400. We now become a BUYer on UNVR.

PT Indocement Tunggal Prakarsa Tbk

2011-11-16T23:07:00.001-08:00

by Kresna Securities

Investment Thesis

We downgrade our recommendation to HOLD, given a recent rally in the share price (over the past three weeks), now only leaving a 9.2% upside potential to our 12-month TP of Rp16,650. 9M11 results were in line with our projection, and accounted for 73.6%-76.1% of our FY11E. With a net cash balance of Rp5.8tr (as of Sep11), INTP is the richest cement company in Indonesia. Again, this will give company the luxury of taking an aggressive expansion stance.

Currently, INTP is trading at FY12 P/E of 15.5x (vs SMGR’s 13.8x and SMCB’s 14.3x) and PEG of 4.6x (vs SMGR’s 4.2x and SMCB’s 2.0x).

Key Catalysts

3Q11 revenue rises 1.8% QoQ. The company posted Rp3.4tr revenue in 3Q11, only ticked up by 1.8% QoQ, supported by a 1.6% QoQ growth in cement prices to Rp799/kg. Meanwhile, cement sales volume and ready mix-concrete sales flat at 3.9m tons and Rp328.0bn in 3Q11, respectively.

Improving operating margin in 3Q11. Amid increasing raw material (+11.4% QoQ) and energy cost (+10.4% QoQ), the company success to maintain its gross margin at around 46% (only slid by 0.2% QoQ). One of the reasons is the 2.8% QoQ increase in 3Q11 domestic selling price to Rp822/kg. Moving on to operating level, 3Q11 operating margin improved by 0.6% QoQ to 31.5% on the back lower operating expenses (opex) of 3.4% QoQ, particularly from salary and wages expenses (as a bonus was booked in 2Q11).

Declining net interest income erodes growth at net profit level. However, bottom line performance was distracted by net interest income, which posted a decline of 9.5% QoQ, as the result of declining cash in 3Q11, to Rp5.8tr from Rp6.2tr in 2Q11. This has caused 3Q11 net profit to post a mere 0.0% QoQ growth, vs +3.7% QoQ on the operating profit level.

9M11 result in line, cut to HOLD due to robust share price rally. Revenue and net income were still in line with our forecast: revenue accounts for 76.1% of our FY11E while gross, operating and net profit has reached 74.6%, 74.1% and 73.6% of our FY11E. However, we downgrade our rating on the counter to HOLD as recent rally in the share price only leaves 9.2% upside potential from our 12-month TP of Rp16,650.

United Tractors

2011-11-16T23:06:00.001-08:00

by Kresna Securities

Investment Thesis

We continue to recommend BUY on UNTR and upgrading our 12-month TP to Rp30,000 as we roll over the base year to 2012 and upgrade earnings by 14.5% - 3.3%. During yesterday’s analyst meeting, management discussed company’s 9M11 performance as well as the outlook for the rest of 2011 and 2012. The headlines are: 1) Thailand flood should have least impact to Komatsu supply for Indonesia, 2) Pama’s margin will continue progressing along with improving weather condition, and 3) Coal sales volume will balloon from the newly acquired coal mines, namely: ABP and DS, as well as the expanding production from PMM and TTA; this will also trickle to Pama’s contracting volume performance.

Key Catalysts

No worry on Thailand disaster, volume outlook remain robust. Amid concern about Komatsu supply disruptions from Thailand due to heavy flood, management mentioned that plant and port there, which are quite distance from the flood, are still running production smoothly. Thus, in October UNTR continued to record strong sales volume of 701units, giving YTD figure arrived at 7,097units.

Pama: Improving Margin. As people may notice, Pama GPM improved to 18.9% in 3Q11 from 15.0% in 2Q11, as no additional cost charged during dry season in 3Q11.

Entering the first month of 4Q11, dry season remained until the weeks 4 which rain started to show up. Meanwhile, for FY12F management aims to record 10% volume growth for both overburden removal and coal extraction by considering the existing contract on hand.

Coal business: volume jump in the pipeline. Company targets to increase coal production by 33.3%-55.5%YoY to 6-7mt in 2012. Except the existing contribution from PMM and TTA, company targets to receive contribution from ABP and DS next year. Meanwhile, for ABB company hopes to commence production in 2013, after finishing the logistic and administrative issue. Additionally, currently it is on the middle of bidding process on 2 new coal assets; company still has around Rp540bn allocated for acquisition.

Earnings Outlook

Komatsu sales: Upgrade 2011, maintain for 2012. In respect to the strong YTD realization of 7,097 units up to 10M11, while HINABI also projects Indonesia Market for Heavy Equipment to hit 17,000 units in 2011, we raise FY11E assumption to 8,400units. Meanwhile, for FY12F we decide to maintain our sales volume forecast of 9,375 units, giving a moderate growth assumption of 11.6%YoY.

Pama: Upgrade the margin. Due to strong realization of overburden result, we decide to upgrade FY11E OB volume by 3.4% to 764m bcm, but yet maintain FY12 volume outlook. Meanwhile for margin wise, we increase our assumption by 2% to 16.0% on the back of normal weather expectation and strengthening dollar.

Coal division: Maintain the expectation. We continue to maintain our estimates for coal business for 2011 as well as 2012. We assume company to sell 4.2mt coal, on the back of strong volume expectation in 4Q11; the rain started to show up in November should smooth coal delivery via the river. Meanwhile, for 2012 we maintain our conservative assumption of 3.0mt coal sales from PPM, 2.5mt from TTA and 0.5mt from new acquired asset.

Adaro Energy

2011-11-16T23:05:00.000-08:00

by Kresna Securities

We maintain our BUY rating on ADRO and introduce our new 12-month TP of Rp3,025 (implying P/E target of 14x) as we roll-over our base year to 2012. In 9M11, company outstandingly showed strong operational results (revenue to net profit have arrived at 77.1%-84.7% to FY11E) on the back of a 18.4% YoY in coal sales volume and 25% YoY increase in ASP. On the other hand, we incorporate the US$153m customer claim and upgrade operational estimate in 2011 but cut production assumption in 2012 by 6.4% to 51.5mt, resulting to slight increase to our net profit projection by 0.9% to US$491.2m in 2011 and 9.8% cut to US$788.1m in 2012.

Key Catalysts

Strong revenue booked. Company remarkably posted US$2.9bn revenue, growing 47.7%YoY on the back of higher average selling price (ASP) and robust volume.

Production volume was on track at 35.3mt (+10.8% YoY) while coal sales volume were also strong at 38.3mt (+18.4% YoY), supported by robust coal trading activity (+591.8% YoY to 3.4mt). Meanwhile, ASP grew 25% YoY to US$70.7/ton, while on a QoQ basis, it continued to rise by around 4-5% QoQ, along with a higher portion of coal sold at index linked price. As an aside, the robust coal trading activity carried a selling price higher than average, also managed to push the ASP.

Cash costs increased 20.3% YoY to US$41.3/ton. The cash cost figure continued to escalate, the result of a higher strip ratio (5.5x in 9M10 vs 5.9x in 9M11), longer hauling road and higher fuel cost. When oil prices fell in 3Q11, company costs did not benefit, since they had already locked their oil purchase contract at US$0.8/liter. Meanwhile, jumping coal trading activity, which caused a 762.9% increase in coal purchases, also affected these rising costs.

One-time off was charged in Aug11. In 3Q11, company decided to record onetime off expense, amounting to US$153m, paid in Aug-11. Despite the charge, company’s net income managed to reach 77.1% to FY11E, while operating profit has reached 86.4%.

Earnings Outlook

FY11E: increase net profit by 0.9%. Due to unexpected robust coal trading activity volume, we raise our coal sales volume by 12.0% to 51.5mt for FY11E (included 1.0mt additional coal production from Wara). We also increase ASP by 4.5% to US$70.2//ton along with higher realization price and robust coal trading activity, which we believe the selling price is higher than the average. On the other hand, we also raise our cash cost assumption by 7.3% to US$41.2/ton, mainly triggered by a higher coal purchase assumption (for trading). These adjustments have yielded a 11.7% upward revision in our FY11 operating profit estimate to US$1.2bn. However, as we also incorporate the US$153m customer claim charges into our model, our new FY11 net profit estimate only increase by 0.9% to US$491m.

FY12F: Cut the production. We cut production volume for 2012, mostly from Wara, by 6.4% to 51.5mt as we assume company won’t significantly ramp up production in Wara, instead of try to start producing from new acquired assets. But, while the production schedules as well as legal status remains unclear, we decide not to incorporate the contribution at the moment. Meanwhile, for the coal trading business, we conservatively assume coal trading activity to slow in 2012, anticipating coal sales volume will arrive at 52.6mt (4.3% cut). Hence, we now only assume an increase in ASP and cash cost assumptions by 1.6% and 10.8%, respectively, to US$76.5/ton and US$39.7/ton. Incorporating the abovementioned, we cut our FY12 net profit forecast by 9.8% to US$788.1m.

Alam Sutera Tbk - BUY recommendation with a 12-month NAV TP of Rp550

2011-11-06T19:47:00.000-08:00

by Kresna Securities

Investment Thesis

We reiterate our BUY recommendation with a 12-month NAV TP of Rp550.

Company's performance in 9M11 was in line and has formed 73.0%-79.9% of our FY11 estimate. We upgrade our marketing sales assumption this year by 14.9% to Rp2.6tr, following impressive marketing sales of Rp2.3tr in 9M11 (+69.0% YoY), as well as additional potential Rp200.0bn windfall from Pasar Kemis. In consequence, we revise up our FY12-13F revenue by 2.9%-7.4% and net income by 3.4%-6.8%.

Key Catalysts

· Marketing sales continues showing impressive progress. As of 9M11, ASRI has marked Rp2.3tr marketing sales, surging by 69.0% YoY over the same period last year. With the potential of an additional stream from Pasar Kemis (estimated around Rp200.0bn), company's FY11 marketing sales target of Rp2.5tr is likely to be achieved with no sweat.

· 3Q11 revenue rises by 5.4% QoQ. The company recorded 3Q11 revenue growth of 5.4% QoQ to Rp317.5bn versus Rp301.3bn in 2Q11, mainly driven by strong sales of land plots, which grew by 28.8% QoQ to Rp239.8bn. Meanwhile, houses and investment property revenue recorded negative growth of 32.1% and 34.9% QoQ in 3Q11, to Rp67.0bn and Rp10.8bn, respectively.

· Surging opex and financial charges hit bottom line performance. Increasing domination of high-margin land plot sales to total sales (78.2% of revenue in 3Q11 vs 65.4% in 2Q11) has pushed the consolidated gross margin up by 1.5% QoQ to 61.5%, bringing 3Q11 gross profit to grow by 8.0% QoQ to Rp195.3bn. Nevertheless, a 54.4% QoQ surge in operating expense (opex) to Rp41.0bn (particularly from significant increase in retribution and consultant fees) dampened operating margin by 2.6% QoQ to 48.6%. The Company thus posted zero operating profit growth, recorded at Rp154.3bn in 3Q11. Adding pressure from below was a significant increase in financial charges, up by 51.5% QoQ to Rp12.4bn. As such, 3Q11 net income suffered a decline of 4.7% QoQ to Rp124.8bn from Rp131.0bn in 2Q11.

Earnings Outlook

· 9M11 results still in line. Revenue reached 73.0% of our FY11E of Rp1.4tr while gross, operating and net profit formed 79.9%, 78.8% and 76.8% of our FY11E of Rp732.9, Rp623.7bn and Rp539.2bn. Considering these figures, we prefer to maintain our FY11 estimate numbers for the moment.

· Upgrading marketing sales and net profit estimates. However, we see upside potential on our 2012 onward forecast numbers, given better-than-expected marketing sales in 9M11 (nearly 100% of our FY11E) as well as possible additional sales of Rp200.0bn from Pasar Kemis. We therefore upgrade our FY11 marketing sales projection by 14.9% to Rp2.6tr while conservatively maintaining the figure for next year at Rp2.7tr (+2.7% YoY), leading us to upgrade our FY12-13 revenue forecast by 2.9%-7.4% to Rp2.1tr-Rp2.7tr and net income by 3.4%-6.8% to Rp844.1bn-Rp1.0tr

Tambang Batubara Bukit Asam (Persero) Tbk - Increase in net Income

2011-11-06T19:45:00.000-08:00

by Kresna Securities

Investment Thesis

PTBA 9M11 results revealed a 68.6% YoY increase in net income, this result considered disappointing given that it only arrived at 66.3% of our FY11E. Culprit for the underperforming result is the postponement of wagon deliveries from PT KAI, causing 9M11 production to mark just 60% of our FY11E of 16.0mt. Thus, we cut our production assumption by 8.8% to 14.6mt in 2011, and 8.5%, to 16.1mt, in 2012. We set a 12 month TP of Rp23,000 on PTBA (still with a BUY), as we roll over our base year to 2012 and change our valuation methodology to pure P/E at 12.6x target.

Key Catalysts

· 3Q11 production was flat. Compared to the previous quarter, 3Q11 production only grew by 7.5% QoQ to 3.4mt, bringing the 9M11 figure to achieve only 60% of our FY11E of 16mt. It seems that we have underestimated the impact of the delay in delivery of PT KAI wagons. 3Q11 coal transportation arrived at 2.8mt, the same as the previous quarter, suggesting the YTD figure also only reached 60% of our estimate.

· Revenue slowed on a QoQ basis. In 3Q11, revenue decreased 6% QoQ, as sales volume and ASP slipped slightly, by 3.5% and 2.6% QoQ to 3.3mt and Rp794K/ton, respectively. Worth noting: despite the decrease in ASP, the YTD figure was still higher than our expectation; we assumed Rp717K/ton versus 9M11 realization of Rp786K/ton.

· Margin slipped in 3Q11. The strip ratio in 9M11 jumped to 4.2x, while 1H11 figure was still at 3.7x. This resulted in a margin correction in 3Q11; GPM fell to 48.9% from 51.5% in 2Q11.

Company Report

Earnings Outlook

· Cutting production assumption. We decided to cut FY11-12 production by 8.8%-8.5%, respectively to 14.6mt-16.1mt, incorporating the impact of the late wagon delivery from KAI. On the other hand, we slightly increase FY11 ASP assumption by 4.4% due higher price realization. Thus, our FY11-12 revenue projections of Rp11.4tr and Rp13.6tr are now lower by 4.7-7.4%, respectively.

· Maintain our cost assumption. 9M11 strip ratio increased quite significant to 4.2x, higher than our expectation of 4.0x. Meanwhile, railway cost realization was also higher than our expectation. Cash cost figure in 9M11 stood at around US$38.2/ton, versus US$36.7/ton of our assumption, deviating by around 4%. Hence, we increase SR assumption to 4.2x for FY11. We also increase railway tariff assumption by 6% for FY11-12. Overall, we increase FY11-12 cash cost assumption by 4.9-3.8% to US$37.3-39.0/ton, resulting 6.0%-10.6% cut on FY11-12 net income.

Ramayana Lestari Sentosa Tbk - 3Q11 performance: Disappointing

2011-11-06T19:39:00.000-08:00

by Bahana Securities

RALS reported 3Q11 net profit of IDR270b, flat y-y and 11% below our expectation, bringing 9M11 bottom line to IDR343b, up 8% y-y, some 5-7% lower than our and consensus estimates.

On the cost front, margins contracted across the board on a y-y basis, which we suspect was partly due to discounting caused by weak purchasing power. At the operating level, 3Q11 earnings declined 5.4% y-y, which brought 9M11 operating profit to IDR376b, some 11-18% below our and consensus estimates (exhibit 5).

On the top line, 3Q11 revenue growth was just 5% y-y on continued weak same-store sales growth (SSG) of 3%, which is negative when we take into account inflation.

Outlook: Margins to remain under pressure on intense competition

RALS performance during this year’s Lebaran festivity, Indonesia’s single largest Muslim shopping season, is testimony that the company will continue to suffer from weak pricing power as its target market undergoes falling overseas remittances and overextensions in credits related to motorcycles and electronics (TVs, DVDs, mobile phones, etc). Additionally, RALS will have to face competition from cheap Chinese imports, hypermarkets selling basic clothing items (similar to what RALS provides to its customers) and deal with higher transportation costs as RALS is forced to open up stores in far away islands). This will continue to pressure margins going forward, in our view.

Recommendation and valuation: From Reduce to HOLD on price fall

RALS’ share price has underperformed the market by nearly 24% ytd (exhibit 4), bringing down valuation to 2012 PE of 11.8x, based on our unrevised forecasts. Hence, we have raised our rating from Reduce to HOLD on RALS. At the same time, we downgrade our target price to IDR700 from IDR780 previously, to account for this disappointing result performance.

Remain Positive Result - United Tractors

2011-11-06T19:37:00.000-08:00

by BNI Securities

Company remain positive on the forthcoming full year revenue escalation driven by the continuing of positive outlook from the domestic market.

CM forecasted to note 9,000unit of Komatsu sold by the end of next year. Revenue in parts & service targeted to record 10%-15% YoY growth, while MC bussiness projected to post higher coal production and overburden removal by around 10% YoY.

PMM and TTA as another UNTR's revenue driver combined with another potential of company's new mines also judged to support company's next year growth, with a total coal production expected to reach around 6-7mn tons.

Maintained our BUY recommendation on UNTR with target price of IDR 27.800 per share

Indonesian Strategy Decent 3Q11 Results

2011-11-06T19:35:00.000-08:00

by CITIGROUP

Indonesian Strategy Decent 3Q11 Results; 9M11 Earnings Growth +27% YoY vs. FYConsensus Growth of +20%

3Q11 net profit were up 3% QoQ and 22% YoY; 9M11 net profit were up 27% YoYvs. FY consensus of 20% YoY —n

Banks and commodities performed best, up 38%and 65% respectively, accounting for 76% and 73% of our FY forecast respectively.

However, the domestic sector was the underperformer (up only 11% YoY) dragged down by telcos, cement, PGAS and Indofood. We expect FY11 net profit growth could reach consensus expectations of +20% YoY.

n 4Q outlook still strong; Still positive —The bank, coal, auto and property sectors willremain drivers of growth in 4Q11 and 2012.

We maintain our positive view on the market and believe that it will still offer a positive return till next year. The market is trading on 2012 PER of 12.5x with EPS growth of 15% and ROE of 24.4%.

Our top picks are Astra International, Bank Mandiri, Bank Rakyat, United Tractors, Jasamarga,Semen Gresik and Indomobil.

PT. Perusahaan Gas Negara (PGAS) - 3Q11 Losses In Derivative and Forex

2011-10-30T10:44:00.000-07:00

by Kresna Securities

Investment Thesis

While PGAS' 9M11 revenue and operating profit did meet our expectations, arriving at 75.3% and 72.4% to FY11E, respectively, their bottom line sustained considerable damage from 3Q11 losses in derivative and forex, resulting in a 9M11 figure that only meets 68.7% of our FY11E. Considering this, we cut our FY11E figures by 11.0% to Rp6.1tr. For 2012F, we increase our net profit forecast by 9.5%, following company's decision to raise prices in East Java. Valuation wise, we shift the methodology used to P/E along with the market volatility. We set our P/E target at 13.8x (average 2006 – now), thus resulting a new 12-month TP of Rp3,900.

Key Catalysts

Revenue slipped 2.6% YoY to Rp14.2tr. The 7.2% YoY distribution price growth was not enough to sustain top line performance, given Rp appreciation and declining distribution volume. In 9M11, Rp has appreciated by 4.6% YoY to an average of Rp8,701/US$ from Rp9,123/US$ in 9M10. Meanwhile, government's decision to divert PGAS' gas supply to supplement national oil production has pressured company's distribution volume, down by 4.4% YTD to 785MMSCFD, with 3Q11 figure only improved by a meager 0.8% QoQ to 791MMSCFD.

Operating margin down by 5.2% YoY to 42.7%. Despite lower volume flowed, cost of revenue increased by 0.7% YoY, as it paid higher purchase price and signed new contract at higher fees; the 9M11 average purchase price was US$2.7/mmbtu versus US$2.5/mmbtu in 9M10. Meanwhile, operating expenses also increased significantly, up by 22.4% YoY, as asset depreciation, salary expenses and allowances for impairment losses recorded a considerable leap of 12.6%, 25.5% and 233.0% YoY in 9M11, respectively.

Below operating figures turned red in 9M11. PGAS suffered additional pressure from non-operating accounts. In 3Q11, it posted humongous loss in the fair value (FV) of derivatives and foreign exchange (FX) of Rp675bn, due to strong appreciation of US$ and JPY against Rp, thus washing away all the Rp268bn gain booked in 1H11. As such, PGAS booked Rp407bn loss in FV of derivatives and FX in 9M11.

Gas price increase in East Java. PGAS decided to increase its distribution price for industrial and commercial customers in East Java by 36% from a current US$6.5/MMBTU, starting next year. Management hopes that this initiative can mitigate the impact of rising gas purchase price (in June11).

Operational level was in line with our estimate. Revenue to operating level meet our expectations, arriving at 75.3% and 72.4% to our FY11 estimates of Rp18.8tr and Rp8.4tr, respectively. However, net income was below expectations, as it is only accounting for 68.7% to our FY11 target of Rp6.8tr, given the unexpected negative turnaround in the FV of derivative and FX to Rp400bn in 9M11. Thus, we incorporate the loss to our model, resulting 11.0% cut to our FY11E net income to Rp6.1tr.

Impact of the gas price increase to our FY12 forecast. PGAS aims to flow around 100MMSCFD of gas in East Java, or 12%-13% of the total distribution volume target this year. By incorporating the impact of a higher price in East Java, we may see a 4.5% upside in distribution price (on a blended basis), thus leading to a 4.0% and 8.0% rise in our FY12 revenue and net profit forecast, respectively.

PT Kalbe Farma Tbk - Revenue Grew 5.8%

2011-10-30T10:42:00.000-07:00

by Kresna Securities

Investment Thesis

We maintain our HOLD recommendation with 12-month TP of Rp3,650. In 3Q11, the company booked revenue of Rp2.7tr, grown by 5.7% QoQ, while operating profit jumped by 13.9% QoQ to Rp526.0bn, mainly resulting from shrinking promotion expenses (-65.0% QoQ). Net income in 3Q11 rose by 11.5% QoQ to Rp1.1tr. Cumulatively, 9M11 revenue grew by 5.8% YoY to Rp7.7tr, while net income accelerated by 18.1% YoY to Rp1.1tr. The results were seemingly somewhat below our projection (65.1%-67.6% of FY11E), however, we believe they remain intact as historical data suggests that 4Q is the strongest quarter and should form around 30%-33% of full-year earnings.

Key Catalysts

Positive growth across divisions. All divisions posted positive revenue growth in 3Q11, ranging between 1.9%-14.3% QoQ. Nutritional Division posted the highest growth of 14.3% YoY in 3Q11, followed by Consumer Health (+7.0% YoY), Distribution & Packaging (+5.0% YoY), and Prescription Pharmaceutical Divisions (+1.9% YoY). Overall, revenue in 3Q11 grew by 5.7% QoQ to Rp2.7tr, bringing 9M11 revenue to Rp7.7tr, a rise of 5.8% YoY, compared to Rp7.3tr in 9M10. However, if we exclude any consideration of the packaging division in 2010, revenue in 9M11 rose by 9.1% YoY.

Higher input cost offset by lower opex. Higher input cost depressed gross margin in 3Q11 by 1.2% QoQ to 51.3%, taking gross profit to Rp1.4tr (+3.3% QoQ). However, we note lower opex by 2.1% QoQ to Rp880.0bn in 3Q11, as a result of declining promotional expenses: down by 65.0% QoQ to Rp75.0bn, pepping up operating margin by 1.4% QoQ to 19.2%; therefore, operating profit accelerated by 13.9% QoQ to Rp526.0bn, while net income rose by 11.5% QoQ to Rp390.0bn. Cumulatively, 9M11 net income grew by 18.1% YoY to Rp1.1tr from Rp902.0bn in 9M10.

Declining cash. Cash position declined by 20.3% to Rp1.9tr by the end of Sep11, taking into account the Rp643.4bn dividend payment in Jul11 and the purchase of the total 7.58% of EMPT's shares (equal to Rp164.2bn) in Aug11. The amount, however, is still sufficient to finance company’s expansion plan next year, which is projected to reach Rp700.0bn.

Earnings Outlook

9M11 results are still within expectations. Revenue accounted for 65.1% of our full-year estimate and 66.7% of consensus, while net income was 67.6% of our full-year estimate and 70.0% of consensus. Worth noting is that while the results in 9M11 might seem somewhat far from our forecast, we believe they remain intact, since historical data suggest that 4Q is the strongest quarter and tends to form around 30%-33% of full-year earnings. Hence, we prefer to maintain our forecast at the moment and reiterate our HOLD recommendation with 12-month TP of Rp3,650.

PT. Perusahaan Gas Negara (PGAS) - 9M11 results below ours and consensus; Minister of Energy approves gas swap plan with Singapore

2011-10-30T10:40:00.000-07:00

by Mandiri Securities

Perusahaan Gas Negara (PGAS) reported a decline in unaudited net income to Rp4.5tn (-4.0%, +8.1%qoq), which represents 69.9% of our FY11F estimate and 66.4% consensus. However, it shows a slight improvement on quarter basis on operational and bottom line.

Distribution volume is 785 mmscfd (-4.4%yoy, +0.4qoq) due to lower contracted gas supplied from main field such as Pertamina and ConocoPhilips.

We are currently reviewing our forecast on PGAS, currently traded at PER11F-12F 10.2x and 10.2x, respectively

New Minister of Energy, Jero Wacik, approves the gas swap agreement to Singapore, previously arranged by BP Migas.

For info, under the gas swap, Gajah Baru field, operated by Premier Oil, will supply 140 mmscfd (previously only 100 mmscfd) to Singapore, while ConocoPhilips will allocate 40 mmscfd from its production to PLN, through PGAS network

This may add additional volume of about 40 mmscfd revenue for PGAS, since it will use its pipeline. Yet, whether it is on distribution or transmission scheme not yet decided.

If PGAS will treat the gas as distribution, there is a 10% potential upside on FY12F net income. No significant impact if transmission scheme applied

Bukit Asam Tbk - 3Q11 Results Review - Lower Sales Hurt Bottomline

2011-10-30T10:38:00.001-07:00

by Mandiri Securities

PTBA booked a 3Q11 profit of IDR722bn (-15% q-o-q) and 9M11 profit of IDR2,336bn (+68% y-o-y). The profit figure was lower than we estimated as sales volume came in lower than we projected.

Rising costs chip off margins. Revenue and gross profit for the quarter declined by 6% q-o-q and 11% q-o-q respectively, leading to lower margins. Rising production cost also took its toll on margins as average sales prices (ASPs) stabilized (-2% q-o-q).

Solid balance sheet a key strength. PTBA’s total cash balance of IDR5,997bn as at September 2011 accounts for 56.7% of the company’s total assets. This puts it in a net cash position.

Bank Central Asia - Strong Results

2011-10-30T10:37:00.000-07:00

by Kresna Securities

BBCA 9M11 result concluded revealing a strong set of results with Rp7.7tr net income, augmented by 25.3%YoY and arriving at 79.7% to FY11 consensus estimates. The loan inked 27.0%YoY growth, surpassing industrial average of 23.4%YoY. Such robust growth is mainly attributed to 28.2% and 33.7% YoY growth in consumer spending (mortgages jumped 41.4%YoY) as well as commercial. Meanwhile, on a QoQ basis, NIM continued expanding, up to 5.7%, this resulting from asset yields improving to 8.12% and CoF declining to 2.62% (saving interest rates were slashed to 2.35% from 2.6% in 2Q11 and 3% in 1Q11).

Net interest income increased by 36.3%YoY to Rp12.4tr… The robust growth in net interest income was supported by 2 main factors: 1) Loan growth jumped heartily by 27.0%YoY to Rp176.3tr, driven by consumer (28.2%YoY) and commercial (33.7%YoY). (2) Asset shifting from SBI held in trading accounts to BI term deposits, a trend gradually building since July-10. By excluding factor number 2, net interest income might grow by around 16%YoY.

… while non interest income fell 10.4%YoY to Rp5.1tr. In contrast to assets shifting to BI term deposits, gains on sales of financial assets in 9M11 dropped 82.7%YoY to Rp296bn. Meanwhile, fees and commissions continue to grow, rising by 14.8%YoY to Rp3.3tr. Other accounts also recorded an increase of 16.1%YoY to Rp1.0tr, mainly supported by 18%YoY growth in BCA finance operating income (Rp930bn).

Expanding NIM. Continuing the positive trend of 2 preceding quarters, NIM continued expanding, arriving at 5.7% in 9M11 figure. This is supported by improving asset yield (to 8.12% in 9M11) due to robust grow in loan portfolio, while cost of funds was reduced (to 2.62%); the drop in cost of funds is facilitated by saving interest rate cut to 2.35% from 2.6% in 2Q11 and 3%in 1Q11.

Improving LDR; slowdown in time deposit market. In line with strong loan growth of 27.0%YoY, LDR increased to 58.3% from 52.6% last year. On the other hand, third party funds grew 14.6%YoY, dominated by CASA; savings accounts and demand deposits grew 19.5% and 17.2% YoY. Meanwhile, time deposit balance only improved by 2.2%YoY, as management decided not to push this expensive funding so aggressively.

Extending mortgages program. With respect to this successful two-year 7.5% fixed rate mortgage programs, management decided to extend it through Dec-11. Worth noting: since company introduced this product, mortgage loans spiked 30% above normal. Though mortgages loan contain 1%NPL, the 7.5% interest rate (hasn’t included additional provision) should still comfort the company’s margin. Currently, mortgages loan dominates 54.1% portion of consumer lending or 13.5% from total lending.

Premium for A Reason. Despite its premium valuation, FY11 P/BV at 4.9x vs sector's 2.8x, investors continue to like BBCA due to its good GCG, conservative management and superior funding and retail chain. At current level, it is trading 9.1% lower than its highest position in 2011.

PT Royal Oak Development Asia Tbk Will Acquire 3 Property Companies

2011-10-27T00:13:00.000-07:00

PT Royal Oak Development Asia Tbk (RODA) which is now renamed PT Pikko Land Tbk, admitted carrying out an assessment with several property companies. Later this year, WHEELS hoping to acquire two to three property companies.

"We expect the total value of about Rp 500 billion. That year the company acquired the property along with land and assets," said Chief Executive Officer (CEO) Pikko Group Nio Yantony, after the Extraordinary Meeting Shareholders , Wednesday (26 / 10).

Later, said Nio, the funds to launch a corporate action is obtained from the remaining funds divestment of subsidiaries, shareholders, and bank loans. According to him, today it is conducting an assessment with a number of local financing banks, both private and state owned enterprises. However, he was reluctant to reveal banking anywhere.

"The rest of the divestment of around Rp 200 billion right again, now for the acquisition of the remaining Rp 500 billion will be met from the banks," he said.

He presented, one of the properties to be acquired by the company has projects in the area of integrated Sahid, Sudirman. Later, the project will be converted into a office building. "Later we will give the name Sudirman Center that will we build a 53 floor office tower and its location was still in the complex Sahid," he said. Unfortunately, he did not disclose two other property companies.

He further said, the company's third acquisition of the property is a series of plans that target company could acquire about ten property companies this year. He said previously the company it had acquired seven properties valued at Rp 512 billion.

As is known, the company has divested its 99.86% stake, or about 799 million shares of PT to PT Transpacific Mutual Capita Swadayanusa Kencana Raharja the middle of this year. Divestment was done wrestling company to focus on business property.

According to him, such a move was appropriate, given the property has a promising business prospects in line with Indonesia's economic growth is stable.

Transpacific Mutual is a subsidiary company engaged in insurance, financial, and property. Of action the divestment, the company scooped fresh funds worth Rp 730 billion and is still remaining Rp 218 billion.

PT Nusantara Infrastructure Tbk - 4th Port Acqutition To Be Settle This Year

2011-10-27T00:10:00.000-07:00

Plan of PT Nusantara Infrastructure Tbk (META) to acquire coal port in South Sumatra retreated into the fourth quarter of this year. Initially targeting the acquisition of META is conducted in the third quarter.

The acquisition process can not be completed on time, because the due diligence process takes longer than expected. "We need more time to study the traffic and feasibility," said Bernard Djonoputro, Managing Director of META, Wednesday (26/10).

However META management still tight-lipped about the identity of the port that the target acquisitions. Clearly, the port has been categorized as an international port and does not not belong to national and local government.

META plans to build bunkers in the port facilities to be bought. Thus, these ports can also serve the oil shipments.

The acquisition of the port will take place in several stages. For the first stage, just after the META minority ownership below 50%. "When was the road, the company will increase the ownership of a majority," said Bernard.

Since only a minority owner, the income of these ports will not be consolidated in META performance this year. Bernard hopes, META could become the majority shareholder in the port next year.

For the first phase of acquisition, the company is set aside U.S. $ 50 million. The entire fund requirement be met from internal cash. Bernard refused to call the current cash position. As of late June 2011, the value of cash and cash equivalents amounting to Rp 103.12 billion META.

META also targeting Kalibaru container port, Jakarta. Currently the port tender process is ongoing. "All the participants except for IPCs, send a rebuttal to the submission of tender documents," he said.

Bernard mentions, at least take up to six months to prepare the tender documents. Thus, the announcement of the winner of new possibilities can be done in the third quarter of 2012. In this tender META compete with four other participants.

META formed a consortium with Mitsui & Co. Ltd., PT 4848 Global System and the Evergreen Group. This consortium will meet about 70% of the loan funding this project and 30% of the equity. "META Shuah there is a commitment from the banks of Rp 6.6 trillion," added Bernard.

While financing with equity will be divided among the shareholders in the consortium. META plans to become the majority shareholder with a share of 51%.

However META still need to find funding to increase its equity. One option being considered is to hold a rights issue.

PT Jembo Cable Company Tbk - PLN Order Boost Net Profit 490%

2011-10-27T00:08:00.000-07:00

PT Jembo Cable Company Tbk (JECC) managed to record net profit of Rp 23.6 billion through September 2011. That number skyrocketed 490% over the same period the previous year of only Rp 4 billion.

The increase in net income also boosted sales increase to Rp 911.5 billion in September 2011 from previous USD 577.2 billion in the same period. Meanwhile, the company's operating profit shot up 5700% from $ 700 million in the third quarter of last year to Rp 40.6 billion at the end of September 2011.

This cable company also recorded a rise in assets to $ 675.5 billion through September 2011 compared to same period the previous Rp 538.8 billion. JECC obligations rose 27.2% from Rp 435 billion in the first nine months to $ 553.4 billion in September 2011. Company capital of Rp 122.1 billion in September 2011 from the same period the previous Rp 103.8 billion.

"We are targeting sales at the end of the year could reach USD 1.11 billion and net income is predicted to reach Rp 36.8 billion," said Anthony Bernady Company Secretary, on Thursday (27/10).

To boost sales, sales JECC currently still dominated by foreign policy that reaches 30% of total company sales. While the remainder is filled by the sale to Telkom by 7%, the distributor about 15%, private sector about 30%, exports 23%. "Orders from the large PLN can improve net profit in 2011, with 20-21% gross profit," explains Anthony.

PT. Perusahaan Gas Negara (PGAS) - Plans to increase gas price in East Java region

2011-10-27T00:04:00.002-07:00

by Mandiri Securities

(CC)Perusahaan Gas Negara: Plans to increase gas price in East Java region (PGAS , Rp2,750, Buy, TP: Rp4,960)

Currently, Santos supplies the gas for East Java region (SBU II), through PGAS network at US$2.4/mmbtu. Santos plans to raise its selling price to PGAS to about US$5.0/mmbtu. Following this, PGAS decided to also increase the selling price by around 30% in order to maintain margin.

Total contracted gas is around 130 mmcfd or 16% of total volume

Based on our discussion with management, the price increase is expected to fix by around next month. However, it is still under discussion with the customers and not finalized.

We did a sensitivity analysis and found out that if PGAS can increase the selling price in East Java by 30%, the impact to FY12F bottom line may be negligible (-2% decline).

We still maintain our Buy call on PGAS, currently traded at PER11F-12F 9.7x and 9.7x

Bukit Asam Tbk - 9M11 results below expectation

2011-10-27T00:04:00.000-07:00

by Mandiri Securities

Bukit Asam: 9M11 results below expectation, 67.6% ours and 67.2% consensus (PTBA, Rp17,350, Buy, Rp 27,000)

∙ Below expectation. PTBA posted 9M11 net profit of Rp2,326bn (+68.6%yoy, -15.8%qoq) followed by revenue of Rp7,755bn (+31.4%yoy, -6.0%qoq). It is below our expectation and consensus which represent about 67% of our FY11F.

∙ Slightly lower sales volume in 3Q11. PTBA sold 9.9Mt coal in 9M11 which slightly higher than 9M10 of 9.8Mt. But on quarterly basis it declined by 4% qoq mainly from export sales, which dropped 26% qoq vs domestic sales that grew by 8.3%qoq. Weighted ASP in 3Q11 of US$95/ton was slightly lower than previous quarter since USD dollar appreciation has dragged down its domestic selling price in US$ term. Coal railway transportation in 9M11 increased by 5%yoy to 8.5Mt.

∙ Lower margin in 3Q11. In 3Q11 PTBA posted lower margin with a gross margin of 48.9% and operating margin of 33.8% vs previous quarter of 51.5% and 36.6% respectively, mainly driven by lower revenue while the opex relatively stable since there was Idul Fitri bonus payment. As a result Opex to Sales (in %) jumped significantly in 3Q11 as seen in the chart below.

∙ We are likely to revisit our earnings forecasts due to the underperforming results.

United Tractors Outlook

2011-10-26T23:24:00.000-07:00

by Kresna Securities

Investment Thesis

We maintain our BUY call on UNTR with TP of Rp27,900. Operational results in September exhibited Komatsu machinery sales, overburden, coal extraction and coal sales grew by 64%, 28.7%, 23% and -1% YoY to 756 units, 69.1m bcm, 7.5mt and 298,000tons. Notably, the outperformed YTD result, machinery sales and overburden, which have arrived 85% and 79% to our FY11E target, may lead us to upgrade our estimate. Our sensitivity test shows that every 5% increase in Komatsu/overburden volume will increase FY11E EPS by 2.5%/1.5%. Recent Rupiah depreciation will also act as buying catalyst for the counter. Final revision will wait after the release of 9M11 result.

Key Catalysts

· Komatsu: another strong result. Sep11 sales rose 28.4% MoM to 756 units, concluding a 8M11 sales growth of 55.7% YoY to 6,406 units. Mining equipments remained as the major contributor, accounting 67.5% of total sales in the corresponding month. Meanwhile, market share still stood strong at 50%.

· Pama: Volumes slightly retreat. Mining contracting activities normalized in 2 months row, after it had inked a new high record in Jul11. In Sep11, both overburden removal and coal extraction volume fell 6.1%MoM and 2.6%MoM to 69.1m bcm and 7.5mt, respectively. Positively, strip ratio remained high at 9.2x in Sep11 as well as 9M11.

· Coal sales: flat but yet on track with target. Sep11 coal sales volume (PMM + TTA) was flat, reaching 298K tons. The 9M11 figure arrived at 3.2m tons which is inline with our FY11 target of 4.2mt.

Earnings Outlook

· 9M11 FS results: expect strong set of results. By the end of this month, UNTR should publish its 9M11 financial report. We expect the numbers are likely higher than ours as well as the streets. Recent rupiah depreciation will also act as buying catalyst for the counter

· Reviewing to upgrade FY11E: Following the strong 9M11 operational result, especially for Komatsu sales and OB volume (both have arrived at 85% and 79% to our FY11E), we are reviewing to upgrade our estimate. Our sensitivity analysis suggest that every 5% upgrade for Komatsu Sales will lead to a 2.5% upside in EPS, while 5% change on OB volume assumption will increase EPS by 1.5%.

· But may downgrade the FY12F. Amid woes on global economic outlook, we also plan to lower our volume growth assumption next year. Base on our sensitivity test, every 5% downgrade on Komatsu sales/overburden removal volume/coal extraction/coal sales, our FY12 EPS will decline by 2.5%/1.3%/0.6%/0.5%.

AKR Corporindo.Tbk - Bright Outlook

2011-10-26T23:22:00.001-07:00

by Etrading Securities

Integrated Infrastructure Logistics Company AKRA and its subsidiaries business are divided into four segments: Trading and distribution, logistics, Manufacturing, and coal mining. Strong Logistics infrastructures and extensive supply chain capabilities is an integral part of the Company's Trading and Distribution business that enables the company to deliver petroleum and chemical products to its customers across the country.

The main Contributor‐Petroleum Business

Starting petroleum Business since October 2005 after deregulations, AKRA enjoying first mover advantage as the first private company to import and distribute petroleum products in Indonesia. AKRA’s Petroleum business recorded an impressive revenue growth with 55% CAGR in 5 years.

Entering Coal Mining and Coal Logistic Infrastructure Currently, AKRA owns five coal mining concessions at Central Kalimantan with a total concession area of 24,388 hectares of coal mining through its owned subsidiary PT Anugrah Karya Raya that was just acquired in 2009. To support the coal mining operation, AKRA also developing Coal Logistic Infrastructure. The Coal infrastructure Logistic will not only be used by AKRA but also will be charged to the third parties for using its hauling roads and coal terminal.

Strong Cash After SOBI Divestment

After the SOBI divestment which is worth of IDR 1.68 trn, AKRA has a strong cash position. Its enable the company to distribute second dividend interim worth of IDR 764 billion. AKRA also plans to spend $110 million in capex, that 30% of it will be spent this year and 70% in the 2012. However, We do not see any difficulties for the company to finance its capex since they have strong cash position. We expect AKRA still have some IDR 630 Bn in cash by the end of 2011 after the Dividend payment and to finance its capex plan for 2011.

Valuation

We initiated AKRA with Buy recommendation and 20.7% potential upside. Our Valuation based on DCF calculation with 12.12% of WACC and 3% of terminal growth rate, the company fair value is IDR 3,200 per share which reflect to 18xPE12F.