Monday, April 29, 2013

Waskita Karya First Quarter 2013 Results Net Earnings

Waskita Karya (WSKT) 1Q13 net earnings came at Rp5.4bn, a significant increase from 1Q12 net earnings of only Rp632mn. The increase in net earnings was mainly attributed by 18.8% yoy growth in revenue; 140bps gross margin improvement and 29.7% yoy decline in interest charges (as company started utilized IPO proceed). The 1Q13 achievement (1.7% of FY2013) was in line with the past 2 years figures (0.2% and 1.2% 1Q contribution in 2012 and 2011).

1Q13 revenue was at Rp957.4bn, or 18.8% yoy growth from Rp806.1bn. 1Q13 revenue achievement equals to 8.9% of FY13 revenue (consistent with the 1Q number in past two years, 9.2% and 9.8% in 2012 and 2011, respectively). We expect that the company should be able to book most part of the revenue in 2nd semester of the year as government projects are normally being tendered at that time.  
1Q13 gross margin (10.3%) was improved by 140bps compared to the same period last year (FY12 and FY13 gross margin were at 8.3% and 9.1%, respectively). Margin improvement was due to company’s effort to be selective on sizeable and high margin projects .

New contract secured during 1Q13 period was Rp3.3tn (our FY2013 new contract target is at Rp12.5tn). We are comfortable with the achieved new contract and some upside may be existed as more government projects will be tendered in the 2nd half of the year.

We are currently in the process of reviewing our recommendation for the counter. WSKT is currently trading at 23.0x 2013PE and 16.9x 2014PE.

Indonesia Market Summaries, April 29 2013

Bank Negara Indonesia First Quarter 2013 Results is in line with expectations

Bank Negara Indonesia - 1Q13 results (Rp5,350Buy; TP Rp5,500)

Results in line with expectations. BNI reported Rp2.1tr net profit in 1Q13 (+34% YoY, +3% QoQ), accounting for 26% of ours and the market expectations. The results were achieved on the back of strong loan growth, high recovery of written off loans and stable provisioning charges.

23% YoY loan growth was recorded in March 2013 (19% in 1Q12) and this was particularly due to strong growth of 44% from the corporate segment, which made up 42% of the total loans compared to 35% in Mar 12. Part of the reasons of the strong growth was the migration of medium-sized loans into corporate and adjusting this additional loans, total corporate loans would have been growing at 26% YoY while the medium loans at 20%, instead of the reported -17%. In addition, consumer lending grew 29% YoY and now make up 21% of total loans compared to 20% a year earlier.

NIM improved to 5.9% in 1Q13 from 5.3% in 1Q12. The strong loan growth was not followed by the deposits which grew 10% YoY leading to rising LDR to 83% in Mar 13 from 75% in Mar 12 and 78% in Dec 12. This, coupled with stronger growth in CASA (+22% YoY, 65% of total deposits), helped improve NIM to 5.91% in 1Q13 from 5.28% in 1Q12 but it was lower than 6.0% recorded in 4Q12. Net interest income hence increased 23% YoY.

Asset quality maintained. Total NPL remained the same at 2.8% with coverage ratio of 122% after the bank wrote off some Rp736bn of bad debt. It was however, was able to recover Rp648bn of the previously written off loans, indicating improving recovery ratio of 88% from 71% in FY12. Of the segment, the small loans (
Rising cost to income due to expansion while CAR at 17.5%. Cost-income ratio was 51% in 1Q13, up from 49% in 1Q12, and this was due to expansion (number of offices increased 8% YoY and ATM 30% YoY), salary adjustment and higher annual bonus.

Maintain Buy. The counter is trading at 2.0x P/BV 2013F and has outperformed the index by 29% YTD. We will review our numbers but keep our Buy call for now with TP of Rp5,500.

Indonesia Market Summaries, April 29 2013

April 2013 Consumer Price Index Indonesia inflation and March 2013 Trade Preview

Inflation result is expected to be relieving. The central bureau statistic will announce April 13 inflation and March 13 trade data on Wednesday (1/5). After several periods of high inflation, we forecast consumer prices to deflate 0.14% mom this month, pulling down the on-year inflation to 5.53% yoy from 5.90% in Mar13. Thus, the year-to-date inflation is expected to reach 2.28% ytd.

Food prices: deflation. The government’s import permits on garlic and onion seems to have brought about results this month as the prices of the two commodities deflated, based on our price observation. Moreover, other commodities such as chicken eggs, and soybean also became cheaper.

Core inflation will likely slow down (again). Although cost pressure has begun to creep up due to previous administered prices hike, core inflation may have decreased (again) this month. Several underlying factors supported our forecast i.e.:
  1. Gold price continued to ease in Apr13 by 4.2% mom
  2. money supply growth has slowed down
  3. the rupiah’s nominal effective exchange rate has remained stable
  4. Investment activities have been easing recently suggested by lower growth of cement and industrial production index.
Meanwhile, we only see minor pass- through effects of higher raw food prices through core inflation. Therefore, we think the core inflation will continue to slow to 4.15% yoy in Mar13 from 4.21% yoy in February 2013.

Volume increase may have reduced trade deficit. Trade balance is expected to print a lower deficit of US$0.06bn in Mar13 from US$0.3bn in Feb13. Export will likely accelerates as countries like China, Korea, and Singapore reportedly increased imports of Indonesia goods by 29% mom, 22% mom, and 11% mom, respectively. It may have been partly down played as a consequence of declining commodity prices such as coal (-2.9% mom), CPO (-2.6% mom), crude oil (-6% mom) and rubber (-6.5% mom) in the corresponding month (see exhibit 4). Meanwhile, as we see moderation trend in investment, non-oil and gas imports are expected to ease whereas oil and gas imports will likely remain firm due to robust subsidized fuel consumption. That said, we think exports and imports accelerated 7.6% mom and 5.7% mom, respectively.

Policy implications: high likelihood of status quo on policy rates. Against the background above, we see the central bank will leave both BI rate and FASBI rate unchanged at 5.75% and 4% in its next board meeting. As we have mentioned before, Bank Indonesia will employ its non-interest rate tools by gradually absorbing liquidity with longer-term instruments to mitigate the temporary spike in inflation. Nevertheless, we expect a FASBI rate hike the soonest in Jun13 by at least 25bps, especially if the government does implement the two- price tier system on subsidized fuel prices.

Indonesia Market Summaries, April 29 2013

Friday, April 26, 2013

Indonesia Market Summaries 26 April 2013

Semen Indonesia gave loan to Thang Long

Quoted in the local news that SMGR is providing loan facilities to their subsidiary in Vietnam, Thang Long Cement, an amount of US$41mn or equivalent to Rp398bn. The loan will bear an interest rate of LIBOR+4.5% per year with a tenor of 12 months. The loan will be used for working capital and others based on the two companies’ agreement. (Bisnis Indonesia)

Bumi Serpong Damai is planning for a placement

BSDE is seeking approval from their shareholders for a private placement. The company is said to let go 10% to a strategic investor where, if approved, have a time limit of two years to find one. BSDE has yet to disclose who the investor would be or what the proceeds of the placement would be used for. However, they said that the company is just opening up an opportunity for a strategic investor who has interest in BSDE. (Kontan)

JPFA will spend up to Rp800bn to buy back shares

Japfa Comfeed Indonesia (JPFA IJ) plan to conduct buy back share with total budget of Rp800bn within 18 months period. Company will appoint Bahana Securities as the main broker for this corporate action. Company will seek approval from EGM on June 12, 2013. This is part of company’s commitment to optimize the excess free cashflow to increase the shareholder’s equity value by improving the ROE and EPS. (Bisnis Indonesia)

Dual subsidized fuel price impact to bank performance

A dual subsidized fuel price, a scenario currently echoed by the government to implement, will slow credit growth and third party fund while increase non-performing loan (NPL), Bank Indonesia research noted. In such case, initial credit growth of 22.5-24.3% is expected to slip to 21.7-23.6%, third party fund from 17.5-18.5% to 17-17.9%, and NPL to 1.6-2.1% mainly coming from construction sector (Kontan)

Bird Flu Warning

Indonesia Market Summaries from the government, Indonesia has issued a travel warning and tightened security of Chinese visitor entrants. There seems to be a new plague of Bird Flu that is plaguing the Chinese mainland. This new form of bird flu is classified as H7N9 type and is stated to be deadly and prone to human transmission. As of yesterday, the disease has infected 108 people, of which 22 died. Although there hasn’t been any flags on the disease being spread to Indonesia, Soekarno-Hatta has tightened security for preventive measures.

WIKA first quarter 2013 result 63% net earning grew

WIKA reported 1Q13 result where net earnings grew by 68% yoy, from Rp104.5bn to Rp175.5bn. The achievement represents 22.3% of consensus estimates.

Revenue grew by 50.3% yoy, from Rp1,748.6bn to Rp2,627.6bn. Compare to last quarter, revenue was down by 23.7% qoq. This quite normal as SOE contractors normally books higher portion of revenue in the last quarter of the year.

Interesting development was on margins side, where we can see quite significant improvement. The company indicated that it is becoming more selective on the project (higher margin projects) they take to improve margins.

The EGM also approved Rp137.4bn dividend (30% payout ratio), which will translate to Rp22.3/share. Dividend payment grew by 27% yoy.

Astra International Final DPS approved

Astra International: Final DPS approved, yielding 2.0% at current price (ASII, Neutral, Rp7,350, TP: Rp7,900)

Yesterday’s AGM approved ASII’s proposed final DPS of Rp150, bringing a total 45% payout ratio including the interim DPS of Rp66 paid last November. The final dividend, which yields 2.0% at current price, would be paid on June 7. Cum and ex-date are on May 20 and 21. The approved final payout is similar to the management’s proposal revealed last month.

Management retained 2013 capex budget at Rp15.5tn (Rp5tn to be financed through bank loans), but altered its allocation. Portion to infrastructures division is raised to Rp2.8tn (versus Rp500bn in FY12) mainly for its toll road business and some Rp0.6-1.0tn for the development of its newly acquired port (Eastkal Supply Base in Penajam, East Kalimantan). Infrastructures and logistics contributed 2.9% to ASII’s 1Q13 NPAT. To compensate the higher infrastructures capex, ASII reduced the portion of UNTR’s budget from Rp5tn to Rp3tn. Automotive capex allocation is Rp8tn.

Key BoD and BoC members are unchanged. Mr. Angky Tisnadisastra stepped back from the BoD, as well as Mr. Kyoichi Tanada from the BoC member (replaced by Mr. Hisayuki Inoue).
We have a Neutral rating on ASII.

Kalbe Farma first quarter of 2013 is on the Right Track

Kalbe Farma: 1Q13 on track (KLBF, Rp1,360, Neutral, TP: Rp1,275)

KLBF released its 1Q13 results yesterday. It posted a healthy 1Q13 growth that was mostly driven by volume. Decline in margins was still manageable, despite labor cost pressures and weak Rupiah. Indonesia Market Summaries quote: Management remains confident with its 15-18% earnings growth target for this year, on track with us and the street. We reiterate our Neutral call. Earnings growth feasibility has improved, yet valuation is no longer cheap – at 32.1x FY13 PE or 27.4x FY14F PE – after outperforming JCI by 12.6% YTD. Our FY13F-14F EPS are 1.0-3.4% lower than the street.

On the right track. 1Q13 sales, EBIT, and NPAT rose 16.2%, 11.7%, and 10.1% yoy to Rp3,490bn, Rp576bn, and Rp444bn, respectively. Each formed 22% of our and consensus’ full-year forecasts. Management remains confident to achieve its 15-18% earnings growth target. We forecast for 15% earnings growth, a tad lower than consensus’ 17% forecast.

Strong volume growth should continue. 16.2% sales growth was mostly fueled by rising volume. Price increases were selective at about 3%, while some 1% growth came from new products contribution. Prescription pharmaceutical, consumer health, and nutrition sales grew 19.2%, 20.1%, and 22.6%; stronger versus 1Q12 YoY growth rate of 16.2%, 8.4%, and 20.6%. We expect the current growth rate to be sustained for the coming quarters, given ongoing investment in brand and promotion strategy. Distribution division's sales growth normalized to 8.6%, given the full-year impact of Abbott’s inclusion. Exports sales contribution rose to 4.2% from 3.4%, following 46% sales growth (versus 15% for domestic market), higher than KLBF’s 20% full-year growth target.

Margin should improve in coming quarters. Margin decline in 1Q13 came as a result of sales mix (i.e. low-margin unbranded generics sales portion up to 11% from 9% in 1Q12), weak rupiah, and rising labor costs and marketing expenses. We expect better margins in the coming quarters as KLBF has selectively raised ASPs by about 3% in 1Q13. Historically, 1Q sales are also the lowest, with average 22% realization to the full-year.

Thursday, April 25, 2013

The Optimism of PT Dyandra Media International (DMI) in 2013

Optimism with the economic situation and the performance of the company in 2013, the net income expected to increase with the growth rate that is almost the same as the previous year, Performance Reports and Financial statements of PT Dyandra Media International Tbk (DMI) 2012, which approximately 70%. The increase is due to the addition of 4 new hotels are expected to be began operations, and the operation of BNDCC phase II.

The company's development strategy in 2013 will continue to improve the "key driver" of growth, which, among others, continues to strengthen its portfolio of Event organizers and exhibitions through Joint Venture (JV) business establishment with the International scale organizer, Tarsus Group and UBMMG Holdings SDN BHD. The JV is expected to strengthen DMI and will be able to expand the exhibition industry sector. The increase of revenue will also be followed by a net profit growth by 30-35% in 2013 from the previous year.

To Indonesia Market Summaries, Daswar Marpaung, DMI's Corporate Secretary pointed out that "As a public company, management of the company will continue to focus on the work plan that has been launched together and trying to achieve the best results in 2013. And in the process DMI will continue to carry vision & mission to increase share holder value.

Performance Reports and Financial statements of PT Dyandra Media International Tbk 2012

Performance Reports and Financial statements of PT Dyandra Media International Tbk (DMI) 2012, marked by the growth rate of the increase in income and net income from Rp 368 billion in 2011 to Rp 624 billion in 2012 (increasing 69%).

Indonesia Market Summaries quote from DMI's Performance Report and Financial Statement in 2012, the main portion of the revenue in 2012 was Event organizer (63%) and supporting events (20%) as well as 2 new business segment in 2012, the Hotel (7%) and a convention and exhibition hall (10%).

This revenue increase also followed by DMI's increasing net income in 2012, which grew 3.5 times when compared with a profit in 2011 at Rp. 14.4 to Rp. 64.9 billion in 2012.

DMI adds 3 new hotels in 2012, Siligita Santika Hotel Bali, Hotel Amaris Panglima Polim II and Hotel Amaris Thamrin City, so the total hotel operated are 6 ​​Hotel now.

While the convention & exhibition center segment is also growing due to the development of Nusa Dua Bali Convention Centre (BNDCC) Phase II, construction began in mid-2012 and expected to be completed in July 2013.

In line with the increase in development projects in hotel and convention & exhibition center, the amount of liabilities (debt) and equity also increased, 26% and 50%. As a result the company ROA increased by 4% to 5%. Likewise with ROE increased respectively by 15% to 18%.

Wednesday, April 24, 2013

BTPN's first quarter of 2013 results is in line with expectations

BTPN 1Q13 results - in line with expectations (Rp5,100; Buy; TP Rp5,600)

Results in line. The Rp573bn net profit, +30% YoY, is in line with expectations, accounting to 22% of our full year expectation (similar to 1Q12) and 24% of the consensus.

NIM declined to 11.4% in 1Q13. Despite the lower NIM the strong loan growth of 28% helped support  the 26% YoY growth in net interest income. Lower NIM was recorded given the decline in average interest yield of 17.5% in 1Q13 compared to 18.9% in 1Q12 while the decline in average cost of funds was slower at 6.8% vs. 7.8%. With deposit growth of 25% YoY gross LDR reached the new record of 88%. Of the total loans we believe loans to pensioners (consumer loans) still account for around 72% while micro loans at 23%. On the deposit side, there is not much change in the composition with CASA deposits make up 16% and time deposits 84%.

Low NPL maintained at 0.7%. This level is the same as in March 2012 but it increased from 0.6% recorded in December 2012. With the estimated write-off of Rp95bn in 1Q13 coverage ratio is now at 155% compared to 170% in December 2012 and 144% in March 2012.

High capital. CAR is one of the highest in the industry at 22.8% with Tier I CAR of 21.9%.

Buy with TP Rp5,600. The bank, which has been recording 23-35% ROE in the past nine years is trading at 2.9x P/B 2013F. Maintain Buy with TP of Rp5,600 based on 3.2x P/B 2013F.

Foxconn is still committed to realize Indonesia investment in 2013

The industrial ministry (Menperin) just announced that Foxconn will realize their investment in Indonesia this year, where the company is currently negotiating with a local partner. Indonesia Market Summaries noted: According to the ministry, Foxconn said that they are committed to build their factory this year; however, they still have yet to disclose the partner, the investment value, and location. The company is said to make a press announcement themselves soon. (Investor Daily)

The president confirmed that fuel price will be increased this May

At last, the president himself has mentioned that the government will take necessary action in order to slash subsidized fuel cost this May and it will likely be informed of a two-tier fuel pricing system.  Until this moment, the government is planning to set subsidized fuel price at Rp 6,500/liter for private cars whereas public transportation and motorcycle could still enjoy the original fuel subsidy at Rp 4,500/liter.

Indonesia Market Summaries view: If this policy is implemented, just as we have mentioned on our previous report, we estimated the impact on inflation will be around 1.0ppt-1.5ppt that could bring our FY13 inflation forecast to 6.4%-6.9% and save Rp54tn (0.6% of GDP) from 2013 budget assuming a full year implementation. We think the policy will trigger the central bank to hike its lower bound rate, so-called FASBI rate by at least 25 bps this year. Meanwhile, its impact on trade balance is likely to be limited, estimated to lower current account deficit by around 0.2% of GDP. We think, however, the effectiveness of the policy will depend on the implementation which will be challenging.

Monday, April 22, 2013

Indonesia Market Summaries 22 April 2013

Lippo Karawaci booked Rp1.15tn 1Q13 marketing sales

LPKR has reported a 1Q13 marketing sales of Rp1.15tn which is 16% of their full year target of Rp6.8tn where township development still became the major contributor of 64.5% followed by condominiums which contributed 35.2% of total 1Q13 marketing sales. Within LPKR, LPCK itself contributed Rp551bn or 47.9% of LPKR’s total marketing sales. LPCK’s 1Q13 marketing sales is equivalent to 22% of LPCK’s full year target of Rp2.4tn. LPCK’s sales include Rp366bn from residential (66.4% of LPCK or 31.8% of LPKR), Rp15bn from commercial (2.8% of LPCK or 1.3% of LPKR), and Rp170bn from industrial (30.8% of LPCK or 14.8% of LPKR). Other major contributors from LPKR include Kemang Village (18.4%) and Tanjung Bunga (10.4%). (Company Release)

Sinarmas Land’s  Deltamas prepares for IPO

Quoted on local news that PT Pembangunan Deltamas is preparing for IPO soon. The company develops a 3,000ha township, Kota Deltamas, in Cikarang, Bekasi and is owned by Sinarmas Land and Sojitz. The company’s IPO plan made the tentative IPO list to 20 companies who are planning to go public between May and July. (Bisnis Indonesia)

Oil production remains lower than government’s target

Oil production along 1Q13 reached 830,900 barrel per day which is higher than end last year at 825,000 barrel per day yet still lower compared to government’s realization target at 900,000 barrel per day (Bisnis Indonesia)

The government postponed hike on 12 kg LPG

The ministry of energy, Jero Wacik, suddenly asked Pertamina to postponed the increase on 12kg LPG. Meanwhile, Pertamina was planning to announce the increase yesterday due to change of distribution for non-subsidized LPG (Bisnis Indonesia)

Bank BJB's First Quarter of 2013 results is within expectations

Bank BJB - 1Q13 results within expectations (Rp1,240; Neutral; TP Rp1,300)

Bank BJB posted IDR371 Billion net profit in first quarter 0f 2013, up 37% YoY, and this account for 26% of the market and 27% of our full year expectations. Strong loan growth, leading to higher NIM, is the main reason for the good performance.

Net interest income was up 38% YoY with NIM improved to 7.2% in 1Q13 from 6.0% in 1Q12 and 5.4% in 4Q12. This was due to the 38% YoY consolidated loan growth which came from mortgage (+225% YoY, from the low base), micro loans (+65% YoY), commercial (+33% YoY) and consumer loans (+24% YoY). Of the total loans, consumer loans remain as the largest contributor, accounting for 60% compared to 67% in March 2012. This comes from loans to the civil servants and teachers as well as pension loans. Commercial loans come second with 22% of total, micro at 12% and mortgage at 6%. With contraction in total deposits of 5% YoY, LDR increased to 84% in Mar 13 from 58% in Mar 12 but the bank is likely to see higher deposits growth.

Non-interest income also showed strong growth rate amid the low base while given the rising NPL, the bank saw its provisioning charges increase 168% YoY. NPL rose to 2.1% from 1.2% a year ago and this increase came from commercial and micro loans (for which the bank just started two years ago). Both segments made up 87% of the total NPL in March 2013, down from 93% in March 2012. However, the significant increase in mortgage loans NPL resulted in their contribution to total NPL increased to 9% from 1% over the last one year.

We expect loan growth to slow down towards 27% at the end of the year with NIM to decline o 6.6% as Bank BJB has started attracting time deposits again by raising the rate by 25 bps in April. NPL is expected to remain at the current level of 2.1% with coverage ratio of 84%. We maintain our Neutral rating for the counter which is trading at 1.8x P/BV 2013F.

Friday, April 19, 2013

PT Timah (Persero) Tbk Plan to divest assets up to IDR 1 trillion

Timah:  Plan to divest assets up to Rp1tn, potential 14.4% market cap increase (Rp1,380, Not Rated)

To divest assets up to Rp1tn or US$100mn. Investor Daily today reported that PT Timah plan to sell its unproductive assets includes 176 ha landbank in Bekasi, Bandung and golf field in Pangkal Pinang and some buildings, with a target value up to Rp1tn. This plan may take place in 2H13 and the proceed will be used to finance its capex spending which budgeted up to Rp1.4tn for 2013.

3.1% dividend yield. Yesterday, the AGM has announced to distribute cash dividend of Rp215bn or 50% from 2012 net profit which translates into Rp42.8 dividend per share or implies 3.1% yield.

Tin price may reach US$25,000/t in 2H13. Indonesia Market Summaries. From the interview, PT Timah’s CEO expects that LME tin price may rise to US$25,000/t (+21% vs curret spot price at US$20,545/t) in 2H12 as supplies from Indonesia will be tight as the Indonesia government impose higher purity standard for export to comply with the new mineral mining regulation ESDM No 24/2012 effective in July 2013.

Potential 14.4% market cap increase?  These assets divestment plan if executed will lead to a potential big chunck one-time gain to TINS’s P&L which subject to the book value of the assets. With Rp1tn or US$100mn fresh cash raised from the asset divestment plan, it potentially may add up 14.4% of the company’s market cap as of today TIN’s market cap is Rp6.9tn or US$715mn.

Bank Tabungan Negara in first quarter of 2013 results is below expectations

Bank Tabungan Negara - 1Q13 results below expectations (Rp1,690; Buy; TP Rp2,100)

The Rp334bn net profit, +7% YoY, account for 20% of consensus and 19% of our full year earnings. This is mainly due to rising provisioning charges and operating expenses.

NIM declined to 5.0% in 1Q13 from 5.1% in 1Q12 but showed improvement from the 4.9% recorded in 4Q12. The support came from 29% Y-Y loan growth. Housing loans increased 27% Y-Y while no-housing loans were up 42% Y-Y. Of the housing loans, the non-subsidized loans increased 51% Y-Y and the subsidized loans a mere 3% Y-Y. Of the non-housing loans, consumer lending reported a 56% Y-Y increase while commercial loans +39% Y-Y.   

NPL was still high at 4.77% in March 2013 with housing loans NPL at 4.6% (3.1% in Mar 12 and 3.9% in Dec 12) and non-housing NPL at 5.8% (4.1% in Mar 12 and 5.1% and 3.9% in Dec 12). To Indonesia Market Summaries, the management indicated that February 2013 saw the peak of the NPL and this has started to improve in Mar with the expectation to continue improving going forward through a more efforts in visiting the customers for loan payment. The problem is concentrated in the interest only balloon payment (IOBP) subsidized housing loans, current outstanding Rp6tr (23% of total subsidized housing loans, 7% of total loans), which were given in 2008-10 for which the customers only had to pay the interest in the first few years and thereafter had to pay both principal and interest based on market rate (11-12%pa). The NPL in this type of loans reached 8% as compared to the other subsidized housing loans at less than 2%. 

As a result of rising NPL, the bank had to increase their provisioning charges leading to the weak net earnings.

We anticipate further improvement in asset quality given the efforts by the bank and based on the Rp1.8tr net profit the stock is trading at 1.5x P/BV 2013F. Maintain our Buy with TP of Rp2,100 based on 1.9x P/BV 2013F

Bank Danamon in first quarter of 2013 results is within expectations

Bank Danamon 1Q13 results - within expectations (Rp6,200, Neutral, TP Rp6,100)

Bank Danamon reported Rp1,005bn net profit in 1Q13, +12% YoY, and reached 22-23% of consensus and our full year expectations, similar to the percentage achievement in 1Q12 and 1Q11.

Net interest income and non-interest income recorded 10-11% YoY growth but the bank saw higher provisioning expenses (+23% YoY) in the quarter which limited net earnings by 12% YoY.

Loan growth increased 11% YoY (+1% QoQ), mainly supported by retail and SME & commercial loans which grew 29% and 24% YoY, respectively, while mass market (among others Adira Finance/automotive, micro/DSP) increased 8% and wholesale/corporate lending was down 5% YoY.

Of the total loans, mass market still dominated at 56% compared to 58% in 1Q12 while SMEC accounted for 27% of total loans vs. 24% over the same period. With lower total deposits, LDR increased to 135% in March 2013 but given the group issued some bonds, Loan-to-finance (LTF) increasd to 89% in March 2013 from 88% in March 2012.

Improvement was seen in NIM on YoY basis, up to 9.65% in 1Q13 from 9.5% in 1Q12 due to steeper increase in cost of funds as the bank has been reducing its time deposits. From 60% of total deposits in 1Q12 T/D now account for 55%. NIM would have been higher if there is more growth in 2-wheeler financing. The Indonesia Market Summaries noted that the automotive financing is still adjusting for the regulation on minimum down payment, both on conventional bank as well as sharia. As a result, Adira Finance sales declined 17% YoY to 373k units for 2-W and -5% YoY to 24K units for 4-W.

Unconsolidated NPL increased to 2.8% in Mar 13 from 2.2% in Mar 12 (not restated, if restated it was 2.8% as well) while the ratio remained at 2.5% on the consolidated basis. The wholesale segment saw the highest increase in NPL to 3.3% from 2.2% while retail and SMEC recorded lower NPL to 1.3% and 1.5% from 2.0% and 2.5%, respectively.

The rising cost-income ratio was due to the expansion and salary adjustment.

At this juncture, we maintain our Neutral call on the bank with TP of Rp6,100. The stock is trading at 1.9x P/B 2013F. The acquisition by DBS Group is still pending the approval from Bank Indonesia, which we anticipate in the near term.

Thursday, April 18, 2013

Indonesia Market Summaries 18 April 2013

Deflation is very likely in April 2013

Sasmito Wibowo, the Deputy of Distribution and Service Statistics within the statistics agency, said that deflation is very likely in Apr13 as horticulture goods prices are declining. These include onion, garlic, red chili, rice, and jewellery. Meanwhile, meat price is still increasing on limited supply; its weight in the CPI is small, though (Investor Daily)

PGAS prepares USD1bn to acquire 3 gas fields

PGN is in preparation for a huge expansion, allocating USD1bn to acquire 3 gas fields, where the location and exact value is still undisclosed. The company claimed that they have enough fund to acquire the fields. As of FY12, PGAS still has a cash balance of USD1.57bn, and the company also got an offer for an USD2bn external financing. The company is also open for bond issuance to finance the acquisition. Aside from the acquisition, PGAS is also further developing their existing gas pipe network in three phases:
  1. Short term: Central Java (150km), Lampung (80km), and Riau (500km)
  2. Medium term: Banyuwangi-Bali (200-300km completed by 2016)
  3. Long term: New gas pipes in Sulawesi and Kalimantan.
(Kontan)

Japfa undergoing major CAPEX to meet growing domestic demand.

PT Japfa Comfeed Indonesia has set aside CAPEX, amounting to IDR 3.9 Trillion to be dispersed throughout 2013 and 2014. They are allocating 60% of the CAPEX budget to develop their DOC (Day-Old-Chicken) business, which is expected to increase production capacity by 34%. Lastly, they are also setting aside 25% of their CAPEX budget to expand their commercial farming and feed mill business. They expect to increase their feed mill production capacity by 19%.  Majority of the CAPEX proceeds are in the form of debt, with portions funded by internal cash. This year, Japfa targets top-line growth at 15%.   (Investor Daily)

There are three news from Indonesia's local newspaper that Indonesia Market Summaries noted for April 18 2013.

Wednesday, April 17, 2013

Indonesia Market Summaries April 17 2013

SSIA announced dividend growth of 170%

Surya Semesta announced that they will pay Rp141.2bn or Rp30/sh as dividend which implies 170% growth yoy. The dividend growth is in-line with the company’s net profit growth of 175% in FY12. (Bisnis Indonesia)

AISA increase CAPEX to IDR 808.9 Billion

PT Tiga Pilar Sejahtera Food (AISA) in Indonesia Market Summaries,  has set aside IDR 808.9 Billion for capital expenditure. The CAPEX will be allocated to develop two rice mills, which would double grain production to 240,000 ton a year. The remainder of the CAPEX budget will be used for their plantation division, notably palm oil. They are planning to garner additional land, amounting to 770 hectares. Lastly, the smallest portion of their CAPEX would be allocated into their food division. Specifically, the Company is planning on adding more production lines within their factories. Another note, the Company is also planning to increase the price of their products by about 5% this year. (Kontan)

JAPFA developing feedlot and breeding center in China

PT Japfa Comfeed Indonesia is currently developing a breeding center and feedlot for livestock in China. The output target would be to breed, and essentially ‘fatten’, 90,000 cows per year or 30,000 cows per cycle (each cycle being four months). (Kontan)

IMF April 2013 World Economic Outlook

In its April 2013 World Economic Outlook (WEO) titled “Hopes, Realities, Risks”, the IMF revised down (again) its global economic forecast for this year to 3.3% from 3.5% in its Jan13 update.

The figure remained unchanged for next year at 4%. Brazil’s growth had the biggest downward revision of 0.5ppt followed by France and Italy of 0.4ppt each. Meanwhile, Japan and ASEAN-5(led by the Philippines and Malaysia) see an upward revision of 0.4ppt and 0.3ppt, respectively. The IMF did not change its forecast for Indonesia’s growth of 6.3% and 6.4% in 2013 and 2014, respectively
Overall, the IMF still sees developing economies to be the engine of global growth in 2013 and next year while recession is expected to linger on the euro area. Global downside risks are revolving around the absence of strong fiscal consolidation plans in advanced countries. Thus, failing to meet the fiscal consolidation could lead protracted period of stalled growth, the IMF says.

Comment:
Despite the IMF expects a better global picture this year, the 2013 global growth number has been revised down for three consecutive times, suggesting the recovery will remain fragile. Moreover, the fact that the growth of developing economies recorded a higher downward revision than advanced economies – usually the opposite – also signals a rising downside risk on emerging countries. Combined with lingering fiscal risk in advanced economies, we believe Indonesia’s economy will definitely be impacted. We expect to re-visit again our macroeconomic forecasts, especially our growth forecast soon with a high likelihood on correcting the growth number down marginally to below 6.3%.

Tuesday, April 16, 2013

Indonesia Market Summaries 16 April 2013 Part 2

Surya Internusa boost commercial property business

SSIA is boosting their commercial property business by expanding their Graha Surya Internusa office building which would cost the company Rp1.5-1.8tn. The Indonesia Market Summaries found that this company is planning to add another tower at Graha Internusa which will add the building size to 80,000sqm from 20,000sqm now. Expansion is expected to start in January 2014 and will be funded using internal cash and external financing. The office building will then change its grade to a grade A from grade B and the average rental rate will rise from USD10/sqm to USD17-18/sqm. (Investor Daily)

Nissan seeks 67%yoy growth in East Java sales

PT Nissan Motor Indonesia aims to increase the monthly sales in East Java from around 600 units in FY12 to 1,000 units this year, implying a 67%yoy growth. Anton Wijaya, its regional manager for East Java, Bali, Lombok, and Sulawesi, expects rising sales to be supported by the opening of new dealerships this year. Initial monthly sales target would be about 700 units before ramping up to 1,000 units towards the end of the year. (Bisnis Indonesia)

Indomobil to do local assembling for Renault

Citing its CEO statement, Indomobil Sukses Internasional (IMAS) plans to do local assembling for Renault cars at one of IMAS’ local assembling facilities. Local assembling would make Renault more price competitive, as it would get better tax incentives from the government. The study remains ongoing now, with better clarity expected in July. The media reports a possibility for Renault to do local assembling for its SUV type. (Kontan)

Adhi karya: securing Rp7.6tn property backlog in 2014

A newspaper reported for Indonesia Market Summaries that ADHI, through its property subsidiaries, is securing a total of Rp7.6tn property backlog in 2014. The largest project will be a 6-Ha superblock in Daan Mogot, West Jakarta with contract value of Rp6tn and low-rise residences in Pejaten with project value of Rp800bn, where ADHI owns 70% of the project. This year, Adhi Properti is aiming for Rp890bn revenue and (Rp341bn revenue in 2012) and Rp160bn in net profit (Rp78bn net profit in 2012) (Kontan).

Indonesia Market Summaries 16 April 2013 Part 1

Bumi Resources recorded sales volume increase of 20.6% in 1Q13

In Q1, BUMI claimed that they have sold 19.1mt of coal which shows a 20.6% growth yoy supported by a 23.7% yoy growth in coal production. The company claimed that this is their highest Q1 production since BUMI was started since heavy downpour usually disrupts production early in the year. BUMI also managed to lower their stripping ration from 10.8x to 9.5x this year. However, BUMI still suffers from ASP plunge as they recorded a 1Q13 ASP of USD73/ton decreasing from USD92.7/ton last year. BUMI claimed that they expect a USD75/ton ASP this year; thus, they are relying more on sales volume to improve their performance for the year. (Kontan)

Comments: Indonesia Market Summaries for BUMI in the first quarter of 2013, BUMI’s sales volume is 25% to our full year forecast vs the usual 20-22%, making the performance a strong one in our view due to inventory carry over from 4Q12 sales.

Coal production is expected to pass 400mt in 2013

The national coal production this year is expected to pass 400mt, 4.4% growth yoy, as production already reached 93mt in Q1. The national coal producer association (APBI) claimed that rising demand from Japan, South Korea, Thailand, and Taiwan will help boost production. Low rank coal production already grew by 20% due to demand from local power plants. APBI stated that coal ASP is still at USD88/ton as of April 2013, but he is confident that it will reach USD100/ton by the end of the year. (Bisnis Indonesia)

Summarecon will build a new township in Bandung

Aside from the township they are planning to build in the Greater Jakarta area, SMRA is also planning to build a new one in Bandung with an area of 200ha. The exact location is also yet to be disclosed but it is currently in the land clearing process and sales will start in 2-3 years. The target market will still be mid-to-upper income segments. As Indonesia Market Summaries posted, the SMRA has prepared more than Rp1tn for the land acquisition in both locations. (Kontan)

Ciputra Development expects 1Q13 revenue growth of 170%

For Q1 this year, CTRA is expecting revenue of Rp1.5tn which is 170% higher compared to the same period last year supported by landed housing sales. In 1Q13, CTRA launched two new residential projects in Medan and Semarang with an area of 100ha each. The company targets sales of Rp1.2tn from the two projects, where the company invested Rp200bn for the construction. (Bisnis Indonesia)

Monday, April 15, 2013

Indonesia Automotives sales is on the right track at first-quarter 2013

Official March auto sales were released on Friday; both aligned with preliminary data. Performances are relatively on-track with bias upward revision on the 4W segment, but we remain vigilant on the government’s plan in announcing a new policy limiting fuel subsidy, which may give a negative sentiment in the short-term. Maintain Neutral on ASII (TP: Rp7,900) and Buy on IMAS (TP: Rp6,150)

4W sales came at 95,936 units (+9.1%yoy; -7.1%mom). Considering the very strong February sales at 103,284 units, the reduction in March volume should not be considered a weakening trend as it is also still higher than the monthly average volume during the strong 2H12 at 96,828 units. As we all know, 2H volumes are seasonally higher than 1H. Toyota volumes weaken by 1.7%yoy or 7.2%mom, though it reportedly managed to sell 1,289 units of Etios Valco (launched on March 11). However, Astra’s performance was strongly offset by the strong sales of Daihatsu (+19.6%yoy; +15.5%mom). Nissan, on the other hand, booked a very weak sales of 4,648 units (-24.5%mom; -22.5%yoy).
On cumulative basis, 1Q13 4W sales came at 295,909 units (+18.0%yoy; -1.3%qoq), accounting for 24.2% of our 1.2mn units full-year estimate (+9.6%yoy), versus historical realization of 24.3% on average (range: 19.4-27.0%). The strong growth was driven by Honda (+228.8%yoy; +16.7%qoq) and Suzuki (+70.4%yoy; -6.4%qoq), mostly due to strong products launching (i.e. Honda CRV, Honda Brio, Suzuki Ertiga).
On the 2W segment, March sales came at 665,334 units (+7.4%yoy, +2.4%mom), marking the highest sales since February 2012, likely due to the effect of fast-forwarded sales ahead of the effective implementation of LTV ruling for sharia banks on April 1. Industry growth was mostly driven by Honda (+26.0%yoy; +2.4%mom), thanks to its aggressive new products launching and strong dominance in the less-sensitive upper-class 2W models.
Cumulatively, 1Q13 2W sales came at 1.9mn units (+1.5%yoy; +3.0%qoq), accounting for 26.4% of our full-year forecast of 7.4mn units (+5.1%yoy). Honda continued to be the outperformer with sales growth of 13.7%yoy and 17.9%qoq, boosting its market share to 61.7%. That said, Honda’s performance is already ahead as it has achieved 27.6% of our full-year estimates of 4.3mn units (+7.2%yoy). We expect Honda to experience a milder impact from the sharia law.
As we had highlighted in our earlier Sector Report on March 14, regulation noise from the government’s plan to curb fuel subsidy spending remains the concern going forward. If the government decides to raise the subsidized fuel price, historical patterns suggests a short-term negative impact of 3-6 months long for auto sales. In our view, the announcement of fuel subsidy policy would also be the key to pave the way for the release of LCGC regulation, which had been delayed.

Coal Industry Overburdened

The Indonesian Coal Sector Report, titled “Overburdened” suggesting another challenging year with more work or earnings pressure for coal producers across the industry.

Interestingly Bumi Plc on the same day, after report dissemination, made another disappointing announcement on the quality of its balance sheet. The new management of Berau Coal Energy (BRAU IJ) has concluded that there is not sufficient evidence to support the capitalization of certain expenditures totaling US$94mn, in particular US$56mn attribute to deferred stripping cost and US$38mn attributed to landowner payment. Therefore, the management likely to expense in FY12 income statement.

Shifts in the global energy mix and in coal industry growth sources in developing economies, create a challenging outlook. We reinitiate our coal sector with an Underweight rating as we expect coal price to linger in 2H13 and further earnings disappointment  in 2013F, leading to unattractive valuations at +1STD or about 15x P/E13F. We have a Neutral rating on PTBA and HRUM; a SELL rating on ADRO, ITMG, BUMI and BRAU.

Tight pricing for 2013, limited signs of recovery. Although the storm may dissipate and the market may see limited downside on coal prices, with 1Q13 at US$91/t (-17%YoY), we see coal price to linger in the coming quarters and we foresee US$90/ton as our 2013 reference price (-21%YoY), or about 5-10% below consensus. Spot price now at US$86.7/t. Indonesia coal export fell 6%YoY or 26%MoM along with slower Chinese coal import at 5%YoY in February 2013 due to continued sluggish power demand which fell 12%YoY, and less restocking activities as inventory remains high at 22 days.

Evolving law: torrent of regulations.  Indonesian government has made a steady progress in mining regulation reform and continues to adjust its mining regulations that, in commercial and practical terms, are more stringent. Plan to seek control on national production or export (quota) are intensely considered. Plans to change from FOB to CIF for Indonesia commodity export trade will likely have negative sentiment to the industry

Where do we turn for 2013? Value plays are very difficult to come by these days especially in the mining universe due to volatile coal prices. While it is intuitive to buy the most geared name for a greater return, but it poses a potential risk of capital raising (BUMI) if coal price recovery do not materialize. Therefore, high quality names with strong balance sheet, growth potential and high cash margin will provide better support (PTBA). Companies that have expensive interest debt, lack of tax shield due to LBO structure will suffer more this year (BUMI, ADRO and BRAU).

Where we differ? Consensus may not adequately incorporate mine-life reserves (adopting an in-perpetuity approach) and potential downside risk from future treatment of actual stripping costs to align with new IFRS. Our FY13 earnings forecast are 22-59% below consensus (ex BUMI). Our adjusted blended valuation incorporates DCF as the core method, blended with earnings multiples, favors PTBA but disfavors HRUM &ITMG given its shorter mine-life reserves.

Property Summaries for Summarecon and Alam Sutera

Summarecon to develop a new township in the Greater Jakarta Area

SMRA is planning to develop a new township in the Greater Jakarta area this year where the exact location is still undisclosed. The Indonesia Market Summaries predict that the new township will have an area of 200-300ha and targets middle to upper class segment. (Bisnis Indonesia)

Alam Sutera increases their CAPEX allocation by Rp2.5tn

ASRI announced that they are increasing their CAPEX allocation to Rp3.2tn which increases by Rp2.5tn, which they will use for land acquisition and project developments. (Investor Daily)

The government to raise subsidized fuel prices for private cars

Kontan newspaper reported that the government has decided to raise the prices of subsidized fuels, namely premium and diesel, for private cars.

Meanwhile, motorcycle, as well as public and logistics transportation are still allowed to consume premium at the current price of Rp 4,500.

In order to do so, the government will separate fuel station for black-plated vehicles and utilize radio frequency identification (RFID) to control subsidized fuel consumption. The government will compensate such plan by giving direct aids which will proposed to the parliament under the 2013 Revised State Budget. (Kontan)

Friday, April 12, 2013

Friday 12 April 2013 in brief

BSDE recorded a yoy jump on 1Q13 marketing sales by 214%

Bumi Serpong Damai announced their Q1 marketing sales of Rp2.6tn which jumped by 214% yoy. The marketing sales itself is already 37% of BSDE’s full year target of Rp7tn. Land plot sales (77% of 1Q13 marketing sales) is the main contributor, where it grew by 613% yoy. Meanwhile, residential contributed 20% of total marketing sales while commercial contributed 11%. The company’s JV with Hongkong Land and AEON Mall was a strong push to BSDE’s early year achievement, according to the company, as they managed to book gain of Rp1.7tn from selling 66ha to the two partners. Moreover, BSDE and Hongkong Land’s JV company will acquire 10ha more land from BSDE, according to the company. (Kontan)

Sentul City gained Rp250bn working capital loan

Last month, BKSL, through PT Bukit Jonggol Asri, gained a Rp250bn loan from Bank Panin to be used to develop a township. The tenor is 3 to 5 years with a single digit interest rate. BKSL added that Rp20bn will be used for working capital, Rp100bn for long term infrastructure and facilities, and Rp130bn for housing construction working capital. (Bisnis Indonesia)

Semen Indonesia showed the strongest growth in Q1

SMGR showed the strongest growth in sales compared to its peers in 1Q13 where the company’s sales grew by 8.6% yoy. The strong growth was due to capacity increase from their new Tuban IV and Tonasa V plants of 750k tons and 600k tons respectively. SMGR expects revenue to grow 21% yoy in 1Q13 which is resulted from sales volume growth. The company claimed that they saw less than 1% growth in ASP in Q1. (The Jakarta Post)

Jaya Agra Wattie to boost CPO and rubber productions

JAWA is targeting CPO production of 56,217 ton which is 21.4% higher compared to the same period last year. Production growth in CPO is expected due to higher palm age that should boost productivity. Fresh fruit bunches (TBS) purchases from third parties is also expected to increase where 39% of their total production will come from third parties. JAWA is also allocating Rp570bn for CAPEX to develop 4,000ha of CPO plantation and 5,500ha of rubber plantation. The company is planning to add landbank of 50,000ha in Kalimantan and Sumatra this year. (Kontan)

Wijaya Karya (WIKA) to accelerate IPO of Wika Beton.

A newspaper reported that Wijaya karya (WIKA) plans to accelerate the IPO of its precast concrete subsidiary, WIKA Beton, to this year. Current WIKA Beton capacity reaches 2mn ton per year at 9 precast concrete plants. It’s also planning to acquire a precast concrete company in Batam. Wika Beton assets is around Rp2.3tn with Rp180bn net profit. On the IPO, proceed is expected to be around Rp1tn for 20% shares. WIKA owns 78.4% ownership of Wika Beton. (Investor Daily)

BI rate flat all eyes on government fuel policy

As expected, Bank Indonesia left its BI and FASBI rates unchanged at 5.75% and 4.00%, respectively in today’s governor board meeting. The central bank is confident that the rates remain consistent with this and next year inflation targets of 4.5% ± 1%.

More on liquidity absorption, rather than interest rate hike to fight inflation.  The first paragraph of central bank’s press release tells its main focus going forward: inflation. It assesses that inflationary pressure in the early months was not a monetary phenomenon and was due to volatile foods. Thus, BI prefers to absorb excess liquidity to manage the short term shock of inflation. Meanwhile, BI will maintain the rupiah's level at its fundamental in which we see a wider toleration of its depreciation.

On the other hand, Bank Indonesia tones down its growth forecast. It remains firm on the domestic economic condition although rising downside risks, especially from the sub-optimum global economic recovery, are highlighted. It expects growth to hover between 6.2% - 6.6% and 6.6% - 7.0% in 2013 and 2014, respectively, a downward revision from the previous 6.3% - 6.8% and 6.7% - 7.2%.

The central bank expects balance of payment deficit to ease in 2Q13 owing to higher surplus in the capital account. This is considering that it will receive fresh flows from government’s recent global bond issuance amounting to US$3bn. Nevertheless, Bank Indonesia anticipates the deficit in current account to linger as the imports of oil products remain high due to rising subsidized fuel consumption.

Wider toleration for the rupiah's depreciation yet volatility remains stable. As of Mar13, international reserve declined by US$0.4bn to US$104.8bn (equivalent to 5.7 times of import and government’s debt service payment), lower than Feb13 reserve reduction of US$3.6bn. In our view it was because Bank Indonesia tolerated further rupiah weakening due to inflationary and trade deficit risks. The rupiah depreciated by 0.57% mom, reaching Rp9,720/US$ in Mar13. Nevertheless, we think Bank Indonesia had intervened the market to smoothen volatility. It was in a downward trend as shown from the rupiah’s volatility index which fell from 15.5 in Feb13 to 15.0 in Mar13.

Until this moment, we remain comfortable with our BI rate forecast of 5.75% until YE13. Despite Mar13 on-year inflation reaching 5.9% and surpassing BI’s upper limit inflation target of 5.5%, the noise has somewhat been over sounded. Rising headline inflation in early months was due to acceleration of few food prices which is mostly a temporary supply side matter and is related with the government’s agriculture import regulation. Meanwhile, the demand-side inflation, the so-called core inflation, remains relatively steady even if we exclude gold price deflation.

We still expect, however, BI’s lower bound rate (FASBI rate) of the money market to be raised by at least 25bps to 4.25% this year. We think the hike is necessary to support the currency that remains under pressure as a consequence of the current account deficit. We suspect FASBI rate will be hiked in Jun13 the soonest as the central bank is expected to be in an autopilot mode until the next governor is officially appointed.

All eyes on government’s fuel subsidy policy. We believe any monetary policy response will be formulated based on the upcoming policy in curbing fuel subsidy. There are several options being discussed but they mainly fall into two categories: price and volume measures. Price hike option will have larger impact on inflation, by around 2.4ppt vs. the latter which is 0.6ppt. Accordingly it can save more government spending by 0.8% of GDP compared to 0.3% of GDP in fuel consumption rationing policy. Without any firm fuel subsidy policy budget deficit could reach close to 3% of GDP assuming no budget cut and higher education spending to maintain the required 20% of total spending threshold.

Thursday, April 11, 2013

Indonesia International Expo Getting Credit Investment of BRI

Indonesia International Expo Getting Credit Investment of BRI worth Rp. 1.135 trillion

PT Indonesia International Expo Investment signed a loan agreement with PT Bank Rakyat Indonesia Tbk on investment loans worth Rp. 1.135 trillion, which will be used for the construction and development of International convention and exhibition hall.

Indonesian International Expo (IIExpo) which located in Serpong, Tangerang, will be the largest convention and exhibition hall in Indonesia. IIExpo was established on an area of ​​25 hectares with a building area reaches 220.000m2. The project is expected to be completed by mid 2014.

PT Indonesia International Expo is a collaboration between Sinar Mas Land, Kompas Gramedia and PT Dyandra Media International Tbk (Dyandra & Co.). For Dyandra & Co., the IIExpo recorded as the 5th of convention and exhibition hall after Gramedia Expo in Surabaya, Bali Nusa Dua Convention Center, International Convention Center Medan and Makassar International Convention Center.

source: Indonesia International Expo Getting Credit Investment of BRI

Indonesia Today's Market and Business April 11 2013

Realization of capital spending reached 5.6% in 1Q13

The realization of government’s capital spending only achieved 5.6% of Rp184.4tn targeted in APBN 2013. Furthermore, this realization figure is lower than the same period of 2012 which reached 6.71%. The head of government’s fiscal policy, Bambang P.S. Brodjonegoro, mentioned that if the government could optimize the disbursement of capital post, then there would be an additional contribution of 0.2ppt – 0.3ppt to economic growth (Bisnis Indonesia).

Kawasan Jababeka prepares Rp9tn to develop CBD

KIJA is preparing Rp9tn to develop a CBD on a land of at least 30ha wide where the first phase will be to develop a residential estate on a 16ha land within the next 12 years with a total investment of Rp4.5tn. Meanwhile, the development of the CBD itself will take approximately 20 years in 2-3 phases. KIJA is currently studying the feasibility of the project where the result is expected to be out by Q1 next year. Aside from offices, the CBD will also have shopping centers, apartments, recreational areas, and town house. (Bisnis Indonesia)

Cikarang Property prices boost as new toll access is opened

For Indonesia Market Summaries news, KIJA and LPCK, in their partnership, has opened a new toll access at KM34.7 of the Jakarta-Cikampek toll road to the residential and commercial areas in Cikarang. The two companies have allocated Rp300bn for land clearing and construction for the toll access where each company pays 50% of the total cost. With the new toll access, KIJA and LPCK expect land ASP to increase by at least 20%. (Kontan, Bisnis Indonesia)

Summarecon gained Rp600bn loan for working capital

SMRA received an Rp600bn working capital loan from Bank Mandiri with a single digit interest rate and a tenor of 7 years. The company was seeking loan earlier this year to finance the development of their hotels in Bali which is expected to cost Rp700bn. Aside from hotel, SMRA is also eyeing for a township project which they claimed to be their expertise. (Bisnis Indonesia)

Agung Podomoro to payback Rp400bn debt

APLN is planning to pay off their Rp400bn syndicated debt using the proceeds from the issuance of their Rp2.5tn bond. The company expects the bond to be issued by June 2013. (Bisnis Indonesia)

Ciputra Development reported a consolidated 1Q13 marketing sales of Rp2.9tn

CTRA reported a consolidated 1Q13 marketing sales of Rp2.9tn which is 28.2% of their full year target. Outstanding marketing sales performance is shown by CTRS who book Rp1.3tn or 41.4% of their full year target. On the other hand, CTRP is still lagging and only booked Rp142bn marketing sales which is 8.1% of their full year target. Product mix wise, contribution still come mostly from houses (56%) and shop houses (24%). Meanwhile, geographic wise the largest contribution comes from Sumatra (37%) and the Greater Jakarta area (32%). (Company release)

Consumers’ confidence remains stable along Mar13

BI’s consumer confidence index was stable last month than Feb13, as the index was unchanged at 116.8. The relative steady number was due to higher optimism among consumers about the economic condition for the next 6 months despite the index for current economic condition eased owing to lower confidence about job availability (Bank Indonesia).

Palm Oil Reserves in Malaysia Drop Most in Two Years but CPO price still drop 1%

Palm oil stockpiles in Malaysia, the world’s second-largest producer, fell the most in more than two years to a seven-month low in March as exports gained for the first time in five months, according to official data. Inventories shrank 11 percent to 2.17 million metric tons last month from 2.44 million tons in February, the steepest monthly drop since January 2011, the Malaysian Palm Oil Board said today. The decline exceeded the median estimate for a 7 percent drop to 2.27 million tons in a Bloomberg survey. (Bloomberg)

Comment: although after the announcement of palm oil Inventory decrease higher than consensus expectation (which should be bullish factor on CPO price), the CPO price decreased by 1%. Indonesia Market Summaries assume to this matter as a sign that CPO price would decrease further in 2H13 when CPO production ramp up and palm oil inventory back to increasing trend.

Erajaya Swasembada Too early to call for a competition

Erajaya Swasembada: Too early to call for a competition (ERAA, Rp2,875, Buy, TP: Rp3,875)

ERAA fell 5.7% yesterday, contributing a total decline of 16.1% from its high of Rp3,425 last month. We have specifically asked the company - and it clearly stated to us that there are no company-specific issues behind the recent sell-off. Potentially weak 1Q13 results, as has been discussed in our recent report, should be quite widely understood and thus expected. We believe that the recent sell-off could be driven by rising market worries over the issues on the potential threat of Taiwanese distributor Synnex entering the competition in the Indonesian handset market. We believe that this call is too early, justified by our explanations below.

Synnex's presence in Indonesia is not new. Synnex is a Taiwanese-based distribution company with main focus in the IT products distribution for the North Asian region like China. Its presence in the Indonesian market is not new at all, as it already has a local joint venture with PT Metrodata Electronics (MTDL) under a company called PT Synnex Metrodata Indonesia, established in 2011.
Synnex's network is not comparable to main players like ERAA and TRIO. As revealed in the website, Synnex distributes its products in Indonesia through agents and sellers using 6 distribution centres in Jakarta, Bandung, Yogyakarta, Surabaya, Medan, and Makassar. This is very insignificant as compared to ERAA that has presence in more than 50 cities with about 90 distribution centres and more than 20,000 retailers.

Synnex's brands portfolio are limited. When we screened through its Indonesian website, we learned that Synnex has wide brands portfolio in the IT products but not in handsets with only a few brands like Samsung, Sony, and ZTE. Its distribution market share in key brand like Samsung, if any, should also be small, we believe, as Samsung has about 50 distributors in Indonesia with ERAA alone, as the largest among all,  having approximate market share of 30%. In the IT products distribution, which is its core, what we know is that Synnex is not as big as the main players like Astrindo which distributes Acer products. ERAA, given its strong distribution network, has also been trusted.

Synnex’s costs structures are no better than ERAA. There has been a few investors asking us about the potential price war and margin cuts happening to ERAA if Synnex is competing in the handset market. We do not think that the company is able to do price war as we learned that Synnex uses a lot of master-dealer concept when distributing products in Indonesia, which yields lower gross margin by 1-2ppt as compared to directly selling to end-retailers. At the same time, having a price war between distributors is also not a good thing for brands principals (who normally set its suggested retail price), as it would have impact to the sustainability of their brands. Some investors also aske

Reiterate our BUY call. After the sell-off, ERAA’s valuation has come off to 13.2-10.7x FY13F-14F PE, on a 30% EPS CAGR in FY12-15F periods. With the continuous increase of retail business proportion, ERAA’s valuation becomes attractive against those high-flyer retailers. We continue to reiterate our BUY call on the stock. Grey market clampdown and strong products launching (i.e. BB Z10, BB Q10, Samsung Galaxy S4, and potentially iPad mini) would make 2Q13 a strong quarter.

Wednesday, April 10, 2013

Property Sectors April 10 2013

Ciputra Property acquired 7.2ha land in Puri, West Jakarta

It was announced in the local news today for Indonesia Market Summaries that CTRP has completed the acquisition of 7.2ha land in Puri, West Jakarta with a transaction value reaching Rp1tn or Rp15mn/sqm. The company has yet to disclose the planned project in the area or its cost, but they will most likely build a high rise project. (Investor Daily)

Comments: Land ASP in Puri Indah is approximately Rp17-20mn/sqm, thus, the deal in our view is a good one for CTRP as the company is paying at a discount.

Kawasan Jababeka to diversify more into residential and commercial projects

Through its subsidiary, PT Graha Buana Cikarang, KIJA is planning to be more aggressive in developing residential and commercial projects. KIJA will allocate 600ha out of 5,600ha for their residential and commercial projects. The company just launched their Beverly Hills cluster, which is a homestay concept project, last month with an ASP of Rp2.3bn where one unit has 11 rooms. The cluster is currently sold out, but KIJA will launch its second phase this month with an ASP of Rp2.3-3.0bn. This year, KIJA expects revenue from residential and commercial to be more than half of the company’s total revenue last year of Rp1.4tn. (Kontan)

Super luxurious property ownership by foreigners is expected to be allowed

Property ownership by foreigners in Indonesia is starting to get attention from the government as regulation revisions regarding it is starting to be discussed. The Indonesia Market Summaries noted that The Public Housing Ministry (Kempera) suggested three revisions to the regulation:
  1. Flats ownerships are limited to 750sqm in size and at least Rp5bn in value;
  2. For landed housing, an area of at least 400sqm and value of at least Rp10bn;
  3. Ownership timeframe to be changed from 25 years to at most 50-60 years. Therefore, only the premium apartments and landed housing are allowed to be owned by foreigners. (Kontan)

Asian Development Bank forecasts a 6.4% economic in Indonesia

Asian Development Bank (ADB) forecasts a 6.4% economic

Indonesia is expected to grow at 6.4% and 6.6% in 2013 and 2014, respectively driven by buoyant private consumption and solid investment performance, and growth in international trade, based on the ADB report published yesterday.

Specifically, Solid private consumption will be supported from increasing employment and higher-than-average minimum wage increase this year. Meanwhile, ADB expects investment to enhance both from private and government sectors (Bank Indonesia, ADB).

BWPT is well-known as low-cost CPO producer

BW Plantation: Low cost. But, too much capitalizing expenses to Balance Sheet?
(Initiate with Sell) (BWPT, Rp1,270, SELL, TP: Rp850)


We initiate coverage on BWPT with Sell call, non-concensus call, with TP of Rp 850 as: 1) BWPT would book lower FY13F net income (our EPS is 40% lower than consensus) due to loss-making newly mature (Figure 41 and 42) and lower CPO price. 2) downtrend in CPO price in 2H13 would make its PE multiple to decrease.

Plantation companies have underperformed the JCI

Drag down by lower CPO price and sizable newly mature area. There are 12,732 ha newly mature area in FY13F (47.9% of FY12 mature area), which around 9,019 ha (70.8% of 12,732ha) is located in East Kalimantan, where BWPT’s first palm oil mill in East Kalimantan would commence its operation since Oct’13. Therefore, BWPT would only sell FFB in East Kalimantan for most of 2013. We are confident that FY13F newly mature plantation contributes net loss to consolidated net income, unless the costs are capitalized to balance sheet (Figure 41 & 42)

Too much capitalising expenses to Balance Sheet? BWPT is well-known as  low-cost CPO producer. However, we notice that although BWPT charges cost per ha to Income Statement pretty much lower than its peers, the rate of BWPT capitalising expenses to immature plantation (balance sheet account) increase significantly in the last 2 years, much higher than BWPT’s historical pattern and its peers (Figure 36, 37 and 38). According to Indonesian SFAS, land compensation is capitalised to ‘Deferred charges on landrights’ (before 2013) or ‘Fixed asset –land’ (since 2013), not capitalised to ‘immature plantation’.

Need huge money to fund its capex, while it has high net gearing ratio. BWPT need external funding around Rp700bn to fund its FY13F capex around Rp1tn. Meanwhile, its net gearing ratio is already high at 167% in FY12 (increase from 51% in FY10). BWPT indicates that it would get around Rp700bn from bank in 2Q13.

Initiate with SELL call with TP:Rp850. We derive our TP of Rp850 based on based on PE Target of 13.5x applied to our EPS forecast for 2013 (-1 SD to 3-year mean).  We have Sell call on BWPT as we think: 1) there would be earning disappointment in FY13F. 2) Downtrend in CPO price in 2H13 would drag down its PE multiple.

Plantation: The calm before the storm

Plantation: The calm before the storm (Underweight)
YTD, plantation companies have underperformed the JCI. However, we see further downside in share prices of plantation stocks in 2H13 because we expect CPO price would decrease further in 2H13, which would drag down their PE multiples. Hence we rate AALI, BWPT and LSIP as SELL, and SGRO as Neutral on cheap valuation.

Bleak outlook on CPO price. We foresee Rotterdam-based FY13F average CPO price of US$825 per ton (equivalent to RM2,271 per ton), a 17.3% yoy decline from FY12.  We expect strong CPO production growth in FY13F following large addition to newly maturing plantation area in FY12 and FY13F (from aggressive new planting in FY08 and FY09). 1H13 may see relatively high average CPO price of US$865 per ton due to seasonally low production, but we expect palm oil inventory to spike, generating unfavorable palm oil stock usage ratio, in 2H13 due to rising newly maturing plantation area and seasonally high FFB yield. This may well compel CPO mills to become distressed sellers because CPO production is likely to outpace sales. Thus we expect CPO price to slide to US$785 per ton in 2H13.

Not all volume production growth contributes additional net income. Due to a large part of their volume growth coming from newly maturing plantation area in 2013, AALI and BWPT’s expected rise in revenue would not in our view contribute additional net income. Newly maturing area often generates losses as their low productivity fails to compensate for their production costs.

SELL call on AALI, LSIP and BWPT, Neutral on SGRO. PE multiples of palm oil plantation companies decrease when CPO price decreases. Therefore, although plantation companies have underperformed the JCI, we still see further downside as we expect CPO price would further decrease in 2H13. As a result, we have sell calls for 7 months period on AALI, LSIP and BWPT. We have Neutral rating on SGRO as we think the downside of its share price is limited as its EV/ha of US$7,930 as cheap as new planting cost.

Bank Indonesia reported is studying possible hike of benchmark policy rate to deal with inflation

Bank Indonesia (BI) reported is studying possible hike of benchmark policy rate to deal with inflation according to Bisnis Indonesia end of last week. BI governor, Darmin Nasution, said that the central bank will be very careful in hiking the rate, however, if it is necessary BI will not be hesitate to increase it.

Comment: We still see BI rate to stay unchanged at 5.75% this year.

This is due to: First, the current inflationary pressure (5.9% yoy in Mar13) is still mostly driven by the supply shock (volatile food). Meanwhile, demand gauge inflation (core inflation) is relatively stable at 4.2% yoy. The previous chili-driven inflation in 2011 shows that the impacts tends to temporary and normalize after the government boost up the supply through imports. We expect the same trend will happen to the current garlic and onion price after government allow imports; Second, the economic growth momentum is currently easing that will require more accommodative bias monetary policy.

Nevertheless, the prolonged food price normalization that could transpire to core inflation and the delay of fuel subsidy reduction policy could risk on unnecessary monetary policy tightening. The delay in implementing the firm policy to reduce fuel consumption will lead to further pressure on the currency, as the oil and gas trade imbalance will continue to drag down overall trade performance.

Until now, the central bank manages to sustain the equilibrium by strengthening its macro-prudential measure and intervening in FX market. However, it would have to tighten further should the external financing position deteriorating and no improvement in significant improvement.

Tuesday, April 9, 2013

Supra Boga Lestari is On the right track

Supra Boga Lestari: On the right track (RANC, Rp830, Buy, TP: Rp980)

The flat operating profit growth in FY12, despite 21% increase in sales, is not something to be surprised about. RANC just hired three new BoDs in mid-2011, causing a 31% increase in salary expense (50% of total G&A expenses), which was within our expectation. The trend shall stabilize this year, as they only hired new CFO from Plaza Indonesia. In fact, the strategy of hiring the current COO from HERO (in mid-2011) enabled RANC to substantially increase its suppliers’ income in the form of listing fees and events promotions, which led to 66% earnings growth in FY12.

After incorporating FY12 results and realignment of selling space assumptions into our model, we fine-tuned FY13F and FY14F EPS by -2.2% and -2.6%.  We lowered our TP slightly to Rp980 (previous: Rp1,000), derived using a similar 1.0x target PEG that implies 31x FY13F PE. Our BUY call is unchanged. RANC is currently trading at 26.4x FY13F PE, at a steep 42% discount to HERO (45.1x PE) as the closest comparable in the supermarket segment.

Tiphone Mobile Indonesia Updates on the acquisition progress

Tiphone Mobile Indonesia: Updates on the acquisition progress (TELE, Rp700, Buy, TP: Rp810)

We had a quick conversation with TELE yesterday, to gain insights on the progress of the acquisitions and the potential impact of the new import regulation on its Tiphone handset brand.
The key takeaways are as follow:
  • The acquisition of MTS, an iPhone distributor for Telkomsel –  TELE expects to announce the acquisition this month. This suggests about two months of delay, assuming that the consolidation starts from May onwards. For every one month of delay, our sensitivity suggests a reduction of 1-1.5% of FY13F EPS.
  • The acquisition of Samsung distributor – The plan to acquire a Samsung distributor for the Jakarta area remains intact for 2H13. During the conversation, TELE further mentioned that it intends to acquire another Samsung distributor for West Java (the company is located in Bandung). If everything goes well, the action may go through in May. We did not manage to get details on the acquisition price, but the company mentioned that the sales target is about Rp600bn this year. Based on the industry standards, the gross margin should be in the range of 8-10% roughly.
  • The acquisition of EXCL voucher distributor – The letter has been sent to EXCL but approval has not been given. From the discussions, we sensed that there could be chance of a disapproval on this transaction, like what happened to the delayed acquisition of Simpatindo. However, TELE claimed that the acquisition of Samsung’s distributor for West Java area should be enough to cover the net profit addition from EXCL voucher distributor. Based on our calculation, the acquisition of EXCL voucher distributor should give annual Rp20bn NPAT assuming 2% net margin.
  • Import regulation impact – The new import regulation has taken place since March 15. The new ruling helped in reducing the grey market imports on brands like BlackBerry, but also at the same time gave more difficulties in importing Chinese-made handsets. TELE acknowledged this, but so far it managed to go through the procedures and found no difficulties yet to import its Chinese-made Tiphone brand. Tiphone brand itself accounts for about one-third of TELE’s EBIT in 2011, but the contribution should come down after the acquisition of the distributors for Samsung and iPhone.

Foreign Exchange (FX) Reserves down, Indonesian rupiah volatility eases

The reduction in international reserve eased during March 2013, just as expected.
It fell slightly by USD 0.4 billion to USD 104.8 billion in March 2013 as the central bank may have scaled down its foreign exchange intervention. It was softer than the reserve reduction in Feb13 which reached US$3.6bn.

Lower intervention: wider toleration of Rupiah depreciation due to fundamental factors.
Trade deficit and inflation risks have caused fundamental correction on the rupiah. Net foreign outflow was recorded in the bond market, reaching Rp3.3tn in Mar13. On average, the rupiah depreciated by 0.23% and surpassed the Rp9,700/US$ level during last month.  
Yet the volatility of it is still in check.

The central bank was intervening in the market to smoothen the depreciation degree. Rupiah volatility was in a downward trend, shown from its volatility index which fell from 15.5 in February 2013 to 15.0 in March 2013.

Episodes of Rupiah weakening pressure: “to be continued”.

It will be difficult for the exchange rate to appreciate below Rp. 9,700/US$. Although food inflation is expected to level off in the next following months, concern of a pass through effect from administered prices to headline inflation remains very much alive. Moreover, rising oil product imports due to increasing subsidized fuel consumption combined with fragile global condition has also reminded the market on the external imbalance risk. The exchange rate expected to hover around Rp. 9,700/US$ to Rp. 9,900/US$.

Policy implication: FX intervention continued and FASBI rate hike remains on the table.
Against the above background, we think Bank Indonesia (BI) will continue to be in the market, albeit of lesser magnitude, to maintain rupiah volatility. We also think FASBI rate hike will be done this year at least 25bps to 4% in order to support the currency. Nevertheless, as we expect the central bank will not do anything significant about changing its stance until the next governor is officially appointed, we suspect FASBI rate will be hiked the soonest in June 2013.

We do not expect significant deterioration in Foreign Exchange reserves. Considering the reserve decline is expected to tone down ahead to tolerate further currency weakening and the central bank continues to upgrade its foreign exchange through term deposit, we hardly see that the reserve will be below the US$ 100 billion. Since the beginning of 2013, BI’s FX reserves portion from the USD term deposit continued to charge up to USD 3 billion in March 2013 from USD 2.2 billion in February 2013. Accordingly, excluding the term deposit Foreign Exchange reserves currently stand at USD 101.8 billion in March 2013.

Another good year for banks in Indonesia

Entering 2013 banks are more optimistic compared to in 4Q12, translating into 23.5% loan growth. However, with a more conservative stance on provisioning charges, we expect slower earnings growth of 13% on average in 2013. We assign a NEUTRAL stance on the industry with BBRI and BBNI on the larger banks and BJTM and BBTN on the smaller banks as our top picks.

Stronger loan growth in 2013. We expect average loan growth on our bank universe of 23.5% in 2013 compared with 22.7% in 2012. This is expected to come from investment or corporate loans and consumer loans, which have been supported by the rising middle income.

NIM to remain high at more than 6%. Average net interest margin on our bank universe is forecasted at 6.56% in 2013 and 6.50% in 2014. We do not see NIM to decline significantly in the medium term given the high cost of business operation in the country.

Asset quality at its best. Industry NPL level stood at 2.0% in January 2013, the lowest since the Asian crisis. This is supported by high coverage ratio of more than 150%. We do not expect any significant asset quality deterioration in the next two years.  Nevertheless we expect a more conservative stance on provisioning charges which will limit earnings growth to 13% in 2013.

No Tier-1 capital raising. With average total CAR of 19.3% in January 2013 (17.% in our bank universe) we do not expect any Tier-1 capital raising in 2013-14. The average ROE is expected at 21.4% and 21.8% in 2013-14, a comfortable level for sustainable growth.

Valuation and stock picks. The banks are trading at 2.8x P/BV 2013F, 1STD above the mean valuation since 2004. We prefer BBRI and BBNI for the large banks and BJTM and BBTN for the smaller ones.

Express Transindo Utama License acquisition fully completed

Express Transindo Utama: License acquisition fully completed (TAXI, Not Rated, Rp960)

TAXI made an announcement last night that the company has acquired PT Ekspres Mulia Kencana (EMK) on April 5, with a purchase price of Rp67bn. The company did not specifically mention the number of regular taxi licenses owned by EMK, but did stated that the acquisition is aligned with the company’s previous statement, written on its IPO prospectus, to add 2,000 regular taxi fleets in 2013.
EMK itself is a land transportation company established in March 2012, as a subsidiary of PT Ekspres Transportasi Antarbenua, an incorporated company founded  in September 1989 that provides elite aircraft services.

On the announcement, TAXI further stated that it targets to operate more than 10,000 regular taxi fleets by the end of this year with approximately a 30% revenue increase and a 65% profit increase as compared to audited FY12 results. That said, the company aims for Rp677bn of revenues (11% above consensus – only one broker covering) and Rp130bn of NPAT this year (8% above consensus). TAXI also expects its regular taxi fleets to reach 15,000 units within the next 2-3 years.

Modernland and the Lippo Group on April 9 2013

Modernland booked Rp648bn 1Q13 marketing sales

In Indonesia Market Summaries as of 1Q13, MDLN has booked an on-track marketing sales of Rp648bn which is 24% of the company’s full year target of Rp2.6tn. More than half of the sales came from Modern Gateway, which is the landbank sold to ASRI, which contributed 61% to total marketing sales. The second major contributor is from Modern Cikande Industrial Estate which contributed Rp133bn or 20% to total marketing sales. From MDLN’s residential projects, contribution still came from Kota Modern (8%) and Modernhill (6%). (Company release)

The Lippo Group to bring 3 of their affiliated companies public in 2Q13

The Lippo Group is planning to list 3 of their affiliated companies public in 2Q13 with a value of at least Rp1.8tn. The three companies are PT Multipolar Technology, PT Bank Nationalnobu, and PT Siloam Hospital. PT Multipolar Technology, which is the direct subsidiary of MLPL in the IT sector, has yet to disclose the total value of their IPO but is expected to be less than Rp1tn. Bank Nobu is targeting an IPO proceed of Rp800bn with an expected free float of 40%. Meanwhile, Siloam Hospital targets an IPO proceed of Rp100bn with an expected free float of 25%. (Bisnis Indonesia)

Monday, April 8, 2013

MNC Kapital Indonesia Tbk to acquire Bank ICB Bumiputera

MNC Kapital Indonesia TBK (BCAP IJ) to acquire Bank ICB Bumiputera (BABP IJ) in 2Q1

MNC Kapital  intends to buy 30% share of Bumiputera Bank from ICB for its full licenses on retail foreign banks activities and credit card issuance.  Hary Tanoe, the President and CEO of MNC group, also planned to expand the bank business through internet and private banking after the acquisition.  BABP reported Rp7,434bn of total assets and Rp714bn total equity in Dec12. Post the acquisition, ICB will still hold 39.9% while SGPT 5.5%, AJB Bumiputera 5.5% and public 20%. Based on the market price the bank is valued at 1.3x P/BV Dec 2012. (Bisnis Indonesia)

Bekasi Fajar has booked marketing sales of Rp 210bn

BEST booked Rp210bn marketing sales as of February facilitated by Marubeni

Bekasi Fajar has booked marketing sales of Rp210bn or 13 ha as of February 2013 where 85% was facilitated by Marubeni, who acted as an agent. Most of the buyers are Japanese companies, and the ASP is around USD169/sqm or Rp1.62mn/sqm, which increased by 10.5% yoy. (Investor Daily)

Comments: Acting as an agent to bring strategic and anchor tenants from Japan, Marubeni in our view is a great channel of tenants for BEST. Marubeni’s strong reputation in Japan will no doubt help promote BEST to the many different Japanese companies, especially when foreign investments is flowing rapidly into Indonesia. For FY13, BEST targets an ASP of USD167/sqm and land sales of 110 ha.

Trade deficit could widened this year in Indonesia

Trade deficit could widened this year

According to the Minister of Trade, Gita Wirjawan, trade deficit could reach US$3bn in 2013 if the government does not do anything significant to reduce fuel subsidy consumption. Moreover, the figure is higher compared to last year’s trade deficit of US$1.66bn (Kontan).  

Plan to limit plantation area to 100,000ha

There is some news that revised Indonesian plantation regulation, which is expected to be issued in near term, would limit plantation area to 100,000ha for every group/holding. The news said that this matter is not retroactive. (Kontan).

Comment: We still wait for the formal announcement. we think this matter would impact to the expansion plan of Indonesian plantation companies, which recently has become very slow pace. The limitation may bring good impact to CPO price in the next 4 years, when the CPO supply growth is limited.

Friday, April 5, 2013

BKSL to buy back PT Bukit Jonggol Asri from ELTY

BKSL to buy back PT Bukit Jonggol Asri from ELTY

According to local news, Sentul City plans to buy at most 20% stakes in PT Bukit Jonggol Asri (BJA) from Bakrieland with a transaction value of approximately Rp300-500bn. The news’ source admitted that BKSL is still negotiating regarding the number of shares they are planning to buy back as well as the transaction value. As of now, ELTY is still the major shareholder of BJA, owning 51% while the rest is owned by BKSL. Should the transaction go through, BKSL will become the major shareholder with 69% stakes. BKSL is said to use standby bank loans and internal cash for the buy back. (Investor Daily)
Comments: As of FY12, BKSL has a net cash of Rp76bn and net gearing of 11%, which is at the lower end leading us to believe that they still have room for debt.

ELTY failed to expedite their USD155mn bond payment

Bakrieland was unable to fulfill their plan to expedite the payment of their USD155mn bond issued by their subsidiary in Singapore, BLD Investment Pte Ltd. The unsecured guaranteed equity linked bond was issued in March 23, 2010 and has a tenor of 5 years, but the company claimed that they were planning to pay it back by March 23, 2013. ELTY claimed that they have been restructuring the bond with the holders since February 2013. The bondholders are currently starting a coordinating committee to discuss the issue further. (Kontan)

Presidential decree for inter-province monorail project update

Vice Transportation minister, Mr. Bambang Susantono, stated that Presidential decree for inter-province monorail project will be issued by end of this semester. The decree will then be a legal basis for monorail project execution in Jabodetabek. He also added that the decree may include Adhi Karya (ADHI) appointment as the coordinator for public transportation projects. Consisted of Len Industri, PT Industri Kereta Api, Telekomunikasi Indonesia, Jasa Marga and Bank Mandiri, ADHI consortium will be appointed directly to execute the ~45km monorail projects (Kontan)

Budget disbursement remains slow along 1Q13

Government’s budget disbursement was still sluggish in 1Q13, only reaching 5.63% of total government target of Rp184.4tn. The realization figure was lower 1% - 2% than the same period of 2012. Thus, the Ministry of finance is concern if the budget disbursement could not be improved going forward, then most of it will likely be disbursed during the end of the year (Kontan).

Bumi Resources No change stake in BRMS as of September 2012

Bumi Resources: No change stake in BRMS AS OF September 2012 (Notes as of 27th Feb 2013)

Company’s disclosure - In response to this morning news about BUMI’s change stakes in BRMS from 87% to 45%, Company has clarified and confirmed officially that BUMI IJ still controlled 87% stake at BRMS AS OF September 2012. Management of the company did not want to give further comment and did not want to speculate on the news, despite the registered file to Idx has clearly showed that BUMI’s ownership in BRMS was reported only at 45%.

Our take: Where does the money go? based on our channel check and market talks, there was a high possibility of doing repurchase agreement or “repo” between Bakrie Group with several investors on BRMS shares. And repo rate at this current condition for Bakrie Group should be very expensive in our view. A repo is economically similar to secured loan, where the seller is effectively the borrower. As we dig further, accounting wise, repo may not change the company’s ownership structure as it depends on the essence of the transaction.

However, the interesting question and our concern are :
  1. Company’s announcement is focusing the stake ownership AS OF September 2012 while the registered file from the berau administration (custody) reported ownership AS OF 25th February 2013. Repo is “off balance sheet” term where the ownership of BRMS should remain under BUMI IJ unless there’s default.  The file registered to idx clearly showed that the ownership has effectively transferred to other parties and BUMI IJ now only owns 45% stake at BRMS, raising QUESTION about the repo status whether is still current or default. In fact, we have seen that BRMS share has been under pressured couple days before the file registered to idx announced.
  2. IF the REPO transaction TRUE, then where does the money go? Should it go into BUMI’s balance sheet to support its operational or debt repayment? Or should it go to Bakrie Family? The answer will be seen in the FY12 audited results. IF the money goes to Bakrie Families, then BUMI should record affiliated party A/R (receivables) as a LOAN to shareholder and would definitely bring more negative sentiment toward BUMI share.
Back in November  2009, BUMI and Bukit Mutiara entered in agreement to grant loan up to US$300mn in 2009 with IRR 19% and until now it still stays at BUMI’s balance sheet as a long term receivables with lack of clarity on the status as it has been renewed until 2015.

Bumi Resources Stock loan agreement

Bumi Resources: Stock loan agreement – Repo for BRMS (Rp720 - Under review)

BUMI finally confirmed there is repo transaction. BUMI finally confirmed on its FY12 financial notes (see notes 51cc) that in 2012, Company entered into 12-month Stock Loan Agreement, which we categorize this as a repo transaction, with several parties which the Company agreed to lend BRMS shares to the Parties or other party appointed by the Parties. But based on the agreement, Company and the parties agreed that any rights or obligations attached to BRMS (including but not limited dividend rights, vote, rights to attend A/EGM) will remain in full control of the Company and never pass or transferred to the Parties or other party appointed by the Parties.

As usual, disclosure risk will remain the main issue in Bakrie Group stock which raising investor concern or confidence. However, this is in line with our expectation (please refer to our previous notes last month on 27th Feb 2013, see below). There is lack of further details about the transaction terms therefore we have difficulty in tracing the fee or cashflow from this transaction to the Company.

Based on our channel check the BUMI’s stake ownership in BRMS may be reported continue to decline temporarily due to the “under-the table” transaction as long as the agreement still applies. In our view this overhang will continue to warrant BUMI trading at discount to peers and suggest diminished market confidence or trust.

Beware of financial support for BRMS. Company also reported that as of 31 December 2012, BRMS and its subsidiaries has negative working capital of US$269mn while BRMS has a very limited source of revenue.Therefore to support its going concern, BRMS plan to extend the maturity of long-term loans that will be due within 1 year. In addition, BRMS also has received a letter of support from BUMI to provide financial support for the settlement of BRMS’s group obligation. Therefore, we may see potential fund raising to support financial or cashflow problem within the Group which may raise market concern on the valuation at this juncture.

Thursday, April 4, 2013

Increasing Indonesian Crude Price should be an alert

Increasing Indonesian Crude Price should be an alert

Until Mar13, the average realization of Indonesian Crude Price (ICP) reached US$111.11/barrel, higher than the ICP assumption used in 2013 government budget at US$100/barrel. Therefore, should the US$111.11/barrel figure linger until the end of this year, there will be an additional Rp39.6tn – Rp41.8tn of subsidy cost from the initial target of Rp193.8tn. (Bisnis Indonesia)

KIJA targets Rp 1,32 trillion recurring income

KIJA targets Rp 1.32tn recurring income

Kawasan Jababeka expects a 349% increase of recurring income to Rp1.32tn this year coming mostly from their new power plant business, which they expect to contribute around Rp1tn. Aside from their power plant, KIJA is also expecting recurring income from their dry port and other services. The company expects contribution from their dry port to grow by 285% this year. In 1Q13, KIJA claimed that they have already earned Rp300bn marketing sales out of their full year target of Rp1.2-1.5tn. (Kontan)

Bank Indonesia eased foreign exchange intervention

BI eased foreign exchange intervention

As indicated by the BI’s Net Foreign Asset position (consists central bank’s holding of gold, securities asset, IMF special drawing rights, and reserve fund), the degree of its reserve decline has eased compared with the Feb13 position. Based on our estimate, the FX reserves may have dropped US$0.4bn to US$104.7bn at the end of third week of Mar13, lower than the US$3.6bn decline in Feb13. This suggests that BI may have started to scale down its FX intervention especially to SOEs. Note that the decline in the reserves has included higher USD absorption through its term deposit instrument, which has increased by US$0.8bn during Mar 13.

Ace Hardware Indonesia: Still not convinced

Ace Hardware Indonesia: Still not convinced (ACES, Neutral, Rp. 890, TP: Rp. 800)

We retain our Neutral call on ACES. We are still uncomfortable with the continuous lengthening of inventory days that would triple to 150 days this year compared with 4Q10, while SSSG is slowing down to 4.4%yoy in 2M13 (from 16.9%yoy in 2M12). In 4Q12, we noticed that inventory turnover lengthened further to 135 days, from 116 days in 3Q12 and 82 days in 4Q11. We understand that the company is on expansionary mode, but we are worried with this worsening trend as SSSG also starts slowing down.

We raised our 13F/14F EPS by 8.7%/9.5% on account of lower tax rates, while main operational assumptions are unchanged. Ability to satisfy the minimum 40% free-float (with no single shareholders holding >5% stakes) since 2Q12 was the reason. Subsequently, our TP is revised up to Rp800 from Rp720 previously.

Wednesday, April 3, 2013

Positive Sentiment of Global and Regional lift IHSG to 4972.39

The positive sentiment from the global and regional push the Indeks Harga Saham Gabungan ( IHSG / JCI ) today, Wednesday (04/03/2013). The index at opening rose 15.14 points, or 0.31% to 4972.39.

At 9:22 am, JCI gained 19.552 points, or 0.39%, to level 4976.80. This is the new high level. So far the index has been moving in a bullish trend in the range of 4968.31 to 4985.85

Top Gainers Are:
  • PT Indo Tambangraya Megah Tbk (ITMG) +Rp450 to Rp36.450
  • PT Japfa Comfeed Indonesia Tbk (JPFA) +Rp250 to Rp9.600
  • PT Mitra Adiperkasa Tbk (MAPI) +Rp200 to Rp8.650
Top Losers Are:
  • PT Indocement Tunggal Prakarsa Tbk (INTP) –Rp250 to Rp23.000
  • PT Matahari Department Store Tbk (LPPF) –Rp200 to Rp11.800
  • PT Astra Agro Lestari Tbk (AALI) –Rp50 to Rp18.250

Market Synopsis for 3 April 2013

SMCB seeking Rp1tn to finance their Tuban II plant

Holcim Indonesia is currently seeking for Rp1tn to fund their second plant in Tuban, East Java where the company is aiming for bank loans. The company admits that funding will come from bank loan, ECA (export credit agency), and internal cash. SMCB claimed that the company needs more than USD300mn to construct the new plant which will be able to add capacity by 1.7mt by 2015. With the addition of 1.7mt each from the new Tuban I and Tuban II plants, SMCB will have a capacity of 12.5mt within 2 years. (Bisnis Indonesia).

Bank Mandiri (Rp9,850; Not covered) - AGM results

Bank Mandiri’s shareholders appointed Budi Sadikin as the new CEO, replacing Zulkifli Zaini, who has ended his 10-year term as the BoD member this year. Mr. Sadikin is Bank Mandiri’s Director of Micro and Retail Banking since 2006 when he moved from Bank Danamon. In addition to the change in top management, the bank declared a 30% dividend payout ratio from 2012 net profit, translating into Rp199.3/share. There is no change in the bank’s business strategy which is geared towards the wholesale transactions, retail payments and retail loans. (Bisnis Indonesia, Jakarta Post).   

Pertamina is expected to bear the cost for rationing program of subsidized fuel

The government mentioned that the funds to finance the rationing program of subsidized fuel will likely come from Pertamina. As a return, the government is planning to cut some amount of Pertamina’s dividend payment which is obliged in the 2013 government budget (Investor Daily).

Tuesday, April 2, 2013

Sentul City reported a net profit of IDR 221 billion

Sentul City: FY12 result booking Rp221bn net profit above ours (108.3%) and in-line with consensus’ estimates (100.1%)

BKSL has reported a FY12 net profit of Rp221bn which is above our estimates (108.3%) and in-line with consensus’ (100.1%). On a yearly basis, margin shows improvement from the gross level to the net margin level.

Lower booking of sales in Q4 was a result of lower number of sales despite the high level margins of the products that BKSL sold. BKSL showed a 68% yoy increase in opex as a result of higher A&P spending. Below the operating line, BKSL was supported by lower other expenses due to provisions which was booked in 2011.

BKSL has a bright 2013 in our view with exciting new and existing projects. Marketing sales booking from last year of Rp739bn from Sentul City and Rp457bn from Sentul Nirwana will most likely boost the company’s revenue this year. The company’s recently opened Pasar Apung (Floating Market) is not to be overlook as BKSL reported that the riverside dine-in spot has been a huge success. New exciting deals and projects coming include HERO’s next generation hypermart in Sentul City, the new Serpong Natura project, Pertamina Hospital, the anticipated Jungleland.

We believe that BKSL has a clear vision of its unique township which continue to offers creative and appealing products and facilities, which leads to continue to like the company. Sentul City’s ASP of approximately Rp5mn/sqm still has much upside in our view due to the unique green hillside location and improving facilities. The company expects ASP to be around Rp6.5mn/sqm this year. Re-iterate BUY on BKSL which is trading at 27.3x FY13F PE vs. industry of 16.4x.