Indonesia Market Summaries 19 July 2013

• One of Japan's largest general trading company, Marubeni Corp., took coal company PT Indika Energy Tbk (INDY, Rp3.700), Korea Midlane Power Corp., and Korea Samtan project to build a 1,000-megawatt power plant in Tanjung Jati, Cirebon.
  
  Projects with investment worth U.S. $ 1.5 billion to U.S. $ 2 billion done by forming a consortium of four companies named Cirebon Electric Power. (Investor Daily).
• Bumi Plc agreed to release their stake in PT Bumi Resources Tbk to Bakrie Group for U.S. $ 501 million. This value was claimed to be more expensive than its book value. (Bisnis Indonesia)
• A German multinational petrochemical company, Ferrostaal Industrial Projects GmbH, invites PT Chandra Astri Petrochemical Tbk (TPIA, Rp2.675), a company owned by Indonesian tycoon Prajogo Pangestu, to build a petrochemical plant. The factory located in Bintuni Bay, West Papua, was worth U.S. $ 1.8 billion or equivalent to Rp 15,25 trillion.
  
  In the other article, petrochemical prices in late June reported by Inaplas up 2.6% to U.S. $ 1,312 per metric ton which is the first increase since the beginning of the year due to the U.S. and European economies began to improve. (Kontan)
• PT Wijaya Karya Tbk (WIKA, Rp2.250, NEUTRAL TP: Rp2.200) plans to increase the share of ownership in the joint venture in Myanmar up to 40% within the next 3 years. Currently, the company only has 10% share of the capital investment of U.S. $ 20 million.
  
  The composition of these shares will be split between Wika and PT Wika Beton, 50% respectively. Thus, the company will increase capital investment 4 times the initial capital to get stake' percentage up to 40%. The funds will be used to increase the stock comes from internal cash. (Bisnis Indonesia)
• PT Holcim Indonesia Tbk (SMCB, Rp2.675, SELL, Rp 3,000) to prepare initial production of Tuban I plant with a capacity of 1.7 metric ton in August. SMCB hopes the plant can produce 850,000 tonnes at the start of production, half of the total capacity. Early next year, the plant will produce a maximum capacity of 10 metric tons per year.
  
  SMCB will start preparing to develop Tuban II plant with a capacity of 1.7 metric tons which will be completed by 2015 and will cost U.S. $ 800 million. (Kontan)

for Indonesia Market Summaries 19 July 2013

Holcim Indonesia reported a weak 1Q13 results

Holcim Indonesia: Weak 1Q13 results 14.4% to our’ and 13.7% to consensus’ estimates (SMCB, Rp3,725, Sell, TP: Rp3,000)

SMCB reported a weak 1Q13 results booking a net profit of Rp184bn (-26.1%yoy, -58.0%qoq) which is 14.4% to our’ and 13.7% to consensus’ estimates. The company was hit hard on the pretax earnings level which we suspect is due to royalty cost.

Revenue is saw a 7.3% yoy growth, but a 13.5% qoq contraction which we believe is due to decline in sales volume. ASP grew by 5% yoy or 3% qoq. Cost wise, COGS/ton grew by 9% yoy or 10% qoq where salary costs showed the highest jump of 38% yoyo t 21% qoq.

In terms of domestic sales volume, SMCB saw a negative growth of -1.6%yoy or -15.5%qoq. On a yoy basis, Eastern Indonesia and Kalimantan saw the most decline in sales volume growth and Sumatra is the only region which posted a positive growth of 13.7%. If we look on a qoq basis, SMCB saw negative growths in sales volume across the board in all area except for Maluku & Papua.

The most significant decline was seen in Sulawesi where volume decreased by -42.9% qoq.
SMCB is still the most expensive among the three cement players; trading at FY13F PE of 22.4x vs. industry of about 19.6x and EV/ton of US$339. Maintain SELL.

Indonesia Market Summaries, 2 May 2013

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).

Holcim Indonesia Better than expected

Holcim Indonesia: Better than expected FY12 result; above ours (109%) and consensus (112%) estimates (SMCB, Rp3,450, Sell, TP: Rp2,450)

• SMCB has announced a positive FY12 result where they managed to book Rp1.35tn net income (+27.0% yoy, +7.9% qoq), ahead of ours (109%) and consensus (112%) estimates. The company posted strong revenue of 19.8% yoy growth (+7.4% qoq) which leads to growths all the way to the bottom line.
• Strong domestic volume growth of 10% qoq, greatly helped SMCB’s sales albeit the slight decrease in ASP by 3% qoq due to change in product sales mix. 9% qoq increase in direct labor cost has also attributed to the slight decline in gross margin.
• A further slight in operating margin came mostly from the G&A cost of +4% qoq. Further, higher than expected finance cost (+32% qoq) attributed in the higher below the line cost.
• SMCB FY12 result may have surprised us. However, we maintain our Sell recommendation on the due to expensive valuation (22.4x PE2013 vs. industry 18.5x; 314 EV/ton vs. industry 368x), aside our jittery in margin that may come below than our expected due to rising import activities.