Memo Kim Eng Sekuritas

Indonesia |2 September 2010
Research Team

Katarina SETIAWAN
Head of Research
Equity Daily
ksetiawan@kimeng.co.id
+6221 2557 1125 Top Idea

Ricardo SILAEN, CFA Mining
rsilaen@kimeng.co.id
+6221 2557 1126
Timah ‐ Bowing to the illegal miners
- Timah posted a y/y increase of 653% in its net profit in 1H10 to
Rahmi MARINA reach Rp322b, thanks to the strong tin price. However,
rmarina@kimeng.co.id
+6221 2557 1128
production costs also rose sharply in the period. Thus, the results
fell below our estimates.
Lucky ARIESANDI, CFA
- ASP rose by 45% y/y to US$17.5k/tonne. However, the sales value
lariesandi@kimeng.co.id
+6221 2557 1127 only rose by 6% y/y to Rp3.75t due to the lower sales volume and
the stronger Rupiah.
Adi N. WICAKSONO
anwicaksono@kimeng.co.id
Market Talk
+6221 2557 1130

Arwani PRANADJAYA
apranadjaya@kimeng.co.id Plantation: Astra Agro Lestari (AALI IJ) has signed conditional sales and
+6221 2557 1129
purchase agreement on 31 August to sell PT Surya Panen Subur (SPS) for
US$27.33m. SPS is a palm estate bought in 2007 for Rp161b with current
total planted area of 3,000 ha. Pg. 3
Mining: The media reported that Bumi Resources (BUMI IJ) has received
US$91m from its 18% stake in Newmont Nusa Tenggara in 1H10, or
40.6% of FY10 target of US$224m. Pg. 3
Banking: Bank Negara Indonesia (BBNI IJ) increased its rights issue
target to Rp10t from previously 6.7t. The bank plans to sell ~3.4b new
shares (22.1% of current outstanding shares) at above Rp3,000 each. BNI
has appointed Bahana Securities as the lead underwriter, and expects
the rights issue to be completed in December 2010. Pg. 3
Oil & gas: Bloomberg quoted, BPH Migas (The Indonesia Oil and Gas
Downstream Regulatory Body) appointed AKR Corporindo (AKRA IJ) as
partner with Pertamina to distribute subsidized petroleum products next
INDONESIA
year. AKR won the rights for the second year to sell subsidized fuel of
102,565 KL, consisting of High speed Diesel of 63,875 KL, and gasoline
(Ron 88) of 38,690 KL. Pg. 4
Mining: Indo Tambangraya (ITMG IJ). Banpu Minerals (Singapore) Ltd, a
Key Indices unit of Thailand Banpu, plans to sell 73.9m shares, with an option to sell
Last Point % chg additional 24.6m or total 8.72% of total through placement at price 2‐8%
IDX Index 3,135.3 53.4 1.7 lower from yesterday closing (Rp36,150‐38,500). Pg. 4
IDR/USD 9,009.5 35.5 0.4
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Equity Daily 2 September 2010
Economy: The month of August saw an inflation of 0.76%. YTD inflation is
now 4.82% while y/y is 6.44%. In 7M10, export was up 42.3% y/y and
import was up 50.9% y/y. Pg. 4

Mining Analyst: Lucky Ariesandi, CFA
Timah (HOLD) ‐ Bowing to the illegal miners

What’s New
Timah posted a y/y increase of 653% in its net profit in 1H10 to reach
Rp322b, thanks to the strong tin price. However, production costs also
rose sharply in the period. Thus, the results fell below our estimates.
ASP rose by 45% y/y to US$17.5k/tonne. However, the sales value only
rose by 6% y/y to Rp3.75t due to the lower sales volume and the stronger
Rupiah.

Our View
Production costs rose by 32% y/y to US$15.1k/tonne as Timah bought
more ores from its partners, the illegal miners. Timah also failed to
negotiate for better terms as it is still paying the miners 70% of the LME
price, or higher than its non‐contractual agreement with the miners, in
which the purchase price would be lowered to 60% whenever the LME
price is above US$15k/tonne.
The cost of buying from the miners has always been higher than Timah’s
own production costs. However, the cost of not buying could be even
higher as there is always a chance that the miners could sell to illegal or
foreign smelters, thus flooding the tin market and dragging the price
down. This is not an empty threat, as according to the CRU, unaccounted
production from Indonesia can reach as high as 40‐50k tonnes, or 12‐14%
of the world’s consumption.
Meanwhile, production volume inched up by 1% y/y to 19.5k tonnes. Yet
this failed to translate into a higher sales volume, which was down by
18% y/y at 19.8k tonnes. The reason was because Timah drew down its
inventories in 2009, with an inventory balance of 2.8k tonnes as of the
end of 2009, as compared to 7.2k tonnes at the end of 2008.

Action & Recommendation
We revisit our model to incorporate our new assumptions for the higher
ASP and production costs. We lower our TP to Rp2,575 from the previous
Rp2,750 and cut our recommendation on the stock to HOLD.

INDONESIA EQUITY RESEARCH
Page 2

Market Highlights

Astra Agro Lestari (BUY): To sell palm estate for US$27.33m
The company has signed conditional sales and purchase agreement on 31
August to sell PT Surya Panen Subur (SPS) for US$27.33m. SPS is a palm
estate bought in 2007 for Rp161b with current total planted area of 3,000
ha.

Analyst comment:
Management sells SPS due to its relatively small size of 3000ha, which
makes it hard to reach economy of scale in the long term.
Our view towards the divestment is positive. We think that the size is too
small for Astra to operate as a stand‐alone operation. Currently, we see a
stand‐alone estate, equipped with a CPO mill, should have planted area
of at minimum 8,000‐10,000 ha.
In addition, we view the selling price of US$9100/ha for SPS is quite
reasonable.
We recommend BUY for Astra Agro Lestari with target price of Rp23,100,
pegging the stock at 15.6x FY10‐13.3x FY11 PER with 15% upside
potential.

Bumi Resources (HOLD): Obtained US$91m from NNT’s dividend
The media reported that Bumi has received US$91m from its 18% stake in
Newmont Nusa Tenggara in 1H10, or 40.6% of FY10 target of US$224m.

Analyst comment:
The amount received by Bumi from NNT is higher than our estimate.
However, we believe it is already recognized in Bumi’s 1H10 result.
Overall, we see Bumi’s performance in 1H10 as disappointing. We
maintain target price of Rp1620, pegging the stock at 9.2x FY10 PE. With
downside potential of 5% from yesterday closing, we recommend HOLD.

Bank Negara Indonesia (HOLD): Eyeing Rp10t proceeds from rights issue
BNI increased its rights issue target to Rp10t from previously 6.7t. The
bank plans to sell ~3.4b new shares (22.1% of current outstanding shares)
at above Rp3,000 each.
BNI has appointed Bahana Securities as the lead underwriter, and expects
the rights issue to be completed in December 2010.

Analyst comment:
We estimate ~5% increase in CAR to 18%, well above the 8% minimum
limit from Bank Indonesia.
Following the rights issue, BNI will have 40% free float, making the bank
eligible for a 5% tax discount (20% effective tax rate) from 2011 onwards.
Page 3
Not yet including the rights issue in our valuation, we recommend HOLD
for BNI with TP at 3,600/share (11.0x 2011F PER; 2.1x 2011F PBV).

AKR Corporindo (HOLD): Granted the rights to sell subsidized fuel next
year
Bloomberg quoted, BPH Migas (The Indonesia Oil and Gas Downstream
Regulatory Body) appointed AKR Corporindo as partner with Pertamina to
distribute subsidized petroleum products next year.
AKR won the rights for the second year to sell subsidized fuel of 102,565
KL, consisting of High speed Diesel of 63,875 KL, and gasoline (Ron 88) of
38,690 KL.

Analyst comment:
The news is positive for AKR to boost revenue in petroleum distribution
division. Quota for subsidized fuel is also higher than last year’s of
56,000KL (only High speed Diesel product).
However, subsidized fuel product represent a relatively small portion
compared AKR’s fuel non subsidized product, or 7% to our AKR’s non
subsidized fuel product in 2011. In addition, higher subsidized fuel quota
to AKR in 2011 does not bring significant impact to our AKR revenue and
net profit estimate in 2011 (AKR revenue is only to increase 2%, while net
profit to increase by 1% in 2011).
Currently, we still maintain our TP at Rp1,320 (HOLD), pegging the stock
at 10.5x 2011 P/E, and 5.4x EV/EBITDA.

Indo Tambangraya: Placement on 8.72% shares
Banpu Minerals (Singapore) Ltd, a unit of Thailand Banpu plans to sell
73.9m shares, with an option to sell additional 24.6m or total 8.72% of
total through placement at price 2‐8% lower from yesterday closing
(Rp36,150‐38,500). According to the media, the lead arranger is Goldman
Sachs, helped by Mandiri Sekuritas, Bahana Securities, and Danareksa.

Economy: Inflation, export & import
The month of August saw an inflation of 0.76%. YTD inflation is now
4.82% while y/y is 6.44%. Largest increase is shown by housing and
utilities with 1.59%.
Export came in at US$12.5b in July, up 1.3% m/m. In 7M10, export was
up 42.3% y/y. Oil & gas export was up 73.7% y/y to US$15.0b while non‐
oil & gas export was up 36.9% y/y to US$70.0b.
Import came in at US$12.6b in July, up 7.3% m/m. In 7M10, import was
up 50.9% y/y. Oil & gas import was up 64.7% y/y to US$15.2b while non‐
oil & gas import was up 47.8% y/y to US$60.3b.

Page 4

Chart Pointers
IDX: Charts of some sectors look good: banking, plantation, and
consumer. Today’s trading range is between 3010‐3050‐3099 (support)
and 3153‐3171‐3225 (resistance).
BBRI: Positive direction came from high volume and upcoming golden
cross signal on MaCD indicator. TRADING BUY.
BBCA: Gap up with strong buying volume. TRADING BUY.

Page 5

Commodities 1‐Sep‐10 31‐Aug‐10 Change (US$) Change (%)
Nickel (US$/ton) 20,996.00 20,646.00 350.00 1.70
Tin (US$/ton) 21,470.00 21,025.00 445.00 2.12
Gold (US$/t.oz) 1,244.30 1,247.45 (3.15) (0.25)
CPO Malaysia (US$/ton) 863.28 * (3.45) (0.40)
Oil NYMEX (US$/barrel) 73.91 71.92 1.99 2.77
Coal ‐ ARA region (US$/ton) 91.15 91.00 0.15 0.16
Weekly data 27‐Aug‐10 20‐Aug‐10 Change (US$) Change (%)

Coal ‐ Newcastle (US$/ton) 90.90 89.15 1.75 1.96
Note: *Holiday, change is measured from 30 Aug 10
Source: Bloomberg
Company ADR ADR Close Change Local (Rp) ADR Shares

Ticker 1‐Sep‐10 % Equivalent IDX Close % Prem
Telkom ‐ NY (US$) TLK US 40.37 3.51 9,093 9,000 1.04 40
Indosat ‐ NY (US$) IIT US 25.36 1.85 4,570 4,450 2.69 50
BLT ‐SG (Sin$) BLTA SP 0.04 0.00 234 240 (2.43)
Rp 9,010.00
Sin $ 6,690.31
Source: Bloomberg
Key corporate actions
Cum date Ex‐date Company Action Price (Rp) Note
2‐Sep‐10 3‐Sep‐10 TSPC Final dividend 09 35
6‐Sep‐10 7‐Sep‐10 MAIN Final dividend 09 56
7‐Sep‐10 15‐Sep‐10 BPFI Final dividend 09 1
7‐Sep‐10 15‐Sep‐10 HMSP Final dividend 09+spec 08 615
16‐Sep‐10 17‐Sep‐10 MERK Interim dividend 10 3,570
28‐Sep‐10 29‐Sep‐10 ITMG Interim dividend 10 795
7‐Oct‐10* 8‐Oct‐10* BBNP Rights issue: 6 (n) : 19 (o) 1,000 *Tentative date

Page 6

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLOSURES
AND
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Indonesia |2 September 2010

Weekly data 27‐Aug‐10 20‐Aug‐10 Change (US$) Change (%)

Company ADR ADR Close Change Local (Rp) ADR Shares

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