TETAPLAH OPTIMIS TERHADAP BATUBARA.........
Subject: Fw: Buy BUMI INDF Initiation (Sales Note 4 July 08)
*BUMI: Buy *INDF initiate with Buy *GEM awaiting Bear-Mkt rally
BUMI: Value emerging
Stock’s weakness is an opportunity: U$350mn worth of BUMI traded yesterday,
the uppermost anyone in this desk can recall and nearly 4x of its AD/TO and was
half of U$ 800mio the IDX churned. Stock is so widely owned hence face high
possibility of having nervous holders exiting anytime. Local also associates
the name to a hypothesis that on big sell-off days ‘certain big holders’ could
sell out - to raise cash so they can buy back when the stock rebound.
Newcastle remains >U$ 170/t and Vicky Binnsmy continue to believe the market
remain very tight with no indication to soften. BUMI currentlytrades on 9.3xE
with 74% EPSg and 64% ROE, having assume U$ 135/t on 2009-9, U$ 100/ton 2010
and U$ 65/t LT. Buy!
Overnight the API2 index failed to spike back, though prices steeled at 205/t
after bobbled around previous close. Market still nervous, but Vicky Binns
reiterates fundamentals are unchanged, and with current crude positioning to
breach $150, it will take some market players conviction to trade coal down too
far the opposite direction. She pointed also talk about China removing VAT on
thermal coal imports which could move China to a major importer of thermal
coal through the south as this would more than compensate for the freight
differential between Northern China and Indonesia to Guangdong (~$5 in favour
of Northern China ). We remain bullish on coal. All incremental demand comes
from emerging markets and until speculations of recession becomes a reality,
it's premature to discuss demand destruction in energy. We believe prices will
remain tight and equity brokers will need to further upgrade prices in company
earnings. Vicky’s top
pick in Asia are PTBA and BUMI.
http://research1.ml.com/C/?q=QqBQKqxgCS%2FltljEpgrEYA%3D%3D
INDF: initiate w/ Buy PxT Rp3,125
Bonny resumed coverage on INDF with Buy PxT Rp 3,125. INDF's ability to pass
on rising costs, combined with easing competition and softening raw material
costs will help sustain margins at its noodle and flour bizz. In fact, we
expect EBIT margin for flour to expand to 11.3% by YE08 from 7% as of 1Q08.INDF
has raised prices by 20% YTD, but still manage to keep market share stable at
60% for flour and 77% noodle, thanks to its well-recognized brand and
preference for its taste. Competition in noodle bizz has eased as competitors
now focus on profitability rather than mkt share. Wheat price which made up 90%
of flour cost has softened since March. In addition, INDF is abeneficiary of
firm CPO price thanks to its acquisition of 64% stake in LSIP in Nov ’07, which
will boost EBIT contributions from plantations from 43% in 2007 to 59% by
2010.INDF is now the 2nd largest plantation in Indo with total planted area of
186,000ha. Trades at 11x '09P/E, 39%
disc to global peers. If westrip out the plantation subsidiaries, INDF's
noodle and flour bizz trades at only 7.3x '09 P/E!
GEM outflow
Are we approaching a Bear-Market rally? EM long-only funds saw another big
$4.3bn redemptions in week to July 2nd and Mike Hartnett’s flow trading rule is
now firmly in “Buy” territory. EEM may test $120 (Jan intraday low was $122)
before investors attempt to catch the guillotine (chart). Other awaited
catalysts: i) spike in VIX, ii) oil prices/inflation expectations down, iii)
rally in short rates/global financials. In addition, investors are now
furiously capitulating out of global growth plays and any H1 “winners” e.g.
Brazil . The 20 consecutive days of redemptions totaling $14bn rivals big
outflow periods of Jan’08 & Jun’06. Big outflows relative to norm are seen in
GEM, Asia, LatAm , India , Taiwan , Thailand .
<<sg2008070359682.gif>> <<INDF.pdf>>
Market Talks
*BIraised rate by 25bps to 8.75% yest'. The move was widely expected by the
market and aimed at containing double-digit inflation from higher fuel and food
prices. BI said it would maintain a "measured" monetary policy and use a
combination of monetary tools to ease inflation, suggesting no aggressive rate
increases in the near term. (reuters)
* ANTMto pay US$66.5mn for 10% interest in Australia-listed Oxiana Ltd.’s
Martabe gold and silver project in N.Sumatera. The transactions require
approval from the boards of Oxiana, ANTM and the Indon govt. Oxiana is spending
US$310mn to dig a giant open pit mine at Martabe, which it estimates will yield
200,000 ounces of gold and 2mn ounces of silver a year starting in 2010.
(reuters)
*ELTY acquired 99.5% of PT Bahana Sukma Sejahtera for Rp45.95bn on 30 Jun 2008.
Bahana Sukma owned 461ha of land around Bogor Nirwana Residence, one of ELTY’s
residential project. ( Bisnis Indonesia )
*BUMI: Herald recommended shareholders to accept BUMI’s bid of AU$2.85 /shr.
Bumi raised its bid earlier this week, trumping a AU$2.80 a share offer from
ANTM-Zhongjin (reuters)
* Indonesia to renegotiate existing mining contracts, Energy Minister Purnomo
Yusgiantoro said. Since 2006, parliament has been discussing a mining law.
According to the draft law, contracts of miners operating in in Indonesia must
be adjusted in line with the new mining law if approved, but with a 5yrs
transition period. No other details at the moment. Current working contracts
are valid for 30 years with an option to extend for further 20 years, whereas
the new mining agreements will only be valid for 20 years with an option to
extend. (reuters)
Santy Tandiana
Merrill Lynch Indonesia
Dir: 6221-515 8997
Mob: 62-8151-4355-954
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