Jasa Marga Tbk outloook

Business profile:

PT Jasa Marga (Persero) Tbk is an Indonesia-based company primarily engaged in toll road planning, development, operation, maintenance and management. The Company is also engaged in the construction of new toll roads, improvement of toll road facilities and other businesses related to the toll road industry. During the year ended December 31, 2009, it had operated 13 toll roads, including Jakarta-Bogor-Ciawi, Prof. Dr. Ir. Soedijatmo, Surabaya-Gempo, Jakarta-Cikampek, Belawan-Medan and Jakarta Outer Ring Road (JORR). The Company's subsidiaries are PT Jalantol Lingkarluar Jakarta, PT Marga Sarana Jabar, PT Trans Marga Jateng, PT Marga Trans Nusantara, PT Marga Nujyasumo Agung and PT Marga Lingkar Jakarta.

Eyeing new opportunities

Government to re-evaluate 24 toll road concessions
To speed up toll road development, the government has appointed the National Development Planning Agency (Bappenas) to re-evaluate 24 toll roads whose development has not shown any significant progress. The study will look at both the feasibility of the projects and the financial strength of the investors and is expected to be completed by March 2011. If the concession holders have not reached financial closure by that time, the concession will be revoked by the government and re-tendered. So far, only two toll road operators have been able to deliver - Jasa Marga and Bakrieland. Other investors, including foreign names such as Thiess, have failed to make any real progress. It has been indicated by the Toll Road Authority Body (BPJT) that investment costs have risen to Rp111.7tn from the previously estimated Rp77tn.

Looking at new sections
Jasa Marga has seven new sections in its development portfolio. However, during our last visit to the company, Jasa Marga indicated that it was eyeing several other sections which are strategic to its portfolio, including the sections under re-evaluation. The undeveloped Cikampek Palimanan section - part of the Trans Java toll road - could, for instance, be easily integrated into Jasa Marga’s current toll road network. Since the traffic volume of a section like this is easier to predict, the project’s feasibility is easier to determine (from the return on investment). Jasa Marga is also conducting a feasibility study of the Benoa-Sarangan stretch in Bali, a route which connects Ngurah Rai Airport and South Bali, the island’s main destination for tourists. In addition, the company is also looking at the Serpong Cinere (West Java) section, which should be integrated into the JORR. Gempol – Pandaan (East Java) is another strategic section of the Trans Java toll road that would connect to the current Surabaya Gempol section. However, there are still some outstanding matters to settle regarding relocation of the current section due to the mud flow disaster.

Making good progress
The first stage of the Semarang-Solo toll road should be completed by the end of the month. An operational test will be undertaken by BPJT within one month and it is hoped that this section should be in commercial operation in late April. The tariff is expected to be Rp5,500, or translating into Rp550 per km. Jasa Marga also plans to start construction of BORR section 2A (flyover) – which is only 2km in length - to avoid a bottleneck at the crossroads. With the addition of a flyover, Jasa Marga shall propose a higher tariff of Rp5,500 (open system), or up from the current Rp3,000. Despite the solid progress, Jasa Marga faces difficulties in land acquisition for JORR W2 North although around 67% of the land owners have approved acquisition of their land. Acquisition of the remaining land is, however, subject to further negotiations on pricing.

E-Toll card usage needs to be boosted
The E-toll card was introduced in January 2009. Nonetheless, the E-toll card revenues are still only around 6% of the total revenues coming from the sections operating automatic toll gates, the inner city toll road and the airport expressway. This is only 1% of total revenues. Looking forward, we think that Jasa Marga needs to increase the number of toll roads using this system in addition to combining more merchants into the E-toll card for items such as parking and fuel. At the present time, the E-toll card issued by Bank Mandiri faces competition from Flazz BCA.

Analysis by : Ciptadana securities 

Jasa Marga Tbk Stock Chart

source:  ft.com

Indonesia Banking : Strong Fiscal Year 2010 results from BRI (Bank Rakyat Indonesia) and BTN (Bank Tabungan Negara)

Analysis by : Deutsche Bank (DB) 

BRI (Bank Rakyat Indonesia) and BTN (Bank Tabungan Negara) have released their unaudited FY 2010 , which are inline and above our estimates respectively. On YoY basis, both banks have shown strong growth. However on QoQ basis, some pressures persist resulting into flat quarterly earnings in 4Q10.

BRI (Bank Rakyat Indonesia) : unaudited FY10 NP of Rp9.0tr (+23.6% YoY, +1.6% QoQ)

This is inline with FY10 estimates from DB and consensus. The strong yoy growth comes as a result of higher NIM due to largely lower COF. But on qoq, 4Q10 NP of Rp2.4tr is only +1.6% reflecting primarily lower NIM of 9.1%  down from 9.4% in 3Q10which may be due to higher COF. We estimate FY10 loan growth would be 22-23% yoy, implying 9% QoQ. This is well below its average annual loan growth of 27% during past five years. We attribute this to BRI's relatively tight capital. Going forward, to retain CAR above 12-13%, we estimate BRI's sustainable level loan growth is 20-25% with sustainable dividend payout ratio of about 30%. Our recent meeting with its CFO highlighted BRI's loan growth towards low riskweighting

portfolio (such as micro loans, where risk weighting was recently reduced to 75% from 85%). This should mitigate capital risks. However, near term headwind persists, particularly in medium and micro segments as some agriculture harvests in 1Q11 will be below projections. According to data, rice harvests in certain areas in rice producing areas in Java may be at least 20% short of average.

BTN (Bank Tabungan Negara) : unaudited FY10 NP of Rp805bn (+64% YoY, +0.6% QoQ)

This is 5% above DB FY10 NP of Rp766bn, but is inline with consensus. However, on QoQ basis, 4Q10 NP of RpXXbn is only +0.6% qoq. We attribute this to rising COFduring the quarter. Loan growth remains robust at over 25% yoy. Credit costs normalised as NPL expected to decline to 3% due to seasonality (from 4% in previous quarters).

International Nickel Indonesia (INCO , Rp 5,000 BUY) Running more efficiently

New 12-month TP of Rp5,875, BUY maintained
INCO - International Nickel Indonesiaoffers investors a good way to attain exposure to the nickel mining industry, supported by its low-cost operations and a generous dividend payout ratio of 40%, despite the expectation of stable nickel prices in the near future and lower production in FY11F. We incorporate our latest nickel price assumptions, production and cost assumptions into our model for FY11-12F. As a result, our FY10-11F EPS are adjusted upwards by 29.7-20.5%. Our new 12-month TP of Rp5,875 implies P/E 11-12F of 13.0-11.0x, still within the historical valuation range.

Stable expected nickel prices this year
We incorporate our latest nickel price assumptions of $24,500/t for FY11F and US$24,000/t for FY12F, and US$22,500/t for our long-term nickel price (which is lower than the current LME nickel spot price of US$28,700/t). This gives rise to ASP for nickel in matte sales for FY11-12F of US$19,110-18,720/t. Our nickel price estimates reflect: 1) the expectation that nickel prices will normalize due to tighter expected economy policy in China as the country tries to curb inflation and 2) the fact that the current LME nickel inventory of 130,000t is at the highest level for the last 10 years. In the longer term, additional nickel demand requirement will be supplied by additional nickel production capacity at the Goro, Ambatovy and On Puma projects.

Overhaul to curb INCO’s production
INCO - International Nickel Indonesia decision to rebuild furnace #2 (which is used to smelt nickel ore) will push down production this year to 67,000t, as the repairs are expected to take 21 weeks to complete, along with the suspension of production after the recent earthquake that hit Sulawesi Island. Our sensitivity analysis shows that for every 2.5% decline in nickel in matte production there will be a 4.1% drop in FY11F core profits. The total cost of the rebuilding is expected to reach around US$60mn. Nevertheless, we expect that production will return to normal at 75,000t in FY12F. INCO will have no difficulties in marketing their products, regardless of fluctuations in the demand of nickel, due to must-take nickel in matte purchase contracts with Vale and Sumitomo.

Running more efficiently
With persistent heavy rains, INCO- International Nickel Indonesia hydro power generator is running at maximum capacity, which will increase the proportion of the electricity generated from hydro power. Cost savings shall also come from the 90MW Karebbe hydro power generator which shall start operating in August 2011, enabling INCO to save up to US$300/t of cash costs. We expect the decline in production to be offset by energy saving initiatives this year, although cash costs will see some increase due to the higher oil price which affects the HSFO price used for smelting nickel. Thus, with better margins, core profits will still experience modest growth of 7% this year, despite the declining production. The sound profitability of INCOs operations means that it can pay generous dividends with an expected dividend payout ratio of 40% this year - a sweetener for investing in INCO.

analysis by : PT. Ciptadana Securities

Indonesian banking sector - Lending rate disclosure may keep lending competition tight

Analysis by Deutsche Bank

Lending rate disclosure to go ahead as of 31 March

The Bank of Indonesia (BI) has provided more details regarding banks' lending rate disclosure requirements. As many as 44 banks with assets of Rp10tr or more will likely be required to disclose their rupiah prime lending rates for corporate, retail and consumer loans. Over time, this change should keep intense lending competition intact. Consequently, we reiterate BNI, Mandiri and BCA as our top picks in the sector. We also believe that these banks have lower earnings risks than peers.

More clarity into what constitutes a prime lending rate

There is now less ambiguity in regards to the components of the prime lending rate. According to BI, the prime lending rate should be gauged by: 1) cost of funds, 2) overhead costs related to loan underwriting and 3) margins determined for the various types of loans offered. Banks will need to disclose corporate, retail and consumer loan rates. These lending rates will be required to be published in: 1) the announcement board of the banks branches, 2) the banks online websites and 3) newspapers (along with the banks quarterly financials).

Banks with low COF, LDR to have fewer risks of lower re-pricing vs. peers

Aside from these disclosures of prime lending rates, we have seen evidence of a declining lending rate trend largely due to competition. Even so, this development should bode well for our top picks (BNI - Bank Negara Indonesia, Mandiri and BCA - Bank Central Asia), as their low COFs and LDRs should increasingly become a competitive advantage. Pricing competition in the sector will likely intensify as borrowers become more aware of the differentrates offered on the market. Our top picks should have fewer risks of lower loan

re-pricing than their peers. Currently, the rate differentials between banks with the highest and lowest lending rates and NIM have declined to 8.4% and 5.1%, respectively, down from the 21-month peaks of 11.4% and 8%, respectively. Additionally, with lower lending rates and margins, robust volume of loan growth will likely become an increasingly important earnings driver.

Focus on banks with lower earnings risk such as BNI, Mandiri, and BCA

Despite near-term concerns over rising inflation weighing on Indonesian banking stocks, we retain our long-term Overweight call. Two key risks to the sector are lower spreads due to lending and funding competition, and higher credit costs. We maintain BNI, Mandiri and BCA as our top picks given their lower earnings risks versus peers. We derive our target prices using the Gordon Growth Model. Other risks are macroeconomic and regulatory changes (e.g. an asymmetrical increase in reserve requirements).

PT Indo Tambangraya Megah - 4Q 2010 weak due to high costs, but operations should start to improve in 2Q 2011

analysis by JP Morgan

FY10 results below expectations due to high costs: ITMG reported FY10  net income of US$204MM, down 39% Y/Y. The reported result was  significantly below both JPM’s (26% below) and consensus (33% below) FY10 forecasts of US$276MM and US$305MM respectively. FY10 production volume of 22MM tons was up 3% Y/Y, while ASP of  US$75/ton was up 6% Y/Y. Total cost of US$59/ton rose 19% Y/Y and was the main reason for the weak performance.  

4Q10 core net income down 71% Q/Q: Subtracting 9M10 results, 4Q10  net income came in at US$18MM, down 74% Y/Y and 65% Q/Q. 4Q10  volume was 5.6MM tons, down 26% Y/Y but up 15% Q/Q. ASP of  US$80/ton is up 32% Y/Y but flat Q/Q. The company mentioned mining  fuel costs, increase in strip ratio, and demurrage costs caused the 71% Q/Q  decline in 4Q10 core net profit.  

Could start to recover in 2Q10: Our channel check with mining  contractors indicated that during 4Q10 rains occurred in 10 out of 12 weeks in Kalimantan, but that the weather has improved on a Q/Q basis in QTD 1Q11. ITMG mentioned that because of rain in 4Q10, it was forced to mine in areas that have a high stripping ratio, which increased its cost. We foresee  an improvement in operations in 2Q10 as the dry season starts.  

Lower Profit Taking to Rp50,000, maintain Neutral: We reduce our FY11 net income forecast by 25% to US$336MM; this is now 39% below consensus  as, at the time of writing, the Street has yet to react to the disappointing FY10. Our earnings estimate revision leads us to lower our Dec-11 DCF based  PT from Rp60,000 to Rp50,000. The weak result could cause the  stock to decline by about 10%, but we believe the worst was in 4Q10 and  operations will start to recover in 2Q11. Maintain Neutral. We recommend  selling the stock now and reestablishing a position at Rp42,500 or below.

Risks: (1) Rise in coal prices; and (2) lower-than-expected FY11E EPS

source: JPM

Fitch upgrades Indonesia, more investments likely

Fitch Ratings upgraded Indonesia's sovereign rating to one notch below investment grade, giving a vote of confidence that is likely to spur further investments to Southeast Asia's biggest economy.

Indonesia's rating was lifted to BB plus with the rating agency citing rising foreign exchange reserves, improving public finances and strong growth prospects as key factors behind the move. The outlook on the rating is stable.

The upgrade of Indonesia's long-term foreign and local currency ratings tightened spreads on credit default swaps and pulled the rupiah off intraday lows and analysts said an investment grade rating was likely in the next few years.

"I expect Indonesia's ratings to be upgraded into investment grades within the next 12-18 months," said Anton Gunawan, chief economist at Bank Danamon in Jakarta.

"I see capital gains for holding Indonesia's bonds with maturity above 10-years for long-term investors and the rupiah should also get a boost," Gunawan said.

Foreign investors have been pouring money into the economy on its strong economic outlook as well as its high yield.

The stock market jumped over 80 percent and bonds posted equity-like returns last year also as investors have been attracted by the tantalising prospect that relatively stable politics and healthy economic growth could catapult the country to investment-grade status in a few years to stand alongside BRIC nations Brazil, Russia, India and China.

PIMCO, the world's biggest bond fund manager recently told Reuters earlier this month that it expects the economy to get an investment grade rating in the next three to five years.

The yield on the 10-year bond currently stands at 9.75 percent, more than double the 3.6 percent on the 10-year U.S. Treasury.

Reforms

Fitch now has the highest rating for Indonesia among the three major rating agencies, though it remains below its investment grade rating prior to the 1997 Asian financial crisis.

Standard & Poor's rates Indonesia's unsecured foreign currency debt at BB minus, while Moody's Investors Service has its sovereign foreign currency rating at Ba2, two notches below investment grade.

Indonesia's public debt to gross domestic product ratio was among the lowest in the region at 30 percent last year, half of that of Philippines and much lower than India's 80 percent.

The upgrade means it is the highest ranking non-investment grade country in Asia ahead of the Philippines and Vietnam.

Its five-year credit default swaps tightened by 3 basis points to 210 basis points after the Fitch upgrade, a Hong Kong based trader said.

Fitch noted, however, that the country's relatively shallow capital markets remained vulnerable to risks surrounding a reversal of carry trades or sudden emerging-market risk aversion. It also said more reforms in its financial sector were needed.

Reforms from the re-elected President Susilo Bambang Yudhoyono's cabinet have been a key factor for the new wave of optimism on the economy though the process may slow after a scandal surrounding a bailout of a local bank ensnared two key reformists.

"The concerns on the ground are the success of the reforms. To get investment grade, the reforms would have to play out," said Wellian Wiranto, Asian economist at HSBC in Singapore.

Moody's said last week the momentum in reform will likely slow but not derail the macroeconomic policy network.

source;moneycontrol.com

PT INTERNATIONAL NICKEL INDONESIA TBK REPORTS FOURTH QUARTER 2010 EARNINGS OF US$108.9 MILLION

PT International Nickel Indonesia Tbk (“PTI”, or the “Company”, IDX: INCO) announces unaudited result for 4Q10. PTI recorded net earnings of US$108.9 million (US$0.011 per share) in 4Q10, in line with 3Q10 result of US$109.7 million (US$0.011 per share).
 

Sales revenue was US$329.2 million for the three months ended on December 31, 2010, slight increase from US$327.9 million in 3Q10. In 4Q10, the average realized price for nickel matte was US$18,011 per metric ton, an increase of 13.8% compared to US$15,822 per metric ton during 3Q10. However, the nickel matte deliveries in 4Q10 were 18,280 metric tons compared to 20,725 metric tons in 3Q10, a decrease of 11.8%.
 

Production of nickel in matte in 4Q10 was 17,996 metric tons compared to 19,998 metric tons in 3Q10, a decrease of 10.0% mainly because of production impacts due to scheduled furnace#4 roof repair to improve its life time and partial reline of reduction kiln #3 and #4 but partially offset by higher nickel contained in the calcine.
 

The Company’s total cost of goods sold in 4Q10 decreased to US$166.8 million from US$172.5 million in 3Q10, primarily due to an 11.8% decrease in deliveries of nickel matte. The 4Q10 cost of goods sold per metric ton increased by 10% largely due to higher supplies and service and contract commitments related with the furnace#4 roof repair and partial reline of reduction kiln#3 and #4. PTI consumed 21,127 kilolitres of diesel fuel at an average cost of US$0.68 per litre in 4Q10 compared to 16,339 kilolitres at an average cost of US$0.62 per litre in 3Q10. In addition, the Company used 675,618 barrels of HSFO at an average cost of US$74.7 per barrel compared to 700,094 barrels at an average cost of US$73.6 per barrel in 3Q10. PTI continues to utilize hydro power generators, given sufficient water levels in its main catchment area.

The Karebbe hydroelectric power generating plant project is continuing as planned. Overall, the project was 78.10% completed at the end of 4Q10 and is expected to come on line in the second half of 2011 as per schedule. This third hydro generating facility will produce enough energy to displace all existing thermal power to feed electric furnaces at the Sorowako facility and is the main initiative in PTI’s energy cost reduction program
 

The Company recorded total net earnings of US$437.4 million (US$0.044 per share) in 2010, an increase of 156.7% from last year net earnings of $170.4 million (US$0.017 per share). Total nickel matte delivered in 2010 was 77,035 metric tons, 13.7% higher than 67,782 metric tons nickel matte delivered in 2009. The average realized price was US$16,568 per metric ton, 47.6% higher than average realized price of US$11,227 per metric ton in 2009.
 

Cost of goods sold was US$8,467 per metric ton, an increase of 11.2% compared to US$7,614 per metric ton in 2009 mainly because of the higher cost of diesel and HSFO. EBITDA in 2010 totalled US$677.6 million, 107% higher than US$327.8 million in 2009. The Company’s results are summarized below (unaudited) – all figures are in US$ except for nickel in matte production and deliveries which are in metric tons.

United Tractors Generated Rp 37.32 Trillion Net Revenue for 2010

United Tractors Generated Rp 37.32 Trillion Net Revenue for 2010

24 February 2010 – Jakarta
PT United Tractors Tbk (“the Company”) today announced that Company’s performance during the year 2010 recorded 27.6% increase in the Company’s consolidated revenue, from Rp 29.24 trillion in 2009 to Rp 37.32 trillion. The increase in net revenues was achieved due to sharp increase in heavy equipment sales contributed by Construction Machinery business unit that contributed 46.3% to the Company’s consolidated revenues, and increased production of coal generated by the subsidiary in mining contracting, PT Pamapersada Nusantara (“Pama”) which contributed 45.4%, whereas the remaining 8.3% came from the mining business unit which is run by DEJ mines (Dasa Eka Jasatama) and PT Tuah Turangga Agung.

However, due to slight unfavorable impact of the strengthened Rupiah, as well as swelled production costs in mining contracting business due to unusually heavy rainfall had caused the Company’s profit to grow less significant. The Company’s gross profit increased only 1.9% from Rp 6.67 trillion to Rp 6.80 trillion. Combined with some additional other expenses, the resulted net income was only slightly increased, from Rp 3.82 trillion to Rp 3.87 trillion. In line with the trend of national economic growth, the Construction Machinery business unit recorded a momentous achievement in breaking a new record of Komatsu heavy equipment sales throughout the Company’s history, soaring to a total of 5,404 unit, 74% over total sales in 2009 which amounted to 3,111 units. 

The Company also managed to maintain its position as market leader in heavy equipment with 46% market share (based on internal market research). Out of the total Komatsu sales volume, the largest portion of sales went to mining sector, namely by 61%, followed by plantation which contributed 19%, then construction and forestry sectors, respectively at 11% and 9%.

Furthermore, revenue from spare parts sales and maintenance services showed a growth of 14% compared to the same period last year. On the mining contracting business, despite constraints in the form of high rainfall, several precaution measures such as innovative approach in operation as well as productivity enhancement has made Pama well set to increase volume in coal production by 15% and overburden removal by 9%, or from 68.0 million tons of coal and 597.9 million bcm overburden removal to 77.9 million tons and 651.5 million bcm in 2010.

On coal mining business, the Company recorded an increase in coal sales volume from 2.40 million tons to 3.05 million tons. On 12 November 2010, the Company has distributed the interim dividend for 2010, in the total amount of Rp 532.3 billion, or Rp160 per share, while the final dividend will be proposed at the Company’s Annual General Meeting of Shareholders in April 2011.

VALLAR PLC Prospectus

24 February

Publication of Prospectus.

Vallar is pleased to announce the publication of a prospectus in connection with the acquisition of holdings in PT. BUMI Resources Tbk ("BUMI") and PT Berau Coal Energy Tbk as set out in its announcement of 16 November 2010.
The BUMI transaction is expected to close in the week commencing 28 February 2011. At the same time, Vallar will assume control of Berau. PT Bukit Mutiara is expected to transfer title to and registered ownership of the Berau Shares to the Vallar group on or around 8 April 2011 after the expiry of the BCE Lock-up.
Commenting on today's announcement, Nathaniel Rothschild, Co-chairman of Vallar, said:
"Today's announcement represent and important milestone towards our objective of creating a London-listed Indonesian coal champion and we are extremely pleased by the progress that has been made towards integrating Vallar, BUMI and Berau since this groundbreaking transaction was announced in November".
Capitalised terms not otherwise defined in this announcement have the meanings given to them in the Prospectus.

You can download The Prospectus of Vallar Plc at here 
contac me at truly.fendi@gmail.com if you can't download it.