Aneka Tambang (ANTM) 2010: strong performance, high operating expenses

● 4Q10 and full-year unaudited results: ANTM’s net profit increased 257% QoQ and 122% YoY, ~10% above consensus but ~11% below our estimates. Its revenue ex. gold trading rose 45% QoQ and 51% YoY, approximately 4% above our 2010 estimate. ANTM’s gross profit was 7% above our expectation, but higher opex and lower dividends from Newcrest put its net profit below our initial forecast.

● ANTM’s significant increase in earnings was primarily driven by strong nickel and gold prices in 2010, as well as additional gold production from Cibaliung. We revise our 2010 earnings estimate to reflect the unaudited results. We also revise our 2011-12 earnings estimates to reflect latest nickel price forecasts and higher fuel prices.

● Strong nickel and gold prices have primarily been driven by growth in global industrial production (indicated by Global IP). Despite positive outlook, we remain cautious given the oversupply concerns about nickel. However, ANTM should benefit from its product mix

from gold, which would provide further earnings hedge.

● We maintain our NEUTRAL rating and target price of Rp2,600.

analysis by: Credit Suisse

KIJA (Kawasan Industri Jababeka Tbk) Off the hurdle

Off the hurdle

KIJA (Kawasan Industri Jababeka Tbk) has finally signed the long-awaited 20-year Electricity Sales and Purchase Agreement with PLN for 100% off-take of electricity generated from its 130-MW combined cycle power plant. The deal will ultimately guarantee the company of some US$85mn annual revenue (EBITDA margin: 34%), which is expected to contribute up to 55% of total revenue onwards. Yet, we see its revenue contribution to start streaming only by 2012, later that we have earlier assumed. Less operational efficiency is seen if the plant runs only with 2 out of 3 planned turbines. This resulted in reduction in the EPS11F by 49% to only Rp9. However, we still like the company, especially given the prospects of its industrial estates post the power plant completion. KIJA can now establish itself as a proxy of fully integrated-industrial estate developer, coupled with the outlook of the country’s economy. We upgraded our TP to Rp150/share, benchmarking it to the current trading discount to NAV of its peers of 58%. BUY. KIJA is trading at attractively 62% discount to RNAV11F.

Passed the biggest hurdle. We understand the prolonged time waiting of the power plant contribution that now we expect to start streaming by 2012. The company said minimal profit is seen if they run the power plant only with the currently installed two turbines. This is evidenced in the company 9M10 book, where KIJA experienced loss supplying PLN on emergency contract basis, while taking similar pricing structure of ±9cents/ kwh. Given such condition, it led us to eliminate our earlier power plant assumption in 2011, hence reducing our EPS11F to Rp9 from initially Rp17. Nonetheless, we are still positive on the company’s growth outlook in 2012, as we are confident that KIJA has passed its biggest hurdle in completing the project.

Loan disbursement to complete the project. We don’t see any more major issue that will impede the completion of the project. The next stage would be the disbursement of the remaining US$40mn syndicated loan that US$20mn is used to complete the project, while the remaining to refinance the maturing CIMB-Niaga’s bridging loans. The company expects this to be received by the end of Mar11.

Buy with new TP Rp150/share. Despite lowered EPS11F, we still like the company, due to its prospects post the power plant completion. We expect land sales to continue showing growth, especially given the guaranteed power supply from the power plant, coupled with the newly dry port service and other maintenance facilities in the area. KIJA is now a proxy of a fully-integrated industrial developer in the country. Buy, with upgraded TP Rp150/share.

analysis by : Mandiri Sekuritas

Bank Tabungan Pensiunan - More upbeat growth outlook

Above; upgrade to Neutral from Underperform. FY10 results were ahead of  consensus and our expectations, with net and core profits at 105% and 128% of the respective forecasts, owing to better-than-expected topline growth and low provisioning charges, as the bank slashed its provisioning coverage to 128% from 335.5% at Dec 09. PPOP was 10% higher than our forecast. We upgrade the stock to Neutral on a higher loan-growth outlook, though expecting asset quality and NIM to face more pressure. Factoring in higher loan growth, we raise our FY11-12 EPS estimates by 31-42%, after adjusting for new shares from its rights issue. We also introduce FY13 forecasts.  Following this, we have a new target price of Rp14,600 (from Rp7,100), still based on GGM valuation with a discount rate of 16.2% and implying 3.1-2.4x CY11-12 P/BV.

• Strong topline growth. 2010 was a strong year for the bank, with 48% yoy loan growth far outpacing sector growth of 23%. Micro loans were the star, supported by a surprising 40% increase in pension loans, about double its historical average. There was an unusually high number of new pensioners in 2010, with a similar boost unlikely in the near future. NIM climbed from 10.1% in FY09 to 13.9% in FY10 as the bank continued to expand its high-yielding micro segment. However, NIM may have reached its peak at 15.0% in 2Q10 as lower NIM for 3Q10 and 4Q10(13.3% and 13.5%) seem to signal normalisation, especially amid benchmark rate increases and intensifying competition in 2011.

• Cost of credit crept up. The bank posted its fourth consecutive quarter of higher cost of credit (provisioning plus net write-offs), which increased from -0.2% in 4Q09 to 2.4% in 4Q10. NPL ratio also went up to 1.1% in 4Q10 from 0.5% in 4Q09. We expect continuing pressure on asset quality as its micro loans mature.

• Lower cost-income as expansion slowed down. BTPN maintained cost-income ratio at a stellar 53.4% in 4Q10 following 52.8% in 3Q10, further solidifying its turnaround from previously high ratios of 68.8% in 4Q09. We expect the ratio to stay below 60.0% as the bank switches away from a focus on expansion to harvesting its established network. After massive openings of 500 branches in 2009, BTPN opened 13 branches in 2010, and plans to add only 20 in 2011.

Aneka Tambang - Indonesia - Brighter outlook

• Above; raised to Outperform from Neutral. 2010 net and operating profits of Rp1.66tr (+176% yoy) and Rp1.99tr (+238% yoy) were 7-8% ahead of our forecasts and consensus. The strong achievement was led by higher-than-expected ASPs, supported by in-line production and costs. This has generated greater confidence in its 2011-12 outlook amid improving nickel and gold prices. We upgrade our FY11-12 earnings estimates by 8-9% (and introduce 2013 estimates). Following this, we raise our DCF-based price target to Rp2,975 from Rp2,800 (WACC 11.4%). We
also upgrade the stock to Outperform, anticipating stock catalysts from nickel and gold price upside.

• Strong earnings delivery. 4Q10/FY10 earnings were supported by higher-thanexpected ASPs for ferronickel, nickel ore and gold, especially in 4Q10. FY10 production largely met our expectations: ferronickel 18,688 tonnes (+49% yoy), accounting for 98% of our projection; gold 2,780 kg (flat yoy), 99% of our forecast; nickel ore 7.0wmt (+20% yoy), 112% of our projection. 2010 earnings also yielded few cost surprises, indicating better cost management.

• Brighter outlook. The sound operating performance bodes well for 2011. For ferronickel, signs of short-term support for nickel prices translate to upside for our 2011-12 price assumption of US$24,000/tonne. We maintain our forecast of FeNi production volume of 18,000 tonnes (-5% yoy) in 2011, factoring in possible maintenance of its production facilities, before a volume increase to 20,000 tonnes (+11% yoy) in 2012. For gold, a second quarter of contributions from its Cibaliung project in 4Q10 suggests firming operations at the new project. We forecast combined gold production of 3,000kg for 2011-12.

Analysis by : CIMB

Indonesia Economics - Headline inflation down, core inflation up; Bank Indonesia might pause this Friday

● CPI inflation of 0.1% MoM (6.8% YoY) in February was below market and our expectations, led by a pull back in volatile food prices. The government initiatives, along with the harvest seasons, are likely to help ease food price inflation in the near term.

● Core inflation resumed its rise to 4.4% YoY in February from 4.2% in January. Although still low by Indonesia’s standards, it has been gradually trending up in the past 12 months. We think the risk to core inflation remains to the upside.

● The fall in headline inflation, recent appreciation of the rupiah, and dovish comments from the Deputy Governor last week suggest that Bank Indonesia might pause this Friday.

● However, if core inflation continues to pick up as we expect, then BI would need to tighten monetary policy further in the coming months. We maintain our view that BI will hike rates by another 75 bp in the rest of 2011.