PT WINTERMAR OFFSHORE MARINE Tbk-WINS signs Loan Agreement with DEG, member of KfW Bankengruppe, for USD 18 million to fund fleet expansion

21 June 2011

WINS has signed a 9 year loan with the German development finance
institution DEG - Deutsche Investitions- und Entwicklungsgesellschaft
mbH, for a total of USD 18 million to finance the company's fleet
expansion plan for 2011. The loan will be used to finance 3 offshore
support vessels in the higher value segment.
DEG, member of KfW Bankengruppe, is one of the largest European
development finance institutions. DEG invests in profitable projects
that contribute to sustainable development in all sectors of the
economy, from agribusiness to infrastructure and manufacturing to
services.
Since the company's IPO in November last year, WINS has taken
delivery 1 unit of Fast Utility Vessel, 2 units of Anchor Handling Tug
Supply, 1 Utility Vessel and expects to take delivery of another Fast
Utility Vessel and one Utility Vessel in June, while another 6 vessels,
including a Heavy Load Barge, another Fast Utility Vessel, and an

Bisi International: Company Visit -Volatile Margins

Company at a glance. Established in 1983 by the Charoen Pokhpand Group, Bisi International (BISI) is Indonesia’s largest producer of hybrid seeds for corn, rice, vegetables and fruit segmented to the domestic market. BISI also has a major role of producing pesticides and distributor of fertilizer. BISI has a strategic partnership with Monsanto, a globally exposed seed producer based in United States. Its 2010 revenue segments are corn seeds (34%), vegetable seeds (23%), pesticides (35%), rice (6%) and fertilizer (1%). 

·        Vertically-integrated seed production business model. BISI’s hybrid production is done by using contract-farmers’ land for producing its hybrid seeds. These hybrid seeds are then sold to agents spread throughout Indonesia. Domestic farmers mostly prefer to use hybrid seeds compared to conventional seeds as the hybrids are able to generate higher profits. In terms of cost, raw materials contribution to production cost in 2010 was 48%, a significant drop compared to 76% in 2009 as BISI has excess of inventory from the previous year to be sold. The hybrid seed industry remains attractive as low hybrid seeds usage in Indonesia is a precursor of better days to come. Indonesia uses only 59% of the corn land to plant hybrid seeds, on the flipside, neighboring countries such as Thailand uses 95% according to FAO stats. Strengthening the aforementioned fact, the Ministry of Agriculture sets a positive outlook for the corn seed hybrid usage market going forward, hence reducing the proportion of the conventional seeds (exhibit 2).

·         1Q11 gross profit hurts by weather disruptions. 1Q11 net profit reached IDR42bn (+65% q-o-q) mainly due to lower opex. However, sales declined 3% q-o-q on the back of lower sales volume as weather disruptions remain to hamper farmers to plant hybrid seeds. As the production weakens, BISI’s strategy was to cut down operation costs such as reducing selling agents. This can be reflected by the company’s 50% decline in opex to IDR37bn, enabling BISI to boost operating profit to IDR51bn (+172% y-o-y). According to the management, corn seeds production is expected to pick up in 2H11 assuming weather conditions would be better.

·        Volatile margins and expensive valuation. 2011 annualized net profit would be IDR169bn, translating to 28x 2011 PE, 22% premium to Its peers. BISI’s share price has increased 710% and 622% relative to JCI since its IPO, giving high multiples at this current stage. On a positive note, the

Borneo Lumbung Energy : Not a bullish takeaway, but still within target

Having met management at our 2011 Asian Stars Conference in Singapore,
these are some of our takeaways.

Volume ramp-up slower than expected
Borneo Lumbung Energy - BORN is still guiding for 3.6mt coal production/sales for 2011, though output in
May was only 285,000t (vs. 0.532mt in 1Q). BORN claimed this was mainly due to
sub-optimal mine site productivity (e.g., equipment utilization not at full capacity),
and not barging issue. Our FY sales estimate of 3.24mt still looks achievable.

Coking coal prices seen trending down
BORN expects prices to trend down in 2H (consistent with our view) as more
Queensland coal hits the market. We understand it has not made any sales to
China in 1Q. It believes it can return to China if its price acceptance level
improves (still no more than US$240/t). It guided for full-year ASP at US$220-
240/t, which looks very conservative given 2Q saw ASPs settled at US$250-300/t.
We maintain our full-year estimate of US$260/t.

9-12% discount because of slightly higher VM and lower CSR
While BORN products can be considered premium HCC, its Coke Strength after
Reaction (CSR; ie, strength of coke while hot) is relatively low end at 60%
(industry average 65%). Its Volatile Matter (the amount of material liberated at

Indofood Sukses Makmur An opportunity to lighten

􀂃 Over the past few weeks, INDF’s share price has remained firm, in spite of a

soft 1Q11A result (9.5% below our quarterly forecast), and the share prices of

its two key investments ICBP (Rp5,200, Neutral, Rp5,700 PT) and IFAR

(S$2.05, Not Rated) continuing to decline (collectively 75% of INDF’s NAV).

􀂃 We highlight that this divergence has increased the implied value of Bogasari

to Rp14.5tr, and quite likely reflects anticipatory buying in the lead-up to the

SIMP IPO. However, we believe the view that the IPO will act as a positive

catalyst for INDF’s share price to be misplaced, and we expect the reverse to

occur, and the stock to sell off after the IPO. We recommend investors utilise

the current strength as a short term trading opportunity to lighten.

Impact

􀂃 We do not believe SIMP’s IPO will act as positive catalyst for INDF: While

INDF’s share price has been strong in recent weeks, IFAR’s share price (the

vehicle actually conducting the IPO) has continued to weaken, indicating that

investors are concerned about the dilutionary consequences of the offer,

and/or the transaction converting IFAR into a holding company. Certainly

there are no indications from IFAR’s share price that the IPO is about to

imminently crystallise value or trigger a positive re-rating. In addition, we

would also flag that after a strong run in the lead-up to ICBP’s IPO, INDF’s

share price collapsed by c10–15% in the days following the IPO. Successfully

trading around the ICBP IPO required selling out before the IPO, not after.

􀂃 Valuation difficult to justify: INDF's share price relative to ICBP and IFAR’s

is now implying a Rp14.5tr valuation for Bogasari – representing a 13.5x

FY11E PER based on normalised (10-year average) margins of 9.5% (which

is high by global flour-milling standard). We note that 1Q11A margins were

below mid-cycle levels, at 8.0%, and could fall further in coming quarters with

PT Sampoerna Agro 1Q11 results update

Solid 1Q11 results – SGRO reported earnings grew triple in 1Q11, the highest in our plantation coverage. Growth was mainly driven by spiking CPO price and production growth in 1Q11. Average CPO price increased by 42% YoY to RM3,649/ton, and SGRO managed to double its CPO production. 1Q11 results were above our expectation, however we will not change our estimation as SGRO’s production pattern has not been able to be predicted yet.

Earning increased by 337% - SGRO’s earning grew by 337% YoY to IDR 189bn, followed by sales and EBIT that surged by 151% and 286% to IDR 759bn and IDR 248bn, respectively. Palm product contributed 95.3% of total revenue. Average CPO selling price was up by 27.7% YoY to IDR8,357/kg while palm kernel increased by 112% YoY to IDR6,675/kg. Volume sales for both product also surged by approximately 86% each. Overall results were above our estimation, EBIT and earning results were 30-35% of our full year 2011 projection.

Production strong, pattern volatile – For 1Q production result, 1Q11 was the highest since 2006. FFB production reached 383,673tons, increased 101% YoY and led to CPO production of 27,710tons, increased by 104% YoY. This is significant as robust production occurred when CPO price picked. Further, production growth in 1Q11 was also driven by Kalimantan side, increased 7% QoQ and 65.3% YoY. In our view, Kalimantan production