Monday, May 31, 2010

CS Indo: JCI soared 7% on MSCI rebalancing & Bakrie’s

MARKET: What is next after MSCI Indonesia weighting increase by 7% & Bakrie’s?

iSay: Arief Wana currently maintains JCI Index Target 3,300pts end-2010F (implying a 16.5x 2010F PER) with Top-5 stock picks BBRI, BMRI, SMGR, UNTR & TLKM. However Sakthi Siva has recommended 2 entry levels assuming no global double dip (15% correction ie MXASJ 430) and assuming global double dip (25% correction ie MXASJ 400). Applying the same assumptions, JCI entry level is 2,550pts (assuming no global double dip- 15% correction from all-time high circa 3,000pts) and 2,250pts (assuming global double dip- 25% correction from all-time high circa 3,000pts). I personally see JCI is side-lined as lacking catalyst until at least 2Q results out at end-July or confirmation of Economics reform will continue (watch new BI Governor appointment and Cabinet Reshuffle by October).

For now, I am recommending Taking Profit GGRM (yesterday tested all time high Rp38,150, @ Rp36,000- 18x 2010 consensus PER), BBCA (@Rp5,250- 15.9x 2010F PER), ASII (@Rp40,050- 12.8x pending new auto tax announcement), ISAT (@Rp5,050- 18x), INTP (@Rp15,600- 18.4x), PTBA (@Rp16,900- 18.3x), SMCB (@Rp2,025- 17.2x), ADRO (@Rp1,890- 17.3x).

Based on consensus estimates, BUMI (@Rp2,050- 11.6x 2010 PER) remains the cheapest in the sector, compared to ADRO (@Rp1,890- 15.2x), PTBA (@Rp16,900- 14.7x), ITMG (@Rp33,250- 12.6x), INDY (@Rp2,550- 12.4x), BYAN (@Rp5,950- 21.1x) & SAR SP (@SGD1.76- 12.9x).

·         As of Close of yesterday May 26th, MSCI rebalancing (Isreal out from Emerging Markets to Developed Markets) had effectively increased MSCI Indonesia weighting in MSCI Emerging Markets World by 7% from 2.01% to 2.15%. The Jakarta Composite Index yesterday had increased by 7.3% on USD700m volume, compared to YTD average USD400m, partly due to MSCI Inflows and Positive sentiment to Bakrie stocks after their largest stock BUMI announced a Non Pre Emptive rights issue (10% new shares at circa Rp2,327/share, subject to EGM on June 24th).

·  Yesterday rebalancing for MSCI Indonesia Index overall Positive to each stocks, except LPKR:
Stock                     Index Action     Value US$m    Est Shares      Est # of days
GGRM IJ                Add                  +55m               17.6m              22.6
SMGR IJ                FIF Inc             +40.5m            46.1m              4.6
INCO IJ                  FIF Inc             + 7.8m             16.2m              0.7
ADRO IJ                FIF Inc             +12.0m            53.2m              0.6
BBRI IJ                  Sh Inc              +2.8m              3.0m                0.1
BMRI IJ                  Sh Inc              +2.27m            4.0m                0.1
ASII IJ                    *                       +5.14m            1.1m                0.2
TLKM IJ                 *                       +4.6m              5.4m                0.2
BBCA IJ                 *                       +3.8m              6.7m                0.4
BUMI IJ                  *                       +2.5m              9.5m                0.1
PGAS IJ                 *                       +2.5m              5.9m                0.2
UNTR IJ                 *                       +1.7m              0.8m                0.1
UNVR IJ                 *                       +1.3m              0.8m                0.6
INDF IJ                  *                       +0.9m              2.4m                0.1
PTBA IJ                 *                       +0.9m              0.4m                0.1
BBNI IJ                  *                       +0.5m              2.1m                0.1
AALI IJ                   *                       +0.5m              0.2m                0.1
ISAT IJ                   *                       +0.4m              0.7m                0.4
ANTM IJ                 *                       +0.4m              1.8m                0.0
LPKR IJ                 Delete              -18.5m             -311.4m           2.8
(* Funding trail impact)

Best Regards,
Dharwin Yuwono, CFA
Director- Indonesia Equity Sales
PT Credit Suisse Securities Indonesia
Sampoerna Strategic Square, South Tower, 23rd Floor,
Jl. Jend Sudirman Kav.45/46, Jakarta 12930, Indonesia
Dealing: +6221 2553 7920

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