Kim Eng Indonesia Equity Daily, 27 Feb 09

Our Comment

Indosat announced 2008 net profit fell 7.8% YoY to Rp1 .88 trillion from Rp2.04 trillion a year earlier due mostly to losses in foreign exchange. Up to EBITDA, the result is in line with our expectation. EBITDA grew 7% YoY to Rp8,715b, while EBITDA margin shows at 50%, down from 52.9% in FY07. However, the share price has come up significantly since the end of tender offer period on 18 February 2009. We see that the stock has been oversold. At 3.8x 2010F EV/EBITDA, we see upside potentials for Indosat. Our 12-month target price is at Rp6,000 (40% potential upside), which pegs the stock at 5x 2010F EV/EBITDA. BUY.

Adhi Karya management indicated that FY08 net profit came in at Rp187b. This has included allocation for monorail project write-off amounted Rp21b. The core net profit (without one-off expense) was surprisingly well above management guidance, our expectation as well as market consensus. FY08 revenue came at Rp6.6t, also above expectations. The company currently manages four toll road projects with a total contract value of Rp2.5t. The land clearance progress of those projects has been going very well. Adhi currently have another four toll road projects totaling Rp1.7t in the pipe line, it could expect another Rp800b revenues flow from toll road projects this year. Maintain BUY, target price is Rp330 (22% potential upside).

Indonesia sold $3 billion of 5-year and 10-year dollar-denominated bonds, according to Barclays Plc, which along with UBS AG arranged the sale. It sold $1 billion of notes maturing May 2014 at a yield of 10.5% and $2 billion of debt maturing March 2019 at a yield of 11.75%. Debt fromIndonesia , which raised $4.2 billion from dollar-denominated bond sales last year, is rated BB- by Standard & Poor´s and Ba3 by Moody´s Investors Service. Both ratings are three levels below investment grade and on a par with Turkey .

The dollar-denominated bonds are part of the government fund raising to finance the budget deficit. Three days ago the government has issued first sukuk of Rp5.6t at 12%. We see that the government should issue dollar denominated debts sooner rather than later this year as so many other countries will flood the market by such issuance. Failure to raise sufficient amount of debt will put pressure on the budget and the domestic interest rates.
Katarina Setiawan

Highlights

o Adhi Karya (BUY): Better-than- expected result

o Indosat (BUY): FY08 EBITDA is in line, stock has been oversold

o Indo Tambangraya: FY08 above expectation

o Indocement (BUY): To settle of US$50m debt

o Timah : Propose to cut dividend pay out to 30%

o Inco: Propose US$0.036 DPS (yield= 20.8%)

o Indika Energy: To hold tender offer on Petrosea

o New IPO: Trikomsel Oke

o Astra Otoparts: FY08 results From our chartist desk

o IDX: Dow Jones touched 7182 two times. There is potential to go to lower level (6826). On IDX, technical rebound will continue, if 1270 level is reached today. Same direction from Bollinger band.
Today´s trading range is between 1230-1247-1270 (support) and 1302-1313-1335 (resistance) .

o INDY: Strong movement from weekly TD sequential buy set up 7th week. Our long trend line target is Rp2100. TRADING BUY

o AALI: Correction was very healthy yesterday. Daily TD sequential is still in buy set up 4th day. TRADING BUY

Technical Analysis, Studies, Indicators : Accumulation/ Distribution Line

You may find the number of indicators in technical analysis to measure volume and the flow of money for an index or a particular security. The Accumulation/ Distribution Line is one of the mostpopular technical indicators to analyze volume. One of the technical analysis statements that "volume precedes price" implies that in many cases after decline and just before the reversal we may see increase in the volume (volume surge). Majority of the money flow (volume) indicators are developed to identify these volume surges in order to predict price trend reversals.


The Accumulation/ Distribution Line was developed by Marc Chaikin to measure the cumulative flow of money into and out of an index or security. The Accumulation/ Distribution Line could be compared to the OBV (On Balance Volume) which adds or subtracts volume depending on the close price. Marc Chaikin chooses different approach and instead of relying on the close price he used CLV (Close Location Value) that is calculated by the following formula:

CLV = (Close - Low) - (High -Close)
------------ --------- --------- --------- --------- --------- -
(High - Low)


or


CLV = 2 * Close - Low - High
------------ --------- --------- --------- --------- --------- -
High - Low


Basically the CLV formula defines where the close is in relation to the high and low:

If close = High (the bar close price is at the bar's high) then CLV = 1. The CLV = 1 reveals that the price advanced and it is at it's highest point;


If close = Low (the bar close price is at the bar's high) then CLV = -1 which reveals that the price declined and it is at it's lowest point;


When CLV = o , it tells us that we had price decline and price advance within the analyzed period, yet, at the end the price stuck in the middle: close = Low + (High - Low) / 2 or close = High - (High - Low) / 2;

The positive CLV shows that the price is closer to its High;

The negative CLV shows that the price is closer to its Low.

After defining CLV its value is multiplied by volume in the analyzed period and the cumulative total forms the Accumulation/ Distribution Line. Opposite to the OBV the Accumulation/ Distribution Line is considered more accurate.


For instance: the OBV will consider volume as positive money flow when price opens with swing up and then declines during the whole analyzed period, yet closes above the previous period close (thebar is up in relation to the previous bar close, yet it declined during the whole period). Because of the price decline during the analyzed period the Accumulation/ Distribution line in this example will consider volume as negative money flow. This situation could be very often seen on intraday charts at the market open.


The OBV is still a very accurate indicator on the daily chart, yet, on the intraday level the Accumulation/ Distribution line is considered as more precisely reflecting in and out money flow.The Accumulation/ Distribution Line could be used in similar to the OBV way: as confirmation indicator and to predict trend reversal.

If the Accumulation/ Distribution Line moves up and the price MA (Moving Average) rising then technical analysis tells that this indicator confirms the up-trend. When Accumulation/ Distribution Line declines during the price slide it confirms a down-trend. The divergence of the Accumulation/ Distribution Line movement and price trend could be used to anticipate possible changes in the market trend.

The declining Accumulation/ Distribution Line during the price advance may indicate possible developing of a new down-trend, while advancing Accumulation/ Distribution Line during the price decline could indicate a possibility of begging a new up-trend.Chart 1: S&P 500 index - Accumulation/ Distribution Line The same as with other volume based indicators the Accumulation/ Distribution Line provides best results when it is applied to analyze indexes (Nasdaq 100, S&P 500, DJI, NYSE and other).


The index analysis could be used to trade index derivatives, such as QQQQ, DIA and SPY, options on indexes, index e-mini futures, options on index derivatives as well as it could be used to trade stocks from the index basket that move along with their index.

Kim Eng Indonesia Equity Daily, 26 Feb 09

Our Comment


Astra Agro posted net profit of Rp2.631b or up 33% YoY, driven by higher CPO price and gain from sale of its estates. In 4Q08 Astra Agro posted Rp1465b revenue and net profit of Rp502b, which at the surface looks like a strong figure. However, taking a closer look, the company booked Rp403b gain on sale of its estate in Kalimantan and forex gain of Rp78.3b in 4Q08. If we strip-off this one time gain (Rp336b after tax), we come up with net earnings of Rp2295b in FY08. Then, Astra Agro only posted net profit of Rp166b in 4Q08, or only 7.2% of total FY08 normalized profit. This certainly is below our expectation. We maintain SELL on the counter. Budget committee of the parliament approved stimulus package proposed by the government. The amount of stimulus is Rp73.3t, consisting of Rp56.3t fiscal stimulus and Rp17t government spending.


Budget for government spending was increased by Rp2t from Rp15t previously. The increase goes to spending for infrastructure, which becomes Rp12.2t from Rp10.2t. The government expects the spending for infrastructure to be absorbed starting March. The increased government spending is positive. Major beneficiary is Wijaya Karya. The company has healthy order book, diverse portfolio and is in net cash position which puts it in a better position to finance projects. Growth will also be supported from non-construction business line (building material, manufacturing of gas tanks and water heater, etc.) BUY, TP is Rp280 (27% potential upside), which pegs the stock at 10.4x 2009F PER.


Katarina Setiawan


Highlights

· Astra Agro Lestari (SELL): FY08 result below expectation

· Indotambang Raya: Obtains exploration license in protected forest

· Shipping: Banks are yet to lend aggressively

· Astra Graphia: FY08 results From our chartist desk

· IDX: Dow Jones closed at resistance level of trend line, and TD sequential sell countdown. It´s time to accumulate for IDX, still attractive with lower line of Bollinger band 20 day. Technical rebound will continue, with new target 1319. Today´s trading range is between 1230-1247-1270 (support) and 1311-1323-1334 (resistance)

. PTBA: Technical rebound will continue, referring to middle line of Bollinger band 20 day. Maintain target at Rp7900. TRADING BUY

Fibonacci Price Extension Levels

by - Bill Poulos

In an uptrend, the general idea is to take profits on a long trade at a Fibonacci Price Extension Resistance Level. The Price Extension Levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent Swing High. Then by clicking on the Swing High and back down to the retracement Swing Low and clicking there. This will display each of the Extension Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend.


Example 5:
Here we plotted the Fibonacci Price Extension Levels by clicking on the Swing Low at about $38.20 and dragged the cursor to the Swing High at about $47.67 and then down to the retracement Swing Low. You can see the resultant levels plotted by the software. Now the expectation is that if the market continues higher it will find resistance at one of the Fibonacci Levels, because traders will be placing sell orders at these levels to take profits on there long trades.


Example 5.1:
Now let’s look at what actually happened after the retracement Swing Low occurred. The market rallied making new highs pausing at the 0.382 level and again at the 1.000 level after a retracement down it rallied again going right through the 1.382 and 1.618 levels. Taking profits at the 0.382 level would have been premature, but taking profits at the 1.000 level would have made a nice trade.


Example 6:
Again, the Fibonacci Price Extension Levels were plotted on the chart in the same manner as described in Example 5. Again, we are looking for the market to continue higher before finding resistance at the Fibonacci Levels.

Example 6.1:
Now let’s look at what actually happened. The market rallied, making new highs and pausing between the 0.382 level and the 0.618 level, and then continued higher. This up move could well continue up to at least the 1.000 level. Taking profits at the 0.382 level would have been premature and only time will tell if taking profits at the 0.618 level was the optimal place to exit the long trade.

Example 7:
Here’s another example. Will the market continue higher to one of the Fibonacci Price Extension Levels?

Example 7.1:
Well in this case the market found resistance at the 0.382 level which would have been the place to take profits on any long trades.

Example 8:
Here’s one more example.

Example 8.1:
Like the last example, the market found resistance at the 0.382 level which would have been the place to take profits on any long trades.

You can see from these examples that the market often finds at least temporary resistance at the Fibonacci Extension Levels - not always, but often. As in the examples of the Retracement Levels, it should be apparent that there are a few problems to deal with here as well. First, there is no way of knowing which level will provide resistance. The 0.382 level was a good level to cover any long trades in two of the examples, but in the other examples taking profits at that level would have been premature. Another problem is determining which Swing

Low to start from in creating the Fibonacci Extension Levels. One way is from the last Swing Low as we did in the examples; another is from the lowest Swing Low of the past 30 days. Again, the point is that there is no one right way to do it, and consequently it becomes a guessing game.
Alone, Fibonacci Levels will not make you rich. However, Fibonacci Levels are definitely useful as part of an effective trading method that includes other analysis and techniques. You see, the key to an effective trading system is to integrate a few indicators (not too many) that are applied in a way that is not obvious to most observers. All successful traders know it’s how you use and integrate the indicators (including Fibonacci) that makes the difference. The lesson learned here is that Fibonacci Levels can be a useful tool, but never enter or exit a trade based on Fibonacci Levels alone.


Good Trading,

Kim Eng Indonesia Equity Daily, 23 Feb 09

Our Comment During a meeting of finance ministers in Phuket (Thailand), Japan, China, South Korea and 10 south east Asian nations (ASEAN +3) agreed to pool US$120b funds to prevent extreme currency depreciation and strengthen net reserve.


The above amount is 50% higher than that agreed on Chiang Mai Initiative in May 2008. The funds can be withdrawn by member countries through currency swap mechanism. Details will be further discussed in Bali in May 2009. Around 80% of the pooled funds is contributed by China , the remaining 20% is generated by other members. For Indonesia , available funds will be US$13.7b, up from US$8b previously. The above is positive for Indonesia and the region as it provides additional funds to prevent currency shock like the one in 1997-98 Asian crisis. Inco Reported lower-than expected net profit in 4Q08 on lower nickel prices and high energy prices. It booked net loss of US$9.8m in 4Q08 vs. net profit of US$200m in 4Q07. The net profit was well below our expectation, as well as market consensus, mainly due to lower nickel prices and high energy prices. Meanwhile, sales were in line with our estimates. The company recorded loss (other expenses) of US$18m in 4Q08. We reckon that aside from that loss, operationally Inco was still profitable in 4Q08. We reiterate our SELL recommendation on Inco. Our TP is Rp1,100. Bumi Resources Is considering holding an EGM to seek shareholders approval on acquisitions of 3 companies: Darma Henwa, Fajar Bumi Sakti, and Pendopo Energi Batubara. Previously, Chairman of Bapepam indicated that the transactions bear conflict of interests. The capital market regulatory body also plans to appoint a new appraiser to value the transactions. (by Katarina Setiawan)


Highlights
o Inco (SELL): Posted net loss of US$9.8m in 4Q08
o Bumi Resources: To hold EGM
o Truba Alam: Aims to book Rp2.5-2.7t revenue
o Bank Permata: FY08 results From our chartist desk

o IDX: Regional markets are in negative territory, in line with weakening Rupiah. Low target on IDX chart are 1230 and 1247, referring to Fibonacci retracement level 61,8% and 50%. But, Bollinger band 20 day in oversold zone. Today´s trading range is between 1230-1247-1270 (support) and 1314-1332-1361 (resistance) .

o UNVR: Minor correction will be healthy, with strong support level Rp7900, according to gap candlestick. BUY ON WEAKNESS


o LTLS: Daily TD sequential buy set up 6th day with strong buying volume. We set target price at Rp750. TRADING BUY

Fibonacci Retracement Levels

In an uptrend, the general idea is to go long the market on a retracement to a Fibonacci support level. The price retracement levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent potential Swing High and clicking there. This will display each of the Retracement Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend.

Example 1:

Here we plotted the Fibonacci Retracement Levels by clicking on the Swing Low at about $71.31 and dragging the cursor to the Swing High at about $89.83. You can see the resultant levels plotted by the software. Now the expectation is that if the market retraces from this high it will find support at one of the Fibonacci Levels, because traders will be placing buy orders at these levels as the market pulls back.

Example 1.1:

Now let’s look at what actually happened after the Swing High occurred. The market pulled back right through the 0.236 level and continued the next day through the 0.382 level before finding support. After a few days, the market resumed its upward move. Clearly buying at the 0.382 level would have been a good short term trade.

Example 2:

Again, the Fibonacci Retracement Levels were plotted on the chart in the same manner as described in Example 1. Again, we are looking for the market to retrace from the Swing High and find support at one of the Fibonacci levels.

Example 2.1:

Now let’s look at what actually happened. The market again pulled back right through the 0.236 level and continued to pull back until it found temporary support at the 0.50 level (a lot of buyers at this level). However, once the buying power was exhausted, the market continued to retrace all the way down to the 0.764 level before resuming its upward trend. In this case, buying at the 0.764 level would have been a good short term trade.

Example 3:

Here’s another example. If the market retraces from the Swing High, where will it find support?

Example 3.1:

Well, in this case the market found support at the 0.50 level. Buying at this level would have been a great trade as the market gapped up a few days later.

Example 4:

Here’s one more example.

Example 4.1:

Whoops! The market gapped down through all levels of support and never looked back. A long trade here would have been a loser or at least an open lose position.

You can see from these examples that the market often finds at least temporary support at the Fibonacci Retracement Levels – not always, but often. It should be apparent that there are a few problems to deal with here. First, there is no way of knowing which level will provide support. The 0.236 level seems to provide the weakest support, while the other levels provide support with approximately the same frequency. Second, the market will not always resume its uptrend after finding temporary support, but instead continue to decline below the last Swing Low.

Thirdly, placement of stops is a challenge – it is probably best to place stops below the last Swing Low, but this requires accepting a high level of risk in proportion to the likely profit potential in the trade. Another problem is determining which Swing Low to start from in creating the Fibonacci Retracement Levels. One way is from the last Swing Low as we did in the examples. Another is from the lowest Swing Low of the past 30 days. The point is, there is no one right way to do it, and consequently it becomes a guessing game.

The Truth About FIBONACCI TRADING

By - Bill Poulos

The truth about Fibonacci levels is that they are useful (like all trading indicators). They do not work as a standalone system of trading and they are certainly not the "holy grail", but can be a very effective component of your trading strategy.

But who is Fibonacci and how can he help you with your trading?


Leonardo Fibonacci was a great Italian mathematician who lived in the thirteenth century who first observed certain ratios of a number series that are regarded as describing the natural proportions of things in the universe, including price data. The ratios arise from the following number series: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 ……


This series of numbers is derived by starting with 1 followed by 2 and then adding 1 + 2 to get 3, the third number. Then, adding 2 + 3 to get 5, the fourth number, and so on.


The ratios are derived by dividing any number in the series by the next higher number, after 3 the ratio is always 0.625. After 89, it is always 0.618. If you divide any Fibonacci number by the preceding number, after 2 the number is always 1.6 and after 144 the number is always 1.618. These ratios are referred to as the "golden mean." Additional ratios were then derived to create ratio sets as follows:


Price Retracement Levels
0.236, 0.382, 0.500, 0.618, 0.764

Price Extensions Levels
0, 0.382, 0.618, 1.000, 1.382, 1.618


The first set of ratios is used as price retracement levels and is used in trading as possible support and resistance levels. The reason we have this expectation is that traders all over the world are watching these levels and placing buy and sell orders at these levels which becomes a self-fulfilling expectation.


The second set is used as price extension levels and is used in trading as possible profit taking levels. Again, traders all over the world are watching these levels and placing buy and sell orders to take profits at these levels which becomes a self-fulfilling expectation.


Most good trading software packages include both Fibonacci Retracement Levels and Price Extension Levels. In order to apply Fibonacci levels to price charts, it is necessary to identify Swing Highs and Swing Lows. A Swing High is a short term high bar with at least two lower highs on both the left and right of the high bar. A Swing Low is a short term low bar with at least two higher lows on both the left and right of the low bar.

To Be Continue...

Soros remarks depress euro ?

The euro fell sharply after investor George Soros was quoted as saying that the shared currency may not survive unless the European Union presses for an international agreement on dealing with soured assets."One would need a type of agreement on lost capital, so that the burden is shared, and in which every country is part of, otherwise more countries will suffer," Mr. Soros said in an interview with Austria's Der Standard newspaper. "The EU should do this. If they don't do this then the euro may not survive the crisis."Reports that Jean-Claude Trichet, the president of the European Central Bank, said policy makers could lower the euro zone's benchmark interest rate, added to the pressure on the shared currency.The yen and the dollar gained as losses in stocks and gloomy reports about U.S. employment and orders for durable goods made investors more hesitant to take on risk. The yen and the dollar have tended to rise in recent months when the economic picture appeared to deteriorate, losing ground when upbeat news prompted investors to seek higher-yielding investments denominated in other currencies

Kim Eng Indonesia Equity Daily, 4 Feb 09

Our Comment We met Bukit Asam yesterday and believe that outlook for the company in 2009 remains attractive. The company indicated net profit in FY08 to come in at Rp1.8t, in line with our expectation, on the back of Rp7.2t revenue. For 2009, it expects sales volume growth of 17% to 15m tons and production to grow by 16% to 12.5m tons, thanks to recent acquisition on coal company inKalimantan and improved railway transportation.

Bukit Asam aims to book revenue at Rp10-11t in 2009, or 39-53% higher than that in 2008. It remains optimistic with its new contract price of Rp884k/ton with Suralaya power plant, its biggest customer. We recommend BUY on the counter with target price Rp8500.

Media reported the Bakrie group has difficulties to meet payments of its repo obligation. Bakrie Capital Indonesia, an investment vehicle owned by Bakrie family, has failed to pay Rp700b debt on time, while Bakrie & Brothers has failed to pay Rp83b last month.

Bank of Indonesia will meet today to discuss BI rate. The consensus expects 50bps cut to 8.25%.

Ricardo Silaen