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