CLSA INDO: Coal update

The downside intensity of this bear market has been unprecedented.

It took less than 350 days for the S & P to decline by 50% (437 days in 73-74, 630 days in 2000-2002).

The extreme collapse has brought about extreme bearish sentiment. A powerful market rally is long overdue. However, i am convinced this is only a bear market rally as it is almost impossible to envision global growth to return anywhere near the previous peak.

Having said that, there is a lot of value in certain areas like commodities where I am happy to add on position on the way up. With Central Banks determined to fight deflation by printing trillions of dollars out of nowhere, they will ultimately prevail but the consequence will be horrible inflation down the line.

The initial phase of inflation will no doubt create a sense that conditions have stabilized. (note consumer prices have been rising in the US). I am afraid there is no free lunch. It is reported by Deloitte that China is looking to invest US$500b in resources outside of China. $22bn worth of deals has already been announced in the last month alone.

Premier Wen said China has decided to diversify its foreign exchange reserve holding (US govt bond yields have nowhere to go but Up, up and up). Sell dollar high and buy commodities low (a weaker dollar will eventually be required to reverse deflationary forces). Interesting to note the recovery of copper prices (highest in more than four months) at the same time stockpiles have slumped about 9 percent since Feb.

If China remains aggressively committed to acquiring commodities, it could signal a turnaround in the fortunes of global and material producers. As a resource rich economy with low debt to GDP, Indonesia will be very well positioned.

CPO prices have recovered 35% from Dec 08. This will translate to higher disposable income for farmers in the region. Note that the Rp has strengthened more than 5% in the last few days. I would take profit on Banks and Buyers of Antam, Inco, LSIP, SGRO and ITMG.

Trading wise, we are 2x net buyers for today.

Research Today:

Coal analyst Olie examines the latest PTT acquisition. Thai´s PTT (PTT TB) will take a 60% stake in Straits Bulk and Industrial (SBI), a wholly owned subsidiary of Strait Resources Limited (SRL). SBI in turn controls a 47.1% stake in Straits Asia Resoucres (SAR SP), coal asset inBrunei and Madagaskar.
Bottom line is that while on a PE basis, the transaction looks reasonably priced (in line with the average PE09 of Indonesian coal names), on the more important EV/reserves measure normally used M&A purposes, the transaction commands a hefty premium of almost 3-4x its Indonesian peers, making Indonesian coal stocks look very cheap.
Trading wise, I would switch out of Astra International and the banks and get into coal and base names.

Key points of the report:

· PTT plans to acquire 60% stake in SRL wholly owned subsidiary that controls SRL coal assets, including Straits Asia (SAR).

· Since SAR would be the only company generating earnings in the JV, the implied PE09 that PTT would be paying for SAR ranges between 3.9x to 5.1x, based on consensus forecasts, in line with average multiple of Indonesian coal companies though suggesting a 28% to 95% premium to pre-announcement price.

· Indonesian coal names look cheap on reserves basis as the deal valued SAR three to four times than those for Indonesian names.

· We do not expect M&A to happen soon to Indonesian coal majors, as some of the controlling shareholders of the listed Indonesian coal companies do not need to do capital raisings while government owned company is not available for sale due to its politically sensitive nature.

· Adaro could be the only one with M&A angle as 1) it is not controlled by a single majority, and 2) financial investors, controlling around 25% stakes, could be willing sellers after.

· We stick with quality names, ITM (ITMG IJ) and Bukit Asam (PTBA IJ) Aneka Tambang (ANTM IJ) FY08 audited results from Olie Slight difference from the unaudited one The company release its FY08 audited result, with net profit arrived at Rp1,368bn, down by 73% YoY, but around 4% higher than the unaudited figure.

The difference was a result of completion of acquisition of BHP 75% stakes in Gag Island nickel project, where from all assets this project have been fully consolidated into Aneka Tambang. Therefore, we are seeing higher than previously reported exploration expenses, amounting Rp354bn as compared to Rp130bn previously reported, and gain from debt write-off amounting Rp263bn. Note these are all non-cash items.

Wijaya Karya (WIKA IJ) 2008FY results slightly below expectation by Hadi Core profit matched our expectation but net profit below forecast. FY08 Revenue Rp6.6tn grew 53% YoY on the back of increasing infrastructure projects. FY08 Gross and operating margins were declined due to rising material cost which could not be fully passed-on to customers. FY08 Net profit Rp156bn (up 21% YoY) was 13% below our forecast. The main differences would be on higher allowance for doubtful expense.

Wijaya Karya made provision on aging receivables from a shopping mall project that is near completion. We believe these receivables should gradually collected when the project start operation this year. As of February 2009 Wijaya Karya has secured Rp15tn worth of order book for 2009-2011. We estimate Rp6tn will be converted to 2009 revenue which is already 76% of our forecast. Maintain BUY.News Headlines/Others: US$15bn China-Indonesia swap deal secured. The US$15bn currency swap is to provide short term foreign exchange liquidity and helpIndonesia improve tight liquidity.

The three year swap arrangement is on top of the multilateral swap agreementIndonesia secured under the Chiang Mai summit. According to local media,Indonesia ´s forex reserve stands at US$53.9bn in mid March 09. The Rp73.3tn stimulus starting to flow this week. The government announced that its Rp73.3tn (US$6.3bn) stimulus package to help the economy has started to flow.

About Rp56.3tb of the stimulus has been channeled in the form of tax incentives and about 13.3tn of the tax incentives is allocated to tax subsidies and import duties exemption for certain labor incentive industries. Total Oil Indonesia launching its first two retail gasoline stations. Total, the oil major from France intends to open a total of five gasoline stations in 2009 and targets to open a total of 200 gasoline stations in the next five years. The cost of a gas station is estimated at US$2m with 10,000 liter sales targeted each day.

Comment:

A number of other oil majors such as Malaysian Petronas, and Shell have enteredIndonesia since the industry deregulation took place in 2005. Financing for the 10,000MW fast track power plant project is still 30% short. The Finance Minister just came back from China and said that both countries had reached an agreement to continue the existing loan agreements for the 10,000MW project.

However there was no additional loan agreement announced for the remaining 30% financing required to complete the project. Previously reported that PLN (The State Electricity Company) is also negotiating with Middle East Investors and JBIC for financing alternatives. We estimate the project investment cost to reach USD10bn which USD7bn is already secured from PLN equity and loans from Chinese and local banks.

Indika Energy - Loan for Cirebon power project secured? It was reported in the newspapers that consortium of Bank of Tokyo Mitsubishi, ING, Mizuho, and Sumitomo Mitsui have agreed to finally provide US$525m financing to 660MW Cirebon Power project. Indika Energy that owns 20% equity in the project has yet to confirm the news though. Note that negotiation for financing has been on going for 18 months hence any loan agreement would be considered positive, though contribution of this project to total Indika estimated NAV is relatively small. Shipper Arpeni Pratama (APOL IJ) delays acquiring nine ships. APOL IJ has canceled the purchase of nine Panamax ships worth US$200m. APOL has a shipping fleet of 78 ships.

Comment:

The company is burdened by its heavy debt level as net debt to equity is 188% as of 3Q08. Indonesia´s LNG exports minimum requirement to be slashed. Indonesia will reduce Japan ,South Korea , andTaiwan ´s minimum in purchasing LNG by max 70% from the previous 15% stated in the contract. This was proposed to help these three consumers countries as the domestic demand in the countries slumped. This means they can reduce their purchases of LNG by 844k ton (total contracted 1.2mt).

Matahari (MPPA IJ) offers 16-17% interest on its bonds. The Rp500bn bond targeted for issuance in 3Q09 is estimated to have coupon rates of 16% and 17% for the 3 years and 5 years maturities. SuramaduBridge to be completed this year. The government targets this bridge to be completed in mid 2009. This 5.4km bridge progress, which is the longest bridge in Indonesia and will connectSurabaya and Madura has been 93% completed. The tariff is estimated to be Rp23k (one third of Ferry´s tariff of Rp70k)

Key Indicators:

JCI: 1,406.647 +45.758 (+3.36%), T/O US$225.2 mil Well ensconced in a "bear market raly", the index is set to post its 5th consecutive gain today. Volumes managed to double from daily averages y'day as both local and retail investors moved back in. Foreign institutions were focusing on the big cap names, so the telco's, banks, consumers outperformed As of this morning, book is 2.5x better buyers.

Chart of the Day:

Did You Know? That 2.6m babies are born every year inIndonesia ? Indonesia currently has a population of 230.6m. If the birth rate is not slowed down (now at 2.6 children per woman), the country could see a population of 261m by 2020. The government has targeted to cut the birth rate to 1.3m babies per annum by increasing birth control awareness. The birth control agency said it needs to add another 13,000 staff to its existing 22,000 employees.

Daniel Oen
CLSAIndonesia Institutional
SalesPhone: (62-21) 2554-8802
Toll free - HK: 800-938-000 Toll free - SIN: 800-621-1104
Toll free - US: 800-460-2581daniel.oen@clsa. com

Successfull Business School - Lesson 1

Father: I want you to marry a girl of my choice.

Son: "I will choose my own bride!!! "

Father: "But the girl is Bill Gates's daughter.. "

Son: "Well, in that case... ok"

Next father approaches Bill Gates.

Father: "I have a husband for your daughter.... "

Bill Gates: "But my daughter is too young to marry!!!!! "

Father: "But this young man is a vice-president of the World Bank. "

Bill Gates: "Ah, in that case... ok"

Finally father goes to see the president of the World Bank.

Father: "I have a young man to be recommended as a vice-president. "

President: "But I already have more vice- presidents than I need! "

Father: "But this young man is Bill Gates's son-in-law. "

President: "Ah, in that case... ok"

And that my friends is how to success in business.

"Selling somthing you don't have and creating the demand for it !"

When economy bottoms out, how will we know ?

By - ALAN ZIBEL, CHRISTOPHER LEONARD and TIM PARADIS

When will this wretched economy bottom out?

The recession is already in its15th month, making it longer than all but two downturns since World War II. For now, everything seems to be getting worse: The Dow is in free fall,jobs are vanishing every day, and one in eight American homeowners is in foreclosure or behind on payments. But the economy always recovers. It runs in cycles, and economists are watching an array of statistics, some of them buried deep beneath the headlines,to spot the turning point.

The Associated Press examined three markets— housing, jobs and stocks — and asked experts where things stand and how to know when they've hit bottom. None of them expects it to come anytime soon.

JOBSHOW BAD IS IT?
The U.S. unemployment rate hit 8.1 percent in February, a 25-year peak. The nation has lost 4.4 million jobs since the recession began in late 2007.The job cuts began early last year, as the housing and construction industries slowed down. The collapse of the financial industry in the fall battered white-collar workers. Soon, layoffs spread across industries and income levels.

HOWMUCH WORSE COULD IT GET?
The darkest days for the job market are almost certainly still ahead. With spending weak and credit markets stalled, experts think the economy will probably shed a total of 2.4 million jobs this year. That would mean an unemployment rate above 9 percent.That would easily surpass the 2001 and 1990-91 recessions but trail the 10.8 percent rate of December 1982. Those expectations could be optimistic :The government's "stress tests" to check the strength of banks' balance sheets assume a 10.3 percent rate.The jobmarket will probably be weak for years, even if the economy starts to turn around next year. The unemployment rate may not fall back to its pre-recession level of 5 percent until 2013, according to Moody's Economy.com.

WHERE'STHE BOTTOM?
Economist Sophia Koropeckyj, a managing director atMoody's Economy.com, is keeping an eye out for two signs — an inchingup in companies hiring temporary workers and a rise in the number of hours worked by those who have managed to keep their part-time and full-time jobs.When business conditions improve, employers hire temporary workers first, she said, and a pick up in permanent hiring wouldn't be far behind. Koropeckyj estimated that could come in mid-2010.

HOUSING HOW BAD IS IT?
The median price of a home sold in the United States fell to $170,300 in January, down 26 percent from a year and a half earlier,according to the National Association of Realtors. But that figure masks the complexity of the market. Price drops have been far steeper around Phoenix and Las Vegas, where new homes sprouted every where during the housing boom, than, say, in Detroit, where economic problems predate the recession. And even within a single metro area, price declines vary sharply. Far away sub urbs, where many buyers stretched to qualify for mortgages, havebeen hit harder than city centers.

This housing crash has spread pain more widely than any before it. Home prices fell about 30 percent during the Great Depression, according to calculations by Yale University economist Robert Shiller. But the nation was less concentrated in urban centers then. And a much smaller proportion of adults owned homes.Other housing down turns in recent decades have been regional. This one is truly national. Prices in the fourth quarter of 2008 fell in nearly 90 percent of the top 150 metro areas, according to the Realtors group.And 5.4 million home owners, about 12 percent, were in foreclosure or behind on mortgage payments at the end of last year.

HOW MUCH WORSE COULD IT GET?
The Federal Reserve estimates home prices could fall 18 to 29 percent more by the end of 2010.Declines will probably be less severe in cities with healthier economies that don't have a glut of unsold homes, like Tulsa, Okla.,and Wichita, Kan.The nation's overall economic health is vital to the health ofhousing. "History tells us that as long as we're losing jobs, that'snot good news for the housing market," said Nicolas Retsinas, directorof Harvard University's Joint Center for Housing Studies.

WHERE'S THE BOTTOM?
Susan Wachter, a professor of real estate at the University of Pennsylvania, is watching the backlog of unsoldhomes. At January's sales pace, it would take about 9 1/2 months to rid the market of all those properties. A more normal pace would be sixmonths.Once foreclosures level off and the backlog is cleared, Wachter says, the housing market can begin to recover. But even with the Obama administration directing $75 billion in bailout money to stave off foreclosures, most economists don't expect home prices to bottom outbefore the first quarter of 2010. And don't expect an explosiverebound: Price increases will probably be modest when they come.

STOCKSHOW BAD IS IT?
The Dow Jones industrial average and the Standard & Poor's 500 index have lost more than half their value since the stock market peaked in October 2007. It's the worstbear market since the after math of the crash of 1929, when the Dowplunged 89 percent and the S&P 500 index tumbled 86 percent.

HOW MUCH WORSE COULD IT GET?
Analysts generally think Wall Street has endured the worst of the bear market. But many of those same analysts never thought the market would fall this far.Jack Ablin, chief investment officer at Harris Private Bank in Chicago,said the Dow could fall to 6,000 if the economy slows much further and unemployment rises well past the current 8.1 percent. He pegs the likelihood of that at about 30 percent. Others are more pessimistic. Bill Strazzullo, chief market strategist for Bell Curve Trading,contends the Dow might fall to 5,000 and the S&P to 500.

WHEN WILL THE BOTTOM COME?
In downturns over the past 60 years, the S&P 500 has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak.Investors will be looking for turnarounds in housing, lending and employment, plus signs that consumer spending has picked up. Then market players would be more likely to move their money from safe havens, such as gold, back into stocks.

Other investors may look to obscure indicators such as the Baltic Dry Index,which tracks the cost of shipping iron ore, grain and other materials.Rising rates can indicate demand for raw materials is increasing, which suggests a strengthening economy.But most of all, traders are waiting for a sudden spasm ofselling known as capitulation.

That wrings fearful investors out of themarket, and as they rush out, bargain-hunters rush in. Capitulation would trigger a huge plunge in prices and frenzied trading volume.Many market experts say the bottom of the stock market couldcome in the second or third quarter of this year. And the recovery,whenever it comes, could be as breathtaking as the fall: Since 1932,the S&P 500 has gained an average of 46 percent in the year afterstocks have hit a bottom.

US Bank will be survive

By - Fandi Cendrawira

You asked some good questions there. To give you an awareness of how this crisis started is because of over-leverage. From fleas, dogs, people to companies in US are borrowing multiple times of their equities as collateral.

That is why overtime, companies are able to expand rapidly and generate massive profits and with people/society having too much money be able to push up share prices to epic ridiculous valuation. Thus everything is wayyy overvalued in 2007-2008. Even now at the current S&P level, company is just reasonably valued with sense with about 12-15x PER.

Would you buy something that will give you break even in over 10 years? I personally would not do so. Imagine yourself buying business or investment that give you back your total return in 12-15 years? Bah. Correct.


Stocks historically during the great depression is valued at 2-3x PER. Surprise? But of course the condition in 1928 is different from now. The world has advanced much in many terms(population, economically, standard of living, technology). People are much smarter now than last time and information from internet has dramatically shrank the world which give people edge in making timely decision or taking advantage. I do not make money by making a bet on the direction of the economy or hoping a screwed up company to overturn(This is extremely hard), but I love something that is really good, the best in it's industry, no problem with it's balance sheet, for discount sale in 20 years !!


Investment Bank in US is practically dead for now, I do not dare to touch an investment bank especially with derivatives because it is a giant ponzi scheme, nobody will be there especially in this economic climate is able to absorb the writedown/losses. I shudder at the thought of banks with derivatives product, it is what cause US financial system meltdown and AIG, Citigroup, Lehman brothers to go BUST. Retail, Commercial Banking will be the face of new US financial system. My money is on Wells Fargo. Some people like BK (Bank of New York Mellon) and USB (Us Bancorp), but I always like the cream of the good, pick the best horse and run to the finish with it.

Palm oil stockpiles may fall below 1.8m tonnes

by - Kamarul Yunus

PALM oil stockpiles in Malaysia, the world's second largest grower, are expected to drop to below 1.8 million tonnes in February 2009, but palm oil prices remain stable, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said.

"Biologically, stockpiles of this commodity will decline in February as palm is producing less. Also, there is only 28 days in February," he told reporters after witnessing the signing of a licence and technical agreement between OCNED Water Technology Sdn Bhd and Japan's Sumitomo Heavy Industries Environment Co Ltd (SHI-EV) in Petaling Jaya yesterday.

Analysts are predicting that palm oil stockpiles may decline in February as production falls.

They said palm oil reserves may have dropped to as low as 1.7 million tonnes in February from 1.83 million tonnes in the previous month.Output will also likely fall by as much as 10 per cent from 1.3 million tonnes produced in January.

Nevertheless, planters would still gain handsome profit from the current price of RM1,800 per tonne, said Chin.

"If the current price is at RM1,800 to RM1,900 per tonne, those planters of a matured farm would still make money," he added.

IDX Technical Analysis , March 6 , 2009

by - super technical analysis

IHSG.JK :
Can't break 1,302 (Whipsaw), Will consolidate at 1,270-1,300.

MEDC.JK :
Already hit our target at 2,150. Sell if tomorrow can't break 2,150.Support at 2,000.

INDF.JK :
Make a whipsaw breakout, Bullish trend. Buy if close above 880.

TLKM.JK :
Strong Stock, Bollinger band bcome narrow. Support at 6,200 andResistance at 6,550.

ANTM.JK :
Yup, Downtrend is begin. Support at 1,130. If tomorrow break 1,080,ANTM will go to 1,040 in short term. Gold price also down from record at $1,000 / Troyounce

ITMG.JK :
Correction but it doesn't mean downtrend. ITMG still uptrend. Buy ifbreak 9,850.

BLTA.JK :
Golden Cross SMA. Resistance at 500.

UNVR.JK :
Strong Buy if hit 7,850-7,900. Will up if market down, Target at8,200.

ASII.JK :
Still look uptrend, Target at 11,450 in short term and support at10,800.

BYAN.JK :
Haha, Our Stock has goes up to resistance at 1,350. Take profit ifhit 1,400 or if break 1,270.

BUMI.JK :
Can't close above 800, will test support at 730-740, Resistance at 800.

TINS.JK :
At support area, buy if hit 1,010-1,020. Oversold.

BBCA.JK :
Still look comfortable, Will test support at 2,525 tomorrow.

BMRI.JK :
Can't closed above 1,800. Will test support at 1,730-1,750.

BBRI.JK :
Can't break 4,000. Down to 3,875. Will test support at 3,800.

PTBA.JK :
Will test support at 6,950, if break will down to 6,750-6,800.

ELSA.JK :
Hmmmm, Are ELSA ready to break 143 again ?

AALI.JK :
Be careful with this stock, if break 13,200 will go to 13,500. But if break 12,450 will go to 11,850.

PGAS.JK :
Still uptrend, Buy if PGAS break and close above 1,920-1,930.

JPRS.JK :
Up with high volume, Will Test 200 in short term