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.