Thermal coal: China imports 60% more coal in April vs. March
Two new developments in the thermal coal space this week :
(1) China trade data this week supports demand strength, confirming 9.2 mt of imports(including coking and thermal coal), up 3.4 mt (60%) from March and 5.7 mt (168%)YoY. (
2) Mc CloskeyEuropean Coal Outlook Conference - Macq commodities team came out of the conference less bearish on prices from here, at least in the Pacific.
On China , the most bullish assessment came from Philip Gasteen, head of marketing and logistics at Asian coal and electricity producer Banpu.
He suggested thata round 55 mt of thermal coal is due to be delivered into China this year under recently completed deals. This would drive imports 20-25 mt higher, while export volumesare likely to fall 15-20 mt. Thus, he sees China's net imports increasing by 40 mt this year.
My take -closer to home, many Asian coal analysts & corporates will attend the Coal Trans conference in Bali during the first week of June.
We shall see whether they will come back with the same positivetake-aways on China/India coal demand. Indoproperty: upgrading price targets Macq research coverage of Indoproperty sector remains on the transition phase, since our previous analyst Lydia Toisuta left the firm on Nov 2008.
In the meantime, ahead of Macquarie Asean conference in June (Bakrieland & Lippo Karawaci have confirmed attendance), Elaine Cheong (Macq property analyst based in Singapore) re-affirms our positive sector view today by lifting price targets on Bakrieland fromRp100 to Rp330 (22% upside), Ciputra Dev from Rp320 to Rp650 (18% upside), andLippo Karawaci from Rp250 to Rp530 (35% downside).
Essentially, she has reduced the NAV discounts implied by those price targets, without changing the NAV estimates by much. She applies a 35%NAV discount for Bakrieland (NAV estimate of Rp519), 35% NAV discount for Ciputra Dev (NAV estimate of Rp1,001), and 35% NAV discount for Lippo Karawaci (NAV estimate of Rp816).
She re-iterates Outperform rating on Ciputra Dev &Bakrieland, Underperform rating on Lippo Karawaci.
Her key arguments for the narrower NAV discounts:
1. Resilient domestic demand in Indonesia
2. Lowering of interest rates PGAS : smoothing out ways for gas price hike (Adam Worthington) Yesterday, PGAS met with government officials and industry players to discuss the future of the gas market.
Upside risk to gas prices post presidential election, re-iterate Outperform.
Three key points:
1. Supply shortage: The domestic gas market is in a supply shortage, and further exploration and development is required at the upstream level.
2. US$ pricing appropriate: Industry participants agreed that US$ pricing is appropriate given that capex, financing cost of gas production, and transmission and distribution costs are US$denominated.
3. Gas is undervalued vs its closest substitute: Participants noted that the selling price of gas has not been raised since July 2007 despite the surge in other commodities, and that at the current exchangerate, the selling price of PGAS 's natural gas is approximately Rp2,038 perdiesel equivalent litre, a competitive price when compared with othersources of energy.
The participants discussed the potential for gas price increases (in the upstream and downstream) to encourage exploration and development of reserves.
Snippets :
Macro - VP candidate Boediono will focus on integrating fiscal, monetary, and sectoral policies, ifhe got elected.
Medco - BPMigashead Mr.Priyono confirms that Medco will get a 20-year extension for its block A project, located in North Aceh, when the term expires in 2011. Block A is a high priority project for the government, since the block will supply to PT Pupuk Iskandar Muda and to PT PLN (85 trillion BTU in 2010-2027). The other partners in block A are Premier Oil (42% stake) and Japan Petroleum Exploration (16%).
Crude Palm Oil - The government may impose 3% tax on palm oil exports, according to theJakarta Post.
PT Telkom -will cancel its plan to acquire a stake in the Telecommunciations Company of Iran, according to Tempo and Bisnis Indonesia.The cancellation is due to the requirement by the Iranian government that the bidders be free of American shareholders. PT Telkom has ADRs listed on the NewYork Stock Exchange.
PT Timah - will pay a dividend of Rp133/sh or equivalent to a 50% payout ratio. The company is budgeting Rp350 bn for capex.
PT Unilever Indonesia -will pay a final dividend of Rp220/sh. The total dividend is Rp315/sh or equivalent to a 100% payout ratio. The company is budgeting Rp700bn for capex.
PT Jaya Ancol -is exploring a Rp250 bn rights issue, according to Bisnis Indonesia. The company will pay adividend of Rp37/sh.
Friday, May 22, 2009
ML INDO : PGAS volume could surprise Flows CPO Fund Mgr Survey (22 May 2009)
While investors continue to have doubt over PGAS execution risk, PGAS volume ramp-up up to April does not disappoint. Gas delivery rose from 720 mmscfd in 1Q to 770mmscfd in April.
At this rate, Daisy's FY09 volume expectation of 720 mmscfd could be easily surpassed. Also, the no. of customers that took up gas below the minimum payment level fell from 270-350 in 1Q to 260, while gas contracts not absorbed by customers dropped from 2-3% in 1Q to 1.6%.
Separately, 3-days planned gas supply stoppage from Conoco Philips for maintenance is not a concern, as impact is minimal at 5-2 mmscfd for transmission and distribution respectively.
On the customer front, by end-09, 56% of PGAS' revenue will come from state owned PLN. This will underpin PGAS's robust growth as we expect PLN's gas consumption to grow at 3-yr CAGR of16%.
We only expect PGAS to grow 7% for 2008-12. Trades at 9.8x '10 P/E,a 41% disc to regional utilities. Potential earnings upside from higher volume, lower tax rate,and higher dividend.
Buy PO Rp3,200
Market News
* Politics:
During a presidential debate,incumbent President SBY pledged to boost economic growth to 7% by 2014 (more conservative than VP Kalla's +8% promise and Megawati's +10%), to accelrate reform of the bureaucracy and cut red-tape for business startups. (Jakarta Post)
* Timah (TINS) cut back this year's capex to Rp 350 bn from Rp 900 bn as it delays plan to buy coal mining company and to built an ash plat plant due to limited fund following the drop in tin prices. (Bloomberg)
* United Tractors (UNTR) to pay dividend of Rp 320/shr or 3.2% yield, of which Rp 100/shr interim has been paid last year. This represent 40% of 2008's profit. Separately, UT allocated Rp 650 bn to acquire coal mines. They continue to do due dilligence on target mines. Funding will come from rights issue proceed from last year. (Bisnis Indonesia)
* Indocement (INTP) - post +14% performance over the past 3 days, media Bisnis Indoensia is speculating that Heidelberg may change their mind on selling 15% stake in Indocement. (Bisnis Indoensia)
* Medco (MEDC) to get 20-year extension for its Block A gas field in Aceh. Medco's current contract for Block A will expire in 2011. Medco owns 41.67% in the field. (Bisnis Indoensia) EM more inflow EM equity funds saw $2.5 bn inflow in week to 20 May, bringing total inflows over past 9 weeks to $20bn ,the largest 9 week inflow since EEM $55 peak in Nov-07. BAS-ML fund flow trading rule still signals Sell, as inflows over past 4 weeks represents 3.2%of AUM.
In recent weeks trading rule has been wrong-footed by big policy stimulus and reallocation into equities. But Mike Hartnett feels the case for EM pause/pullback is now strengthened by big EM bullishness revealed in Fund Mgr Survey, e.g. 55% asset allocators OW EM, 80% of PMs OWChina, i.e. "pain trade" no longer up.
Note also EEM struggles once its gets >20% above its 200 mda (was 17% above yest'). By region: inflows into Asia ($0.9bn), GEM ($0.9bn),LatAm ($0.6bn). EMEA flows flat. By country: big inflows into Brazil & China. CPO: beginning of the fall?Jeffrey Ngreiterates his bearish view on CPO following the futures mkt down as much as 4.7%yest', breaking key support of RM2,500/mt as rain lashed oil palm growing regions and on concerns that high prices may curb demand.
He has been bearish since the rally began in late March. The rally, in our view, was driven by liquidity, tactical positioning by refiners and supported by low inventory data.Meanwhile, long term fundamentals are unchanged - production to recover, US soybean planting starts might be revised upward in June and stockpiling is over. CPO price in 2009 is supply driven and with production picking up in2H09, the only direction CPO going is downward. Jeff sees current levels as agood opportunity to take profit.
Global Fund Mgr Survey: No"Sell in May"
Investors are now positioned for global economic recovery according to the May Fund Mgr Survey. The unrelenting gloom 3mths ago has been replaced by fairly typical early-cyclicalsentiment, with the only hint of potential irrational-exuberance in Emerging Markets.
For the first time since March '05, investors expect corporate profits to improve in the next 12 months, with many forecasting EPS growth to exceed10%. Asset allocators are still hedging their bets: they remain U/W equities (-6%)and have only marginally lowered cash O/W (+21% from +24%).
A brief 9-month so journ into bonds ended with allocators cutting to a net 3% U/W. They stay U/WEurope & Japan, but a record net 40% of investors see GEM as the region toO/W for the next 12 mths.
Investors´ top 3 global sectors are now tech , energy, & materials as May saw a rout in defensive sectors: pharma fell to-2% from +21%, staples -1% from +9%, and utilities -19% from -15% (now the mostU/W sector). In Asia, cash positions droppedsharply with a net 9% saying they are now UW cash.
At this rate, Daisy's FY09 volume expectation of 720 mmscfd could be easily surpassed. Also, the no. of customers that took up gas below the minimum payment level fell from 270-350 in 1Q to 260, while gas contracts not absorbed by customers dropped from 2-3% in 1Q to 1.6%.
Separately, 3-days planned gas supply stoppage from Conoco Philips for maintenance is not a concern, as impact is minimal at 5-2 mmscfd for transmission and distribution respectively.
On the customer front, by end-09, 56% of PGAS' revenue will come from state owned PLN. This will underpin PGAS's robust growth as we expect PLN's gas consumption to grow at 3-yr CAGR of16%.
We only expect PGAS to grow 7% for 2008-12. Trades at 9.8x '10 P/E,a 41% disc to regional utilities. Potential earnings upside from higher volume, lower tax rate,and higher dividend.
Buy PO Rp3,200
Market News
* Politics:
During a presidential debate,incumbent President SBY pledged to boost economic growth to 7% by 2014 (more conservative than VP Kalla's +8% promise and Megawati's +10%), to accelrate reform of the bureaucracy and cut red-tape for business startups. (Jakarta Post)
* Timah (TINS) cut back this year's capex to Rp 350 bn from Rp 900 bn as it delays plan to buy coal mining company and to built an ash plat plant due to limited fund following the drop in tin prices. (Bloomberg)
* United Tractors (UNTR) to pay dividend of Rp 320/shr or 3.2% yield, of which Rp 100/shr interim has been paid last year. This represent 40% of 2008's profit. Separately, UT allocated Rp 650 bn to acquire coal mines. They continue to do due dilligence on target mines. Funding will come from rights issue proceed from last year. (Bisnis Indonesia)
* Indocement (INTP) - post +14% performance over the past 3 days, media Bisnis Indoensia is speculating that Heidelberg may change their mind on selling 15% stake in Indocement. (Bisnis Indoensia)
* Medco (MEDC) to get 20-year extension for its Block A gas field in Aceh. Medco's current contract for Block A will expire in 2011. Medco owns 41.67% in the field. (Bisnis Indoensia) EM more inflow EM equity funds saw $2.5 bn inflow in week to 20 May, bringing total inflows over past 9 weeks to $20bn ,the largest 9 week inflow since EEM $55 peak in Nov-07. BAS-ML fund flow trading rule still signals Sell, as inflows over past 4 weeks represents 3.2%of AUM.
In recent weeks trading rule has been wrong-footed by big policy stimulus and reallocation into equities. But Mike Hartnett feels the case for EM pause/pullback is now strengthened by big EM bullishness revealed in Fund Mgr Survey, e.g. 55% asset allocators OW EM, 80% of PMs OWChina, i.e. "pain trade" no longer up.
Note also EEM struggles once its gets >20% above its 200 mda (was 17% above yest'). By region: inflows into Asia ($0.9bn), GEM ($0.9bn),LatAm ($0.6bn). EMEA flows flat. By country: big inflows into Brazil & China. CPO: beginning of the fall?Jeffrey Ngreiterates his bearish view on CPO following the futures mkt down as much as 4.7%yest', breaking key support of RM2,500/mt as rain lashed oil palm growing regions and on concerns that high prices may curb demand.
He has been bearish since the rally began in late March. The rally, in our view, was driven by liquidity, tactical positioning by refiners and supported by low inventory data.Meanwhile, long term fundamentals are unchanged - production to recover, US soybean planting starts might be revised upward in June and stockpiling is over. CPO price in 2009 is supply driven and with production picking up in2H09, the only direction CPO going is downward. Jeff sees current levels as agood opportunity to take profit.
Global Fund Mgr Survey: No"Sell in May"
Investors are now positioned for global economic recovery according to the May Fund Mgr Survey. The unrelenting gloom 3mths ago has been replaced by fairly typical early-cyclicalsentiment, with the only hint of potential irrational-exuberance in Emerging Markets.
For the first time since March '05, investors expect corporate profits to improve in the next 12 months, with many forecasting EPS growth to exceed10%. Asset allocators are still hedging their bets: they remain U/W equities (-6%)and have only marginally lowered cash O/W (+21% from +24%).
A brief 9-month so journ into bonds ended with allocators cutting to a net 3% U/W. They stay U/WEurope & Japan, but a record net 40% of investors see GEM as the region toO/W for the next 12 mths.
Investors´ top 3 global sectors are now tech , energy, & materials as May saw a rout in defensive sectors: pharma fell to-2% from +21%, staples -1% from +9%, and utilities -19% from -15% (now the mostU/W sector). In Asia, cash positions droppedsharply with a net 9% saying they are now UW cash.
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