PT Kalbe Farma Tbk, 1Q12: Strong Quarter; Beats Expectations, Morgan Stanley

Quick Comment: Kalbe Farma reported strong results
for 1Q12. Revenue, EBIT, and PAT grew 27.7%, 23.6%,
and 27.7% yoy, respectively. Revenue beat
expectations by 4%, while earnings beat MS estimates
by 5-6%. The upside was driven by better-thanexpected
growth and margins from the Prescription
Pharma and Nutritionals divisions. 1Q PAT is 24% of our
full- year profit estimate (vs. historical average of c22%).
We continue to view Kalbe as a better consumption play
within our Indonesian consumer coverage and retain our
OW rating.

Ace Hardware, 100 stores by 2015, CLSA

Having opened its 59th new store in Tebet (South Jakarta) this month, the
company is on track to meet their targeted 15 additional stores or +20%
on gross space basis. Coupled with strong same-store-sales growth
(Sssg) number of 18.3% as of 3M12, we foresee the company to deliver a
robust 26% top-line growth this year. Well execution should lead them to
possess 100 stores by 2015, while competition may however limit their
margin expansion. We maintain our BUY rating on the company with
slightly lower TP of Rp5,400/sh to reflect some margin pressure.

ICBP, Less savoury, CLSA

We foresee flat Ebit margin of 13% this year despite lower input cost, due
to less likelihood of price adjustment coupled with stiffer competition
which lead to greater ads spending. The company has targeted to
increase its ads spending by about 30% this year, or about 3.5% of its
total sales, from 2.9% in 2011. We thus trim our earnings assumption by
3-5% for FY12-13CL, which translate to 8% earnings Cagr over FY11-
14CL, halved from its consumer peers. Retain U-PF with new TP of
Rp5,400/sh.

Mitra Adiperkasa, Mounting cost pressure, CLSA

Despite strong 4Q11 result, we believe Mitra Adiperkasa (MAPI IJ) might
face near-term potential operating risk from mounting cost pressure and
higher working capital requirement this year. Its plan to open two new
department stores paired with rising salary and rental cost should
translate to lower Ebit margin of 9.4% (vs 2011’s 10.6%). Armed with
these facts, we slightly cut our earnings estimate by 4% for FY12-13CL
and downgrade our recommendation to O-PF, from Buy.

Indofood CBP, Still lacking upside catalysts, Macquarie

Event

􀂃 We analyse ICBP’s FY11A result (released on 20/3) in detail, and take the

opportunity to update our investment thesis, earnings forecasts/outlook, and

valuation. We maintain our Underperform call, but raise our valuation and PT

to Rp5,100 from Rp4,900, and raise our FY12E earnings estimates by 7.2%.

􀂃 While ICBP is trading only modestly above our fair value estimate, we believe

the story remains unexciting on account of the company’s relatively weak

growth prospects, coupled with its premium operating margins. We view the

stock as a fully-valued “cash cow” that is likely to continue to tread water, and

in a growth market, significantly underperform on a relative basis.

Kalbe Farma, Management revised its guidance upwards—numbers in line with our estimates, Credit Suisse

● Kalbe’s management has revised its 2012 guidance: it now
expects operating margins of 16.0-16.5% and earnings growth of
10-15% YoY, on the back of 18-20% revenue growth YoY.
Previously, during an analyst meeting in mid-Feb, management
had guided for 15-20% YoY revenue growth for 2012, with
operating margins of 15-16% and earnings growth of 5-10% YoY.
● Management said that the upward revisions were based on the
encouraging results in the first two months of this year, while it is
optimistic about price increases in 1H12. Management also sees
an improving trend for the newly launched products.
● Our forecasts are in line with management guidance. We expect
19% YoY revenue growth in 2012, with operating margins of
16.2% and net profit growth of 8% YoY.
● Our DCF-based target price of Rp3,100 implies 19.9x 2012E P/E,
with 27% estimated earnings growth over the next two years. The
stock has underperformed the JCI: it has only gained 2% YTD,
while the JCI has gained 4%. We reiterate our NEUTRAL rating.

Indonesia Fast Fashion Frenzy, CLSA

Fast fashion‟s popularity has been growing rapidly over the last 7 years.
Favourable demographics make Indonesia a lucrative market for fast
fashion retailers. Zara, locally held by Mitra Adi Perkasa (MAPI), is
currently the only one of the top three players to have entered Indonesia.
The potential arrival of H&M and Uniqlo in Indonesia may pose a threat
for Zara. We nonetheless maintain our BUY call on MAPI for its expansion
capability. Media companies will also benefit from increased competition.

CLSA ON THE ROAD, Modern stores war continues

As Indonesia’s middle class expands rapidly, they are willing
spend more to avoid muddy floor or other inconveniences when
shopping. Thousands of wet markets are disappearing as a
result from the transition. Take Benhil for example, the street
is only 1.4 km long road but packed with a traditional market,
at least four mini markets and three convenience stores. During
our visit, we saw heavy traffic at Seven Eleven and Indomaret
behind CLSA office.