Indonesian banks, Results lacking momentum, Macquarie

Event
 1Q12 results wrap for banks under coverage except for BNI, which has yet to
report its results.

Impact
 Overall impression: Headline net profit growth in 1Q12 was in-line with our
estimates, up 13% YoY and up 22% if we exclude Garuda recovery at
Mandiri. Pre-provision profit, however, was weaker than expected (mainly in
large banks) from a combination of NIM and cost pressure. Loan-loss
provisions, which were much lower than expected, were the main driver for inline
profit growth. We would rank the results from best to worst as follows:
BTPN, Panin, Mandiri, BCA, Danamon, Bank BJB, and BRI.

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.

Astra International , Right place, wrong time, Macquarie

Event

·         We downgrade our recommendation to Neutral from Outperform; cut our FY12–13E estimates by 6.7%; and reduce our PT to Rp76k from Rp80k (representing a 15x FY13E PER). Our downgrade reflects several factors which collectively have made us sufficiently uncomfortable with the stock’s short term risk/reward profile to downgrade. We nevertheless remain positive on the long term story, and would look to re-accumulate in the low 60ks.

·         These factors include the likely material impact of BI down payment (DP) limitations on 2W volumes; the market share risk posed by Nissan’s upcoming NV200 launch; our existing expectations (now exacerbated) for ASII’s FY12E earnings growth to slow; and ASII’s relatively full short/medium term multiples.

Impact

·         20% down payment limitations looking increasingly likely:

Regional Plantations , Clouds on the horizon, Macquarie

The fundamentals of Crude Palm Oil (CPO) held up relatively well through 4Q11

and 1Q12, as we had expected. However, an elevated macro risk environment

kept most investors away from plantation stocks for the better part of last year.

With these risks receding somewhat, we have finally seen equity prices catch up

with the fundamentals of the commodity. In the past three months, plantation

stocks have risen on average by 14% vs. a 2% rise in the commodity. From here

on, individual company prospects, rather than the commodity price, are likely to

drive differential stock performance in our view.

Indonesian strategy, Not so surprising rate cut, Macquarie

Indonesian strategy

Not so surprising rate cut

Event

§ Bank Indonesia (BI) decided to cut its BI rate today by 25bps to 5.75%

vs. consensus expectations of no rate cut. The signal for further easing was

provided last month on 17 January when BI decided to bring down the lower

band of the interest rate corridor by 50bps. The primary reason for the current

rate cut is to provide additional stimulus for the domestic economy given the

slowdown in the global economy.

Impact

§ More liquidity to the system. The overnight interbank rate will decline to

~3.75% (5.75% less 200bp) from its previous 4.0%, further boosting domestic

liquidity. The lower BI rate should pave the way for further cuts in the deposit

rate, benefitting banks with greater reliance on more interest-sensitive time

deposits such as Danamon, BTPN, and BJBR. On the other hand, banks with

low LDR and excess liquidity such as BCA could face some short-term NIM

compression. Our top picks in the banking sector are BRI and BJBR.