Happy Idulfitri 1432 H

Dear our precious readers,

Along with Idul Fitri and 5 days holiday of Indonesia Stock Exchange, starting on August 29 to September 2, I will leave Jakarta and take long holiday.

During the period, we won't continually be able to write and publish stories at Insider Stories. If you find one or two articles, perhaps my partner, Linda Silaen takes her valuable time to write and provide articles at this blog. 

We would like to wish you, especially for those those who celebrate it, a Happy Idulftri 1432 H.  Please apologize for wrong information we have made, especially in the articles we have published it at Insider Stories. We try to provide you reliable inside information from our sources. We apologize for inconvenience. 

Insider Stories Team

Wisnu Wijaya&Linda Silaen

Tuah Turangga controls 100% Agung Bara

Coal miner PT Tuah Turangga Agung (TTA), a wholly owned subsidiary of PT United Tractors Tbk (UNTR), has entered into an agreement to acquire the remaining 40% stake of coal miner PT Agung Bara Prima at consideration price of US$10.60 million. 

In an official statement today, TTA has signed the agreement on August 24 2011. Following the agreement, TTA has controlled the whole stake in Agung Bara Prima.

Agung Bara is a company focusing in coal mining and has a mining license based on the decree of Kapuas Regional Head on July 20 2011. The company has 1,271 hectares of coal concession in Buhut village, Central Kapuas, Central Kallimantan.

In June last year, TTA also entered into conditional sale and purchase agreement in a bid to acquire 60% stakes of Agung Bara Prima worth Rp306 million.  In a public announcement to Indonesia Stock Exchange (IDX), Tuah Turangga has signed the agreement on June 9 2010. United Tractors is majority-owned by Indonesia's largest automotive distributor PT Astra International Tbk (ASII).

Disclosure: No position at the stock mentioned above.  

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Indika seals extension to re-float Petrosea

Energy integrated company PT Indika Energy Tbk (INDY), that is controlled by Indonesian businessmen Agus Lasmono and Wiwoho Basuki Tjokronegoro, has obtained approval to extend the re-float requirement of PT Petrosea Tbk (PTRO) by the end of January 2012.

In an official statement submitted to Indonesia Stock Exchange today, Indika said it had to meet requirement of the regulation regarding to re-float of a minimum 16.6% stake or 16.74 million shares in Petrosea at the latest date of August 28 2011.

Indika has to comply the regulation after it completed the majority acquisition of Petrosea which was followed by tender offer last year.

At the end of June 2010, Indika Energy controled 99.38 million shares of Peetrosea or 98.55%, while 1.45% belonged to public investor.  

"We have secured an approval from Bapepam-LK on August 25 to extend the re-float from August 28 2011 to the end of January 2012. We are considering the negative sentiments in the global markets," said Indika Corporate Secretary Dedy Happy Hardi today.

Indika, company that owns 46% shareholding in coal miner PT Kideco Jaya Agung, reported a 25.14% increase in net profit for the first 6 months of this year because higher profit contribution from associated companies.
Indika booked Rp584.59 billion net profit 1H 2011 from Rp467.16 billion in 1H 2010. Profit from associated companies rose 32.62% to Rp956.49 billion from Rp721.23 billion.
Gross profit increased to Rp361.83 billion from Rp353.33 billion. Indika's consolidated revenue rose climbed 12.43% to Rp1.99 trillion from Rp1.77 trillion. The biggest contributor remained contract and services business with Rp1.83 trillion and the remaining of Rp159.42 billion came from coal mining business. 

Disclosure: No position at the stock mentioned above.

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PLN 1H net profit rises 16.50%

The state-controlled electricity producer PT Perusahaan Listrik Negara (PLN) (Persero) today reported a 16.50% increase in attributable net profit as operating revenue increased 26.36%.

PLN booked Rp9.46 trillion attributable profit in 1H 2011 from Rp8.12 trillion in 1H 2010. Operating profit slightly increased 5.97% to Rp7.99 trillion from Rp7.54 trillion.  Operating revenue rose 26.36% to Rp98.56 trillion from Rp78 trillion. 

PLN schedules road show in several cities in a bid to sell US$2 billion bonds. PLN President Director Dahlan Iskan said the bond proceed will be used to fulfill capital expenditure of Rp66 trillion. "Road show will be scheduled in Singapore, Hong Kong, London, New York, and Los Angeles, while pricing will be set in September-October," he said. 
According to him, PLN will offer 5, 10, and 30 year bonds to investors. Joint lead arrangers for the bonds are Barclays Capital dan Citi. PLN is scouting Rp12 trillion net profit after tax this year, a slight increase from Rp10.1 trillion last year.

Disclosure: No position at the stock mentioned above.

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PGN 1H profit slightly increases 1.56%

The state-controlled gas distributor and transmitter PT Perusahaan Gas Negara Tbk (PGN) today reported a slight increase in attributable net profit of 1.56% in the first half of this year.

PGN booked Rp3.26 trillion attributable profit in 1H 2011 from Rp3.21 trillion in 1H 2010. However, operating profit declined 11.18% to Rp4.05 trillion from Rp4.57 trillion.

The decrease was mainly contributed by the decline of distributed gas and higher cost of goods revenue and operating expenses.

The increase of cost of goods revenue was a result of a price increase of gas purchase from contract extension and new contracts.  

In the gas transmission business, PGN transmitted 846 MMscfd in 1H 2011 and distributed 782 MMscfd to house holds, commercial, industrial players, and power plants. PGN booked a slight decrease of 1.16% in revenue to Rp9.41 trillion from Rp9.52 trillion.

Disclosure: No position at the stock mentioned above.
 
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Bakrie Plantations 1H profit surges 1,059%

Palm oil and oleochemical products maker PT Bakrie Sumatera Plantations Tbk (UNSP) today reported a 1,059.69% jump in attributable net profit for the first 6 months of this year on the back of strong net sales, driven by higher CPO price and sales volume.

Bakrie Plantations booked Rp408.79 billion attributable net profit in 1H 2011 from Rp35.35 billion in 1H 2010, mainly underpinned by interest income that surged 2,635.75% to Rp52.80 billion from Rp1.93 billion.

Operating profit surged 101.17% to Rp654.10 billion from Rp325.14 billion. However, operating margin was flat at 28% as a result of higher costs.

Bakrie Plantations' gross profit rose 85.28% to Rp840.26 billion from Rp453.52 billion. But, gross margin declined to 36.47% from 39.98%, despite higher cost of goods sold that jumped 114.96% to Rp1.46 trillion from Rp680.78 billion.

Net sales soared 103.54% to Rp2.30 trillion from Rp1.13 trillion.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

U.S. stocks dropped Thursday after 3 days of sharp gains as Warren Buffett's US$5 billion investment in Bank of America failed to stoke investors' appetite for risk ahead of Federal Reserve Chairman Ben Bernanke's speech on Friday. The Dow Jones Industrial Average dropped 170.89 points, or 1.51%, to 11149.82, in a broad decline. How about Indonesia stock market today? 

e-Trading Securities: 

Today, Jakarta Stock Exchange (JCI) may move in consolidation phase today. The index may move in the range of 3,794-3,881 with sideways possibility. Stocks to watch: BBCA and KIJA.

Reliance Securities

The JCI technically may move sideways in the range of 3,813-3,866.

Sinarmas Sekuritas:

The index is estimated to swing in the range of 3,824-3,875. Stocks to watch: AALI, BBCA, ASRI, and TINS.

Minna Padi Investama:

The index may move within the range of 3,821-3,884. Prior to the long holiday, investors tend to reduce their portfolio. Stocks to watch: ASII, BBCA, and BBNI.

Disclosure: No position at the stock mentioned above.  

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BISI International 1H profit rises 13.21%

PT BISI International Tbk today reported Rp79.80 billion attributable profit for the first 6 months of this year, a 13.21% increase from Rp70.49 billion a year earlier.

Operating profit slightly declined 3.48% to Rp103.58 billion from Rp107.32 billion. BISI booked Rp195.35 billion gross profit in 1H 2011 from Rp173.86 billion.

The company posted a 14.53% increase in net sales to Rp501.31 billion from Rp437.71 billion. BISI is Indonesia’s largest producer of hybrid seeds for corn, rice, and horticulture, a major Indonesian producer of pesticides and a distributor of fertilizer.  The company’s head office is located in Sidoarjo, East Java, with its plants located in Kediri, East Java.

The company was founded by the Charoen Pokphand Group and has an operating track record of more than 25 years. Today, BISI maintains a nationwide operational footprint for research and development, production, marketing, distribution, and sales.

BISI has three subsidiaries, PT Multi Sarana Indotani (MSI) which manufactures pesticides, PT Tanindo Subur Prima (TSP) which distributes and markets the imported horticulture seeds, and PT Tanindo Intertraco (Tinco) which distributes and markets the products of MSI and the Company.

Disclosure: No position at the stock mentioned above.

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Surya Semesta 1H profits skyrockets 772%

Property developer, hotel operator, and industrial land owner PT Surya Semesta Internusa Tbk (SSIA) today reported a 772.63% surge in attributable profit in the first half of this year as operating revenue steeply jumped.

Surya Semesta booked Rp129.76 billion profit in 1H 2011 or Rp110.31 per share from Rp14.87 billion in 1H 2010 or Rp12.64 per share.

Gross profit soared 106.85% to Rp400.89 billion from Rp197.79 billion. However, gross margin slightly fell to 25.99% from 26.39%.

Surya Semesta posted a 105.75% jump to Rp1.54 trillion from Rp749.57 billion.

Disclosure: No position at the stock mentioned above.

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Timah 1H profit surges 113.78%

The state-controlled tin producer PT Timah Tbk (TINS) reported a 113.78% jump in  attributable profit, driven by higher tin prices.

Timah booked Rp688.99 billion profit in 1H 2011 from Rp322.29 billion in 1H 2010. Gross profit rose 81.76% to Rp1.25 trillion from Rp689.08 billion, sending a higher margin to 25.88% from 18.38%. Net revenue increased 28.8% to Rp4.83 trillion from Rp3.75 trillion.

 
Disclosure: No position at the stock mentioned above.

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Citra Tubindo 1H profit jumps 670.97%

PT Citra Tubindo Tbk today reported a 670.97% jump in net attributable profit in the first half of this year as revenue increased.

Citra Tubindo booked US$28.68 million attributable profit in 1H 2011 from US$3.72 million in 1H 2010. Operating profit surged 323.53% to US$33.11 million from US$7.82 million as cost of goods sold narrowed to US$59.60 million from US$72.89 million. Revenue slightly increased 6.12% to US$98.31 million from US$92.63 million.

Disclosure: No position at the stock mentioned above.

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3 Arrangers to sell Indo sukuk bonds

Ministry of Finance has mandated three lead arrangers to arrange the issuance of US$1 billion global sukuk bonds. They are Citi, HSBC Securities, and Standard Chartered Bank.

"Of the five shortlisted arrangers, Indonesian government finally has picked three arrangers, excluding CIMB Securities and  Credit Suisse," said a source close to the deal.

Finance Minister Agus D. W. Martowardojo confirmed that the ministry has picked three arrangers to lead the global sukuk bonds. "The arrangers will represent Asia, Europe, and US," he said.

Disclosure: No position at the stock mentioned above.

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MASA sale drops as unexpected price

Two controlling shareholders of tire maker PT Multistrada Arah Sarana Tbk (MASA), PVP XVIII Pte Ltd and Salim affiliated company PT  Central Sole Agency have dropped the sale of 38.7% stake as the final price was below expectation.

A source close to the deal said three potential buyers, Hankook Tire Company, Texas Pacific Group, and Yokohama Tire Corp, submitted the final offer at Rp500 per share, while the sellers expected above Rp800 per share.

In an official statement submitted to Indonesia Stock Exchange (IDX) yesterday, Director Y. Ade Bunian Moniaga said PVP and Central Agency don't have any intention to sell their stakes in Multistrada. They are both committed to keep their existing shares in the maker of Achilles, Strada, and Corsa tires.

Disclosure: No position at the stock mentioned above.

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Intraco eyes US$200 mio coal takeover

Heavy equipment distributor PT Intraco Penta Tbk, that was founded by Halex Halim, is scouting a coal acquisition with the valuation above US$200 million.

Intraco Penta President Director Petrus Halim said the target coal company may have valuation higher than Intraco's market capitalization which is now about US$200 million.

"We estimate the target company has valuation more than Intraco's market cap," he said as quoted by Bisnis Indonesia today.

According to him, at the end of this year, Intraco Penta expects to complete the take over, enabling the company to penetrate coal miner business.

"We are prudent on this take over as the size is higher than Intraco Penta. Many companies are suffering loses in the coal mining business but they don't reveal it," said Petrus.

Intraco Penta was founded in 1970 and listed at Indonesia Stock Exchange in 1993. Intraco Penta has several subsidiaries such as PT Intan Baruprana Finance, PT Clumbia Chrome Indonesia, PT Terrafactor Indonesia, and PT Karya Lestari Sumberalam. Intraco is distributor for heavy equipment brands such as Volvo, Bobcat, Mahindra Tractors, and Sinotruk.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

U.S. stocks inched up for a third straight day as an upbeat durable goods report set a positive tone while investors await Federal Reserve Chairman Ben Bernanke's highly anticipated speech later this week.
The Dow Jones Industrial Average gained 143.95 points, or 1.29%, to 11,320.71. How about Jakarta Composite Index today (JCI)? Here are stock recommendations provided by Bisnis Indonesia today:

Minna Padi Investama:
The JCI may move within the range of 3,761-3,891 today. The market is awaiting for the result of Federal Reserve's meeting to heal the US economy. Stocks to watch: BBRI, ASII, and PTBA.

e-Trading Securities:
The index is estimated to move with the closest support level of 3,822. The JCI may move in the range of 3,798-3,883 with stocks to monitor: BSDE and ELTY.

Sinarmas Sekuritas:
The JCI may swing with downtrend possibility in the range of 3,823-3,889. Stocks to watch: PTBA, HEXA, BSDE, and CMNP.

Disclosure: No position at the stock mentioned above.

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Indofood Sukses 1H profit rises 12.05%

Instant noodle maker PT Indofood Sukses Makmur Tbk (INDF) today reports a 12.05% increase in attributable profit on the back of higher sales.
In the financial statement published today, Indofood recorded Rp1.58 trillion profit in 1H 2011 from Rp1.41 trillion.

Net sales rose 20.53% to Rp21.84 trillion from Rp18.12 trillion, while operating profit increased 16.78% to Rp3.48 trillion from Rp2.98 trillion.

PT Indofood CBP Sukses Makmur Tbk (ICBP) also reported a 23.72% increase in attributable profit to Rp989.99 billion from Rp800.19 billion.

Disclosure: No position at the stock mentioned above.

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Adaro acquires Mustika Indah Permai

PT Alam Tri Abadi, a subsidiary of Indonesian coal miner PT Adaro Energy Tbk (ADRO), has agreed to acquire 75% shareholding in green field miner PT Mustika Indah Permai worth US$222.5 million from Elite Rich Investment Limited. The shares sale and purchase agreement has been signed on August 19 2011.

Mustika Permai is a coal miner company that develops green field project in South Sumatra with concession of 2,000 hectares.

According to President Director Garibaldi Thohir, the acquisition is part of Adaro's strategy to enhance value added. "We aim to boost production capacity to 80 million tons in the medium term," he said in a press statement last night.

However, there is no clear information about the coal reserves and resources at Mustika Permai's concession.

In 2008 and 2009, Mustika Permai and four other companies involved in coal concession dispute in Lahat, South Sumatra, with the state company PT Tambang Batubara Bukit Asam Tbk. 

Besides Mustika Permai, the other companies were PT Bukit Bara Alam, PT Muara Alam Sejahtera, PT Bara Alam Utama, and PT Bumi Merapi Energi.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

Dow Jones Industrial Average rose 322.11 points, or 3%, to close at 11,176.76, while Standard & Poor's 500-stock index rose 38.53 points, or 3.4%, to 1,162.35. How about Indonesia stock market today? Here are stock recommendations provided by several local houses.

Sinarmas Sekuritas:
 Jakarta Composite Index (JCI) may move within the range of 3,870-3,926 today. Stocks to watch: MYOR, BBNI, CPIN, and INTA.

Minna Padi Investama:

The JCI may move in a limited way with a support level of 3,820. The trading volume today is estimated to shrink. Stocks to monitor: INDF, HRUM, and BMRI.

e-Trading Securities:

Technically, the JCI is estimated to move in the range of 3,844-3,920 with uptrend possibility. Stocks to watch: HRUM, UNTR, and MYOR.

Disclosure: No position at the stock mentioned above.

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Astra Agro 7M CPO sales rises 20.1%

Palm oil producer PT Astra Agro Lestari Tbk (AALI) today reports a 20.1% increase in CPO sales in the first 7 months of this year. 

Astra Agro's CPO sales volume was 688,888 tons in 7M2011 from 573,608 tons in 7M2010. Of the total CPO sales volume, approximately 95.7% or 659,340 tons were absorbed by local market, while the remaining volume of 25,548 tons by export market. 

The average CPO selling price of AALI in 7M 2011 was Rp7,868/kg, a 19.9% increase compared to the same period last year.  

Meanwhile, sales volume of kernel in this period went up by 40% to 81,159 tons with the average selling price of Rp5,818/kg from 57,991 tons.

Disclosure: No position at the stock mentioned above. 

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Sims Jaya back door listing via Myoh

PT Myoh Technology Tbk, a technology information company, plans a back door listing by acquiring coal mining and services PT Sims Jaya Kaltim from Samtan Co Ltd.

In an agenda of extraordinary general meeting submitted to Indonesian  Central Securities Depository, Myoh will use proceed from rights issue to support the acquisition.

South Korea's company Samtan owns 49% shareholding in coal miner PT Kideco Jaya Agung, which is also 46% owned by PT Indika Energy Tbk and 5% owned by PT Muji Inti Utama.

However, there is no clear information about the proceed generated from the rights issue. Sims Jaya Kaltim is one of contractors working for Kideco. Sims Jaya's equity is US$2 million. Samtan has partnered with the US-based company Samchully.

Sim Jaya, founded on April 1 2001, is represented by Lim Jae Jung with 528 local and five korean employees. In 2003, the company recorded US$19.19 million revenue and US$1.8 million net profit. Prior to the rights issue, Myoh plans to reverse its outstanding shares. MYOH stocks today surged 14% on the backdoor's plan.

Disclosure: No position at the stock mentioned above. 

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London Sumatra 1H profit jumps 112%

Palm oil producer PT PP London Sumatra Indonesia Tbk (Lonsum) today reported a 112.14% jump in net profit for the first 6 months of this year as sales rose 51.59%.

In the financial statement published today, London Sumatra reported Rp886.26 billion attributable profit in 1H 2011 from Rp417.78 billion in 1H 2010.

Operating profit surged 92.14% to Rp1.06 trillion from Rp550.18 billion, sending a higher margin to 44.54% from 35.12%.

London Sumatra's gross profit rose 68.69% to Rp1.27 trillion from Rp750.39 billion, while sales increased 51.59% to Rp2.38 trillion from Rp1.57 trillion.

Disclosure: No position at the stock mentioned above.

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Bumi aims Rp3.90 trio shares buyback

Indonesia's largest coal exporter PT Bumi Resources Tbk (BUMI) today announces a buyback of 780 million shares or 3.75% of its outstanding shares with a commitment to spend Rp3.90 trillion cash from part of its net profit.

Bumi must complete the buyback within 18 months after it obtains approval of extraordinary general meeting scheduled on September 26 2011 or on March 26 2013. 

In an official prospectus published today, the shares buyback, held by PT Danatama Makmur, is expected to increase earning per share, return on equity, and flexibility to obtain equity-linked financing such as convertible bonds.

Vallar Investments UK Ltd is holding 29.86% stake in Bumi Resources and public shareholders hold the remaining shares. As of August 15 2011, Bumi manages 473.21 million treasury stocks and 56.73 million portfolio stocks.

Disclosure: No position at the stock mentioned above.

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Surya Semesta sells 200 ha land bank

Property development and industrial land provider PT Surya Semesta Internusa Tbk (SSIA) has sold 200 hectares of its industrial land in the first 8 months of this year.
The company manages a business of industrial land in Karawang, West Java, from its subsidiary dubbed PT Suryacipta Swadaya.

Post the sale of 200 hectares, Surya Semesta's total industrial land is 522 hectares, consisting of land bank for the first and second phases of 122 hectares and the third phase.
The company is holding a land clearing to support the third phase. It expects to complete the land clearing in the last quarter of this year.

Disclosure: No position at the stock mentioned above.

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Intiland scouts Rp1.1 trio marketing sales

Property Developer PT Intiland Development Tbk (DILD) plans to launch several new projects in the second half of this year in a bid to achieve a Rp1.1 trillion marketing sales target, representing a 57.14% increase from Rp700 billion last year.

In the first half of this year, Intiland's marketing sales reached Rp450 billion. The company will launch Serenia Hills, Lebak Bulus, Jakarta. The project will be developed on 10 hectares of land. 

"We will launch the project and starting to put it on sale in the last quarter," said Archied Notopradono, Director of Capital and Investment Management at Intiland Development. Intiland is planning to spend Rp1 trillion of capital expenditure this year.

Disclosure: No position at the stock mentioned above.

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Nusantara to refinance Rp750 bio debts

Toll road operator PT Nusantara Infrastructure Tbk (META) intends to refinance Rp750 billion debts to PT Bank Mega Tbk using new loan facility from PT Bank Central Asia Tbk (BCA).

The debts are coming from its subsidiaries namely PT Bintaro Serpong Damai of Rp360 billion, PT Bosowa Marga Nusantara of Rp40 billion, and PT Jalan Tol Seksi Empat of Rp350 billion.

Bintaro Serpong Damai is the operator of Bintaro-Bumi Serpong Damai toll road and Jalan Tol Seksi Empat is the operator of the fourth session toll road in Makassar, Sulawesi.

According to Finance Director Danni Hasan, the new facility bears lower interest rate than the existing debt. BCA provides interest rate of 9.75% in the first year, and cost of funds plus 4.25% onward, while Bank Mega's loan facility has charged interest rate of above 13% annually.

With the refinancing, Nusantara Infrastructure enables to put down the interest payment of Rp25 billion. "The cost efficiency is 25% of the total interest of Rp100 billion."

Disclosure: No position at the stock mentioned above.

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Apexindo buyer urged to declare identity

Indonesian capital market regulator is tracking an ultimate identity of investors behind Tuscany Investment Group Ltd, the buyer that has entered a sale and purchase agreement with PT Mitra International Resources Tbk (MIRA) in take over of drilling company dubbed PT Apexindo Pratama Duta Tbk at consideration price of US$40 million.

Gonthor Ryantory, Head of Bureau for Financial Sector of Corporate Financial Assessment at Capital Market Supervisory Agency, said the regulator has instructed Tuscany Investment to meet the regulation of IX. H.I regarding to the take over of publicly listed companies. 

"Apexindo had been removed from trading board of Indonesia Stock Exchange. But, it remains a publicly listed company. Hence, the acquisition of the drilling company must comply with the regulation," he said as quoted by Bisnis Indonesia today.

Referring to the regulation, the buyer of the publicly listed companies must declare and provide proper and sufficient information about its identity of investor behind, address of the company, telephone number, business sector, the purpose of the control, and tender offer mechanism.

Mitra Resources and Tuscany entered into a sale and purchase agreement of 93.35% shareholding in Sabre System International which has a wholly owned subsidiary dubbed Sabre System International Offshore Pte Ltd.

Sabre Offshore is controlling Mira International Holding which also owns 98.14% stake in Apexindo Pratama. Sabre is recorded US$136.66 million and Mira International's debt is US$523.3 million. In total, a group of Mitra Resources recorded a US$659.86 million or Rp5.9 trillion.

Jakarta Stock Exchange has suspended stock trading of Mitra Resoures since June 30 at Rp160 per share as a result of disclaimer opinion on its financial statement for the last 2 consecutive years.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

The Dow Jones Industrial Average inched up 37 points, or 0.3%, at 10,854.65, after dropping 4% the past week. How about Jakarta Composite Index today? 

Three local stock brokerages provide their view about the movement of Jakarta Composite Index (JCI) today as quoted by Bisnis Indonesia daily.

Sinarmas Sekuritas:

The JCI technically may move in the range of 3,782-3,878 today. Several stocks to monitor: INDF, LSIP, INTP, and PTBA.

Minna Padi Investama:

The index is estimated to move with resistance level at 3,884, while the negative sentiments from the US and global markets are fading. Several stocks to watch: ASII, PTBA, and BMRI.

e-Trading Securities:

The JCI today may move within the range of 3,798-3,890 with uptrend possibility. Several stocks to monitor: GGRM, ASII, and TBLA. 

Disclosure: No position at the stock mentioned above.

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Radiant secures loan from DBS Indonesia

Oil and gas services company PT Radiant Utama Interinsco Tbk (RUIS) has secured loan facility from Bank DBS Indonesia on July 25.

In an official statement to Indonesia Stock Exchange today, Director of Radiant Utama Coki Lubis said the facility will be used by the company to buy mobile offshore production unit (MOPU) worth US$35 million. Radiant has submitted a plan to buy MOPU to regulators. The company is seeking approval from shareholders.

Disclosure: No position at the stock mentioned above.  

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INCO to invest US$1.5 bio for expansion

Nickel miner PT International Nickel Indonesia (INCO) is planning to invest US$1.5 billion in the next 5 years to jack up production capacity to 120,000 tons a year from 72,500 tons.

"Expansion is aimed to respond the global demand for nickel. The capacity expansion is targeted to complete by 2016," said President Director Tony Wenas as quoted by Investor Daily tiday.

The company will finance the expansion plan with internally generated cash flow. INCO has two projects set to boost production such as rebuilt and furnace production facilities and starting to explor Bahodopi block in Central Sulawesi.

Disclosure: No position at the stock mentioned above.

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Summarecon considers rights issue

Property developer PT Summarecon Agung Tbk (SMRA) is considering to issue bonds or rights in a bid to grab Rp600 billion. The proceed will be used by the company to acquire land bank.

Summarecon Director Michael Yong said the company requires Rp600 billion to buy 20 hectares of land in Serpong, Bekasi, and Bandung.

"To buy land, properti is not allowed to use bank loan facility. This is why we are exploring several fund raising options such as bonds or rights issue," he said as quoted by Bisnis Indonesia today.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

Dow Jones Industrial Average fell 1.57% to 10,817.65 on Friday last week, while S&P 500 Index also declined 1.50% to 1,123.53.

FTSE100 Index dropped 1.01% to 5,040.76, CAC 40 dipped 1.92% to 3,016.99, and DAX plunged 2.19% to 5,480. How about Jakarta Composite Index (JCI) today? Here are stock recommendations provided by Bisnis Indonesia today:

e-Trading Securities:

The JCI may face further corrections today that strives to test a strong support level of 3,735. The index may move within the range of 3,735-3,866. Stocks to watch: CTRS, SMGR, and BBCA.

Reliance Securities:

In the short to medium run, the JCI may move in a bearish trend with a stop loss level of 3,813 and a possible decline to 3,763. Investors are suggested to wait and see. Stocks to monitor: ASII, BBNI, BBRI, and GGRM. 

Disclosure: No position at the stock mentioned above.

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Bakrie Toll buys 85% Cibitung Tollways

PT Bakrie Toll Indonesia, a subsidiary of PT Bakrie Indo Infrastructure, has acquired 85% shareholding in PT Cimanggis Cibitung Tollways (CCTW) from Plus Expresway Berhad and PT Capitalinc Investment Tbk. 

PT Bakrie&Brothers is still holding 15% stake in CCTW, a license holder for toll operator Cimanggis-Cibitung, part of Jakarta Outer Ring Road 2. Bakrie Toll has acquired the stakes of 60% from Expresway Berhad and 15% from Capitalinc in August.

However, the completion of the stakes sale requires consent from Ministry of Public Works and shareholders of CCTW. 

Disclosure: No position at the stock mentioned above.

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Bank Danamon sets rights issue at Rp4,300

PT Bank Danamon Tbk (BDMN) has set the exercise price of preemptive rights issue at Rp4,300 per share, entitling the bank with a total proceed of Rp4.99 trillion.

Bank Danamon aims to hold the rights issue of 1.16 billion new shares with holder of 1,000 existing rights to entitle 138 rights to buy new shares. Each one rights will enable the holder to buy one new share. The Bank plans to seek approval from shareholders meeting scheduled on August 24 2011. 

Citigroup Global Markets Singapore Pte Ltd and Deutsche Bank AG, Hong Kong are acting as standby buyers for the rights issue with commitment to buy a maximum of 189,60 million new shares at Rp4,300, equals to Rp815.28 billion. The dilution effect from the rights issue is 12.13%.

Disclosure: No position at the stock mentioned above.
 
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Bakrie aims to issue Rp1 trio bonds

PT Bakrie&Brothers Tbk (BNBR) aims to issue Rp1 trillion of rupiah denominated bonds in the last quarter of this year and has dropped its initial plan to raise fund from US dollar bonds.

BNBR CFO Eddy Soeparno said the company has submitted documents to obtain a rating from rating agency PT Pemeringkat Efek Indonesia (Pefindo).

"We will use an audited financial statement in September as a based for the bonds issuance," he said last night.

According to him, Bakrie will use the bonds proceed to make an early refinancing of medium secured notes (MSN).

The company plans to make early refinancing of Rp3.3 trillion notes and it paid Rp1.2 trillion notes in the first half of this year as well.

 
Disclosure: No position at the stock mentioned above.

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BNBR returns to Rp45.49 bio profit

PT Bakrie&Brothers Tbk (BNBR) returned in net profit of Rp45.49 billion for the first 6 months of this year after suffering a prolonged net loss.  The company booked Rp171.51 billion net loss in 1H 2010.

The positive bottom line was mainly driven by write-off interest expenses of Rp362.08 billion and foreign exchange gain of Rp281.18 billion.  

Operating profit fell 41.68% to Rp296.69 billion from Rp508.76 billion, while gross profit slightly dropped 5.39% to Rp1.93 trillion from Rp2.04 trillion.

Bakrie posted net revenue of Rp6.48 trillion, reflecting a 7.46% increase from Rp6.03 trillion.

Disclosure: No position at the stock mentioned above. 

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Tuah Turangga acquires Duta Nurcahya

Coal miner PT Tuah Turangga Agung, a wholly owned subsidiary of PT United Tractors Tbk (UNTR) via PT Pamapersada Nusantara), has agreed to acquire 60% shareholding in PT Duta Nurcahya.

Under the agreement, which was signed on August 15, Tuah Turangga has to require several conditions prior to complete the take over.

Duta Nurcahya is a coal miner with concession located in Hurung village, Juju Baru, North Barito, Central Kalimantan. Duta Nurcahya manages 4,999 hectares of coal concession.

However, United Tractors' Corporate Secretary Sara K. Loebis hasn't disclosed the takeover price. 

Disclosure: No position at the stock mentioned above.  

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CMA Indonesia buys Reka Jasa Akses

Bakrie Group, via PT Capital Managers Asia Indonesia (CMA Indonesia), officially acquired 100% stake in PT Reka Jasa Akses worth US$12.5 million or Rp107.03 billion in a bid to penetrate the market of 4G-based technology internet.

CMA Indonesia requires 7 months for negotiations, valuation, and take over of Reka Jasa. Bakrie Telecom President Director Anindya N. Bakrie said the company provides US$37.5 million to develop Reka Jasa Akses.

Reka Jasa owns and manages 12.5 Mhz bandwidth , which is compatible for 3.3 Ghz frequency. CMA Indonesia is an investment company that controls 75% stake in PT Visi Media Asia Tbk with its media business such as TVOne and Vivanews.com.

Disclosure: No position at the stock mentioned above.

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CIMB underwrites TPS Food rights issue

PT Tiga Pilar Sejahtera Food Tbk (TPS Food) has mandated PT CIMB Securities as a lead underwriter to arrange Rp700 billion rights issue scheduled in the fourth quarter of this year.

Corporate Secretary Yuliani Liyuwardi said initially, the company has talked with three potential underwriters for the rights issue.

"We have picked a single underwriter, but we can't disclose it. There were three potential underwriters, one of them is CIMB Securities," she said as quoted by Bisnis Indonesia today.

Soon after the appointment of the underwriter, TPS Food will submit documents of the rights issue to Bapepam-LK. "We plan to submit documents in October."

Disclosure: No position at the stock mentioned above.

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BTEL 1H suffers Rp179 bio net loss

CDMA-based cellular operator PT Bakrie Telecom Tbk (BTEL) reported a Rp179.7 billion net loss in the first half of this year from Rp2.72 billion net profit in 1H 2010.
In a press statement last night, net revenue slightly increased 0.14% to Rp1.38 trillion from Rp1.37 trillion. Bakrie Telecom's subscribers rose 26.1% to 14 million from 11.1 million subscribers.

According to Rakhmat Junaidi, Director of Corporate Services at Bakrie Telecom, competition in the cellular market is getting tougher.

“In the first half, subscribers for data services were 225,000 from 145,000 in the first quarter. We are optimistic that we can achieve 400,000 subscribers by end of this year," he said.

Disclosure: No position at the stock mentioned above.  

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Stock recommendations today

Amid global economy recession, the Dow Jones Industrial Average ended down 419.63 points, or 3.7%, to 10,990.58. The Standard & Poor's 500-stock index dropped 53.24 points, or 4.5%, to 1,140.65, while the Nasdaq Composite lost 131.05 points, or 5.2%, to 2,380.43.
At the opening this morning, Nikkei-225 index fell 1.9% to 8,771.70, extending Thursday's fall to a 5-month closing low for the key market index. How about Indonesia market today? Here are stock recommendations provided by Bisnis Indonesia today:

Sinarmas Sekuritas:

Technically, Jakarta Composite Index may swing with uptrend possibility in the range of 3,977-4,045 today. Stocks to watch: UNTR, PGAS, BBRI, and SMGR.

Minna Padi Investama:

The JCI may experience correction today with the support level at 3,961. Profit taking may arise after the index rose for consecutive days. Stocks to watch: AKRA, PGAS, and PTBA.

e-Trading Securities:

The index today may move within the range of 3,964-4,050 with downtrend possibility. Stocks to monitor: MYOR, TLKM, and PGAS.

Disclosure: No position at the stock mentioned above. 

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Bumi Resources 1H profit up 8.76%

Indonesia's largest coal exporter PT Bumi Resources Tbk (BUMI) reported a 8.76% increase in attributable profit for the first half of this year as higher average selling price. 

BUMI booked US$274.37 million attributable profit in 1H 2011 from US$252.26 million in 1H 2010. Referring to the 1H 2011 profit, it counted 88.22% of BUMI's full year profit last year of US$311 million.

BUMI's ASP rose 36.07% to US$91.3 per ton from US$67.1 per ton. The company's coal sales slightly fell 5.48% to 29.3 million tons from 31 million tons, while production abated 2.29% to 29.9 million tons from 30.6 million tons.

BUMI's operating profit rose 42.06% to US$548.74 million from US$386.26 million, sending a higher margin to 30.61% from 26.81%. Revenue increased 24.31% to US$1.79 billion from US$1.44 billion.

Disclosure: No position at the stock mentioned above.

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Bumi Minerals 1H net profit surges 96.82%

PT Bumi Resources Minerals Tbk (BRMS), a non-coal subsidiary of coal miner PT Bumi Resources Tbk (BUMI), reported a 96.82% jump in net profit for the first half of this year. 

In a press statement today, the profit jump was mainly driven by the favorable realized commodity prices and the reduced interest and financing charges.

Bumi Minerals booked Rp343.82 billion in 1H 2011 from Rp174.69 billion. Revenue slightly increased 7.14% to Rp67.26 billion from Rp62.78 billion, despite the lower gold and copper production.
Ken Farrell, the CEO of BRMS, said the temporary production drop by PT Newmont Nusa Tenggara (NNT) has been anticipated due to the delayed phase six developments in the Batu Hijau mine site. 

NNT is currently producing copper and gold from the maturing phase five and from the lower grade stock pile ores nearby. 

As the phase six development is being finalized, NNT is expected to increase its copper and gold production rate early in 2013. 

"BRMS is also on track to commence its first iron ore production from the Bumi Mauritania S.A. early in 2012, while our zinc and lead project operated by PT Dairi Prima Mineral plans to initiate production in 2013 subject to the borrow and use exploitation permit issued by the Ministry of Forestry by end of this year,” said Ken Farrel.

Yuanita Rohali, the CFO of BRMS, added the company's realized copper and gold prices in the 1H 2011 increased by 36% and 25% respectively from the same period of last year. 

In addition, BRMS has successfully de-leveraged its balance sheet and maintained a relatively strong net debt to equity ratio of 0.1x. 

"Consequently, the company’s interest and financing charges were reduced by 61% to its current level. These factors were responsible for the 96% profit increase to Rp 343 billions,” she said.

Disclosure: No position at the stock mentioned above.

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Berau Coal 1H net profit surges 270%

Coal miner PT Berau Coal Energy Tbk (BRAU) today reported a 270.43% in net profit for the first half of this year as coal sales volume and average selling price surged.

Berau Coal booked US$90.31 million net profit in 1H 2011 from US$24.38 million in 1H 2010. Despite strong bottom line, financial charges surged to US$57.59 million from US$27.03 million.

Berau's operating profit soared 102.25% to US$247.29 million from US$119.90 million, sending a higher margin to 33.91% from 25.64%. Sales rose 55.90% to US$729.06 million from US$467.64 million.

The company produced 9 million tons of coal in 1H 2011 from 6.4 million tons in 1H 2010. Coal sales volume increased to 9.6 million tons from 8.2 million tons, while average selling price increased to US$74.6 per ton from US$56 per ton.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

Dow Jones Industrial Average last night ended 0.04% higher, while Nasdaq and S&P 500 index slightly fell 0.47% and inched up 0.09% respectively.
European stock markets such as FTSE 100 Index slightly abated 0.49%, CAC 40 climbed 0.73%, and DAX fell 0.77%. Jakarta Composite Index (JCI) today may experience a correction today. Here are stock recommendations provided by Bisnis Indonesia today:

Sinarmas Sekuritas:
The JCI technically may swing today within the range of 3,925-3,987. Stocks to watch: JSMR, BBRI, CMNP, and ROTI.

e-Trading Securities:
The index is estimated to experience a correction today and may move in the range of 3,906-3,997 with several stocks to watch: BBRI and BSDE.

Reliance Securities:
The JCI may consolidate today with downtrend possibility. The support level is 3,935 with resistance level of 4,003. Stocks to watch: ANTM, BBNI, AALI, INTP, and MEDC.

Disclosure: No position at the stock mentioned above.

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Berau reserves up 35% to 467 mio tons

PT Berau Coal Energy Tbk, Indonesia's fifth largest coal miner, reported a  35% increase in total coal reserves to 467 million tons from 346 million tons, said a new Joint Ore Reserves Committee (JORC) report published in June 2011. 

Berau's assets are located in the northeastern part of Kalimantan and consist of three operating mines, namely Lati (which is the largest mine accounting for circa 60% of PT Berau's output), Binungan and Sambarata. 

Berau recorded a strong operating performance for the first half of 2011. Despite high levels of rainfall PT Berau produced 9 million tonnes of coal, a 41% increase over the prior period, and recorded sales of 9.6 million tons of coal.

Berau's average selling price for the period was US$75/ton. Production costs at PT Berau were US$35/ton. The increase from the prior period is mainly due to an increase in the stripping ratio, greater haulage distances (between the coal mined and the coal processing plant), higher fuel costs, and higher contractor costs. 

The average stripping ratio for the period was 9.5. In terms of sales by destination, 36% of sales went to China, 16% to Taiwan, 11% to India and 21% to the rest of Asia, with the remaining 16% sold domestically into Indonesia. 

Berau's first half sales were split 77% contracted priced, 20% contracted index-linked and 3% contracted unpriced. 

Disclosure: No position at the stock mentioned above.  

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Bumi & Berau Coal 1H coal production

Two coal miners PT Bumi Resources Tbk (BUMI) and PT Berau Coal Energy Tbk (BRAU) in the first half of this year reported a 5.48% decrease and 17.07% increase in coal sales volume.

In an official statement published by Bumi Plc today, BUMI reported 29.3 million tons in coal sales volume in 1H 2011 from 31 million tons in 1H 2010.

Coal production slightly decreased 2.29% to 29.9 million tons from 30.6 million tons. FoB average selling price (ASP) rose 36.07% to US$91.3 per ton from US$67.1 per ton. Berau Coal's sales volume was 9.6 million tons in 1H 2011 from 8.2 million tons.

Coal production surged 40.63% to 9 million tons from 6.4 million tons, while FoB ASP rose 33.21% to US$74.6 per ton from US$56 per ton. 

Bumi Plc, parent of BUMI and BRAU, is scouting 86 million tons this year, a 11.69% higher than 77 million tons last year.

BUMI aims to boost coal production to 66 million tons from 60 million tons last year, while BRAU intends to jack up its output to 20 million tons from 17 million tons.

BUMI plans to spend US$310 million capital expenditure this year, while Berau Coal will spend US$106 million. 

Robust first half performance 

In the last 4 months ended June 30 2011, Bumi Resources reported net profit of US$41 million, while Berau Coal's net profit was US$31 million.

Assuming 25% stake of BUMI owned bu Bumi Plc, BUMI is calculated to post US$246 million net profit in 1H 2011, counting 80% of the full year in 2010 or a 82% jump from US$135 million in 1H 2010. Assuming 75% stake of BRAU owned by Bumi Plc, BRAU is estimated to book US$60.45 million net profit in 1H 2010. 

Disclosure: No position at the stock mentioned above.

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Bumi Plc 1H operating profit US$62 mio

Bumi Plc, London-listed parent company that controls two previous coal assets in Indonesia, reported a US$62 million in operating profit for the first half of this year on the back of higher thermal coal prices. However, the company recorded a US$308 million net loss in 1H 2011.

The net loss was contributed by loss in fair value after Bumi Plc took over majority stakes in PT Berau Coal Energy Tbk (BRAU) and PT Bumi Resources Tbk (BUMI). 

Bumi Plc spent US$3 billion to acquire BRAU and BUMI. In June, Bumi Plc has revealed its intention to buy 75% stake in PT Bumi Resources Minerals Tbk (BRMS).

Nowadays, Bumi Plc controls 85% shareholding in BRAU and 29% stake in BUMI. Revenue of Bumi Plc in 1H 2011 reached US$478 million.

"I am pleased to report that we have delivered a strong performance for the first half of the year. Despite high levels of rainfall in the first quarter, a significant amount of the shortfall was made up in the second quarter. Higher volumes in the second half, coupled with record coal prices, should ensure a strong overall performance for 2011," said Bumi Plc CEO Ari Saptari Hudaya in an official statement published today. 

Disclosure: No position at the stock mentioned above.
 
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BW Plantation 7M CPO output up 48.02%

CPO producer PT BW Plantation Tbk (BWPT), that is controlled by Indonesian businessman Budiono Widodo, reported a 48.82% increase in CPO output for the first 7 months of this year.

BW Plantation produced 69,515 tons CPO in 7M 2011 from 46,712 tons, while production of fresh fruit bunch (FFB) in 7M 2011 rose 42.03% to 288,730 tons from 203,294 tons.

In the first half of 2011, BW Plantation reported a 99.4% increase in net profit for the first 6 months of this year due to higher CPO sales volume.

BWPT booked Rp170.55 billion in 1H 2011 from Rp85.55 billion in 1H 2010. Net margin increased to 35.8% from 31%. In line with the robust bottom line, BW Plantation's operating profit jumped 122% to Rp275.05 billion from Rp123.87 billion. In return, operating margin rose to 57.7% from 44.9%.
Gross profit rose 98.8% to 327.64 billion from Rp164.84 billion. Revenue increased 73% to Rp476.95 billion from Rp275.67 billion.
CPO sales volume rose 35% to 53,248 tons from 39,438 tons with average selling price of Rp7.77 juta per ton, a 19.4% higher than Rp6.50 million per ton.
BW Plantation's added new planting of 4,418 hectares. Total planted area was 56,476 hectares of the total land bank of 93,000 hectares.

Disclosure: No position at the stock mentioned above.  

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Astra Agro 7M CPO output rises 24.1%

PT Astra Agro Lestari Tbk (AALI) today reported a 24.1% increase in CPO production in the first 7 months of this year (7M 2011) to 705,136 tons from 568,315 tons. Thanks to higher fresh fruit bunch (FFB) output.

In an investor bulletin published today, the FFB output rose 18.1% to 2.6 million tons from 2.2 million tons.

Of the total FFB output, plantation area in Sumatra contributed 42%, while Kalimantan and Sulawesi contributed 37.7% and 20.3% respectively.

Disclosure: No position at the stock mentioned above.

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Tiga Pilar eyeing Rp700 bio rights issue

PT Tiga Pilar Sejahtera Food Tbk (AISA) is considering Rp700 billion preemptive rights issue in a bid to add its working capital.

"We are finalizing the usage of proceed. But, the rights issue is about Rp700 billion," said Finance Director Sjambiri Lioe as quoted by Bisnis Indonesia today.

According to Corporate Secretary Yuliani Liyuwardi, Tiga Pilar is scheduling the rights issue in the last quarter of this year.

Assuming closing market price yesterday, the rights issue will crease 35% dilution to Tiga Pilar's existing shareholders.

Tiga Pilar today also reports a 82.26% increase in net profit for the first 6 months of this year on the back of strong growth in revenue.

Tiga Pilar booked Rp45.11 billion net profit in 1H 2011 from Rp25.75 billion in 1H 2010. Operating profit rose 77.62% to Rp126.59 billion from Rp71.27 billion. However, its operating margin fell to 16.96% from 23.5% as a result of more than double operating expenses.  Tiga Pilar's net sales surged 146.47% to Rp746.17 billion from Rp302.74 billion.

Disclosure: No position at the stock mentioned above.

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Jababeka rights issue set at Rp250

Property developer and dry port company PT Kawasan Industri Jababeka Tbk (KIJA) today announces a 6.04 billion new shares rights issue at the exercise price of Rp250 per share, entitling the company with the proceed of Rp1.51 trillion.

Every holder of 500 existing shares of Jababeka will entitle 219 rights to buy new shares to be issued by the company. Cum-rights in the regular and negotiation markets is scheduled on September 27 and cash market on October 3. To proceed the rights issue, Jababeka aims to hold extraordinary general meeting on September 20 2011.

According to the rights issue prospectus, Jababeka will use the proceed to acquire 100% shareholding in PT Banten West Java Tourism Development (BWJ) and 21.63% stake in PT Tanjung Lesung Leisure Industry (TLLI).

Under conditional sales and purchase agreement signed on August 3 2011 between Jababeka and the sellers namely Green Emerald Investment Ltd, PT Nusansa Duta Pratama, PT Buma Sakti Inti Pratama, PT Sapta Manunggal Investama, PT Tanjung Lesung Paradise, Bramelis Investment Ptd, and Meadwood Capital Ltd, Jababeka will pay the acquisition of BWJ with promissiory notes of Rp1.50 trillion.

Green Emerald Investment Ltd and Meadowood Capital Ltd are acting as the standby purchasers for the rights issue.

BWJ & TLLI

Banten West Java is developer of tourism integrated area in Tanjung Lesung with total area of 1,500 hectares. Tanjung Lesung is 170 km distance from Jakarta. BWJ is owned by Meadowood Capital of 77.72%, Green Emerald Investment of 10.29%, Bramelis Investment of 5.12%, PT Nuansa Duta Pratama of 2.29%, PT Bima Sakti Inti Pratama of 2%, PT Tanjung Lesung Paradise of 1.72%, and PT Sapta Manunggal Investama of 0.86%.

President Director and President Commissioner of Banten West Java are Setiawan Mardjuki and Tjahjadi Rahardja.

Tanjung Lesung Leisure is owned by BWJ of 78.37% and PT Sapta Manunggal Investama of 21.63%. President Director and President Commissioner of Tanjung Lesung are Johandi Kumaheri and Setiawan Mardjuki. Responding to the announcement, Jababeka stocks today is up 4.71% to Rp200 per share.

Disclosure: No position at the stock mentioned above.

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Saptaindra 1H net revenue rises 31%

Coal mining contractor PT Saptaindra Sejati (SIS), a wholly owned subsidiary of coal miner PT Adaro Energy Tbk recorded 1H 2011's revenue of US$190.4 million, a 29% increase over the same period of last year. 

After elimination, this translates to net revenue of US$87.6 million, an increase of 31% over the same period last year. SIS’s higher revenue is attributable to increased overburden removal and coal getting volumes following the arrival of new and larger heavy equipment. 

In 1H 2011, overburden removal increased 26% to 76.59 million bank cubic meters and coal getting increased 12% to 10.48 million tonnes.

SIS continued to prioritize Adaro Indonesia, conducting 56% of its total overburden removal and 66% of its total coal getting.

Disclosure: No position at the stock mentioned above.

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Adaro 1H profit up 104% on higher prices

Indonesia's second largest thermal coal miner PT Adaro Energy Tbk’s net income for the first-half of the year rose two-fold, thanks to higher production volume combined with higher average selling price. 

The company, in a press release published today, said its net income reached US$267.78 million or US$0.0084 a share from US$131.48 million or US$0.00411.

The strong net income was bolstered by higher production volume combined with higher average selling price, despite an increase in the cost of revenue. 

In addition to the higher production volume and average selling price, the increase in net income is also a result of a foreign exchange gain of US$13.2 million and no goodwill amortization, compared to the US$26.6 million amortization incurred during the same period of last year.
The company’s net revenue increased 36% to US$1.8 billion, while cost of revenue increased at a lesser rate of 34% to US$1.2 billion. 

Adaro Energy’s President Director Garibaldi Thohir said that the outlook for coal remains robust and the company remains on track to achieve our full year production target of 46 million tons-48 million tons. 

“We had a record quarterly performance during the second quarter of 2011 due to the arrival of new and larger heavy equipment combined with our contractors’ good performance,” said Thohir. 

Adaro’s production and sales volume for the first half of 2011 increased 5.5% and 10.4% to 22.81 million tons and 24.02 million tons, respectively, compared to a year earlier. 

The company’s average selling price climbed 23% due to higher thermal coal prices. Meanwhile, its cash cost excluding royalty increased 23% to US$40 per ton due to the higher planned strip ratio, longer overburden hauling distances and rising fuel costs. 

The ADRO-coded stock jumped 1.08%, or Rp25, to Rp2,350 at the closing session in Jakarta trading today.

Disclosure: No position at the stock mentioned above.

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Indosat 1H profit surges 137% on forex gain

Indonesia's second largest cellular operator PT Indosat Tbk (ISAT) today reported a 137.5% jump in net profit for the first 6 months of this year, mostly driven by foreign exchange gain.

In an official statement published today, Indosat's net profit reached Rp681.9 billion in 1H 2011 from Rp287.1 billion in 1H 2010.

Foreign exchange gain rose 83.37% to Rp677.68 billion from Rp369.56 billion, while financing cost decreased 14.89% to Rp921.58 billion from Rp1.08 trillion. Indosat's EBITDA slightly fell 2.1% to Rp4.49 trillion from Rp4.59 trillion.

Operating profit decreased 16.5% to Rp1.34 trillion from Rp1.60 trillion as operating expenses increased 8.1%, while operating revenue increased 4%.

Operating expenses increased to Rp8.71 trillion from Rp8.06 trillion. Indosat booked Rp10.05 trillion revenue from Rp9.66 trillion revenue.

Cellular subscribers grew 25.1% to 47.3 million from 37.8 million subscribers. Wireless broadband subscribers declined 32.6% to 506,800 from 751,900 subscribers. Subscribers of fixed wireless access dropped 49.7% to 350,500 from 697,400.

Disclosure: No position at the stock mentioned above.

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Davomas suffers Rp14.55 billion net loss

PT Davomas Abadi Tbk suffered a net loss of Rp14.55 billion for the first 6 months of this year from Rp8.23 billion net profit a year earlier.

The net loss of Davomas, cocoa butter maker, was mainly driven by a 14.99% decrease in revenue to Rp588.93 billion from Rp692.82 billion. As a result, gross profit decreased 7.59% to Rp106.68 billion from Rp115.45 billion. 

Hassocks Enterprises Ltd owns 23.17% stake in Davomas, PT Citi Pacific Securities holds 20.27%, Caterpillar Associates Ltd holds 11.46%, and Lehman Brothers Investments Pte Ltd s/a SA holds 11.11%. Krigler Holdings Ltd, Polar Cap Investments Ltd, and public investors hold 7.75%, 6.09%, and 20.15%.

Disclosure: No position at the stock mentioned above.

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Indospring gets Rp172 billion loan

PT Indospring Tbk (INDS), a maker of auto spare parts such as multi-leaf spring for an automotive suspension, has secured Rp172 billion loan facilities from PT Bank Mandiri Tbk.

Indospring has obtained additional loan facilities from Bank Mandiri in term of investment credits and working capital. Indospring obtains investment credits of US$5 million, bearing 6% annual interest rate, credit investment of Rp43.50 billion with 10.5% annual interest rate, and credit investment of Rp30 billion with 10.5% annual interest rate. 

Indospring also receives working capital of Rp55 billion with 10% annual interest rate. 

To secure the facilities, Indospring provides assets as guarantee such as stocks worth Rp66 billion, receivable of Rp43.80 billion, new machines worth Rp141 billion, land and production facility III worth Rp21 billion. Gresik, East Java-based company, Indospring, is 87.46% owned by PT Indoprima Investama.

Disclosure: No position at the stock mentioned above.

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Fitch upgrades PGN rating to AAA (idn)

Fitch Ratings has affirmed PT Perusahaan Gas Negara's (PGN) long-term foreign-and local-currency issuer default ratings (IDRs) at BB+ and simultaneously revised the outlooks to Positive from Stable. 

PGN's national long-term rating has also been upgraded to AAA(idn) from AA+(idn). The outlook is stable. 

These rating actions follow a review of PGN's operating and financial profiles, including the impact from a potential significant increase to its gas purchase costs. 

"PGN's ratings reflect its dominant position in Indonesia's gas distribution sector and positive domestic demand dynamics. The company has maintained a very strong financial profile for its ratings, with strong free cash generation, low financial leverage and solid liquidity," said Shahim Zubair, Associate Director with Fitch's Asia-Pacific Energy and Utilities team. 

PGN has benefitted significantly from low-cost gas purchases based on long-term contracts; its profit margins, as measured by EBITDA to revenues, have been around 50%. 

Fitch understands that some of PGN's gas suppliers and Indonesia's upstream oil and gas regulator, BPMigas, are seeking to renegotiate prices upwards under existing long-term gas supply contracts with the company. The price revisions sought are significant. 

"Given PGN's market position, Fitch believes that it is strong enough to ensure it can, over time, pass-through a meaningful share of any cost increases to its customers. Even if its profit margins are significantly affected, the company can continue to generate strong positive free cash flows and maintain a financial profile strong for its current ratings," he said.

The company's financial and business profile is so strong that its IDRs are constrained by the ratings of its 57% majority shareholder, the government of Indonesia (BB+/positive).  

Therefore any changes in the sovereign ratings will lead to a corresponding change in PGN's ratings. PGN controls about 90% of Indonesia's gas distribution infrastructure. 

Furthermore, selling prices of natural gas are still at a significant discount to most alternative fuels. The flexibility in the sales price is supported by the very high share of sales that are negotiated on a business-to-business basis with its industrial and power generation customers; around 98% of PGN's revenues are to customers that do not currently come under regulatory price intervention. 

PGN's liquidity is very strong. Its free cash flow (FCF) margin (FCF/revenue) has averaged about 20% over the past three years (pre-dividend FCF margins are around 30%). Given this strong cash generation, PGN's net-indebtedness (total debt net of cash reserves) has been improving and the company had a net cash position of Rp865 billion at 31 March 2011. 

Furthermore, around 90% of its total debt is long-term with well-spread out maturities. PGN's net debt/EBITDA leverage has also gradually improved to -0.1x in Q111 (FY07: 2.2x), while FFO interest coverage has improved to 41.1x from 6.1x. 

PGN however faces on-going challenges in relation to securing additional gas supply to meet increased demand from limited domestic gas production. 

Also, the company faces some regulatory risks from potential price revisions to existing long-term gas purchase contracts, and from new regulations issued in 2010 which prioritise domestic gas production to the oil production sector. This has resulted in some of PGN's contractually committed supply volumes being diverted away from the company. 

However, Fitch believes that PGN's robust financial and operating profile sufficiently compensates for these risks at current ratings.

Disclosure: No position at the stock mentioned above.  

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Tiga Pilar buys Taro Snack from Unilever

PT Tiga Pilar Sejahtera Food Tbk (AISA) has agreed to acquire production facility and brand of Taro Snack from PT Unilever Indonesia Tbk (UNVR) at the consideration price of more than Rp200 billion. Tiga Pilar will acquire production facilities located in Gunung Putri, Bogor, and Meda, North Sumatra.

Corporate Secretary Yulianni Liyuwardi at Tiga Pilar said Unilever is considering that Taro Snack is not a strategic product. "This is different from us that produces snack," she said as quoted by Investor Daily today.

According to her, Taro Snack will be accretive acquisition for Tiga Pilar as the brand will scout middle to up class consumers, while Tiga Pilar's products are maintain its middle to low class consumers. Tiga Pilar is a maker of instant noodle with its brand of Chicken with 2 Eggs (Ayam 2 Telor), Superior, Kremezz noodle, and Gulas candy.  

Yulianni said the acquisition will positively contribute revenue to Tiga Pilar next year. By end of this year, Tiga Pilar is still under agreement with Unilever. "Starting January 2012, Taro Snack will contribute revenue to us," she said.

Disclosure: No position at the stock mentioned above.

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Myoh Technology to hold reverse stock

PT Myoh Technology Tbk today announces a proposed 8-for-1 reverse stock with PT Kresna Graha Sekurindo Tbk as the standby buyer for the odd lots. 

In an official announcement today, following the reverse stock, Myoh's nominal price will rise to Rp200 per share from Rp25.

Myoh Tehnologi will seek approval from shareholders meeting scheduled on September 12 2011. Post reverse stock, the company's outstanding stocks will recede to 210.13 million shares from 1.68 billion shares. Portfolio shares will shrink to 289.88 million from 2.32 billion shares as well. Myoh Tehnology plans to issue rights soon after the company completes the reverse stock. The rights issue will be held at the theoretical price at Rp100 per share. 

Disclosure: No position at the stock mentioned above.

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Nippon Indosari drops bonds issuance

PT Nippon Indosari Corpindo Tbk, Sari Roti bread maker, has decided to drop its initial plan to issue rupiah denominated bonds as it will obtain bank loan facilities to establish two new bread making facilities.

Operational Director Yusuf Hadi, as quoted by Bisnis Indonesia today, said Nippon Indosari will secure Rp150 billion bank loan facilities in the last quarter of this year.

"We decided to borrow the money from banks as the loan is more flexible than bonds issuance. The facilities will be used in several stages based on the need," he said.

Disclosure: No position at the stock mentioned above.

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Stock recommendations today

Dow Jones Industrial Average on last Friday inched up 1.13% to 11,269.02, while European stock benchmark index rose. FTSE 100 index soared 3.04% to 5,230.03, CAC 40 surged 4.02% to 3,213.99, and DAX climbed 3.45% to 5,997.74.

Despite the positive movement of the global indexes at end of last week, foreign funds flow from Indonesia stock market reached US$388.7 million last week, which was relatively low compared to that in South Korea and Taiwan stock markets of US$2.91 billion and US$4.41 billion. Foreign funds flow from Thai and Philippine markets reached US$619.3 million and US$107.2 million. Here are stock recommendations provided by Bisnis Indonesia today:

Reliance Securities:

Jakarta Composite Index (JCI) may continue further gains today and in the next 2 or 3 days. Support level and resistance are 3,849 and 3,909. Stocks such as ANTM, BBNI, GGRM, INKP, LSIP, and TINS may continue further gains.

Minna Padi Investama:

The JCI today may move within the range of 3,803-3,947. The negative sentiments from economic crisis in the US and European countries may abate. Stocks to watch: MPPA, UNVR, and INDF.

Sinarmas Sekuritas:

Technically, the index may swing with uptrend position in the range of 3,855-3,926 today. Stocks to watch: BDMN, SMGR, CPIN, and INCO.

e-Trading Securities:

Today, the JCI may continue further gain and move in the range of 3,793-3,848 with several stocks to watch: CPIN, BBCA, and AALI. Last week, the index inched 0.55% to 3,890.53 with total transaction of Rp5.3 trillion. Foreign investors booked a Rp395 billion net sell.

Disclosure: No position at the stock mentioned above.  

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IndoAgri 1H net profit jumps 51%

Integrated palm oil and edible oil producer Singapore-listed Indofood Agri Resources Ltd (IndoAgri) reported a 51% jump in net profit for the first 6 months of this year on the back of higher sales volume and average selling prices of edible oils and fat and palm products.
In an official statement published on Friday last week, IndoAgri booked Rp823 billion in 1H 2011 from Rp545 billion. Profit from operations rose 59.7% to Rp1.87 trillion from Rp1.17 trillion.

IndoAgri's EBITDA soared 55.2% to Rp2.02 trillion from Rp1.30 trillion, sending a higher margin to 33% from 31%. IndoAgri, a subsidiary company that is effectively 57.74% owned by PT Indofood Sukses Makmur Tbk (INDF), booked Rp6.14 trillion revenue, a 45.8% increase from Rp4.21 trillion. INDF is controlled by Hong Kong-listed company First Pacific Ltd, owned by Indonesian mogul businessman Anthony Salim.

The largest contributor for IndoAgri's sales was edible oil and fats of Rp4.65 trillion and plantations made 4.21 trillion contribution.

"We are pleased to achieve another strong set of result. Our FFB nucleus and CPO production in 1H 2011 grew 14% and 18% year on year to 1.26 million tons and 381,000 tons respectively," said Mark Wakeford, CEO and Executive Director at IndoAgri, in a statement.

Operational performance
IndoAgri's CPO production rose 18% to 381,000 tons from 323,000 tons. Fresh fruit bunch increased 19% to 1.71  million tons from 1.43 million tons. 

Planted area slightly increased 5% to 205,199 hectares from 195,522 hectares, while mature area was 154,939 hectares, a 2% higher than 151,259 hectares. CPO's average selling prices in the first and second quarters were Rp8,286 per kg and Rp7,697 per kg.

Disclosure: No position at the stock mentioned above.

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Delta Dunia 7M coal output rises 1.54%

Indonesia's second largest coal mining contractor PT Delta Dunia Makmur Tbk (DOID) reported a slight coal production of 1.54% in the first 7 months of this year.

Delta Dunia, parent of PT Bukit Makmur Mandiri Utama (BUMA), booked 19.8 million tons of coal production in 7M 2011 from 19.5 million tons in 7M 2010.

Overburden removal rose 16.03% to 186.7 million bank cubic meters (bcm) from 160.9 million bcm. Coal production in July reached 3.4 million tons from 3 million tons a year ago, while overburden removal in July was 32 million bcm from 25.2 million bcm in July last year.

Disclosure: No position at the stock mentioned above.

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First Resources 1H net profit jumps 88.4%

Palm oil producer First Resources Limited, which has listed its shares at Singapore Exchange, reported a 88.4% jump in net profit for the first 6 months of this year, boosted by strong CPO prices as well as higher sales volume.
First Resources, parent company of non-listed CPO player PT Ciliandra Prakarsa, is 85% stake owned by businessmen Ciliandra Fangiono and his brother Cik Sigih, booked US$67.3 million net profit in 1H 2011 from US$35.7 million.

First Resources, that controls 95.51% shareholding in Ciliandra Perkasa, posted EBITDA of US$115.6 million, reflecting a 58.9% increase from US$72.8 million.

Profit from operations also rose 58% to US$104.7 million from US$66.3 million, while gross profit increased 86.2% to US$136.5 million from US$73.3 million.

First Resources made a 54% growth in sales to US$191.1 million from US$124.1 million.

Ciliandra Fangiono, Chief Executive Officer of First Resources said the 1H 2011 financials were aided by strong CPO prices. 

"In addition, our plantations’ recovery from biological tree stress and the growth in maturity of our trees enabled us to deliver an impressive set of operational results,” he said.

Operational performance 

Production of FFB and CPO in 1H 2011 increased 26% and 25.1% respectively, boosting the company's sales volume from its plantations and palm oil mills segment.  

First Resources's CPO sales volume rose 14.2% to 177,896 tons from 155,835 tons. FFB total increased 26% to 785,953 tons from 623,781 tons, while CPO production improved 25.1% to 186,718 tons from 149,294 tons. FFB yield increased to 9.2 tons per hectare from 8 tons per hectare.

First Resources' total planted area reached 126,883 hectares in 1H 2011 from 114,970 hectares. Mature area was 85,696 hectares and 41,187 hectares were immature area. 

 

Disclosure: No position at the stock mentioned above.
 
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Adimitra gives Petrosea more coal target

Coal mining contractor PT Petrosea Tbk (PTRO), a wholly owned subsidiary of energy integrated company PT Indika Energy Tbk (INDY), has signed a term sheet in a bid to amend the existing coal mining contract with PT Adimitra Baratama Nusantara.

Under the contract amendments signed on January 18 2011, coal production of Adimitra Nusantara has been risen to 4 million tons in 2011 from initial plan of 3 million tons. The production in 2012 has been jacked up to 5 million tons from 4 million tons.  

The contract period has been renewed to December 31 2018 from August 18 2014.In the first half of this year, coal mining contributed US$96.99 million revenue to Petrosea's consolidated revenue, the largest, while services and engineering and construction contributed US$9.28 million and US$6.13 million.

Disclosure: No position at the stock mentioned above.

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INCO to appoint new president in Sept.

PT International Nickel  Indonesia Tbk (INCO) reported on Friday that Tony Wenas has tendered  his resignation as President Director of the company due to personal and family reasons.
Tony Wenas’ decision has been communicated to the employees of the company. To ensure a smooth transition, a successor has been identified and will be proposed to the shareholders of the company for appointment at a general meeting of shareholders expected to be held in September 2011. 

Tony Wenas will continue to assist the company after his departure.  The company re-emphasizes its strong commitment to implementing existing initiatives and growth plans to achieve annual production of 120,000 metric tons in the near future.
The plans are part of a comprehensive strategy that the  company believes will  continue to generate meaningful shareholder returns, enhance the social and economic development of the communities where it operates and generate further revenues for all Indonesian society. 

Disclosure: No position at the stock mentioned above.

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GMR Energy buys Golden Mines

PT Dian Swastika Sentosa Tbk (DSSA), a parent company of coal mining PT Golden Energy Mines that is controlled by Fuganto Widjaja, son of Sinarmas' Indra Widjaja, has signed a conditional Sales & purchase agreement (CSPA) with India's GMR Energy Ltd, subsidiaries of GMR Infrastructure.

GMR Energy has agreed to acquire a 30% stake in Golden Mines Tbk for consideration price of US$450-US$550 million. 

The transaction is expected to be completed by the end of this year. "The CSPA was signed yesterday. GMR will buy combination beetwen our stakes and from IPO," said Hermawan Tarjono, DSSA's Corporate Secretary. 

Golden Mines plans to go IPO in November and release 15-20% shares to get proceed Rp3 trillion-Rp4 trillion helped by PT Sinarmas Sekuritas. As part of the deal, GMR Energy Ltd has entered into an off-take agreement with Golden Energy to buy coal over the next 25 years starting Jan 1, 2012. The annual off take will steadily increase to 10 million tonnes per annum over the coming years, GMR said in statement. 

GMR, with interests in airports, energy and highways, will fund the buy via a combination of debt and internal accruals.

Disclosure: No position at the stock mentioned above.  

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XL Axiata to refinance Rp2.5 trio debts

Indonesia's third largest cellular operator PT XL Axiata Tbk (EXCL) aims to put more debts payment of Rp2.5 trillion from the initial plan of Rp2 trillion this year.

To refinance the operator's existing debts, XL Axiata's Finance Director Willem Lucas Timmermans as quoted by Kontan daily, the operator will use bank loan facility. "We have talked with several banks to secure loan facility for the refinancing," he said. 

By end of this year, XL Axiata is scouting 45 million subscribers, while average revenue per user now is Rp32,000-Rp33,000 from Rp35,000 last year.

Disclosure: No position at the stock mentioned above.

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Salim Ivomas 1H profit jumps 113.8%

Diversified agribusiness company PT Salim Ivomas Pratama Tbk (SIMP) today reported a net profit jump of 113.8% to Rp885 billion in the first half of this year from Rp414 billion a year earlier.

These steep growth was a result of higher profitabilities, shown by both gross margin and operating margin that improved to 37.5% and 26.7% respectively, said an official statement filed to Indonesia Stock Exchange today.

SIMP's gross profit increased 57.1% to Rp2.29 trillion from Rp1.46 trillion, along with improvement of operating profit which rose 81.9% to Rp1.64 trillion from Rp901.9 billion. 

Consolidated revenue of SIMP rose 45.8% to Rp6.14 trillion from Rp4.21 trillion, mainly attributable to higher sales volume and average selling price of edible oils and fats products as well as higher sales volume of palm products.

Operational performance
Fresh fruit bunches (FFB) output increased 19% to 1.71 million metric tons from 1.43 million metric tons.

CPO production grew 18% to 381,000 metric tons from 323,000 metric tons.

Salim Ivomas managed a nucleus planted area of 242,319 hectares, slightly flat from 242,107 hectares. Mature area of oil palm reached 154,939 hectares in 1H 2011 from 155,400 in 1H 2010, while immature area was 50,260 hectares from 49,664 hectares.

Rubber area was 37,120 hectares from 37,043 hectares, sugar cane reached 11,553 hectares from 11,302 hectares.

Disclosure: No position at the stock mentioned above.  

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Petrosea 1H profit slightly drops 4.8%

Coal mining contractor PT Petrosea Tbk (PTRO), a majority stake owned by PT Indika Energy Tbk (INDY), integrated energy company that is controlled by Agus Lasmono and Wiwoho Basuki Tjokronegoro, reported a slight decrease in net profit of 4.86% for the first 6 months of this year as other charges steeply increased.

In an unaudited report published today, Petrosea, which is set to refload a maximum of 20% shares next month, posted US$19.18 million net profit in 1H 2011 from US$20.16 million net profit in 1H 2010.

Net other charges steeply surged 877.61% to US$4.62 million from net other income of US$594,000. Gross profit increased 13.18% to US$28.90 million from US$24.37 million. Petrosea recorded a 26.58% in revenue to US$112.39 million from US$88.77 million.

Disclosure: No position at the stock mentioned above.

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stock recommendations today

Dow Jones Industrial Average last night ended with a 4% gain to 11,143.31 and S&P 500 Index jumped 4.6% to 1,172.64 after the US jobless claim reported unexpected drop yesterday. Several stock brokerages estimated that Jakarta Composite Index may continue moving in the positive zone, extending gain in the last 2 days. Here are stock recommendations provided by Bisnis Indonesia daily today:

Minna Padi Investama:

The JCI is swing in the range of 3,805-3,921. The US economy progress and Europe are main keys for the JCI movement. Stocks to watch: AKRA, BMRI, and UNVR.

Sinarmas Sekuritas:

The index technically today is predicted to be in mixed with uptrend position. The JCI may move within the range of 3,817-3,893. Stocks to watch: GGRM, UNVR, BSDE, and CMNP.

e-Trading Securities:

The JCI technically may record gain, regarding to stochastic indicator. MACD histogram signals a reversal in the last 2 days. The index may move in the range of 3,828-3,906 with several stocks to watch: GGRM, PTBA, and DEWA.

Disclosure: No position at the stock mentioned above. 

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Megapolitan 1H profit plunges 63.05%

Property developer PT Megapolitan Development Tbk (EMDE) reported a 63.05% plunge in net profit in 1H 2011 to Rp4.58 billion from Rp12.39 billion in 1H 2010.

In an official statement to Indonesia Stock Exchange today, the profit drop was in line with a 29.78% decrease in operating revenue to Rp54.35 billion from Rp77.4 billion. The performance was caused by delays in several projects.
There were several technical problems, creating delays in Urbana Cinere and Cimandala projects, such as design revision. Operating profit tumbled 52.78% to Rp10.86 billion from Rp22.99 billion. 

Disclosure: No position at the stock mentioned above.

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Lonsum 1H CPO output rises 25.2%

CPO player PT PP London Sumatra Indonesia Tbk (Lonsum) produced 199,446 tons CPO in the first half of this year, a 25.2% increase from 159,247 tons in the previous year. CPO yield in nucleus plantation rose to 2 tons per hectare from 1.9 tons. 

Fresh fruit bunch (FFB) of Lonsum rose 15.3% to 590,026 tons from 511,768 tons. FFB yield from nucleus increased to 8.6 tons per hectare from 8 tons per hectare.

Disclosure: No position at the stock mentioned above.

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Fitch Ratings affirms Telkom at BB+

Fitch Ratings has affirmed PT Telekomunikasi Indonesia Tbk's (Telkom) long-term foreign-and local-currency issuer default ratings (IDRs), as well as its senior unsecured rating at BB+. The outlook is positive.

Given the Indonesian sovereign's (BB+/Positive) majority ownership (52.58% at end-June 2011) and significant influence over Telkom, the company's ratings are capped at the level of the sovereign. 

Any change therefore in the sovereign rating will lead to a corresponding change in Telkom's ratings. Telkom's rating reflects its position as Indonesia's dominant incumbent operator and its relatively conservative credit profile. 

Telkom is the market leader in the fixed-line and broadband segments, while its 65% subsidiary-PT Telekomunikasi Selular (Telkomsel, BBB-/Stable)-leads the wireless segment. 

Telkom has a strong financial profile compared with other Fitch-rated Asia-Pacific telecom companies, with high operating EBITDAR margins (FYE10: 54.1%), low funds from operations (FFO)-adjusted net leverage (FYE10: 0.7x) and strong pre-dividend free cash flow margins (FYE10:16.5%). 

Telkom's liquidity is strong; at FYE10 cash and equivalents were Rp9 trillion and available committed credit facilities were Rp4 trillion.

The key concern for Telkom's financial profile would be any potential acquisition of Singapore Telecom's (A+/stable) 35% stake in Telkomsel. 

Fitch notes that although Telkom's plan is still in the discussion stage, any largely debt-funded transaction is likely to lead to a deterioration in credit metrics. 

The agency notes that if shareholder returns are higher than currently envisaged (average dividend payout of 50%-55% of net income and Rp5 trillion of share-buybacks), the company's financial profile will decline. During 2010, despite Telkom's revenue growing by 1.4% yoy, operating EBITDAR grew only by 1% due to margin pressures in the wireless segment. 

Fitch expects Telkom's operating EBITDAR margins to continue to decline marginally as management focuses on adding more wireless subscribers at the expense of lower tariffs.

Other than a sovereign upgrade, Telkom's ratings may be upgraded if the links between the government and Telkom weaken, as these ties currently constrain the rating. 

On the other hand, Telkom's ratings might be downgraded if credit metrics deteriorate significantly due to an increase in shareholder returns, and/or from any major unforeseen debt-funded acquisitions. 

Disclosure: No position at the stock mentioned above.

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