MANDIRI SEKURITAS INVESTOR’S DIGEST
What interest me the most in Indonesia today - BRMS
- In his speech at Diggers and Dealers mining conference in Kalgoorlie, Australia, Newmont’s head of Asia Pacific operation told the audience that its Elang prospect could have a bigger deposit than its Boddington mine in Australia. The company is continuing study on the project and mine life would be central in its discussion with the government.
- Boddington Gold Mine (BGM) is the largest gold mine in Australia, located 130km south-east of Perth. By end of 2011, proven ore reserves at Boddington were 20.3mn ounce of gold and 2.26bn pounds of copper. By way of comparison, Newmont’s current Batu Hijau mine in Indonesia has a proven ore reserves of 4.5mn ounce of gold and 2.96bn pounds of copper. So in terms of gold reserves, the Boddington mine is more than four times the size of Batu Hijau already; so it should be a shocker to the market to hear that Elang’s reserves may be even bigger.
- Boddington is a $2.4bn project was initially a three-way joint venture between Newmont Mining, AngloGold Ashanti and Newcrest Mining. In 2006 Newmont bought Newcrest's 22.22% share (price tag US$225mn), bringing its interest to 66.67% and ending any Australian ownership. AngloGold owned the remaining 33.33% (price tag US$1.1bn). In June 2009, Newmont became the sole owner of the mine by acquiring the 33.3% interest of AngloGold. The original, mainly oxide open-pit mine was closed at the end of 2001.
- BRMS has an effective 18% stake in PT Newmont Nusatenggara (PT NNT), who in turns own direct ownership in Batu Hijau and Elang mines. On 100% basis, we value PTNNT at US$9.6bn to arrive at our fair value of Rp830/share for BRMS, but we still assign zero value to Elang prospect. We are of the view that there could be big hidden value to be found in BRMS, with the main issue being how to unlock its true potential. We foresee a significant re-rating potential in BRMS should PT Bumi Resources Tbk surrenders its controlling stake in BRMS, on the basis that a new owner may offer better bankability and ability to form JVs with the global miners.
GDP 2Q12: Surprise on the upside on domestic demand
· The GDP growth in 2Q12 accelerated to 6.37% yoy, higher than expected as our and consensus estimates expected a marginal slowdown from the 1Q12 to 6.06% yoy and 6.10% yoy, respectively. The recent growth figure showed Indonesia’s high resiliency against external shock while other emerging countries such as China, Brazil and India have experienced an easing trend. Overall, the economy has grown by 6.35% yoy in 1H12.
· Investment spending surged at the fastest pace since 3Q08, increasing by 12.3% yoy in 2Q12 from 10.0% yoy 1Q12. The figure was stronger than we anticipated. Buoyant investment propelled by demand for machinery (18.3% yoy in 1Q12 v.s. 23.4% in 2Q12) and transportation (32.8% yoy in 1Q12 v.s. 60.3% yoy in 2Q12) due to expansion activity in the manufacturing sector, while building investment only recorded a slight increase to 7.3% yoy. The high demand of machinery and transportation were in line with the monthly data of capital goods imports revealed by the statistical agency as it grew 37% yoy in 2Q12. Moreover, investment contributed 2.9ppt of 6.4%, the highest compared with other variables.
· Private consumption marginally edged up to 5.0% yoy (the highest since 3Q10) from 4.9% yoy in 1Q12 while we expected a halt. Relatively stable inflation, improvement in labor market and income boosted purchasing power. From the government perspective, some spending expansion was also seen, which we think related to earlier projects bidding process and better budget absorption. Overall, private and government consumption contributed 2.8ppt and 0.5ppt to total 6.4% yoy growth.
· The wildcard: higher inventory accumulation. Inventory accumulation surprisingly contributed by 2.3ppt (36% to the GDP growth) the highest contributors after investment and private consumption. Higher inventory may suggest involuntary stock pile due to easing exports demand that may lead to reduction in output in the coming period. However, given the significantly consistent contribution of inventory since the 1Q12 that is coupled with continuing robust consumption and investment indicators, we view that the increase in inventory may also be intended to cater future potential demand. Thus, we expect the adjustment in output will be done gradually ahead.
· Net export contracted by 29.3% yoy in 2Q12 from positive 7.2% yoy in 1Q12 as a result of a lower external demand on export goods followed by rising internal demand for import goods. Export growth fell significantly from 7.9% yoy in 1Q12 to 1.9% yoy in 2Q12 as a result of a slower global economy. On the other hand, demand for import goods, especially capital goods kept increasing on solid investment activities. Interestingly, despite net exports contracted 29.3% yoy, its negative contribution was only 3.2ppt due to its declining share to GDP from 11.7% in end 2011 to 7.3% in 2Q12 (the lowest share since 2Q05).
· From the production side, solid domestic demand continued reflected in firm untradeable sector expansion, such as trade, communication, and services. Non-tradable sector recorded an increase from 7.6% yoy in 1Q12 to 8.0% yoy in 2Q12 while tradable sector growth slowed to 4.8% in 1Q12 v.s. 4.5% in 2Q12. Nevertheless, the slower pace on tradable sector was mostly due to the decline of petroleum and gas production while growth of manufacturing sector excluding petroleum and gas remained relatively stable at 6.1% yoy. Moreover, manufacturing sectors such as cement, transportation and machinery equipment recorded an increase which is in line with higher investment activities explained previously above.
· Robust growth gives wider room for BI to delay any policy relaxation for the time being, as the economy remains resilient against global economic turmoil. Looking through the 2H12, we still expect strong domestic demand to prevail, particularly given strong FDI inflow and robust consumer purchasing power. However, at the same time uncertainty in European economies has adversely affected the core Asian emerging economies, such as China and India that have more direct impact to Indonesia. Accordingly, we maintain our GDP forecast at 6.2% and 6.5% for FY12 and FY13, with an upside risk should the domestic demand resiliency be maintained. Against this background and with relatively stable inflation, we think BI will continue to keep the policy rate unchanged for the remainder of 2012 at 5.75% and continue to focus on maintaining rupiah stability, through securing sustainable foreign exchange financing for the deficit in current account (see Macroscope: Inflation rose on seasonal factor, trade deficit hit record high). At this juncture, we maintain our rupiah forecast at Rp9,320/US$ and Rp9,210/US$ in end of 2012 and 2013 respectively.
Automotive: 2W sales up 8.1%mom in July with FIF ramping up its sharia unit
- Preliminary domestic motorcycles sales (wholesale) grew 8.1%mom (-20.6%yoy) to 585,658 units in July, as dealers do more stock up to anticipate the upcoming Ramadan season. Despite coming from a low base, the gain was also quite unexpected as a minimum 20% down-payment for motorcycles financing has been implemented since 15 June, giving some signals of purchasing power resiliency.
- Cumulatively, 7M12 sales still down by 10.6%yoy to 4.3mn units, weakened further from the 8.7%yoy drop in 6M12. With shorter working days, August sales would likely to show a month-on-month contraction.
- Looking at the YTD decline, further downside from our 7.5% decline in FY12F total domestic motorcycles sales is possible. On the good side, we think that Honda could meet our 2.9% decline assumption for the full-year. Its 1H12 sales remained flat against 8.7%yoy industry decline, while Bisnis Indonesia today quoted that Federal International Finance (FIF), the motorcycles financing arm of Astra International (ASII), has channeled about 50% of July’s financing through its sharia unit. As we all know, the newly implemented LTV ruling does not apply to sharia-based financing. Strong support from PermataBank Syariah, a subsidiary of ASII’s 44.5%-owned Bank Permata, will be the competitive advantage of FIF’s funding
FROM THE PRESS
PTBA, PLN and Tenaga Nasional Berhad (TNB) will build steam power plant
PTBA, PLN and Tenaga Nasional Berhad (TNB) will build steam power plant with capacity of 2 X 600 MW in Riau. Total investment is Rp15tn. The construction of steam power plant is expected to be commenced at the end of 2013 and finished in 2016-2017. PTBA will supply coal to the steam power plant between 5 – 6 mn ton per year. Comment: This steam power plant project will benefit PTBA by adding coal sales volume in 2016-2017