strategy - market outlook 2011 - equity research - jan 2011

8/7/2019 Strategy - Market Outlook 2011 - Equity Research - Jan 2011

1/8


2/8

- 1 -

Our economy is at the early stage of a 7year expansionary

cycle, meaning higher sales revenues to come.

Oureconomyisattheearlystageof7yrexpansion

Economiccycle Productionutilization

Source:DanareksaResearchInstitute Source:CEICThe Indonesian production utilization index has shown a

consistent increase since 2009s dip.

72

78

84

90

96

102

108

114

120

Jan

90

Oct90

Jul91

Apr

92

Jan

93

Oct93

Jul94

Apr

95

Jan

96

Oct96

Jul97

Apr

98

Jan

99

Oct99

Jul00

Apr

01

Jan

02

Oct02

Jul03

Apr

04

Jan

05

Oct05

Jul06

Apr

07

Jan

08

Oct08

Jul09 83

87

90

94

97

101

104

108

111

LEI(LHS)

CEI(RHS)

50

55

60

65

70

75

80

85

90

Mar03

Sep03

Mar04

Sep04

Mar05

Sep05

Mar06

Sep06

Mar07

Sep07

Mar08

Sep08

Mar09

Sep09

Mar10

Sep10

Indonesia EU Thailand USA


3/8

- 2 -

2007 core earnings growth was driven by resources. Since

2008,consumers and banks have taken the lead. The 19.2%

YoY core earnings growth forecast for 2010 bodes well for agood year. Resources and cyclical stocks shall see faster

growth than other stocks next year. We estimate 25.1% YoY

earnings growth next year.

Corporategrowthandprofitability

Earningsgrowth Profitability

Source:DanareksaSekuritas Source:DanareksaSekuritas

The ROE will continue to be robust at 25%, while the capex to

sales ratio is estimated to reach 12%. The fact that companies

are investing more suggests corporate optimism towardfuture growth. Revenues are estimated to pick up next year

amidst economic recovery.

0%

5%

10 %

15 %

20 %

25 %

30 %

35 %

2007 2008 2009 2010F 2011F

Revenuegrowth ROAE Capextosales


4/8

- 3 -

Post the 2008 global crisis, the Indonesian government bond

yield spread to the Treasury has been on a declining trend,

hitting a low in April 2010. Lately, there was pressure but stillmanageable.

Marketrisksshotupoflate,butposenoconcerns

Indonesiagovernmentbondspreadtotreasury Marketriskvolatility

Source:Bloomberg,DanareksaSekuritas Source:Bloomberg,DanareksaSekuritas

That has changed, steeply rising in Feb and Jun as confidence

was rattled by fears that Europes debt crisis would worsen.

Recently, fear on inflation has pushed the market into highervolatility.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Sep

08

Dec

08

Mar09

Jun

09

Sep

09

Dec

09

Mar10

Jun

10

Sep

10

Dec

10

%

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Dec09

Jan10

Feb10

Mar10

Apr10

May10

Jun10

Jul10

Aug10

Sep10

Oct10

Nov10

Dec10

Jan11

%


5/8

- 4 -

The JCI has risen by 1,000 points from its low in February

2010. Daily trading remains high, averaging around Rp4.5trn

per day, or about US$502mn. Trading activities are dominatedby locals rather than foreign players.

Tradingvalue

Domesticvs.Foreign Foreignnetbuy/sell

Source:IDX Source:IDX

Foreign players were net sellers of Rp2.5trn or around

US$400mn in January 2011. Yet from JanDec 10, foreign

players were net buyers of around US$2.4bn, with the largestnet inflow in September 2010.

868

1,990

2,656

1,460

3,794

445

895

467

2,694

4,140

6,461

824

1,160 5

62

1,815 2

,602

1,974

747

3,090

1,345

925

3,118

1,794

3,

839

833

2,008

4,922

1,524

4,811

2,030

5,917

322

2,515

2,617

3,6

01

4,497

1,652

5,000

3,000

1,000

1,000

3,000

5,000

7,000

Jan08

Mar08

May08

Jul08

Sep08

Nov08

Jan09

Mar09

May09

Jul09

Sep09

Nov09

Jan10

Mar10

May10

Jul10

Sep10

Nov10

Jan11

Rpbn

0.01.02.03.04.05.06.07.08.09.0

Jan

10

Feb

10

Mar10

Apr10

May

10

Jun

10

Jul10

Aug

10

Sep

10

Oct10

Nov

10

Dec10

3Jan

11

4Jan

11

5Jan

11

6Jan

11

7Jan

11

10Jan

11

11Jan

11

12Jan

11

2,500

2,700

2,900

3,100

3,300

3,500

3,7003,900

Average Dailytransaction(LHS) Foreigntransaction(LHS)

DomesticTransaction(LHS) JCIIndex(RHS)Rptrn


6/8

- 5 -

YTD, the JCI has been the best performing index in the global,

followed by Philippine, Thailand and Malaysia

JCIperformance

JCIperformancein2010 Performancebysector

Source:Bloomberg Source:Bloomberg

However with concern over inflation, Indonesia had a weak

start in 2011.

14.3

3.0

5.3

9.0

9.6

10.1

11.0

12.8

17.4

19.3

21.9

23.2

37.6

40.6

46.1

20.0 10.0 0.0 10.0 20.0 30.0 40.0 50.0

China

Jepang

Hongkong

England

Taiwan

Singapore

USDowJones

USS&P

India

Malaysia

Korea

Rusia

Philipphina

Thailand

Indonesia

%

4.8

4.0

3.9

1.3

0.1

0.5

1.5

1.7

2.1

2.3

2.62.8

3.1

4.2

4.7

6.0 4.0 2.0 0.0 2.0 4.0 6.0

India

Indonesia

Philipphina

Thailand

Taiwan

China

USDowJones

Singapore

Korea

USS&P

EnglandJepang

Malaysia

Rusia

Hongkong

%


7/8

- 6 -

The market PE has rerated over the past 1 year and is

arguably likely to continue rerating albeit more slowly

given greater earnings visibility and potential upside fromearnings revisions.

JCIvaluation 12mthindextargetis4,100,implying16.3x2011PER

JCIvaluation PERcomparison

Source:DanareksaSekuritas Source:Bloombergestimates

Our market remains to trade within PER market average.

Despite the steep correction in the past week, JCI is still not

considered cheap.

Market Current NextYear

Shanghai CSI200 13.6 11.4

HongKong HangSeng 13.0 11.4

India Sensex 18.1 15.0

Jakarta JCI 14.0 11.8

Malaysia KLCI 15.5 13.9

Philippines PSEi 13.4 11.8

Singapore STI 14.9 13.5

Taiwan TWSE 12.4 10.7

Thailand

SET 13.3 12.1AVERAGE 14.2 12.4


8/8

- 7 -

Our top picks, taking into consideration the momentum of higher commodity prices, include ADRO, UNTR, LSIP and BWPT.

Meanwhile, we also like INDF and GGRM given their exposure to domestic consumption. Other stocks we like are BBRI, INTP,

JSMR and ASRI. Among the smaller stocks, we like MASA.

Ourbottomupstockpick

JCIvaluation

Source:DanareksaSekuritas

strategy - market outlook 2011 - equity research - jan 2011

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