“The conventional opinion today is that crowds in general and the stock market crowd in particular are manic beasts. However, as you study the history and read the sociology, you begin to come to the conclusion that there is great wisdom in crowds, that the equity market itself is the epitome of a wise crowd, and that we should pay close attention to its messages, particularly when it reverses its trend.” Wealth, War and Wisdom by Barton Biggs.
The most common questions these days: Is the market toppish? Is it all going to turn into pumpkins and mice soon? Is this a bear market rally and momentum driven buying?
We understand that we are very far from being qualified at identifying market bottoms and tops. Yesterday, our regional sales Andrew Riddick wrote that sometimes it is better not to stand in front of a train discussing semantics. And in Indonesia too, the train is still coming in full speed. Our sales report today discusses the rise of retail internet-based brokers and their investors, many new to the market.
Talking to 2 Indonesian rising internet brokers, we learn that there are no dominant few customers contributing to the bulk of their increasingly important market shares. In other words, it seems like we are dealing with the general mass.
For the first time ever, investors who are too small for traditional stock brokers or live too far from the stock broker’s office have direct access to the market. Housewives who are not comfortable sitting in the old fashioned brokerage houses with mainly chain smoking male investors now can trade at the comfort of their own homes, while doing chores too.
Some investors just love the privacy and speed of execution in the internet broking, while others value making up their investment decisions without the pressure from pesky stock brokers (obviously not us).
Whatever the reason, internet broking is an important trend as it broadens and deepens the country’s investor base. This is democratisation of information and capital market access. The train is indeed coming and I wouldn’t stand in front of it.
Infrastructure update, from Hadi Susilo
Progress on land acquisition.
The final alternative for land acquisition process is being implemented. By regulation, if a land owner rejected the fair replacement price proposed by the independent appraisal then further negotiation will be done in trough the court. This ensures that disputes over land price will not sacrifice construction schedule.
The owner of Jakarta East Canal who happens to be the Jakarta Government has submitted Rp91.2bn to the court for land acquisition. This would be the replacement cost for 181 segments that are required for the project. Land owners shall then pursue their compensation trough the court by justifying why their land worth higher than the independent appraisal’s estimate. While legal ownership of land will be transferred to the project owner and construction shall resume immediately.
This alternative was actually included in the 2006 Presidential Decree but could not be implemented as the supporting regulations were not yet available. The government issues 7 regulations on land acquisition during 2005-2008 to allow faster and smoother land acquisition process.
Our preferred tollroad operator Jasa Marga (JSMR IJ) is also preparing the same scenario for Bogor Ring Road and Semarang Solo sections. Maintain BUY.
1Q09 results: Sampoerna Agro (SGRO I)
Sampoerna Agro (SGRO IJ) reported a weak result with net profit of Rp13bn which is only 6% of our full year forecast and market consensus. Although weak 1Q09 is largely expected, the sharp fall in production volume (FFB harvest from inti -70% yoy) has amplified the weakness.
South Sumatera was hurt by low crops season in 1Q09 that caused the 70% yoy fall in FFB production of Sampoerna Agro as 82% of its mature estates are located in South Sumatera.
Low harvest means production costs per ton is higher given production costs per hectare is relatively fixed. Production cost per ton FFB of Sampoerna Agro has increased from Rp657/kg in 2008 to more than Rp1,000/kg in 1Q09. This despite the facts that Sampoerna Agro FFB production costs in 1Q09 is 33% lower than last year at Rp42bn (largely due to lower upkeep and harvest costs).
Management expect harvest to pick up strongly in 2H09, following the pattern in 2005 and 2007 where first quarter harvest only accounts for 11%-12% of full year production. The chart below shows that production pattern of Sampoerna Agro could be very volatile.
Please note that Sampoerna Agro lent Rp111bn (US$9.2m) to PT Siak Raya Timber that is claimed to be non related parties. We believe this is part of the process of Sampoerna Agro intention to diversify into sago palm plantation and processing facilities in Riau, Sumatera where Siak Raya Timber is located.
Politics: Golkar branches called on the part to return to a coalition with Demokrat. Dozens of Golkar district chapter yesterday called for the party to drop its decision to pair party chairman VP Jusuf Kalla with former General Wiranto in the July 8 presidential election and instead return to a coalition with President SBY’s Partai Demokrat. And chairmen from various branches are demanding the party to hold an extraordinary meeting. Separately, former President Megawati will announce her VP candidate either today or tomorrow.
Chiang Mai initiative. ASEAN, Japan, China and Korea, have set up a US$120bn foreign exchange fund which provides access to foreign capital for countries facing a balance of payments crisis. Japan’s contribution is US$38.4bn, China & HK US$38.4bn and Korea US$19.2bn. The idea is to establish a regional ‘lender of last resort’ independent of the IMF but it could take a long time to develop an effective institution. For now, countries can borrow 20% of an agreed swap amount without restrictions. However, to get the other 80%, the country will still have to agree to restrictions (involving the IMF and ADB). See Tony Nafte report today (attached) for details.
Mandiri (BMRI IJ) cuts payout ratio to 35%. Mandiri received approval for a 35% dividend pay-out ratio for 2008 profits. That means that other Government owned banks will probably also get approval to lower pay-out ratio from 50% in the previous year.
Adaro (ADRO IJ) announced that it has acquired 74.16% of Orchard Maritime Pte Ltd (“OML”), a Singapore-based barging and ship loading company, for US$78.55 million. The acquisition was made by PT Jasapower Indonesia (“JPI”), which is 99.99% owned by Adaro Energy’s wholly-owned subsidiary PT Alam Tri Abadi. The acquisition was closed on April 30th, 2009. The 74.16% controlling stake was sold by a consortium of previous shareholders of OML as follows: 18% from Saratoga Capital (Singapore) Pte. Ltd., 18% from BRS Investments Pte. Ltd. and 7.2% from Recapital Maritime Holdings Ltd. As part of the transaction, JPI also acquired 30.96% in OML by acquiring 86% in Coronado Holdings Pte. Ltd which owns 36% of OML. ADRO will not be seeking for minority approval.
The Chief of Corruption Eradication Commission (KPK) has been declared a suspect in murder case. The KPK chief was formally declared a suspect and has been suspended from his duties at the KPK. Leading anti-corruption watchdogs threw their weight behind the beleaguered KPK urging it to do business as usual.
The General Elections Commissions (KPU) has counted 72 million votes. The KPU is working overtime to meet the May 9 deadline to complete the counts. As of yesterday, 72 million votes has been counted from 50 electorate areas across 22 provinces. Democrats still retain the top spot at 19.74%, Golkar at 15.59%, and PDI-P at 14.9%, PKS 8.29%, and PAN 6.32%.
Arpeni (APOL IJ) intends to buy eight ships. The shipper has allocated US$304m for eight ships (tankers, barges, floating crane). Article in the newspaper did not mention the source of funds for these acquisitions.
IDR strengthens. Rupiah continues to go up amidst regional currencies' strength. Now trading around 10,400 levels. The IDR has strengthened by 5.89% YTD.
Chinese Banks providing USD1bn loans for the 10GW state power plant projects: more like a loan agreement signing ceremony. The loan it self was already secured and announced early April 2009. Comment from Hadi: We estimate that 80% of the 10GW is on track with 2011 operational target. Of which the State Electricity Company (PLN) will fire the first 1GW coal turbines by this year including Labuhan (315MW), Rembang (315MW) and Indramayu (330MW) power plants. The remaining 20% of the project is scheduled to complete by 2012 as new loan facilities currently being negotiated with foreign and local ban
Economic releases today:
Bank Indonesia meeting today, expectation is 25bps cut from 7.50% to 7.25%. Our economist Tony Nafte noted that the firmer exchange rate and continued decline in inflation have all but ensured another 25bp cut at Bank Indonesia’s policy meeting today. Inflation dropped from 7.9% in March to 7.3% in April with an even steeper decline anticipated over the coming months as the high 2008 base year effect kick in.
Falling food prices in the last two months have driven overall inflation down. Annual food inflation has fallen below 9% from the 20% peak in September 2008. This implies an increase in real discretionary income especially for lower income households. The question though, is whether or not this will translate into increased consumption.
Chart of the Day:
JCI: 1,788.147, +58.565 (+3.39%), T/O US$582.8mn, YTD: +31.93%
ADR:
TLKM US$30.41 = IDR7,983
ISAT US$26.61 = IDR5,589
Momentum has been increasingly positive as volumes in the market have now crept north of USD 500m a day. Remarkably, more than 80% of turnover is coming from local retailers, providing additional depth to the market.
This morning, book is flat.
Did You Know That?
E-trading, one of the three most active retail internet brokers holds a hugely popular stock picking competitions. This is not a virtual portfolio, but based on real returns from a real portfolio in E-Trading accounts. The investor with the highest weekly return will receive a blackberry. Interestingly, an investor can win the competition only once. I guess a bit of socialism in this otherwise very capitalistic world. Investors with longer term time horizon do not need to worry. Every 11 weeks (that seems to be as long term as it can possibly get), 3 investors with the highest returns will receive money prizes of Rp50mn, Rp30mn, and Rp10mn each. As an additional incentive, the names of the winners will be published in the local business newspaper. They can opt to use the real names or nicknames, just like the winner last week: HERO.
.gif)
Posts
No comments:
Post a Comment