BUMI Resources, Maintain Buy

The JCI has been performing as the best market in the world this year, with ytd return of 40%. Some of the blue chip stocks has been continually making a new record high. One of the laggard is BUMI. As we all know, BUMI management always make some maneuver that for some investors is so hard to understand. That makes BUMI performance ytd is -5%.

The plan to divest its subsidiary Bumi Resources Mineral into an ipo this year will become a trigger to its stock price movement. Me personally still put some confidence in the future of this stock, the recent right issue to convert some of its debt into stock also could be seen as a positive signal for the future cash flow.

The transaction of this conversion was in the price of Rp 2,375, hence with the price of BUMI today of 2,300 per share should be seen as a discount.


In the beginning of 2010, I estimated the price of BUMI would be 4,000 at the end 0f 2010. I think we have to revise it target price based on current condition. I put 3,300 as the ideal target price for BUMI at the end of 2010. I noticed that lately foreign investors are accumulating this stock, hence I am expecting that when the JCI loose its momentum to go high further, investors will shift their portfolio to BUMI. We will see whether my guess will become a reality.

Infrastructure is on Fire..

I believe 2010 would be the year for Infrastructure sector to get back on fire. The FY 2009 results for some infrastructure related stocks that I cover were excellent. JSMR net income has grown about 40% year on year, WIKA has grown its net income about 25%. ADHI net income is more fantastic grew about 100%.

Over the last 6 months, the infrastructure sector has been lagging the overall market. If you look at this chart, obviously the last couple of days, ADHI, WIKA, and JSMR have started to chase the Jakarta Composite Index (JCI). I believe this is just the beginning and there is still more potential upside for those stocks.

(Source: Bloomberg.Com)

From valuation point of view, those stocks are also still very cheap. Based on their FY 2009 EPS, I made some projection for their FY 2010 earnings with either 20% or 30% growth.

	FY 2009	GROWTH
		20%	30%
		2010F	2010F
ADHI	94.2	113.04	122.46
JSMR	146.5	175.8	190.45
WIKA	33.7	40.44	43.81

Based on the data, the ideal price for 2010 would be:

	PE 10x		PE 12x
	20%	30%	20%	30%
ADHI	1130.4	1224.6	1356.48	1469.52
JSMR	1758	1904.5	2109.6	2285.4
WIKA	404.4	438.1	485.28	525.72

Hence, I would recommend you guys to accumulate these infrastructure related stocks.

JCI: a Record High

the Jakarta Composite Index (JCI) has been rallying since mid February 2010 to reach a new record high in its history at around 2900. The foreign investors are the major buyer with total fresh fund inflow more than 3 trillion rupiah for the 1Q 2010.

In the last few days, the market has some correction. I believe this is just a normal correction, while the overall trend is still bullish.


(Source Dongsuh Securities, edited)

If the JCI could maintain its first uptrend support, the JCI would continue the rally again in the next few days. But I prefer to choose the second possibility. The JCI might not be able to maintain its first uptrend support, hence it would retrace to around 2730 (38.2% fibonacci retracement). Hence, if this is the case, I suggest to take some profit and wait until JCI reach 2730 that might be happen in about a 2-3 weeks, and then get along with the bull again.

JCI: Wacth out of a correction

In the last few days, the JCI has gained significantly. Since the breakthrough of the ascending triangle pattern it has gained about 4%. The yield to date per today close is 5.61%.

If you look at the chart, you could see that JCI has a very good volume that confirmed the bullishness. I also notice that some foreign brokers are still accumulating Indonesian blue chip stocks.

(Source: Dongsuh Securities, edited. Click to enlarge)

While in the medium and long term I am still positively bullish on the market, it would be wise to take some profit in the near term. I am afraid that traders would take some significant profit in the coming days, based on the technical chart. If you see the ascending triangle pattern, the highest level might has been reached according to the tip of the point in the triangle. That’s the common rule in triangle pattern.

I also noted that there is a 50% chance that the JCI would form a “double top” pattern which is usually a bearish sign for traders. If it is the case, JCI could retrace to 2600 level. Hence, I think it would be wise to take some profit. Personally, I set 75%-80% as the target equity holding in my portfolio and 20%-25% as cash. If the JCI does retrace, I am expecting the JCI to reach a new high before the first semester of 2010.

Sampoerna Agro SGRO, Buy TP 3250

Bloomberg Code: SGRO:IJ
Reuters Code: SGRO.JK

I would like to discuss Sampoerna Agro (SGRO). I like this stock and I believe it would grow at least 20% this year. I would show you the fundamental data and I also would show you some technical perspective.

Fundamental Data

(click to enlarge)

I made a projection for full year 2009 which is shown on the above table. I noticed that the revenue growth on 3Q-2009 and 2Q-2009 mostly due to the substantial increased in CPO prices. I believe this price trend would be appropriate to be included in the full year 2010 projection.

I also believe that the 2010 net margin would be similar to the current margin, with tendency to increased.

Based on my assumption and projection, I derived the ideal price for full year 2010 with appropriate PE multiplier of 11x-12x.

Expected Price	FY 2010F
PE 11 x	3005.92
PE 12 x	3279.19

This price target I believe would be reached by the end 2010.

Technical Point of View

I also like SGRO because it has retraced about 38.20% since its long rally which is started in September 2009 with initial level 1950 and has reached the highest level at 3075. The 38.20% Fibonacci retracement should be at 2645. This stock has reached 2675 today and closed at 2700. If in the next few days the stock could maintain its support around 2650-2675, I believe this stock would bounce back and might continue the long rally to reach a new high.

Based on my short analysis, I would recommend a "BUY" for SGRO with TP 3250

Target for 2010

The market starts the trading day in 2010 with confidence and full of optimism. You guys might have your personal target for Jakarta Composite Index (JCI) this year. (Please join the poll at the bottom of my blog). Me personally, set 2950 – 3000 as the target for this year or around 15% - 20% return for full year 2010.

The commodity sector I believe would be the main index mover at the beginning of the year, with BUMI as my favorite stock in this sector. I set the TP for BUMI at 4000. The plan to double its production in 2012 would be the main factor to the price movement.

The other stock that I like from Bakrie group is ELTY. The Book Value of ELTY today is around 213. If ELTY could grow about 20% this year, its book value is expected to be at 250. With P/BV ratio of 2, I am expecting ELTY to reach 500 at the end of 2010 or more than 100% gain.

I also still like cement sector with SMGR as my top pick. I am expecting SMGR to grow 20% - 30% this year. With this projection of growth, I am expecting SMGR to reach 9000 – 10000 level this year. Since 2005, SMGR has been successful in growing its book value 20% every year. Hence, I believe it is not a difficult task for SMGR to repeat its growth story.

In banking sector, I would overweight BBRI. I am expecting BBRI to grow 15% - 25% this year. The yoy inflation rate in December 2009 at 2.78% is very likely to boost the credit consumption. The TP that I set for BBRI is at 9200.

Here is the summary of the target price of the index and some stocks that I picked:

	Price 2009	Target Price	Potential Gain
JCI	2534	3000	18.39%
BUMI	2425	4000	64.95%
ELTY	193	500	159.07%
SMGR	7550	10000	32.45%
BBRI	7650	9200	20.26%