Senior Vice President Head of Research
Bahana Securities
Following last month’s announcements of Indonesian corporates’ full-year 2011 results, which were mostly lower than expected, we have fined tuned our 2012 earnings of all the 73 stocks in our coverage (80% of total market capitalization). The result has been a slight decline in the overall 2012 y-y market EPS growth from 15.1% to 13.7%. Additionally, with 1Q12 earnings season upon us, we have formed 1Q12 results preview to help investors ascertain which sectors/ stocks would surprise on the upside or downside.
Thus, far five companies have reported 1Q12 earnings with Bank Danamon (BDMN) reporting result which was in line with our expectation. On a positive note, upside earnings surprise came from Kalbe Farma (KLBF) and Bank Tabungan Negara (BBTN) while the plantation sector has registered negative earnings surprise with disappointing results coming from both Astra Agro (AALI) and BW Plantation (BWPT).
In fact, we believe that AALI’s 1Q12 result release should be seen as a precursor of worse things to come from the rest of the CPO planters. For the market as a whole (exhibit 1), we expect 1Q12 operating profit growth to decelerate to 10.8% y-y from 23.7% in 1Q11, although slightly picking up from 4Q11’s level. On the bottom line, market EPS (earnings per share) growth will slow to 10.2% y-y from 12.6% in 4Q11 and 34.1% in 1Q11.
The Good: Property, Coal, Cement, Auto & Heavy Equip. There are 4 sectors in exhibit 2 which we expect to register better than the overall market result. On property, companies should book solid operating and net profit growth due to high marketing sales in 2010-11, manageable operating expenses and higher interest incomes. Coal should benefit from higher y-y pricing; however, we note that there is deceleration when compared to 4Q11 y-y growth on lower q-q pricing and volumes, and we expect this slowdown to worsen going into 2Q12 on falling coal prices. On cement, we expect strong top line higher margins to support earnings while on auto/heavy equipment, ASII’s growth will mainly be supported by United Tractors’ performance. The Bad: Consumer, Banks, Poultry & Infrastructure Under this category, 4 sectors registered mixed performances relative to the market’s y-y growth (exhibit 3).
On consumer, we expect relatively muted growth in 1Q12 on margin pressure caused by rising raw materials prices. On the banks, weakness will stem from lack of growth in 1Q12 loan growth coupled with the absence of sizeable recoveries. At the same time, we expect pressure on NIM due to lower yields on government and BI papers and downward loan repricing. On poultry, we expect earnings to be dragged down mainly by Japfa Comfeed’s (JPFA) higher base in 1Q11 while infrastructure’s slower growth is skewed towards Jasa Marga’s (JSMR) performance. The Ugly: Telcos, Plantations, Metals, Oil & gas In this category, there are four sectors (exhibit 4), displaying lower than market performance with telco counters continuing to suffer from intense competition.
For both plantations and metals, performances are adversely impacted lower y-y commodity prices while on oil & gas, Perusahaan Gas Negara (PGAS) suffers from lower margins due to higher gas prices. We list below companies which we think will book the best and worst operating and net profit growths in 1Q12 (exhibit 5). Happy trading!
Exhibit 1. Market performance
Operating profit
|
Net profit
|
|||
1Q11
|
1Q12F
|
1Q11
|
1Q12F
|
|
y-y growth (%)
|
y-y growth (%)
|
|||
Bahana cov.
|
23.7
|
10.8
|
34.1
|
10.2
|
Source: Companies, Bloomberg,
Bahana estimates
Exhibit 2. The Good
Operating profit
|
Net profit
|
|||
1Q11
|
1Q12F
|
1Q11
|
1Q12F
|
|
y-y growth (%)
|
y-y growth (%)
|
|||
Property
|
37.5
|
44.2
|
79.1
|
43.8
|
Coal
|
27.6
|
42.4
|
60.0
|
29.3
|
Cement
|
6.4
|
24.0
|
12.8
|
18.5
|
Auto & H.E.
|
33.1
|
15.0
|
42.6
|
13.1
|
Source: Companies,
Bloomberg, Bahana estimates
Exhibit 3. The Bad
Operating profit
|
Net profit
|
|||
1Q11
|
1Q12F
|
1Q11
|
1Q12F
|
|
y-y growth (%)
|
y-y growth (%)
|
|||
Consumer
|
11.2
|
9.0
|
10.8
|
13.1
|
Banks
|
35.1
|
8.2
|
43.3
|
11.4
|
Poultry
|
47.9
|
11.4
|
46.7
|
8.7
|
Infra. related
|
22.4
|
13.5
|
29.6
|
3.1
|
Source: Companies,
Bloomberg, Bahana estimates
Exhibit 4. The Ugly
Operating profit
|
Net profit
|
|||
1Q11
|
1Q12F
|
1Q11
|
1Q12F
|
|
y-y growth (%)
|
y-y growth (%)
|
|||
Telcos
|
(2.3)
|
5.2
|
4.1
|
2.6
|
Plantations
|
112.0
|
(26.1)
|
128.2
|
(25.8)
|
Metal mining
|
58.2
|
(21.8)
|
54.9
|
(15.9)
|
Oil & gas
|
7.8
|
(11.3)
|
19.1
|
(23.8)
|
Source: Companies,
Bloomberg, Bahana estimates
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