Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Country Assessment
Indonesia
Raising growth momentum
Indonesia has officially entered a new era with an established
democratic culture, which leads us to remain upbeat on long-term
prospects. The completion of presidential polls and the victory of SBY-
Boediono team mark Indonesia’s coming of age as a democratic
country. We believe this will provide a base for a long-term sustainable
economic development. At the same time, GDP growth of 4% in 1H09
also shows that Indonesia’s domestically driven economy is in a better
economic position than its peers. Meanwhile, the progress of
infrastructure projects and commitment from the elected government
to accelerate infrastructure development will increase growth
opportunities in Indonesia. This is just the beginning of the renewed
growth momentum.
The presidential polls were completed with SBY-Boediono winning the election
with significant 61.7% of the votes. With this margin, the election did not have
to go through to a second round. We believe the completion of the presidential
polls shows an established democratic culture that sets a base for a sustainable
economic development for Indonesia. On the economic front, Indonesia grew
4.0% yoy in 2Q09 (+4.4% in 1Q), and economic data including cement and
auto sales have shown a recovery, marking acceleration in growth momentum.
Meanwhile, we believe that the new government will maintain the same
economic policies with prudence and accommodative policies.
JCI has outperformed other markets in the region; it was one of the best
performers in the global market YTD. JCI posted a 78.6% return YTD, and is
currently trading at 13.3x FY10 PER. We believe that the investment theme for
4Q09 onwards should be based on increasing economic growth momentum, a
low interest rate environment and a pick-up in infrastructure related sectors. As
such, we are positive on banking, cement & construction, energy and
telecommunication sectors. We pick BBRI and PTBA as our top picks in 4Q09 on
the back of expected stronger revenue growth.
Agus Pramono, CFA (6221) 39832668 . agus.pramono@id.dbsvickers.com
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Refer to important disclosures at the end of this report
Ed: LM / sa: TW