Left Brain Right B - the DBS Vickers Securities Equities Research

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Regional Equity Strategy 4Q 2009 Country Assessment Earnings Estimates by Sector EPS Growth (%) EPS PATMI (Rpbn) PER (x) 09F 10F CAGR (%) 09F 10F 09F 10F Conglomerate/Automotive (4.4) 21.3 15.5 8,785 10,660 15.6 12.9 Infrastruct. 25.4 14.6 15.7 5,351 6,135 14.2 12.4 Consumer 12.0 23.6 22.8 1,950 2,410 18.2 14.5 Banks 21.5 9.0 11.9 22,567 24,591 15.0 14.0 Plantation (25.6) 8.7 8.3 2,646 2,877 15.9 14.7 Basic Materials (66.9) 181.4 75.9 2,074 5,836 38.0 13.9 Oil, Gasn & Energy 35.1 6.0 14.0 23,475 24,886 14.2 13.2 Telecomm. 10.3 (0.3) 7.0 13,783 13,746 14.2 13.2 Source: DBS Vickers Page 135
Regional Equity Strategy 4Q 2009 Country Assessment Sector recommendation and stocks for Indonesia SECTOR REMARKS STOCK SELECTION Conglomerate/ Automotive Neutral Cement and Construction Overweight Consumer Goods Neutral Banking Overeweight Plantation Neutral Auto sales have shown a recovery since May09 and the latest auto sales data indicate that the decline in car and motorcycle sales could be lower than our estimate. However, on motorcycle sales, Astra may have lost its domination as Yamaha has reached the same market share. While data on ASII and its subsidiaries have shown positive developments, its valuation has become demanding and all positive expectation have been priced in on ASII stock price. We are upbeat on the sector on the back of the expected demand recovery, demand from infrastructure as well as continued improvement exercised by cement producers. We expect cement sales to fully recover next year on the back of faster economic growth with recovery in the property sector. We pick SMGR as our top pick as we believe that the company still offers more upside potential from efficiency programs. At the same time, the construction commencement of SMGR’s two cement plants will ensure the company’s leading position in the market. The outlook for consumer goods companies should get a boost from lower borrowing costs in 4Q09, as banks look set to lower borrowing rates. Stable commodity and fuel prices as well as lower consumer borrowing rates should be together maintain momentum for consumer staples and discretionary in 4Q09, despite a seasonally lower demand post-Eid festival. However, recent jump in stock prices has priced in these expectations. We are positive on the banking sector as we have seen there is a recovery in the sector. A strong sign of recovery in loan growth is seen from some banks preparing to issue sub-debts. At the same time, loan quality should improve in 3Q09. The agreement between 14 banks and BI also signal that banks will temporarily enjoy higher NIM as deposit rates fall faster than lending rates, although we believe that the latter will follow deposit rate but with some time lag. At the end, the lower lending rate that is expected to start in 4Q09 will increase demand for loan from all segments. We expect 4Q09 palm oil price to rebound on seasonally slower palm oil supply growth and run down in US soybean oil inventory. However, as most plantation stocks have not moved in-tandem with CPO price’s current correction, we recommend investors to remain selective. We currently have Hold calls on both Astra Agro Lestari and London Sumatra. - SMGR KLBF BBRI - Page 136
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Left Brain Right B - the DBS Vickers Securities Equities Research

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