Friday, 11 May 2012

Strategy: CIMB Research maintains Overweight on Indonesia

KUALA LUMPUR (May 11): CIMB Research has maintained its Overweight rating on Indonesia and said first quarter 2012 (1Q12) results were not quite as strong as 4Q11.

“But 1Q12 results were decent despite disappointments from commodity stocks, offset by strong numbers from PROPERTIES [] and telco,” it said in a strategy note on Friday.

The research house said seventy-one percent of companies met or exceeded expectations versus 74% in 4Q11.

Earnings remain under pressure even after four months of downgrades, it said.

It said risks were emerging in the resource sector, though there was upside for non-resource if fuel prices are left untouched. JCI still underperformed ASEAN-4 despite two good months in Mar-Apr.

“Valuations at 13.1x forward P/E are at their 3-year MA, while PBV of 2.9x has factored in a 3%-pt increase in CoE, in our estimate.

“Our bottom-up index target of 4,450 is intact, implying 15.3-12.8x CY12-13 P/Es, as is our Overweight position. A reversal in earnings downgrades should provide a market catalyst,” it said.

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