Indonesia Seen Recovering in Strong Q1 Earnings Reports

Jakarta Globe, Bloomberg & Reuters, April 29, 2010

A slew of strong first-quarter results on Thursday from some of Indonesia’s biggest companies provided further evidence that the domestic economic recovery is on track.

State-controlled miner PT Timah, diversified firm PT Astra International, cement maker PT Semen Gresik and three banks — PT Bank Central Asia, PT Bank CIMB Niaga and PT Bank Permata — all posted healthy numbers.

Higher international commodity prices and strong consumption, supported by low inflation and low interest rates, are driving the recovery. Finance Minister Sri Mulyani Indrawati predicted this month that the economy would grow by between 5.5 percent and 6 percent this year.

Thursday’s results “definitely strengthen the assumption that the domestic economy is recovering,” said Suryadi Candra Kasih, head of research at PT eTrading Securities. Although the assumption had already been “priced in by the market,” he said, “we are penciling in significant earnings growth for Indonesian commodities companies this year.”

Timah, the world’s second-largest tin producer, said its first-quarter net income had surged almost tenfold to Rp 141.82 billion ($15.7 million) because of an increase in the price of the metal.

Timah’s bumper result follows that of PT Aneka Tambang, Indonesia’s second-biggest metal producer by market value, which last week announced that its first-quarter profit had more than doubled to Rp 201.9 billion.

Astra International, an automotive retailer and distributor with interests in plantations and finance, said first-quarter net profit rose 60 percent to Rp 3.014 trillion. The gains were more modest but still significant at Semen Gresik, which reported Rp 802.5 billion in first-quarter profit, up 17.8 percent.

Consumer-oriented companies have also enjoyed a strong earnings in the first quarter. “Cement and consumer-goods companies, except telecommunications, will likely continue posting strong earnings growth this year,” Suryadi said.

PT Bank Central Asia, the country’s largest bank by market value, posted a 16.6 percent rise in first-quarter net income to Rp 1.9 trillion. CIMB Niaga, the local unit of Malaysia’s CIMB Group Holdings, reported a first-quarter net profit of Rp 524.2 billion, more than double that of the year before, while Bank Permata said its first-quarter net profit was up by 62 percent to Rp 269 billion.

Suryadi said all three banks were likely to enjoy robust loan growth this year on the back of low inflation and interest rates.

“There may be some increase [in interest rates], but at the end of the year, the rates will still be low,” paving the way for more lending, he said.

BCA said on Thursday that its outstanding loans had grown by 12.7 percent in the first quarter to Rp 120.85 trillion from a year ago, driven by broad-based consumer lending.

BCA planned to maintain its 15 percent lending target, said Jahja Setiaatmadja, the bank’s vice president director. “Consumer lending will grow mainly on housing credit and vehicle credit,” he said.

Edwin Sinaga, president director of brokerage PT Financorpindo Nusa, said the strong earnings highlighted the improving local economy and were likely to lift the Jakarta Composite Index in the short term. But he warned that the JCI had risen too far.

“What I see happening now is euphoria from excess liquidity that has prompted local stock prices to jump and not reflect their fundamentals anymore,” he said.