Kamis, 2009 Maret 12
Credit Suisse - Asian Equity Strategy: Is Indonesia worth another look?
In our note of 9 March on Taiwan, we highlighted Taiwan tech’ 26%
outperformance from its 5 December lows on the back of a slowing trend
in consensus EPS downgrades.
Rather than chasing Taiwan tech after such a strong outperformance, we
highlight Indonesia. In the first 10 days of March, 2009E Indonesian
consensus EPS was -0.4% versus - 3.4% in February, -10.4% in January
and -14% in December.
We also highlight that on our P/BV versus ROE valuation model,
Indonesia is the most inexpensive market and trades at a 44% discount
to the region. Historically, markets trade at a discount only when
they anticipate large downgrades to earnings.
The key factor preventing us from upgrading Indonesia (from our
current small UNDERWEIGHT) to Overweight is the currency risk. CS
Economics forecasts a small current account deficit in 2009 of US$5.2
bn (1.3% of GDP) and the gap between FX reserves (US$40 bn estimate
for 2009) and short-term external debt (US$35.6 bn) remains small. For
details, see Cem Karacadag’ report, Indonesia: less risk than meets
the eye.
Within Indonesia, the biggest discount is in Indonesian coal (a 192%
discount now versus a 164% premium when we highlighted it as a
“crowded” trade on 1 July 2008).
The second biggest discount is in Indonesian consumer cyclicals. We
note that while Indonesian materials has been still associated with a
downgrade to 2009E consensus EPS of -1.7% so far in March, consumer
cyclicals have been associated with a 1.3% upgrade. Astra
International is the top pick from the CS regional model portfolio.
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