PO raised to Rp4,700; 25% upside potential\r\nOur revised PO is based on a blended 13x 2009E core EPS multiple and DCF,\r\nassuming a higher WACC of 13.8% (on higher risk premium) and 7% terminal\r\ngrowth. SGRO’s stock price has dipped by 23% following the sharp correction in\r\nCPO price, despite its solid fundamental. At the current price, SGRO is trading at\r\n13.3x FY08E core EPS, below its IPO level. We reiterate Buy.\r\n\r\nhttp://rapidshare.com/files/111919522/SGRO20080328MLBUY4250.rar
Bank Pan Indonesia (PNBN.JK)\r\nTarget price Rp 970\r\nBuy: 1Q08 Below Estimates Due To Large Bond Losses\r\n\r\n\r\n1Q08 profit Rp206bn — Earnings grew 5% YoY in 1Q (2% QoQ), below our estimates, due to bond losses of Rp198bn, and despite provision reversal of Rp35bn in 1Q. Underlying earnings, before provisions, were flat vs. a year ago as the bank’s exceptionally strong B/S growth in the past year (loans: 57% YoY, total assets: 50%) had been offset by its narrowing NIM to 4.97% (-121bps). \r\n\r\nAnalysis — 1Q NII Rp598bn (12% QoQ; 12% YoY); loans Rp32tn (9% QoQ; 57% YoY), deposits Rp34tn (9% QoQ; 43% YoY), NIM 4.97% (+22bps QoQ) as asset yield improved 40bps to 10.76% (due to unusual interest income accrual policy) while cost of funds unchanged at 6.27%. Other income Rp224bn; costs Rp334bn (18% YoY); for a pre-provision profit of Rp489bn (2% YoY). Provision reversals of Rp35bn (4Q: Rp123bn), NPL ratio at 2.6%, 93% coverage.\r\n\r\nLarge bond losses — Panin’s reported bond losses of Rp198bn in P/L in 1Q (in addition to Rp100bn booked in equity account in B/S) were the largest among banks in our coverage as the bank had relatively large portfolio of government bonds in its trading account of Rp2.16tn as of Dec 2007. The decline in this exposure to Rp520bn in Mar 2008 suggests that most of the bond losses were realized losses (unlike those at other banks). \r\n\r\nOutlook — Panin’s strong asset growth momentum of the past year has failed to translate into better earnings and returns. Despite the bank’s disappointing earnings and lack of earnings visibility, the stock still has a speculative appeal as a potential M&A target in Indonesia, particularly in light of the high valuation (P/B of 4.7x) paid by Maybank for its acquisition of BII.