TRIM-Indonesia Strategy 2007

TABLE OF CONTENTS
Executive Summary 3
List of Stock Recomendation 4
Equity Market Outlook 9
Economic Outlook 21
View From The Charts 31
Sector Outlook 41
Banking
Cement
Heavy Equipment
Pharmaceuticals
Plantation
Resources
Retail
Telecommunication
2007 Stock Picks 51
Astra Agro Lestari

Bank Mandiri
Holcim Indonesia
INCO
Indofood
Kalbe Farma
Perusahaan Gas Negara
Telkom
Total Bangun Persada
Debt Market Outlook 71
Appendix 83
TRIM Stock Universe

Corporate Bonds
Outstanding Government Bonds
Trimegah Yearbook 2007
Flying High
2006 proved to be quite an eye opener, with the JCI taking a relatively smooth ride into record territory
as the domestic economy rebounded strongly after weakness following October 2005's fuel price
increase. The JCI was one of the region's top performers for the fourth consecutive year. For 2007, we
expect macroeconomics to cede the spotlight somewhat, as investors focus more on valuations and
the strength of corporate earnings on the back of expected economic stability. That said, the stock
market is likely to experience a more volatile year reminiscent of 2005. Overall, the JCI should continue
to fly high, although the altitude gains may moderate, on the back of continued economic growth
translating to solid earnings.
Economic growth continues. We expect the economic expansion to continue in 2007, with the central
bank poised to continue its easing monetary policy. This is a clear signal for the market to continue its
upward momentum. We believe this because we expect inflation to be restrained with a lack of inflationary
pressures, neither planned increase in the electricity tariff nor change in the budget for fuel subsidy, and a
relatively stable exchange rate. With inflation contained and the possibility of a declining US Fed Funds
Rate, we see room for further cuts in the BI Rate, albeit at a slower pace. Further positives are an expected
recovery in purchasing power and realization of infrastructure investments, which we expect to begin to
kick in midway through the year.
2007 JCI target - 2,046. We estimate 2007 earnings growth to reach 23.6% driven by the banking (36.2%),
telecoms (17.5%) and resources (26.7%) sectors. We have thus calculated a JCI target of 2,046, implying
a 2007 projected P/E of 15.4x, while the market's current P/E stands at 13.6x. At these valuations, the JCI
is still on a par with most regional markets, with only Thailand and the Philippines trading well below due
to political concerns. But with growth potential and a dividend yield of 3.2%, the JCI offers greater upside
than most markets.
Technical indicators point to 2,100. Technical observations indicate the JCI will continue its current
upward movement to the 2,100 territory. However, the formation of wedges indicates the movement may
not be as smooth as in 2006, and we expect the JCI to claw its way to this target range. Expect corrections
to be frequent and possibly deep, but look at these events positively as possible re-entry points. In summary,
expect plenty of trading opportunities in 2007.
Equity Market Strategy. With increased volatility expected in early 2007 reminiscent of 2005, we advise
investors to take positions in fundamentally sound and undervalued stocks. Nevertheless, given the fact
that large caps outperformed mid & small caps in 2H06, consider an increased focus on mid & small cap
stocks. FY06 and 1Q07 earnings will provide a further boost to the Index. Moving forward, with interest
rates expected to decline further and banks beginning to cut lending rates, we advise investors to take
positions on interest rate sensitive sectors and related sectors, such as autos, property, consumers and
cement. Expect commodities to continue to play in 2007, while telecoms should always be on the radar.
Debt Market Outlook & Strategy. As the trend of interest rate cuts continues in 2007, we recommend
investors to consider high duration bonds in order to catch opportunities of rising prices in the secondary
market. When expectations of interest rate decreases diminish, switch to high YTM bonds to take
advantage of securing stable and high coupon income. Watch the movements of foreign players and
possible switching opportunities for improved yield issuance is the guidance for investors with trading and
shorter-term holding strategies.
Arhya Satyagraha - Deputy Head of Research
p.3
Trimegah Yearbook 2007 INDONESIA
List of Stock Recommendation

Summary
No. Stock Reason
1. Adhi Karya With a new director stationed in the Middle East, ADHI is planning to expand its overseas
(ADHI.JK) - BUY market aggressively in 2007 and onward, promising better margin and terms of payment
Price : Rp800 compared to domestic projects. We expect the company to register a 45.0% revenue
Target Price : Rp980 increase in 2007. By demanding a 10% down payment and L/C for new projects, ADHI will
2007 P/E : 9.9x be able to reduce its working capital needs, which has been a major concern over the past
two years. ADHI’s improving cash flow should be a very positive catalyst for the counter.
2. Astra Agro Lestari Of Indonesia's publicly listed plantation companies, AALI should be the main beneficiary
(AALI.JK) - BUY of rising CPO price as it has the largest plantation area in the midst of their prime age at
Price : Rp12,600 12 years old. Hence, it deserves the EV/ha. valuation premium of US$13,539 compared to
Target Price : Rp14,900 the sector average of US$11,080. Along with lower oil price, also expect fertilizer cost to fall
2007 P/E : 13.3x next year. AALI currently trades at a discount to the sector's 2007 P/E of 14.4x.
3. Aneka Tambang We believe ANTM's current stock price is in-line with our expectation of nickel price extending
(ANTM.JK) - HOLD its peak to 2007. ANTM's ferronickel production volume will increase by 57.0% in 2007 and
Price : Rp8,100 by 24.2% in 2008, but these are already included in our model. At current valuation, the
Target Price : Rp8,100 stock is more of a dividend play, considering dividend yields of 5.8% and 8.8% in 2006 and
2007 P/E : 5.7x 2007, respectively.
4. Bank Central Asia The nation's #2 bank by asset size, in excess of Rp165.7tr for 2006, has excess liquidity
(BBCA.JK) - BUY and we expect loan growth of Rp10.7tr in 2007, this would increase LDR to 44.9%. Due
Price : Rp5,200 to expected fall in interest rates, we do not expect growth in interest income, but a favourable
Target Price : Rp5,775 TPF composition translates to a low CoF of 4.5% in 2007, leaving NIM steady at 7.2%.
2007 P/E : 13.3x CAR remain solid at 22.9%, with gross NPL still at a very low 1.7%.
5. Bank Danamon Micro expansion is a wild card that could push profitability higher from our 2007 NII growth
(BDMN.JK) - HOLD of 15.1% on the back of 17.6% loan growth. With 2007 LDR of 74.4%, there is still ample
Price : Rp6,750 room for further loan growth. Meanwhile, we expect net profit to post strong growth of
Target Price : Rp7,040 70.9% to Rp2.6tr on the back of normalized provisioning expenses. NIM is expected to
2007 P/E : 13.5x reach 8.4% despite unfavorable TPF structure, whereby 72.8% of TPF are in TD's.
6. Bank Mandiri Proof of its ability to resolve its NPL will be the main focus in 2007, we have taken a more
(BMRI.JK) - BUY conservative estimate with gross NPL expectation of 13.1%, which is higher than
Price : Rp2,900 management’s target of 10.0%. However, we do expect provisioning expenses to normalize,
Target Price : Rp3,239 which will be the major profit driver. Loans are also expected to post growth of 16.5%, with
2007 P/E : 19.0x potential upside on plantations and infrastructure projects for Indonesia's largest bank.
7. Bank Niaga 2007 loan growth is expected to be limited to 16.3% due to lack of sufficient TPF growth to
(BNGA.JK) - BUY finance loan expansion. Hence, there is a long-term threat of lower loan growth post 2007.
Price : Rp920 Although 2007 LDR position is at a healthy level 93.3%, the highest amongst the Top 10
Target Price : Rp1,085 banks, a breach above the 95% level provide concerns. NIM is expected to fall slightly to
2007 P/E : 12.8x 5.3%. Its ability to outperform peers in 2006 loan growth was a price driver, but future price
driver seems to be limited. Merger issues with LPBN (Not Rated) may provide limited
sentiment.
Closing price as per 28 December 2006
p.4

Summary
No. Stock Reason
8. Bank BRI The mainstay of MSME banking is expected to report 2007 loan growth of 21.9%. Expected
(BBRI.JK) - BUY 2007 NIM of 10.2%, is still the highest in industry. Gross NPL’s expected to improve to
Price : Rp5,150 4.1% on the back of strong loan growth, while possible loan downgrades from areas hit by
Target Price : Rp5,894 natural disasters are not expected to significantly affect NPL. CAR, albeit falling, at 17.0%
2007 P/E : 12.9x is still healthy to support loan growth.
9. Bumi Resources Despite BUMI's expanding production volume of 27.1% between 2007-2010, the company's
(BUMI.JK) - HOLD export focus render it susceptible to fluctuations in international coal price, which we
Price : Rp900 expect to decline by 18.0% for the same aforesaid period. The company's plan to sell
Target Price : Rp890 30.0% of its coal assets to a strategic foreign investor could serve as a non-operational
2007 P/E : 8.9x catalyst, but its negative operating cash flow remains a concern.
10. Ciputra Surya CTRS' disappointing marketing sales in 2005 and 2006 has led to a drop on our 2007
(CTRS.JK) - HOLD revenue forecast by 39.9%. Higher land acquisition price and construction cost also add
Price : Rp980 pressure in the 2007 operating margin to 19.5% from 34.2% in 2006. The counter currently
Target Price : Rp1,060 trades at an NAV/ha of Rp2.1bn.
2007 P/E : 25.1x
11. Gajah Tunggal Prospects for 2007 should be significantly better at top line as well as at operating level.
(GJTL.JK) - HOLD Revenue expected to grow by 26.5% in 2007 on the back of stable export sales and
Price : Rp580 rebound in domestic sales. Cost pressures arising in 2006 should tail off, as cost increases
Target Price : Rp632 last year will fully be passed on to customers. Hence, we expect gross and operating
2007 P/E : 10.2x margin improvement to 16.6 and 8.0%. But debts are still a problem, with expected 2007
net debt-to-equity ratio of 1.2x. We see little sentiment to provide push in share price on
the back of weaker bottom line.
12. Hexindo AP We expect HEXA will post a 10.6% sales growth in 2007 on the back of 888 units to be
(HEXA.JK) - BUY delivered next year. We also expect the diminishing impact of last year's fuel price increase
Price : Rp900 to improve HEXA's operating margin from 9.6% to 10.4%, resulting in an increase in net
Target Price : Rp1,000 profit by 27.1% in 2007. Valuation wise, HEXA has the lowest 2007 P/E and P/BV in its
2007 P/E : 8.5x sector.
13. Holcim Indonesia SMCB's new brand and robust outlet expansion should boost sales by 17.3% in 2007.
(SMCB.JK) - BUY Along with higher operating efficiency (lower breakdown time and FC/unit), we expect an
Price : Rp670 improvement in operating margin from 2.2% to 4.9%, resulting in an increase in core profit
Target Price : Rp790 from Rp134.3 net loss in 2006 to Rp48.8 net gain in 2007. SMCB also managed to
2007 P/E : 193.3x restructure its US$195.7m loan, hence an upward revision from our 2007 net profit forecast.
Considering all the factors above, we expect 2007 will be a turnaround year for SMCB as
we move forward.
14. INCO 2006 production is likely to be below expectation by 1.6%, but the impact will be sublime,
(INCO.JK) - BUY reducing net profit by 2.1% and valuation by 0.3%. We believe the market is over-discounting
Price : Rp31,000 the stock for the production decline and delays at the Karebbe Dam project, which we still
Target Price : Rp35,300 forecast to be completed by 2010. The dam is pivotal to INCO’s plan to increase capacity
2007 P/E : 5.5x by 24.2%.
p.5

Summary
No. Stock Reason
15. Indocement TP With sturdy grip in Java and Kalimantan markets, we are confident that INTP can maintain
(INTP.JK) - BUY its position as #2 largest cement player in Indonesia, pocketing a 31.0% market share.
Price : Rp5,750 Unlike SMGR, capacity should not be a constraint for INTP as its 23.0% excess should
Target Price : Rp6,340 be enough to feed the growth up to 2010. Reasonable valuations should also appeal to
2007 P/E : 22.5x investors.
16. Indofood SM INDF's instant noodle division is expected to post another strong growth of 10.7% YoY in
(INDF.JK) - BUY 2007, underpinned by a 5.4% YoY higher sales volume and a 5.0% increase in selling
Price : Rp1,350 price. By raising US$250m-US$300m through Reverse Takeover Transaction between
Target Price : Rp1,749 the company's palm-oil subsidiary and City Axis, the company will have greater financial
2007 P/E : 15.1x flexibility to expand planted area.
17. Indosat The nation's # 2 operator is set to post strong revenue growth of 20.4% in 2007 on back
(ISAT.JK) - HOLD of 1.4m and 3.3m net adds in 2006 and 2007. Market share is expected to decline to
Price : Rp6,750 25.5%, although there is upside through increased promotion efforts, which will also
Target Price : Rp7,119 support ARPU from further falls. 2007 ARPU expected at Rp54,000. Despite tight
2007 P/E : 17.7x competition, ISAT comfortably remain as the second biggest operator. Share price
appreciation has been significant lately, limiting upside potential.
18. Kalbe Farma 2007 top-line is projected to grow by 11.2% (vs. 7.2% in 2006), mainly underpinned by an
(KLBF.JK) - BUY 8.5% growth in pharmaceutical (vs.1.3% in 2006) and a 20.0% increase in the nutritional
Price : Rp1,190 division. Better integration among business units and earlier debt repayment of
Target Price : Rp1,442 US$66.5m will result in a more solid performance. As the market leader, the counter
2007 P/E : 14.5x deserves premium P/E valuation.
19. Matahari PP The recent approval for Rp1tr right issue has given the financial flexibility for the company
(MPPA.JK) - BUY to continue aggressive expansion in 2007 by opening 12 hypermarkets and 7 department
Price : Rp800 stores. Consolidated revenue is expected to grow by 24.2% to Rp10.4tr in 2007 (vs.20.8%
Target Price : Rp973 in 2006). Furthermore, MPPA's valuations are also attractive as the counter trades at
2007 P/E : 14.1x 2007 P/E that is 12.1% lower than the sector average.
20. Mayora Indah Expected higher consumption would increase revenue by 15.0% in 2007, reaching Rp2.4tr.
(MYOR.JK) - HOLD Nevertheless, a major challenge facing MYOR is the extent to which prices of flour, sugar
Price : Rp1,620 and coffee (constitutes 57.0% of total production cost) would remain at high level.
Target Price : Rp1,770 MYOR’s margin threat and lack of stock’s liquidity are major reasons for our
2007 P/E : 11.1x recommendation.
21. Mitra Adiperkasa Revenue is projected to grow by 19.4% in 2007 (vs.15.6% in 2006), with net profit improving
(MAPI.JK) - BUY substantially from Rp82.6bn to Rp161.5bn. To support growth, MAPI would add another
Price : Rp910 60,000sqm, 12.8% larger than expansion in 2006. With an extensive portfolio of renowned
Target Price : Rp1,050 international brands and lower valuation compared to sector's 2007 P/E of 15.8x, we view
2007 P/E : 9.4x the counter remains attractive.
p.6

Summary
No. Stock Reason
22. PGN Completion of both SSWJ pipelines should increase distribution volume by 305.0mmscfd,
(PGAS.JK) - BUY or 79.0% of total volume in 2006, and will remain the major catalyst for PGAS. Upon
Price : Rp11,600 completion, we believe the company will also raise price by 10.0% to US$5.5/mmbtu,
Target Price : Rp16.900 allowing it to keep up with forecasted 8.8% increase in gas purchase price. We believe
2007 P/E : 16.4x the market is over apprehensive of the open access risk and maintain our gas price
assumption.
23. Ramayana LS With consumption revival on the horizon, RALS would be the main beneficiary considering
(RALS.JK) - HOLD the company's focuses on lower-end market segment. However, hefty competition of low-
Price : Rp870 priced Chinese product is a growing concern for RALS. Hence, revenue is projected to
Target Price : Rp952 grow moderately at 10.3% in 2007. In addition, a 2007 P/E of 19.9x indicates a demanding
2007 P/E : 19.9x valuation.
24. Semen Gresik Better synergy with its subsidiary, Semen Padang, has led to a market share increase to
(SMGR.JK) - BUY 47.0% from 45.2%. We expect 2007 sales and net profit to grow by 9.1% and 18.2%,
Price : Rp36,300 respectively. Its near full capacity level (95.0%) should only pose minimal threat in the
Target Price : Rp40,820 short term as the company had decided to build a new plant in 2007. Market leader with
2007 P/E : 14.7x the lowest P/E in its sector brings a certain appeal to this stock.
25. Summarecon Agung Due to unfavorable economic condition in 2006, SMRA only post 853 units of marketing
(SMRA.JK) - HOLD sales in 2006, resulting in a 30.0% drop in our 2007 revenue forecast. Yet, downtrend in
Price : Rp1,170 interest rate has led the company to begin building their delayed projects in late 2006.
Target Price : Rp1,250 According to our NAV valuation, the counter trades at Rp6.0bn per ha.
2007 P/E : 58.5x
26. TB Bukit Asam PTBA's newly appointed President Director (former Director of Operations) has affirmed
(PTBA.JK) - BUY that the company's long-term strategy will remain focused on coal and power plants, with
Price : Rp3,525 PLTU Banjarsari and PLTU Banko Tengah as priority projects. Although we expect a decline
Target Price : Rp4,100 in global coal prices, domestic coal price should remain strong. Using sum-of-parts
2007 P/E : 12.1x valuation, both power plants contribute Rp914, while current operation is worth Rp3,211.
27. Telkom # 1 operator expected to further tighten hold on the cellular business as subs growth
(TLKM.JK) - BUY expected to reach 29.2% outpacing peers, hence market share expected to increase to
Price : Rp10,100 58.9%. TLKM should be able to fend off competition in all business sectors after the
Target Price : Rp11,588 government gave national CDMA license to BTEL (Not Rated) and planned tender for new
2007 P/E : 15.2x licenses in the fixed line segments. Attractive valuations support attractive outlook.
28. Total Bangun P TOTL's reputation as a quality builder has provided the company with minor competition
(TOTL.JK) - BUY and higher margins compared to its peers. With a net cash position of Rp226.0bn, there is
Price : Rp650 plenty of growth potential. In 2007, we expect the revenue to grow by 27.0%. TOTL's
Target Price : Rp975 prudent business practice has also led to relatively low bad receivables and working
2007 P/E : 19.9x capital. All of these factors justify our call that the counter deserve premium valuations.
p.7

Summary
No. Stock Reason
29. Tempo Scan P In 2007 total revenue is forecasted to grow by 8.8% (vs.5.2% in 2006) on the back of a
(TSPC.JK) - BUY 13.2% growth in distribution division and a turnaround performance in pharmaceutical
Price : Rp900 division to 6.1% in 2007 (vs.-4.8% in 2006). Considering its distinctive performance as a
Target Price : Rp1,039 cash rich based company and an attractive dividend yield of 3.7% in 2007, counter should
2007 P/E : 11.7x appeal for long-term investors.
30. United Tractors Low interest rate combined with bright prospect in the mining, plantation and infrastructure
(UNTR.JK) - BUY should spur demand for heavy equipment as well mining contractor business in 2007.
Price : Rp6,550 We expect UNTR will register a strong revenue growth in both of its heavy equipment and
Target Price : Rp7,660 mining contractor unit by 16.7% and 32.7% in 2007 respectively. We feel that its business
2007 P/E : 18.2x model has an appeal that differentiates it from its competitors.
p.8
Equity Market Outlook
Equity Market Outlook

Flying High Analyst: Arhya Satyagraha
2006 Year in Review

JCI continues to post record highs The Jakarta Composite Index (JCI) extended its bull run in 2006, gaining 55.1% to
… close at yet another record all time high of 1,805.5. Not wanting to be left behind,
foreign investors have continued to pour money into the market, as net foreign
fund inflows amounted to US$1.9bn. Investor appetite is evident from the bourse's
market capitalization, which surged by 54.6% to Rp1,238.5tr and an average daily
transaction value of Rp1.85tr, which is an increase of 10.2% from Rp1.67tr in
2005.
JCI Index - Major Events

Volume (m) JCI reaching an all JCI
time high of
Fed increased rate by
20,000 1814.163
BI Rate peaked to 25 bps to 5.0%
12.75%
Fed increased 1,700

Regional stock markets
15,000 rising, Rupiah rate to 5.25%
appreciating, steady
interest rate
Thailand’s new foreign

inflow policy 1,400
10,000 precipitated regional
market crash
Thailand’s
Middle East conflict, oil
military coup
price rising to
US$75/barrel 1,100
5,000
- 800
4-Jan-06 3-Mar-06 4-May-06 3-Jul-06 31-Aug-06 2-Nov-06
…the JCI is the region's third best Comparing the JCI's performance against the other regional indices, we were the
performer third best performer in the region behind Shanghai and Shenzhen markets, which
gained 118.5% and 95.7%, respectively. By placing third in 2006, the JCI was one
of the region's best performing markets for the fourth time in a row, and it is this
steadiness in performance over the past few years that has underpinned the
continued foreign funds inflow.
p.10
2006 Regional Indices Performance
Code Country Index Yo Y Chg

28-Dec-05 28-Dec-06 (%)
JCI Indonesia 1,164.1 1,805.5 55.1
STI Singapore 2,337.9 2,963.5 26.8
KLCI Malaysia 906.6 1,088.9 20.1
SET Thailand 704.6 679.7 (3.5)
HSI Hongkong 15,101.5 20,001.9 32.5
NKY Japan 16,194.6 17,224.8 6.4
KOSPI South Korea 1,368.2 1,434.5 4.9
SHSZ300 China 920.9 1,979.9 115.0
SHCOMP China 1,157.0 2,567.6 121.9
Source : Bloomberg
Growth driven by improving Improving economic data drove the JCI higher in 2006; YTD GDP growth of 5.14%
economic indicators … as of 9M06 and a return of inflation to single digits, with YTD inflation in November at
5.32%, erasing the effects of the 2005 fuel price increase. This has allowed Bank
Indonesia (BI) to take an aggressive easing stance on the domestic benchmark
interest rate (BI Rate), which now stands at 9.75%.
… and global commodity The market also benefited from the continued appreciation of commodity prices in
prices the mining and plantation sectors. During 2006, international nickel prices rose by
147.0% to US$15.2/lb, while gold and tin prices rose by 23.2% and 77.1%
respectively, to close at US$636.7/t.oz and US$11,510/ton. Soft commodities also
performed very well, with CPO prices increasing by 49.4% to US$620/tpn and the
rubber price gaining 15.4% to US$2,008.9/ton. To highlight their importance,
companies in these sectors have a market capitalization of Rp114,7tr or a 9.1%
weighting in the JCI.
As expected 1H06 was Appreciation of the JCI for 1H06 was driven by sentiment factors as seen by gains
sentiment play and 2H06 across the board of big, mid and small cap stocks. However, as 2H06 rolled, the
valuation driven market became more valuation driven as economic outlook improved upgrading
prospects in most sectors with the banking and telecom sectors benefiting the
most. Coincidently, most of the big caps are from these sectors. Hence, big caps,
which are perceived to be more fundamentally stronger, outperformed mid & small
caps.
Big Cap, Mid & Small Cap.

1,700
1,550
1,400
1,250
1,100
950
800
3-Mar-06
5-May-06
3-Nov-06
6-Jan-06
2-Jun-06
7-Jul-06
4-Aug-06
7-Apr-06
6-Oct-06
1-Sep-06
1-Dec-06
3-Feb-06
Big Cap Mid & Small Cap
Source : Jakarta Stock Exchange
p.11
JCI Volatility 1997-2006 Sectoral Performance 2006

2,000 JCI 55.3%
1,814
Trade & Service 5.7%
1,600
Misc. 7.0%
1,195 Mining 8.6%

1,200
1,007 Infrastructure 28.0%
1,161
740 Finance Index 26.7%
716 703 700 951
800
554 Consumer Goods 11.8%
551
470 666
Property 3.0%
400
404 377 Basic Industry & Chemical 6.6%
339 372 342 323
256
Agriculture 2.8%
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Source : Bloomberg Source : Bloomberg
Market Movers 2006 Indonesia Foreign Fund Flow 2003-2006

JCI 55.3% (US$bn)
10.0
-75.6% TKIM
-62.5% ADMG 8.0
-42.3% ENRG
6.0
-13.2% GGRM
-10.6% 4.0
INKP
ASII 51.0%
2.0
BBCA 55.2%
0.0
TLKM 69.7%
BBRI 73.1% -2.0

8-Mar-03
8-Mar-04
8-Mar-05
8-Mar-06
8-May-03
8-May-04
8-May-05
8-May-06
8-Nov-03
8-Nov-04
8-Nov-05
8-Nov-06
8-Jan-03
8-Jan-04
8-Jan-05
8-Jan-06
8-Jul-03
8-Jul-04
8-Jul-05
8-Jul-06
8-Sep-03
8-Sep-04
8-Sep-05
8-Sep-06
BMRI 76.8%
-100.0% -80.0% -60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
Source : Bloomberg Source : Bloomberg
p.12
2007 Market Outlook

JCI 2007 target of 2,046 provides After recording significant gains for four consecutive years (2003-2006), the JCI
upside potential of 13.3% should continue its bull run in 2007. However, we expect market appreciation to
moderate somewhat in 2007, with a gain of 13.3% to 2,046, translating to an FY07
P/E of 15.4x. We have taken a bottom-up approach in reaching our 2007 JCI target:
(1) 30 companies within our stock coverage with a total market capitalization of
59.1%;
(2) Plus 3 additional blue chips, ASII, GGRM and UNVR, to add a further market
weighting of 10.8% with the purpose of gaining a fairer representation of the
market;
(3) Aggregate the price targets of the companies included in this calculation. For
those companies within our coverage we have used a variety of methodologies,
including DCF, NAV and PABV, while for those companies not in our coverage,
we have taken market consensus price targets;
(4) Take the aggregate price targets and weight them against their market
capitalizations.
JCI Valuation
Sector Target 2007 Net Profit 2007 NP Growth
Mkt Cap (Rpbn) (%)
Automotive 73,265 5,481 20.8
Banking 258,268 16,541 36.2
Cement 53,608 2,425 6.1
Consumers 113,598 6,759 16.4
Heavy Equipment 22,512 1,112 3.6
Property & Construction 9,987 367 (32.4)
Plantation 23,464 1,490 68.8
Resources 153,828 14,136 26.7
Telecommunications 272,528 15,503 17.5
Current Market Cap (Rpbn) 1,238,503

Current JCI 1,806
Target Mkt Cap of Trim Universe (Rpbn) 981,229
Target JCI 2,046
FY07 Net Profit 63,815
FY07 Net Profit Growth (%) 23.6
Implied FY07 P/E (x) 15
Source : Bloomberg & Trimegah Research
FY07 Market P/E of 15.4x still Our FY07 projected P/E for the JCI of 15.4x is almost at par with other regional
attractive bourses, but we believe the JCI remains attractive. Taking into account the upside
potential (13.3%) and dividend yield (3.2%) of the JCI and comparing it against
regional markets, the JCI returns are more attractive than those offered by most
markets.
p.13
Regional & JCI Indices - est. P/E & Div. Yield

Index Code Country Est. P/E (x) Div. Yield (%)
HSI Hongkong 18.0 5.5
KLCI Malaysia 18.0 2.7
PCOMP Philippines 14.9 1.5
STI Singapore 16.7 1.8
SET Thailand 11.5 2.8
JCI - Trimegah* Indonesia 15.4 3.2
Source : Bloomberg & Trimegah Research
Growth of JCI moving towards Although expected 2007 JCI growth pales in comparison to the CAGR of the JCI
sustainable long-term growth over the past four years (2003-2006) of 43.6%, such annual gains are unsustainable
rate in the long-term. We believe expected growth in the JCI for 2007 may represent a
more accurate, sustainable growth rate, and remains an investment opportunity
unavailable in most markets. Having said that, we advise caution of increased
volatility in 2007, as there are signs that the market may move in a similar fashion to
2005, but this does not change our overall positive outlook. In summary, we advise
an OVERWEIGHT bias on the JCI because:
(1) Economic fundamentals improving
The ill effects of the fuel price increase in 2005 that led to a mini-crisis were
mostly erased in 2006, with 2005's surging inflation down significantly to our
estimated 6.0% in 2006. This allowed BI to cut rates aggressively by 300bp in
2006. As we move into 2007, we expect economic recovery to continue, with
purchasing power showing signs of slowly improving. In our view, BI still has
room to cut rates further in 2007 to 8.0%. This would leave the interest rate
differential between the Fed Funds Rate and the BI Rate at potentially its lowest
level of 2.25% - 2.75% (expected BI Rate vs. current Fed Funds Rate). However,
with a market consensus that a cut in the Fed Funds Rate is imminent due to a
weakening US economy, the more likely interest rate differential may be in the
3.25% - 3.75% range. This would still be below our market risk premium estimate
of 4.5%, however, should our country rating continue to improve, we believe the
market risk premium may narrow towards the expected interest rate differential.
Furthermore, with market, economic and political stability on the domestic front,
we do not think investors will shun Indonesia's capital markets.
BI Rate Movement 2006

(%)
13.0
12.5
12.0
11.5
11.0
10.5
10.0
9.5
9.0
Apr-06
Aug-06
Oct-06
Jan-06
Mar-06
May-06
Jun-06
Jul-06
Feb-06
Nov-06
Dec-06
Sep-06
Source : Bank Indonesia
p.14
(2) Potential surprise in the form of FDI from potential infrastructure projects
Further improvements in the domestic economy may also support continued

interest rate cuts, as inflation should remain contained at 6.5%. Meanwhile,
low interest rates will also spur consumption and economic expansion through
both domestic and FDI investments to realize infrastructure projects offered
during the Indonesia Infrastructure Conference last November. The conference
offered 111 projects, including toll road, electricity and telecommunications
sector projects valued at US$17.1bn. The market will warmly welcome any
positive news on this front, as we believe FDI, which has been sorely lagging,
is very much needed.
Infrastructure Projects & Value

Project Model Potential Project Total Project
Numbers Value Numbers Value Numbers Value
(US$m) (US$m) (US$m)
Toll road 2 1,037 18 4,303 20 5,340

Water 3 108 10 394 13 502
Electircity 2 1,475 34 3,052 36 4,527
Gas piping - - 12 2,855 12 2,855
Transportation 2 369 27 1,999 29 2,368
Telecommunication 1 1,517 - - 1 1,517
Total 10 4,506 101 12,603 111 17,110
Source : Newspapers
(3) Domestic investor appetite increasing through direct or indirect investments
With the equity market booming over the past few years, investor appetite for
both direct investment in equities, as seen by the increase in market
capitalization, or through mutual funds has been extraordinary. We believe
domestic investors salivate at the potential returns from mutual fund
investments, which have rapidly outpaced the returns available from time
deposits. We note that fund flows into equity-based or related mutual funds
have increased dramatically over the past few years from Rp412.0bn in 2003 to
Rp8.1tr per December 26, 2006. The long-term holding period and investment
nature of mutual funds form a solid foundation for index strength. To further
highlight the importance of mutual funds in the market, the total nominal amount
of equity-based mutual funds now contributes 0.7% to total JCI market
capitalization, compared to 0.2% in 2003.
AUM Equity Mutual Fund & % to JCI Market Capitalization

% to JCI Market Cap (Rpbn)
0.7% 9,000
8,000
0.6%
7,000
0.5%
6,000
0.4% 5,000
0.3% 4,000
3,000
0.2%
2,000
0.1%
1,000
0.0% 0
2003 2004 2005 26/12/06
Equity Mutual Fund (LHS) % To Mkt Cap (RHS)
Source : Infovesta
p.15
(4) Foreign investor appetite continues to rise
Foreign investor appetite for Indonesian securities, both fixed income and
equities, has rapidly increased over the past few years. We attribute the attraction
to the generous returns offered by Indonesian securities on the back of upgrades
in Indonesia's sovereign credit rating by the international rating agencies,
meaning Indonesian securities are now rated near investment grade. Hence,
we expect net foreign fund inflows in portfolio investments to continue in 2007.
Indonesia Equity Foreign Fund Flow 2006

(US$m)
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
-0.05
-0.10
May-06
Mar-06
Nov-06
Jan-06
Jun-06
Jul-06
Aug-06
Apr-06
Oct-06
Sep-06
Dec-06
Feb-06
Source : Bloomberg
Government Bond Holders 2002-2006

100%
95%
90%
85%
80%
2002 2003 2004 2005 2006
Domestic Foreign
Source : Bank Indonesia
(5) IPO's of Jasa Marga, Indonesia Power amongst others
As part of the Government's privatization program, two major SOE's are slated to
be offered to the public by IPO next year. The two companies are toll road operator
PT Jasa Marga and PT Indonesia Power, a subsidiary of PT Perusahaan Listrik
Negara (PLN). Although the Government does not plan to divest majority stakes,
we believe a 30.0% divestment in each case would generate enough market
interest to provide further liquidity.
p.16
IPO 2007
C omp a ny Sector Note
PT Jasa Marga Toll Road IPO

PT Indonesia Power Electricity IPO
PT Wijaya Karya Construction IPO
PT Bank Tabungan Negara Bank IPO
PT Bank Negara Indonesia Bank Secondary Offering & Rights Issue
PT Krakatau Steel Steel IPO
Source : Newspapers
(5) 2007 corporate earnings to remain strong, albeit at slower growth
We remain unconcerned by the expected weaker corporate earnings growth in

FY07 compared to the FY06 estimate. We believe the lower growth in FY07 is
due to an extraordinary FY06, when earnings were skewed by higher than
expected profits at commodity companies on the back of higher commodity prices,
while a stronger Rupiah also played a part. In addition, 2007E earnings growth
of 23.6%, down from an 2006 estimate of 26.2%, is still the highest in the region.
Even with a lower growth rate, there should be no significant impact on dividend
yield, which we estimate at 3.2%, and which is again amongst the highest in the
region.
Earnings Growth per Sector CAGR 2006E - 2008F

TELCO 20.0
RETAIL 29.4
(16.2) PROPERTY
PLANTATION 44.7
PHARMACEUTICAL 11.9
RESOURCES 15.5
HEAVY EQUIPMENT 13.0
CONSUMER 25.2
CEMENT 14.3
BANKING 28.2
AUTOMOTIVE 11.4
-20 -10 0 10 20 30 40 50
Source : Trimegah Research
p.17
Sector Strategy
Our optimism of Indonesia's economic growth prospect translates to an overweight
weighting on all sectors under coverage. The Automotive, Banking, Pharmaceutical,
and Retail sectors should be the prime beneficiaries of lower rates and the expected
consumer spending recovery that follows. We still like the resources sector mainly
because of our buoyancy with PGAS and PTBA's prospect, as both provide abundant
domestic exposure. The plantation sector should also do well, due to promising
volume and CPO price growth for at least the coming two years. We are also turning
upbeat on the Heavy Equipment sector, inline with expected expansions within the
resources and plantation industries. In terms of bottom line growth, we expect the
automotive, banking, resources, and plantation sectors to be top performers.
Telecoms still ringing the bell - New players joining the 3G saga (Hutchinson, CP Telecommunications Indonesia
OVERWEIGHT and Natrindo/Maxis) and stiffer competition in fixed line and FWA are not much of a
concern for incumbent stalwarts the likes of TLKM and ISAT, as we believe the pie is
still big enough to share. Total GSM subscribers should grow by 26.9% in 2007,
implying a penetration of only 32.3%; higher competition will only begin to impact
growth two years from now. We expect top line and bottom line growth of 19.4% and
17.5%, respectively. BUY on both TLKM and ISAT, with TLKM as our top pick.
Banking: lower rates priced in, Improving economic growth, lower rates and higher consumer spending all point to
NPL improvement not - better overall prospect in 2007. The primary driver will be lower BI rate, but much of
OVERWEIGHT the impact is already priced in so expect limited upside in share prices. We believe
there is still more NPL improvement to come though, particularly for state-owned
banks. NII should grow by 12.3% in 2007, while gross NPL balance should decline
to 6.6% from 10.8% in 2006. Out top pick is BMRI, with potential share price
upside of 11.7%.
Pharmaceuticals sector to Along with a purchasing power recovery and a stable Rupiah, the pharmaceuticals
recover - OVERWEIGHT sector should rebound from a negative growth of 2.2% in 2006 to a positive 5.2% in
2007. The improvement will be mainly driven by stronger OTC drug sales (6.0-8.0%)
and recovering ethical drug sales (1.0-2.0%). We also believe the sector's long-
term growth is still promising, considering Indonesia's low drug consumption
compared to its neighboring countries. We issue BUY recommendations for both
KLBF and TSPC.
Resources remains attractive, A more mixed view on commodity prices this year, due to concerns over global
but be selective - growth. Expect international oil and coal prices to decline, while nickel should extend
OVERWEIGHT its peak to 2007. Given lower oil price and expectation of a strengthening US$, we
believe gold price has peaked in 2006. We still like INCO for its pure exposure to
nickel and better margins, and we are also bullish on PGAS and PTBA for their
abundant domestic exposure, with respective 89.3% and 67.9% of 2007 revenue
derived locally.
p.18
Plantation's productivity and Expect supply constraint and demand growth to boost CPO price by 16.3% in 2007
price are set for further increase and another 5.0% in 2008. Indonesian plantations' EV/ha. valuation currently lagging
in 2007 - OVERWEIGHT Malaysian plantations by 32.4%, which we believe is grossly unwarranted. Productivity
is very much comparable, while Indonesia's CPO production should overtake Malaysia
by 2008. Our top pick is AALI, which at current average plantation age of 12 years
provides plenty of growth at the right time. Its net cash position also allows it to
expand without equity funding risk.
Cement sector is set for a Three factors to consider: 1). Higher public residential construction, 2). Infrastructure
margin recovery - projects; and 3). Improving macro outlook. The combination of those factors should
OVERWEIGHT propel cement consumption to a 5.0% growth in 2007 versus a -1.8% growth in
2006. Price war should not be a concern, as demand revival should prompt higher
prices, as cement players look to recover their margins. Our top pick, SMCB, was the
only cement producer that lagged the index in 2006, but we believe the trend is set
to reverse. The company's large spare capacity means it extra growth without extra
capex.
Heavy Equipment to benefit The combination of replacement sales in the mining sector, infrastructure projects,
from expansions in mining, and continued expansion in the plantation sector all contribute to an expected volume
resources, and infrastructure - growth of 8.0% in 2007. We believe infrastructure projects will be the main catalyst
OVERWEIGHT for the medium term, considering the sector's post-Asian financial crisis contribution
of 20.0% to total heavy equipment sales. We have BUY calls on both UNTR and
HEXA, with UNTR as our top pick in view of the extra growth provided by its mining
contractor division.
Retail Sector: Time To Shop - After experiencing a prolonged downturn caused by soaring fuel price in 2005, growth
OVERWEIGHT should recover in 2007. We believe better macro economic condition will lead to
higher employments and higher overall spending. This could be seen from the data
at Indonesian Board of Investment Coordination, which 57.5% realization rate for
investment as of October 2006 would potentially create around 246,400 new jobs.
Taking into account the impact of new worker spending in 2007 and a 10.0% increase
in the minimum wage would result in 19.3% revenue growth of retail sector in 2007.
MPPA and MAPI are our top picks.
p.19
Stock Picks
Stock EPS EPS Div. Yield 2007 P/E Price Rec. Catalyst
(Rp) Growth (%) (%) (x) Target
AALI 946 68.8 3.8 13.3 14,900 BUY 1) CPO price increase of 16.3% to US$552/ton.
2) Higher plant productivity, with FFB rising from
estimated 20.0 in 2006 to 21.1 in 2007.
3) Annual plantation expansion of 15,000ha. per year will
sustain production growth beyond 2009.
BMRI 152 140.2 2.6 19.0 3,239 BUY 1) NPL improvement to 13.1% from 24.9%.
2) Recovery in loan growth to 16.5%.
3) Normalized provisioning expenses to boost profits.
INCO* 5,628 5.6 7.3 5.5 35,300 BUY 1) Nickel price to increase by another 5.0% to US$11.1/lb.
2) Finalization of negotiation with the Dept. of Forestry is
key for a 24.2% capacity expansion by 2010.
3) Volume risk for 2007 is more on the upside, compared
to our assumption of 155.0m lbs.
INDF 89 15.8 2.0 15.1 1,749 BUY 1) Recovery in instant noodles' market share to 80% in 2007
(vs.73% in 2005).
2) Higher wheat prices in 2007 should have limited impact on costs.
3) Financial strength to finance expansion of plantation division.
KLBF 82 12.0 0.7 14.5 1,442 BUY 1) Turnaround in pharmaceutical division with sales
growth of 8.5% in 2007 (vs.1.3% in 2006).
2) Nutritional division is projected to post a 20% annual
revenue growth.
3) Early debt repayment of US$66.5m will decrease
volatility at bottom-line.
PGAS 708 63.9 3.2 16.4 16,900 BUY 1) SSWJ pipelines completion to increase distribution
volume by 81.6%.
2) Domestic gas price should increase by another 10.0%
upon completion.
3) Further divestment adds short-term catalyst.
TLKM 666 14.6 3.3 15.2 11,588 BUY 1) Growth of cellular remains strong at 29.2%, increasing
market share to 58.9%.
2) Competition in all fixed line segments not likely to have
significant impact in the near future.
3) Profitability remain intact with NP growth of 14.6%.
TOTL 32 (11.6) 2.3 19.9 975 BUY 1) Lack of competition and higher margins secure revenue and
profit generation.
2) Prudent business practice led to low bad debts and less
need for high working capital.
3) Net cash position of Rp226bn, and ROA and ROE is
highest amongst regional peers.
SMCB 3 (86.6) - 193.3 790 BUY 1) Re-branding and aggressive expansion to spur revenue
growth of 17.3%.
2) Improving operating efficiency will boost profits.
3) Profitability and cash flow to improve after debt restructuring.
Source : Trimegah Research
Note: * Converted into Rupiah
p.20
Economic Outlook
Economic Outlook
Blasting Through The Clouds Contributor: LPEM FEUI
After a slowdown in the first half of 2006, economic growth seemed to pick up in
the second half of the year. Macroeconomic progress has been continuing at the
end of 2006: Inflationary pressure has been reduced significantly, bringing year to
date inflation to 5.3% in the first eleven months of 2006; Bank Indonesia (BI) has
started to ease interest rates; the Rupiah has stabilised at around Rp9,100 after
the "mini-shock" in May 2006; and stock prices have surged. With positive signs of
macroeconomic stabilisation and high commodity prices in the international
market, a sense of optimism has begun to permeate certain economic sectors,
particularly portfolio investment and primary production. It is true that a tendency
for capital inflow remains, as reflected by the strengthening of the Rupiah, but it is
limited to portfolio investment. As a result, short-term capital inflows have little
significant impact on investment in the real sector. In fact, the Government needs
to be aware of the possibility of reverse capital flow in the event of an economic or
political shock. It is worth noting, however, that thus far at least, the Indonesian
Government has been able to maintain political stability and the market is getting
less sensitive to political issues, including the second Bali bombing last year.
Capital Inflow by Type (US$m)

FDI Portfolio Other
Mar- 2005 415 395 -1,374

Jun- 2005 3,246 -805 -1,949
Sept-2005 857 1,738 -6,014
Dec-2005 695 2,862 -112
Mar-2006 463 3,730 -2,038
Jun -2006 1,224 -1,152 -228
Sept-2006 1,085 691 -2,547
Source: Bank Indonesia
Although economic growth remains relatively weak, we should see a healthier

economy in 2007. Several issues will need to be watched closely to prevent any
downswing, including the investment rate, strong monetary and fiscal policy and
purchasing power.
Inflation and Interest Rate

Even with the price hikes in early After a double-digit inflation in 2005, price growth has decelerated in 2006. Some
2006, we expect the inflation rate would say that BI's monetary policy explains the low inflation rate, while other
to be 6.0% by the end of this year commentators might think that the economy was slipping behind the figure. Looking
at this trend, we expect inflation around 6.0% YoY for 2006, which is below BI's
target.
p.22
Parallel with the fall in inflation, BI has cut its rate (the 'BI Rate') since August, easing
to 9.75% in December from 12.5% in May. It is worth noting that a relatively high real
interest rate over the past few months implicitly shows that BI has to pay a price for
its limited monetary policy credibility that fails to bring inflation down consistently
low. Financial agents are not sure whether the current low inflation will hold. As a
result, BI has to maintain a high real interest rate, which in turn damages
competitiveness through real exchange rate appreciation.
Although interest rates have been in decline over the last couple of months, lending
rates remain high. As a result, little significant impact of the interest rate decline has
been felt in the real sector. The banking sector's reluctance to provide lending is
also due to other impediments, notably the risks in the real sector. These remain
high due to the various uncertainties related to labor issues, the cost of doing
business and smuggling. Many banks have become very conservative in providing
credits, in anticipation of possible bad debts, which are perceived as being liable to
lawsuit. Similar arguments apply on the demand side, where investors' appetite to
absorb credit is also in decline due to their risk-averse behavior.
Inflation 2004 - 2006 (MoM & YoY)

(%)
20
15
10
-5
May-04
May-05
May-06
Mar-04
Mar-05
Mar-06
Jan-04
Sep-04
Jan-05
Sep-05
Jan-06
Sep-06
Nov-04
Nov-05
Nov-06
Jul-04
Jul-05
Jul-06
MoM Y oY
Source: CEIC
Inflation, Core Inflation and Volatile Food (YoY)

(%)
25
20
15
10
0
May-05
May-06
Mar-05
Mar-06
Oct-05
Oct-06
Jan-05
Jan-06
Sep-05
Nov-05
Sep-06
Nov-06
Feb-05
Apr-05
Feb-06
Aug-05
Dec-05
Apr-06
Aug-06
Jun-05
Jun-06
Jul-05
Jul-06
Inflation Core Inflation Volatile Food
Source: CEIC
p.23
We forecast inflation in 2007 at There is some concern regarding increasing rice price, but the Government's
6.0% - 6.5% decision to lift the rice import ban should contain the risk of inflation push.
Additionally, the President has stated that there will be no further cut in the oil and
gas subsidy, nor any increase in the electricity price. This will contribute to a more
stable inflation rate next year.
Expect some monthly spikes between November 2006 and February 2007 as the
result of higher prices on food items. High monthly inflation rates will take place
around July (start of the new Academic Year), October and December 2007 (holiday
season for Ied and Christmas). Other than that, there is no reason for higher
interest rates next year, so our overall forecast for inflation in 2007 will be 6.0% -
6.5%.
A stable foreign exchange rate One of the contributing factors to the stable inflation rate was the stability of the
contributed to declining inflation exchange rate. The Rupiah traded with less volatility compared to other currencies
in the region. The IDR/USD rate for 2006 was Rp9,100 (annual average), within a
range of Rp8,420 - Rp9,795 (Bank Indonesia, Mid-Rate).
Interestingly, the inflation rate followed the foreign exchange trends. This shows
that the exchange rate plays a bigger role in the rate of inflation in Indonesia. One
of the reasons behind a declining inflation trend during 2006 is the relatively strong
Rupiah against the US Dollar.
Domestic interest rates are still higher than foreign interest rates. Combined with
the better performance of the Indonesian economy and the strong monetary policy
stance planned by BI for 2007, the capital inflow will continue to grow. Additionally,
Indonesia has declining interest rates, creating an increasing bond yield that will
further ensure the capital inflow to the country. Due to the high capital inflow, we
predict the Rupiah to be stable around Rp9,100 - Rp9,200 per US Dollar in 2007.
Exchange Rate and Inflation

(%) (Rp)
20 10,500
16 10,000
12 9,500
8 9,000
4 8,500
0 8,000
May-06
Mar-06
Nov-05
Nov-06
Jan-06
Jun-06
Jul-06
Aug-06
Oct-05
Apr-06
Oct-06
Dec-05
Feb-06
Sep-06
Inflation (YoY) (LHS) IDR/USD (RHS)
Source: CEIC
p.24
Interest rate was anchored to BI has acted very carefully in maintaining the stable and relatively decreasing interest
core inflation, showing a rate despite the high inflation rate. The SBI 1-month rate was anchored to core
declining trend inflation (The inflation rate without food and transportation items) which was stable
around 8.0%-10.0% during the first three quarters of 2006, and the SBI 1-month rate
was maintained around 13.0% then gradually decreasing to 10.0%.
BI targets the inflation rate will reach 8.0% (±1.0%) in 2006 and 6.0% (±1.0%) in
2007. These projections are actually very conservative, considering Indonesia's
experience in rapidly bringing down inflation rates. In addition, the global trend for
inflation is relatively low, so there is little external pressure that could increase
inflation.
Forecast 1-month SBI is 8.0% - With lower inflation expectations for 2007, there is room for the central bank to lower
9.0% its interest rate by 25 basis points. The rule of thumb for BI is a 2.0% spread between
inflation and the BI Rate. In the absence of external pressures, we expect the SBI 1-
month rate to be 8.0% - 9.0% (range) in 2007. As for the SBI 3-month rate, we
consider the BI projection of 8.5% (average) for 2007 to be a bit aggressive. The 3-
month SBI rate is forecast to be 9.75% by the end of 2006, and this means that BI
must ease its rate below 8.5% to reach the targeted average rate. The impact of
aggressive rate cutting on the exchange rate is large and risky. We can expect 8.5%
by the end of 2007 but not as the average rate on the 3-month SBI.
The Forecast of Inflation and Interest Rate

(%)
20
15
10
0
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Inflation MoM Inflation YoY SBI
Source: LPEM Research
Economy Growth
GDP growth finally picked up in After declining for five consecutive quarters since Q404, GDP growth started to pick
Q206.... up in Q206, reaching 5.2%. This increase continued into the third quarter, reaching
5.5%. It must be noted that even though growth has yet to reach previous levels, the
trend definitely shows the economy is picking up.
p.25
GDP Growth
(%) (%)
8 5
4
7
3
6
2
5 1
4 0
3 -1
-2
2
-3
1
-4
0 -5
1Q02 4Q02 3Q03 2Q04 1Q05 4Q05 3Q06
QoQ (LHS) YoY (RHS)
Source: CEIC
… driven by non-trade sectors; The increase in GDP growth was mainly driven by the non-traded sectors
transportation, hotel trade and (Transportation and Communications, Trade, Hotel and Restaurant, and Services),
restaurants, and other services which continued to grow above 6.0% during 2006. Meanwhile the traded sectors
(Agriculture, Mining and Quarrying) and the manufacturing sector have been growing
at a slower rate of around 3.0% on average since 2005. As for the non-oil & gas
manufacturing sector, growth finally picked up after having slowed since the fourth
quarter of 2005, reaching 5.8% by Q306. Non-oil and gas GDP growth also showed
a much improving performance, reaching 5.5% on average in 2006. This is a sign
that the country can survive without depending too much on the oil and gas sector.
GDP Growth by Sectors

2Q05 3Q05 4Q05 1Q06 2Q06 3Q06
GDP 5.6 5.6 4.9 4.8 5.1 5.5

Non-Oil & Gas GDP 6.6 6.5 5.7 5.4 5.4 6.1
Traded Sectors 2.8 3.4 3.3 3.4 3.7 3.6
Agriculture, Livestocks,
Forestry and Fisheries 0.9 2.9 5.5 4.3 3.8 2.3
Mining and Quarrying (0.5) 1.0 1.9 2.2 3.7 1.0
Manufacturing Industries 4.9 4.5 2.9 3.3 3.7 5.3
Excluding Petroleum
and Gas 6.2 5.7 4.1 4.0 3.9 5.8
Non-Trade Sectors 9.0 8.2 6.6 6.3 6.6 7.6
Construction 8.2 6.9 6.9 7.1 8.1 8.4
Trade, Hotel & Restaurant 10.0 8.6 6.0 4.9 4.5 7.2
Transport 7.7 5.2 2.6 3.8 7.2 6.6
Communication 25.7 27.4 25.4 24.2 22.7 24.0
Financial, Ownership
and Business 8.9 7.9 5.2 5.5 5.2 4.6
Other Services 4.4 5.6 6.0 6.0 6.4 7.0
Source: CEIC
p.26
Growth of Import Goods (by type, YoY)

(%)
100
80
60
40
20
-20
-40
consumer goods raw material capital goods
Source: CEIC
Several Leading Indicators (YoY Growth)

(%)
80
60
40
20
-20
-40
-60
motorcycle cement vehicle
Source: CEIC
GDP to be around 5.4% in 2006 Several key leading indicators show clear signs of better economic conditions ahead.
and 6.1% in 2007 In particular, motorcycle and vehicle sales started picking up in mid-2006. We can
expect GDP growth for 2006 to be around 5.4% YoY, while GDP growth in Q406
should reach 6.0% QoQ.
Economic growth is likely to pick up in 2007 for several reasons. Firstly, consumption
should continue to increase in 2007 due to relatively low inflation and strong
Government consumption. Secondly, investment is likely to pick up in Q207. Finally,
a combination of lower commodity prices and high non-oil and gas export volumes
should moderate export growth. YoY growth in Q107 will be high due to the low GDP
in the same period in 2006. By the second quarter of 2007, GDP growth should
follow trend line GDP growth. Looking at this trend, we predict GDP growth for 2007
to be around 6.1% YoY.
p.27
GDP Growth Forecast 2007 (Quarterly Data, %)

QoQ Yo Y
1Q 07 2.54 6.59
2Q 07 1.64 6.25
3Q 07 3.32 6.08
4Q 07 -1.96 5.57
Overall GDP 2007 6.12
Economic Risks in 2007

Although the forecast for 2007 shows an improved economic situation, there are
several risks that might face the economy and could moderate economic growth.
These risks are:
z High inflation: Still around due to the possibility of high rice prices. This could
trigger a price hike in food items causing the inflation rate to soar. High inflation
would have a direct effect on interest rates, causing them to climb again;
z An increase in the US Federal Funds Rate: This would cause the domestic
interest rate margin to decrease. In order to prevent capital flight and exchange
rate depreciation, BI would have to increase domestic interest rates;
z Slowdown in the US economy: The forecast for the US economy is gloomy.

However, past history tells us that the impact of a slowdown in the US economy
has little effect on our domestic economy;
z Aggressive monetary policy. BI must be careful in exercising their aggressive

easing of interest rates. Should they become more aggressive in cutting rates
there will be an inflationary effect as a result. The impact of cutting rates is
usually felt on consumption lending first, and is not immediately followed by
the investment lending rate. As the result, the consumption sector expands,
creating demand-pull inflation.
Most of the risks seem to be on the monetary side and it is the role of BI as the
monetary authority to implement a careful policy regarding interest rates.
Government Budget
Due to the economic contraction and high interest rates in early 2006, the
Government deficit is likely to increase from a prediction of 0.6% of GDP to 1.0% -
1.5% of GDP. Although the Government's ability to spend is still limited, 2006
Government spending is much larger than 2005.
p.28
Due to the economic contraction and high interest rates in early 2006, the Government
deficit is likely to increase from a prediction of 0.6% of GDP to 1.0% - 1.5% of GDP.
Although the Government's ability to spend is still limited, 2006 Government spending
is much larger than 2005.
For 2007, the draft budget (RAPBN), projects that the deficit will diminish from 1.2%
(APBN-P 2006) to 0.9-1.1% in 2007. The GDP growth assumption of 6.3% is
considered acceptable by both business and academics.
The oil price will continue to have a limited impact on the budget. The lower impact
is due to the Government's decision to cut the energy subsidy. An increase of $1.00/
barrel would increase the deficit by Rp0.6 trillion (0.02% of GDP). However, the oil
price's potential impact on the deficit is not linear: Higher increases will actually
lower the budget deficit.
Some of the key aspects of the 2006 budget are:
z Increase in the projected domestic tax revenue, from 13.1% of GDP in 2006 to
14.4% of GDP in 2007;
z Despite the increase in total revenue (nominal), the proportion of total revenue to
GDP will actually decline from 20.9% in 2006 to 20.4% in 2007;
z The same case applies to the expenditure side. Even though growing in nominal
terms, the proportion of total expenditure to GDP falls from 22.1% of GDP in 2006
to 21.6% of GDP in 2007;
z Capital expenditures decline from 2.1% to 1.9% of GDP. The decline was due to
unspent budget amounts carried over to the following year.
Investment Climate: Policies and Perceptions

Presidential Decree INPRES No.3/2006 was published in March 2006 in an attempt
to improve the investment climate. The package consists of several cross-ministry
policies including import tariffs, movement of goods in and out of the country, tax
incentives, business licensing, and infrastructure. Implementation progress has
been very slow and subject to numerous delays caused by the slow pace of
amendment of several laws regarding investment. The package is also subject to
Parliamentary approval of the relevant draft. Delays were also caused by a lack of
coordination between ministries and/or between central and local Government. (Basri
and Patunru, BIES 2006)
The impact of this investment policy package can only be measured from the second
quarter of 2007. In the meantime, business is still complaining about the
deterioration of the investment climate in Indonesia. Recent surveys done by LPEM
FEUI and the World Bank (LPEM FEUI 2006, LPEM FEUI forthcoming) showed that
firms experience obstacles in doing business in Indonesia. Based on the results of
the survey, business' perceptions of the investment climate improved from 2003 to
p.29
2005, but the high inflation and interest rates of the end 2005 through early 2006
have caused them to deteriorate again. This is in line with business' ranking of
obstacles: The top three obstacles are macroeconomic instability, policy uncertainty
and corruption. These are viewed as the most important, though the trend has
showed significant improvement since 2003. Areas that require attention are labor
and infrastructure issues: Though neither rank highest in the survey, their
importance has increased since 2004. There are positive signs in customs and
trade regulations, which show significant improvement according to business
people.
Business Obstacles Reported by Firm
Macroeconomic Instability
Economic Policy & Regulation Uncertainty
Corruption Local Government
Transportations
Corruption Central Government
Electricity
Tax Administration
Cost of Finance
Legal System&Conflict Resolutions

Tax rate
Labor skill & Education
0 10 20 30 40 50 60 70 80 90
ADB Round 2 Round 3
Source: Monitoring Investment Climate, LPEM Research
Macroeconomic Forecast - Summary
Macroeconomic Forecast
Indicators 2006E 2007F 2008F
GDP growth (%) 5.4 6.1 6.5

Inflation (%) 6.0 6.5 6.5
SBI 3 months (%) 9.75 8.0 8.0
IDR/USD 9,100 9,200 9,000
p.30
View From The Charts
The Jakarta Composite Index

Steering Clear To 2,100 Analyst: T. Heldy Arifien
Main Points
• The JCI is expected to continue posting record highs in 2007 as outlook remains positive. The year's
strong support is seen at the critical level of 1,550 set during 2H06. Meanwhile, the JCI may trade as
high as 2,100.
• Looking at the indicators, we advise a "Sell on Strength" strategy when the JCI breaks into the 2,010
- 2,030 range, from where the Index should begin a period of near-term consolidation.
• Longer-term we remain optimistic that the JCI remains firmly embedded in an uptrend. Even though
the JCI looks set for a volatile trading pattern reminiscent of 2005, we're confident that strong
fundamental performances by listed companies will provide a solid underpinning for the market to
maintain its bullish pattern. View from the chart indicates that the JCI may close in the 2,010-2,050
area.
2006 in Review
• The Jakarta Composite Index (JCI) booked an • Additionally, a view from the charts in 2006, we have
impressive 55.1% YoY gain, reporting all time highs observed that the parallel lines has developed out of the
throughout the year. Its peak was actually booked in the original formation. As such, a new strong support level
last trading day itself, where the JCI reached 1,814.3 also emerged at 1,370 - 1,550.
before finally closing at 1,805.5. We believe the year's
close came as no surprise, because a break in a
"massive rectangular formation", which actually took form
in 1990-2003, in 2004 meant that the JCI was pointing
towards the 1,800 mark.
JCI Index (Monthly Semi Log 20 & 50 WMA)

161.8% 1,814.26 2000
JCI managed to break out from a long 1,553.88

rectangle formation in 2004, making 1500
100.0% clear move towards 2,100 of the rectangle
target. Trendline 1,157.03
Resistance 1,222.28
1000
742.98 951.19
681.94 Trendline
612.89 Support
557.69
500
Rectangle 323.14
Bottom
253.51
223.25
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
p.32
Where will the JCI go from here?
Short term (1 - 3 months) Medium & Long-Term (3 months - 12 months)

• We're bullish: The JCI closed the year at 1,805.5 and • On a medium-term view, indicators have pointed out that
average trading volumes in the least two months were the JCI is likely to trade with increased volatility, 1,712 -
strong, so we see the Index continuing its upswing in 1,974. Looking at further ahead till year's end, indicators
1Q07, with a solid support at 1,750 that should buttress have pointed 1,970 - 1,990 as resistance points.
further gains for the foreseeable future. This analysis is However, we believe such levels are on the conservative
further bolstered by the strength of the Index's current side that should be reached.
move to stay within the upper band, as well as an RSI of
(14)65.9908 that indicates the breadth of possibility for
• Given the above outlook, we advise investors to curb
their more aggressive instincts in building long positions
the JCI to move higher and test the 161.8% Fibonacci
for short-term trading. Longer-term accumulation should
target at 2,020 - 2,040.
continue until the Index corrects to the 1,750 - 1,810
• Nevertheless, pay attention because there's the potential range around the end of 1Q07. Watch moves in second
for trouble. We've come a long way in a relatively short board stocks that we expect to ride out any weakness in
time, and as the Index enters unknown territory there's the JCI at least until the Index settles around the 1,750
always the possibility of a short-term correction, after support level in 1Q07.
which we might expect the market to trade sideways for
a time in the range of 1,750 - 1,810. We advise investors
follow a "Sell on Strength" strategy to lock in profits if the
Index reaches the Fibonacci target at the 2,020 - 2,040
level, when we see the Index taking pause and entering
a period of consolidation.
JCI Index (Monthly Semi Log - 20 & 50 Monthly WMA)

2100
2000
1,814.26 1900
1800
The Bullish Pattern formed since 2003 1700
1600
promises strong support through 2007 1,553.88 1500
1400
1,157.03 1300
1200
Ascending 1,222.28
1100
Triangle
1000
951.19 900
681.94
800
Ascending Triangle to target 2,040
likely to be achieved in 1H07 700
Upslopping Channel Lines
557.69 support the argument that the
600
JCI will continue to bullish
its bullish
trend in 2007
500
400
323.14
300
Rising Wedges
223.25
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
p.33
Top Pick Charts

All Pops And No Fizzles
Astra Agro Lestari - Rp12,600 Reuters : AALII.JK

Mkt Cap : Rp19.8tr Bloomberg : AALII IJ
AALI (Monthly Semi Log - 20 & 50 Monthly WMA)

161.8%
15,000
12,700
100.0% 10,000
61.8%
4,300 5,000
3,400
2,275 Share price still moving

movies strongly
strongly in
in
current uptr end line, and a constant
width i n the suppor t tr endline channel
between Rp9, 500- Rp10, 100 i ndicates
share price could r eac h targets set by
fibonacci ratios in the Rp15, 000-
Rp15, 250 area.
850
475
2001 2002 2003 2004 2005 2006 2007
Bakrie Sumatra Plantation - Rp970 Reuters : UNSP.JK

Mkt Cap : Rp2.3tr Bloomberg : UNSP IJ
UNSP (Monthly Semi Log - 20 & 50 Monthly WMA)

1,500
161.8% 1,170
1,000
100.0%
820
410
61.8% Str ength is seen to br eak
a downslopping channel 500
and emphasing new high
level towar ds r etr acement
325
tar get at Rp1, 400-
250
Rp1,500 in 2007
160
55
25
2002 MJ J A S ON D2003 A MJ J A S ON D 2004 A MJ J A S ON D 2005 A M J A S OND 2006 A M J A S OND 2007 A M J A S ON D
p.34
Bank BRI - Rp5,150 Reuters : BBRI.JK

Mkt Cap : Rp62.6tr Bloomberg : BBRI IJ
BBRI (Weekly Semi Log - 20 & 50 Weekly WMA)

6,500
161.8% 5,750
6,000
Potential upsi de target Rp6, 150 to be hi t in 2007. 5,500
5,050
But need to work through curr ent suppor t
channel Rp5, 000- Rp5,500 for 2007. 5,000
Rising
Wedges 4,500
100.0%
4,000
3,400 3,325 3,500

3,450
61.8% 3,000
2,500
2025
2,000
2,050
1,575 1,500
Price Trend
1,000
0.0%
950
2003 F M A M J J A S O ND 2005 M A M J J A S O N D 2006 M A M J J A S ON D 2007 M
Bank Mandiri - Rp2,900 Reuters : BMRI.JK

Mkt Cap : Rp59.2tr Bloomberg : BMRI IJ
4000
3900
BMRI (Monthly Semi Log - 20 & 50 Weekly WMA) 3800
3700
3600
161.8% 3500
3400
BMRI is seen to move in a rectangle patter n 3300
2,925 3200
with resistanc e at Rp2,450, a br each in 2007 3100
clears way towar ds target at Rp3,500 3000
2900
123.6% 2800
2700
2600
2,375 2500
100.0% 2400
2300
2,050 2200
2100
2000
1900
1800
61.8%
1700
1600
1500
1400
1300
1200
1100
1,100
1,050 1000
Jul AugSepOct Nov 2005 MarApr MayJunJul AugSep Oct NovDec 2006 Mar AprMayJun Jul AugSep Oct Dec 2007 Mar
p.35
Berlian Laju Tanker - Rp1,740 Reuters : BLTA.JK

Mkt Cap : Rp7.2tr Bloomberg : BLTA IJ
BLTA (Monthly Semi Log - 20 & 50 Monthly WMA)

161.8%
2,200 2,500
Upside tar get at Rp2, 750 based on c urrent Ascending 2,000

trend remains intac t. Shor t-ter m c onsolidation Triangle 1,570
100.0%
is expected, reaching its strong support area
1,660 1,500
of Rp1, 500- Rp1,650
61.8%
1,000
Trendline
Support
610
630
500
410
230
200
100
2001 2002 2003 2004 2005 2006 2007
Holcim Indonesia - Rp670 Reuters : SMCB.JK

Mkt Cap : Rp5.1tr Bloomberg : SMCB IJ
900
SMCB (Monthly Semi Log - 20 & 50 Monthly WMA) 850
161.8% 800
730 710 750
670 700
650
600
490 550
100.0%
500
450
A break from rectangle Rp700
resistance can be expected in the 400
61.8% near future. A nd a move towards
retracement target at Rp800-Rp850 i n 350
2007
540 300
260 250
200
150
105 0.0% 100
2002 2003 2004 2005 2006 2007
p.36
Indofood - Rp1,350 Reuters : INDF.JK

Mkt Cap : Rp12.7tr Bloomberg : INDF IJ
INDF (Monthly Semi Log - 20 & 50 Monthly WMA)

2,500
Potential of an ascending triangle upside tar get

1,820 2,000
161.8% Rp1,850 to be hit somewher e ar ound 2H07.
Str ong suppor t is seen at Rp1,200- Rp1, 230 for
2007
1,450 1,500
1,275 1,360
1250
100.0%
Ascending
950 Triangle 1,000
700
890
600
550
500
475
0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Kalbe Farma - Rp1,190 Reuters : KLBF.JK

Mkt Cap : Rp12.1tr Bloomberg : KLBF IJ
KLBF (Monthly Semi Log - 20 & 50 Monthly WMA) 2,000

1,570
161.8%
KLBF is seen to be moving withi n a downslopping Symmetrical 1,500
channel. A br eak at Rp1,300 resistance signals
signal Triangle
upside to Rp1, 520 in 2007
890
100.0% 1,000
1,090
Downslopping
Channel
600
500
325
230
150
90
2002 2003 2004 2005 2006 2007
p.37
London Sumatra Plantation - Rp6,600 Reuters : LSIP.JK

Mkt Cap : Rp7.2tr Bloomberg : LSIP IJ
LSIP (Monthly Semi Log - 20 & 50 Monthly WMA) 9,000

161.8% 8,000
7,000
6,000
100.0% 5,000
4,000
61.8%
3,000
1,775
2,000
1,000
Stock is moving strongly in its current tr end to gain
850 momentum. Expec t the stock to move towar ds
600
retr acement tar get at Rp7, 800- Rp8,000 or slightly
higher in 2007
445
190
2002 2003 2004 2005 2006 2007
Summarecon Agung - Rp1,170 Reuters : SMRA.JK

Mkt Cap : Rp3.2tr Bloomberg : SMRA IJ
SMRA (Daily Semi Log - 20 & 50 Daily WMA) 1,450
1,400
A breakout from i ts current tr end may lead to
1,350
appreciaton. Fibonacci 161.8% level may be
in store for 2007 1,300
161.8%
1,220 1,220 1,250
1,180 1,200
1,150
Dead Cat 1,100

Bounces 1,090
1,050
100.0%
After a throwback down and f or med 1,000
A breakaway
a breakaway gap,
gap, SMRA
SMRA managed
managed toto 960
pullbac k at Rp850 (Fibonacci 61. 8%)
950
900
900
61.8% 850
830
800
April May June July August September October November December 2007
p.38
TB Bukit Asam - Rp3,525 Reuters : PTBA.JK

Mkt Cap : Rp8.1tr Bloomberg : PTBA IJ
PTBA (Weekly Semi Log - 20 & 50 Weekly WMA) 4,500
161.8% 4,025 1,520 4,000
3,500
3,000
100.0% 2,750
2,500
2,250
Optimistic shore may move
towar ds its 2007 target at
1,890 Rp4,000, but needs to work 2,000
1,780
1,520 thr ough the current
sideways consoli dation
around Rp3,200-Rp3, 600 A
close above Rp4, 000
negates the bullish triangle 1,500
1,520
and rec tangle pattern.
1,780
1,000
Oct Nov 2005 Mar Apr MayJun Jul AugSep Oct NovDec 2006 Mar Apr MayJun Jul AugSep OctNov Dec 2007 Mar
Telkom - Rp10,100 Reuters : TLKM.JK

Mkt Cap : Rp203.6tr Bloomberg : TLKM IJ
TLKM (Monthly Semi Log - 20 & 50 Monthly WMA)

161.8%
13,000
12,000
11,000
Ascending
10,000
Triangle 8,500
100.0% 9,000
8,000
Ref ering
er to the
to the
WMAWMA
monthly
monthly
indicator,
indicator,
asc ending triangle tar get of Rp12,500- 7,000
Rp13, 500 to be met in 2007.
6,000
61.8%
4,400 5,000
4,100 4,000
Tr end Suppor t deri ved from a Bullish

Patter n for med in 2003 wi ll be the major
3,000
suppor t level i n 2007. Thi s tr end opens
2,350
the way for price appr eciation to
Rp14, 000 i n mid2007.
2,000
1,175
1,000
875
1999 2000 2001 2002 2003 2004 2005 2006 2007
p.39
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Sector Outlook
Banking Overweight
Analyst: Arhya Satyagraha
Verifying Expectation
Main Points
The sector's financial performance is set to improve in line with declining domestic interest rates. We
forecast loan growth and LDR to reach 18.2% and 64.8%, respectively, while expecting CoF to decline
to 5.7%.
An improvement in NPL is also on the cards, as we expect the sector's gross NPL to decline to 6.6%
from 10.8% (estimated) for 2006 on the back of the Government's issuance of PP 33/2006 and PMK 87/2006.
We believe current share prices reflect all the positive sentiment on the sector, so we gauge upside
for the banks we cover is limited to 11.8%. Nevertheless, we remain bullish on the sector. The sector
trades at a 2007 PABV of 2.8x. OVERWEIGHT.
Sector Outlook
The banking sector's performance is set to improve in The Government's decision to issue PP 33/2006 and
2007 after a disappointing 2006. We project 2007 loan PMK 87/2006, which revise PP 14/2005 and PMK 31/
growth of 18.2% to Rp386.8tr for the banks we cover, 2005 on the definition and management of State-Owned
compared to an 8.4% loan growth in 2006. As such, we Enterprise receivables, should ease the process of
look for LDR to increase to 64.8% in 2007 up from 58.8% resolving the NPLs of the state-owned banks. Given
(estimated) for 2006. We believe 2007 loan growth that NPLs at BMRI, one of only two SOE banks in our
should come from renewed consumer spending as well stock universe and the only one with an NPL problem,
as corporate loan growth as interest rates continue to account for 77.6% of the total NPL in our bank coverage,
decline: For 2007 we estimate the BI Rate to fall further
we drastically reduce the gross NPL balance of banks
to 8.0% from 9.75% currently. Meanwhile, infrastructure
projects slated for 2007 as well as investments in the within our coverage to 6.6% from our 2006 estimate of
plantations sector should provide lending opportunities. 10.8%.
Banking stocks have enjoyed a very good year in price
We don't believe next year's softening interest rate
environment will be enough to significantly change the performance terms, with average share price
composition of TPF. For 2007, we project Current Account appreciation of 67.6% for the banking stocks in our
and Saving Account (CASA) to slightly increase to 53.9% coverage, roughly in line with the gains posted by the
from 53.6%, while high cost Deposits decline by 0.3% to JCI. We believe this strong performance has been
46.1%. That said, we do feel that the blended CoF should driven by several factors, including declining interest
decline from our 2006 estimate of 6.4% to 5.7%, despite rates and the new regulations on SOE receivables, as
a 7.3% increase in 2007 TPF to Rp596.6tr. well as a general improvement in investors' appetite
in the domestic market. Having said that, we believe a
Declining interest rates should have no adverse impact bullish sector outlook for next year has mostly been
on profitability. Indeed, interest income generated from priced in at current levels. Hence, despite our optimistic
strong loan growth should offset lower lending rates,
outlook for the sector's financial performance in 2007,
and, as we previously stated, we expect CoF to decline.
We therefore project 2007 NII of Rp43.9tr, representing we see limited upside potential in share prices. Within
growth of 12.3%, while we estimate 2006 NII growth of the sector, we prefer BMRI for its strong earnings growth
9.4% to Rp39.1tr. Meanwhile, we expect NIM to remain of 140.2%, declining NPL balance to 13.1%, and
steady at 7.1%. potential share price upside of 11.7%.
LDR, NIM, CAR & Gross NPL (2004-2008F) 2007 Valuation Matrix
12.0% 80.0% PBV (x)
4.0
70.0%
10.0% BBRI
60.0% BBCA
3.0
8.0%
50.0%
BDMN SECTOR
6.0% 40.0%
2.0
30.0% BNGA BMRI
4.0%
20.0%
1.0
2.0%
10.0%
0.0% 0.0%
- P/E (x)
2004 2005 2006E 2007F 2008F
- 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0
CAR (RHS) LDR (RHS) Gross NPL (LHS) NIM (LHS)
Source: Company & Trimegah Research Source: Company & Trimegah Research
p.42
Cement Overweight
Analyst: Stanley Tjiandra
Keep Lovin' It!
Main Points
Although it has outperformed the JCI by 19.5% in 2006, we are still buoyant on the cement sector due
to its multiple exposures to higher public residential construction, government infrastructure projects,
and improving macro outlook.
No need to worry of another price war, better demand should persuade cement players to raise
prices, recovering the margins they lost in 2006.
With a 12.1% potential return in 2007 reflecting P/E of 19.1x, we believe the sector is still attractive.
SMCB is our top pick, as we believe it will benefit the most from a recovery in cement demand.
Sector Outlook
As of 11M06, actual cement sales grew by 0.6% YoY winners being SMGR (+1.7%) and INTP (+2.8%), and
versus consensus of a 2.0% decline, which implies that the loser being SMCB (-3.8%). We believe better
demand is recovering, albeit slowly. As Indonesia's outlook for cement demand and higher overall volume
economic growth picks up its pace next year, cement growth will impede the cement players from replicating
demand is bound to improve. We expect domestic the price war strategy. In efforts to improve their battered
cement consumption level to grow by 5.0% YoY in 2007, margins, expect price to rise by 5.0% 2007, in-line with
from 31.0m tons estimated for 2006 to 32.6m tons, and our long-term annual projection.
we assume growth of 7.0% p.a. from 2008 onwards in
our base scenario. Projected supply shortfall within the next 4 years and
market share expansion strategy induce SMGR and
According to the Center of Indonesia Property Study SMCB to expand capacity. SMGR has announced plans
(PSPI), construction of new residential housings in 2007 to add 2.5m tons of capacity in either West or Central
will grow by 16.2% YoY, from 18,536 houses to 21,543 Java, while SMCB is planning to build a 3.0m tons in
houses. The central government is also in the midst of a Tuban, East Java. 10 other domestic and foreign
5 year project to build 1.0m public houses, which
investors are already planning to join the fray, with
commenced in 2005. The residential segment
additional potential 4.0m tons of capacity by the new
contributes around 60.0% of total domestic cement
players. The result is 27.1% of extra capacity in 2010,
demand. Additionally, infrastructure projects could be a
surprise catalyst for the sector, which we have not yet not a threat to our price outlook.
included in our model. If infrastructure projects can get We remain buoyant on the sector, hence our
rolling by year-end 2007, it shall add 1.0% and 2.0% of OVERWEIGHT rating, as the sector promises to deliver
volume growth in 2008 and 2009, respectively. a 12.1% return in 2007 translating to 2007 P/E of 19.1x.
Heightened competition in Java (traditionally the most Within the sector, we place BUY calls on all SMGR,
lucrative market) initiated a price war that begun in May INTP, and SMCB, with SMCB as our top pick. According
but has dissipated as of late. In 2006, average cement to our DCF valuation, SMCB offers 17.9% return with a
price in the island fell by 11.8%, but we are seeing a price target of Rp790, reflecting 2007 P/E of 193.3x.
normalization of price decline beginning in October 2006. Meanwhile, our DCF methods for SMGR and INTP imply
Market share proportions changed afterwards, with the returns of 12.5% and 10.3%, respectively.
Price, Volume & Capacity (SMGR, INTP & SMCB)2002-2008F 2007 Valuation Matrix
(m tons) (Rp/kg) EV/Ton (US$)
200.0
50 600
40 480 INTP
150.0
30 360 SECTOR
SMGR
100.0
20 240 SMCB
10 120 50.0
0 0
2002 2003 2004 2005 2006E 2007F 2008F 0.0 P/E (x)
0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0
Sales volume (LHS) Installed capacity (LHS) Selling price (RHS)
p.43
Heavy Equipment Overweight

Bound To Rebound!
Main Points
After facing a tough year in 2006, we expect the heavy equipment sales will pick up in 2007 as low
interest rate combine with bright prospect in the mining, plantation and infrastructure should provide
enough nutrition for the sector to grow.
We forecast heavy equipment sector to grow by 8.0% YoY in 2007 from 4,600 units to 4,970 units and
10.0% p.a from 2008 onward.
Fundamentally, we like the sector's prospective growth, hence our OVERWEIGHT rating. Within the
sector, we have placed BUYs for UNTR (target price Rp7,660 with 2007 P/E 18.2x) and HEXA (target
price Rp1,000 with 2007 P/E 8.5x).
Sector Outlook
Outlook in the heavy equipment sector in 2007 should p.a. assuming 50,000ha of additional plantations area
greatly improve compared to 2006 as we estimate 2007 over the next 3 years. For 2006, we estimate sales to
volume growth may reach 8.0% to 4,970 unit compared this sector should amount to 1,288 units. To highlight
to 2006 estimate of 4,600 units. We believe there are the importance of this sector to heavy equipment, this
several positive catalysts for next year and onwards. The sector contributes about 30.0% of heavy equipment
combination of replacement sales in the mining sector, sales. Hence, Indonesia' ambition to overtake Malaysia
robust coal demand, infrastructure projects, and as the #1 producer of CPO translate to a hefty sales
continued expansion in the plantation sector will support growth prospect as we go forward.
our growth estimates. Meanwhile, declining interest rates
add weight for a recovery in sales of heavy equipments The added bonus to heavy equipment sales is
in 2007. infrastructure projects to be undertaken in the future.
Although, currently, this sector has not yet yield a
Sales to the mining sector, which contributes to 50.0% significant and consistent sales over the past few years,
(estimate) of total heavy equipment sales is expected to this sector hides enormous growth prospect. Post the
recover next year after delayed purchases in 2006. We Asian financial crisis, this sector contributes to about
believe so, due to the cyclical nature of sales to this 20.0% of total heavy equipment sales. Hence,
sector, 4-5 years of useful life. These replacement infrastructure projects like the one offered during the
purchases was due in 2006 but was delayed due to the Infrastructure Summit II could spur demand of heavy
high interest rate environment. Hence, we expect
equipments. We estimate sales to this sector will grow
replacement sales to be realized in 2007. In addition,
with the government now focused on building more coal by 5.0% in 2007 and 10.0% p.a. onwards.
fired electricity plants, 10,000MW, coal miners are Taking into account the factors above, we rate the sector
expected to expand operations, which should generate with an OVERWEIGHT rating. We have placed BUYs
demand of heavy equipment. As such, we estimate for both UNTR and HEXA, with UNTR as our stock
demand from this sector should grow by 8.0% in 2007
pick. We have placed a target price of Rp7,660 per
and 10.0% onwards from our 2006 estimate of 2,300
share for UNTR, with 16.9% upside potential, reflecting
unit.
2007 P/E and P/BV of 18.2x and 3.5x. Meanwhile, HEXA
Continued high global demand of CPO has led to offers 11.1% upside potential at Rp1,000 per share
continuous expansion of CPO plantations, we believe compared to current price with 2007 P/E and P/BV of
sales to this sector could grow by an average of 10.0% 8.5x and 1.7x, respectively.
Heavy Equipment Sales (UNTR & HEXA) 2002-2008F 2007 Valuation Matrix
(Units) (Rptr) P/BV (x)
5,000 10 5.0
4,000 8 4.0
UNTR
3,000 6
3.0
SECTOR
2,000 4
2.0
HEXA
1,000 2
1.0
INTA
0 0
2002 2003 2004 2005 2006E 2007F 2008F 0.0 P/E (x)
Sales volume (LHS) Sales value (RHS) 0.0 5.0 10.0 15.0 20.0 25.0
p.44
Pharmaceuticals Overweight
Analyst: Remalia Rachmawati
A Healthy Addiction
Main Points
The Indonesian pharmaceutical industry is set for a turnaround in growth from negative 2.2% in 2006
to 5.2% in 2007, providing attractive investment opportunities. We look to an improvement in OTC
drug consumption, up by between 6.0% and 8.0% on the back of higher purchasing power, to underpin
the sector's recovery.
Indonesia's drug consumption, which at US$8.80 per capita lags well behind our neighbors, indicates
the sector's long-term growth prospects. Hence, we are OVERWEIGHT the industry in our model
portfolio: We calculate a sector 2007 P/E of 13.7x, which is slightly above the market P/E forecast of
13.6x.
Sector Outlook
The industry is projected for a growth turnaround in 2007. A stable Rupiah exchange rate is also favorable, given
We forecast growth of 5.2%, compared to an 2006 that 85.0% of raw materials are still either imported or
estimate of negative 2.2%. We look for this improvement quoted in US Dollars. Assuming a Rupiah exchange
to be mainly driven by stronger OTC drug sales, which rate of Rp9,200 to the US Dollar in 2007, and further
we project to grow in the 6.0%-8.0% range, up from an annual Rupiah appreciation of 2.0% from 2008
2006 estimate of 2.0%. Ethical drug sales are also due onwards, the companies within our coverage, KLBF
a turnaround, with growth of 1.0%-2.0%, which is still and TSPC, are set to enjoy an increase in gross margin
attractive after an estimated 4.9% decline in 2006. This by an average of 1.6%.
general turnaround is primarily due to an expected
recovery in purchasing power in 2007. In addition, the The valuation of the Indonesian pharmaceutical sector
row over Government regulations on labeling of generic as a whole remains fairly attractive. We have projected
drugs that led to negative growth in 2006 should be an 2007 P/E of 13.7x, which is slightly above an
resolved in 2007 as producers comply with the new expected market PE of 13.6x. Given our expected
rules. recovery in growth, we have placed an Overweight rating
on the sector.
Indonesia's current low drug consumption compared to
our neighbors indicates the market's growth potential. We have BUYs on both KLBF and TSPC, the two stocks
Present drug consumption per capita is only US$8.80, we hold in our model portfolio. KLBF, which holds an
well below Thailand (US$19.00), Malaysia (US$16.00) 11.7% market share, trades at a compelling valuation
and Singapore (US$67.00). In an effort to increase of an 2007 P/E of 14.5x. Although at that level the stock
consumption per capita as well as improve public health, is valued 5.8% above the sector P/E, we believe KLBF
the Government plans to open and increase public deserves its premium based on its market share.
access to better health services across all social TSPC is a Buy because it is cheaper at an 2007 P/E of
classes. To support this, the Government has budgeted 11.7x and has large cash holdings, which usually
Rp15.3tr in 2007 for health expenditure. translate to a higher dividend yield.
Industry Value & Growth 2000-2007F 2007 Valuation Matrix
(Rptr) (%)
EV/EBITDA (x)
30 35
8.0
30
25 KLBF
25 7.0
20
20 SECTOR
6.0
15 15 TSPC
5.0
10
10
5 4.0
5
0
3.0
0 -5
2000 2001 2002 2003 2004 2005 2006E 2007F P/E (x)
2.0
Pharmaceutical Industry (LHS) Growth (RHS) 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0
Source: Industry Data & Trimegah Research Source: Trimegah Research
p.45
Plantation Overweight
Analyst: Sebastian Tobing
Plants Gone Wild
Main Points
Although the CPO Rotterdam price increased by 11.8% YoY in 2006, we believe the demand impact of
biodiesel and the supply impact of El Nino are not yet appropriately reflected in the market.
Most Indonesian plantations are just entering or in the midst of their productive period, implying
steady volume growth for the next few years.
AALI provides an amalgam of growth, stability, and low financial risk that warrants its EV/ha based
premium valuation. With estates that are in the midst of their productive age (12 years), we believe
AALI is the best proxy for the sector.
Sector Outlook
Despite a 11.8% increase over the past year, we believe to the CPO price, given that the majority of Indonesia's
the CPO price still has plenty of upside. With escalating listed plantation companies are upstream players,
demand for biodiesel and a supply decline due to the El whereas many Malaysian plantation companies also
Nino weather phenomenon, the supply-demand operate significant downstream process and
mismatch should continue well into the future. We expect properties.
average CPO Rotterdam (CIF) price to increase by 16.3%
to US$552/ton in 2007 and to peak at US$580/ton in In terms of EV/ha valuation, at an average of US$11,080,
2008, before gradually easing to our long-term Indonesian plantations still trade at a steep 32.4%
assumption of US$450/ton. discount to their Malaysian counterparts. Investors
currently perceive that Malaysian plantations are more
As for its use as vegetable oil, we are also seeing higher operationally efficient, but we believe otherwise. On
CPO consumption trends in both Asia and the U.S. CPO's average, Malaysian plantations have an FFB yield of
long-standing substitute, soybean oil, has been 22.0 tons/ha and a CPO extraction rate of 21.7%, while
censured by the FDA due to its trans-fatty acid content, Indonesian plantations manage a lower FFB yield of
recently accused of being a contributory cause of a variety 20.6 tons/ha but a higher CPO extraction rate of 23.1%.
of cancers. According to the US Department of Agriculture, On a CPO/ha basis, productivity is very comparable at
domestic CPO consumption in China, India, and the 4.8tons/ha.
U.S. will rise by 12.6%, 21.7%, and 24.5%, respectively.
Meanwhile, global production will increase by only 8.4% Our top pick in the sector is AALI, which we believe is
in 2007. the best proxy for the Indonesian plantation due to its
prime age profile, allowing it to take full advantage of a
Malaysia is recognized globally as the leading exporter rising CPO price. We have a BUY recommendation for
of plantation products, and global fund managers AALI with a TP of Rp 14,900 (assuming a WACC of
naturally look to Malaysia first for exposure to the sector. 11.6%). On a relative basis, at 2007 P/E of 13.3x, the
We believe this might change soon, for three reasons: stock looks cheap compared to sector's 2007 P/E of
1). Indonesia will be the world's leading exporter of CPO 14.4. On an EV/ha. basis, AALI trades at US$13,539,
by 2008, due to higher planted area. 2). Indonesia has while the sector trades at US$11,080; However, as the
lower labor costs, and consequently, provides better largest and most profitable plantation in Indonesia,
ROE; and 3). Indonesia provides a more "pure" exposure we feel the company deserves its premium.
Indonesia's Plantation Area and Productivity 2007 Valuation Matrix
(Ha.) (Ton/Ha.) EV/Ha. (US$)
180,000 25.0 17,000
160,000 MALAYSIA
21.6 21.0
20.8 15,000
140,000 20.0
19.2
AALI
120,000 13,000
15.0 LSIP
100,000
11,000
80,000 SECTOR SMAR
10.0
60,000
9,000
40,000 5.0 UNSP
20,000 7,000
0 0.0 P/E (x)

5,000
AALI LSIP UNSP SMAR
Plantation Area FFB Yield
10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0
Source: Company & Trimegah Research Source: Bloomberg & Trimegah Research
p.46
Resources Overweight
Selectively Bullish
Main Points
We have a more mixed view of commodities prices this year, as concerns over global growth
loom. We expect international oil and coal prices to slip somewhat, while nickel reaches a
new peak in 2007. Hence, overweight on domestic energy plays and selectively bullish on
nickel.
With lower oil prices and strengthening US$, we believe the gold price has peaked in 2006.
Recent price movements have impelled us to be more selective within the nickel sub-sector,
with INCO has our top pick. Among the energy companies, we like those with abundant
domestic exposure, maintaining our BUY calls for PTBA and PGAS.
Sector Outlook
We expect the U.S. to lead a slowdown in global growth we believe international coal price will soften only by
next year, which should eventually trickle down to an 4.1% in 2007. With current domestic power plant prices
alleviation of the super-cycle in commodities prices. Oil still 19.9% lower than international prices (for
should lead the way, as has been apparent towards the comparable calorific value), the risk is more on the
end of 2006. Our forecast for the Sweet Nymex Crude upside for coal producers with a domestic focus.
future contract is US$61.0/barrel in 2007, a YoY decrease
Given gold's positive correlation with oil price and
of 12.0%. However, there's still plenty of upside in
domestic natural gas price; at current price of US$5.0/ negative correlation with US$, we believe gold has
mmbtu gas still trades at a 68.8% discount. peaked in 2006, ending a 5 years rally. At 0.7596, Euro/
US$ is only 3.6% above its all-time low of 0.7333. We
Despite our negative outlook on global growth, we expect gold to fall by 2.9% to US$587.5/t.oz in FY07F.
believe nickel will be an anomaly, as delays in planned
new projects continue to create short-term tightness in Following Indonesia's expected economic expansion,
supply. Recent strikes in the Goro and Voisey's Bay we are increasingly bullish on the domestic energy
projects are the good examples of the problems being plays, particularly PTBA and PGAS. We expect domestic
encountered with opening new mines: Together they derived revenues for PGAS, PTBA and BUMI in 2007 to
were slated to produce 114,432 tons in 2007, or 7.3% of be 89.3%, 67.9%, and 13.7%. We have a TP of Rp4,100
projected global production. We expect nickel demand for PTBA (assuming WACC of 13.2%) and a TP of
to grow by 5.4% with only a 5.3% increase in available Rp16,900 for PGAS (assuming WACC of 10.1%).
supply, and believe this shortfall should result in a new Of the nickel producers, we rate INCO a BUY with a TP
peak in nickel prices this year. We forecast an average of Rp35,300 (assuming a WACC of 12.9% and a LT
LME 3 months nickel future of US$11.1/lb. in 2007, up growth rate of 3.0%) , and ANTM a HOLD with a TP of
5.0% YoY. Rp 8,100 (assuming a WACC of 12.1% and a LT growth
Global Coal's Newcastle Price Index shows a moderate rate of 3.0%). On a relative measure, INCO is slightly
average increase in coal price of 1.8% to US$48.8/ton in cheaper with 2007 P/E of 5.5x, while ANTM is trading at
2006. Although we expect a 11.5% decline in the oil price, 2007 P/E of 5.7x.
Coal and Nickel Prices 2007 Valuation Matrix

(US$/ton)
(US$/ton) EV/EBITDA (x)
70 40,000 12.0
60 35,000
10.0 PGAS
30,000
50
25,000 8.0
40 PTBA
BUMI
20,000
6.0
30
15,000
ANTM SECTOR
20 4.0
10,000
10 INCO
5,000 2.0
0 0
0.0 P/E (x)
2/21/2003 2/6/2004 1/21/2005 1/6/2006 12/22/2006
LME Nickel 3M GlobalCoal Newc 6700 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0
Source: GlobalCoal, LME & Trimegah Research Source: Trimegah Research
p.47
Retail Overweight
Time To Shop
Main Points
A gradual improvement in consumer purchasing power should be a key driver to re-enter the retail
sector. The likelihood of improvement is compelling, with strong new job creation data and a proposal
for a 10.0% increase in the minimum wage.
Bright macroeconomic prospects and retailers' aggressive expansion plans, lead us to rate the retail
sector OVERWEIGHT in our model portfolio. We believe the sector's outlook remains attractive, with a
19.3% revenue growth, in line with the better economic outlook for 2007 onwards.
Sector Outlook
According to the Indonesian Board of Investment Hypermarkets will continue to be the major growth
Coordination, as of October 2006 the realization rate for vehicle for modern retailers, underpinned by consumer
investment from domestic and foreign companies preferences for one-stop shopping and price
reached 57.5%, above the 47.4% annual realization rate competitiveness. By the end of 2006, we forecast
posted during the past ten years. The projects realized hypermarkets to contribute 45.0% of the retail market
would create around 246,400 new jobs, or 56.4% of the space, while the proportion for supermarkets and
new employment target. This is a positive factor for department stores erodes to 30.0%.
consumer spending, as we believe the impact of new We place an Overweight recommendation on the sector
worker spending should come into full effect in 2007. due to its compelling medium to long-term prospects.
Along with the gradual improvement in purchasing power, The sector currently trades at a 2007 P/E of 15.8x and
we believe consumer appetite for spending is likely to an EV/EBITDA of 5.9x, well below the 2006 sector P/E
rise due to an expected 10.0% increase in the minimum and EV/EBITDA of 18.2x and 7.1x, respectively.
wage and lower interest rates, which should help trigger Despite the sector's overall rosy prospects, we believe
private consumption. certain companies will perform significantly better than
others. We have BUY calls for MPPA and MAPI, as we
The retail sector should have more opportunities to
believe they will benefit the most from rebounding
improve its internal efficiency in 2007. The prolonged
purchasing power, projecting 2007 revenue growth of
effects of high inflation should ease in 2007. Based on
24.2% and 19.4%, respectively. We place a HOLD
our calculations, growth of inflation related costs for
recommendation on RALS, due to concerns on
RALS, MPPA and MAPI should decline from 15.6% to
stiffening competition from bargain Chinese imports.
10.8% in 2007, lifting operating profit by 23.2% YoY, above
We expect RALS to record 2007 revenue growth of only
the 17.9% growth in 2006.
10.3%, lagging the 19.3% sector's growth.
Number of Hypermarkets 2005-2008F (%) 2007 Valuation Matrix
(Units)
EV/EBITDA (x)
60 0.3 12.0
RALS
50 0.25
40 0.2
9.0
30 0.15
20 0.1 SECTOR
6.0
10 0.05
MAPI
MPPA
0 0
2005 2006E 2007F 2008F 3.0 P/E (x)
Number of Stores (LHS) Growth (RHS) 6.0 9.0 12.0 15.0 18.0 21.0
Source: Desk Research Indonesia & Trimegah Research Source: Trimegah Research
p.48
Telecom Overweight
Still Ringing
Main Points
Tighter competition in GSM market is expected, but no significant impact will arise, and any impact
will not be felt in the short-term. Cellular outlook remains strong as we estimate 2007 subscriber
growth of 26.9% to 76.4m.
Fixed line and FWA are also slated for stiffer competition due to government’s plan to tender new
licenses in the fixed line segment. While, FWA expansion should continue with 2007 subscribers to
reach 10.2m.
Valuations are still attractive with 2007 P/E and EV/EBITDA of 15.5x and 5.4x, while outlook remains
positive. With top line and bottom line growth of 19.4% and 17.5%, respectively, we placed an
OVERWEIGHT rating on the sector.
Sector Outlook
Early 3G license holders (Hutchinson, CP Incumbent operators are also concerned by

Telecommunications Indonesia and Natrindo/Maxis) are Government plans to tender new licenses next year for
expected to roll out their GSM and 3G services into what fixed line, domestic long distance and international
is already a tight market. They will do battle with three dialing, although no impact should be felt for two to
other cellular incumbents who have rolled out 3G three years at the earliest. This development should
services in 2H06. We believe this service is only a value- not significantly affect incumbent operators' earnings,
added feature for current operators, as usage will remain as the contributions from domestic long distance and
low. However, we believe potential users of 3G may reach international connections currently represent only 5.3%
3.5m subscribers, based on our estimated 76.4m of ISAT's consolidated revenues and 6.6% of TLKM's
cellular subscribers for 2007. The 26.9% subscriber
total revenues. Investors are less keen on the fixed
growth in 2007 represents penetration of 32.3%. Though
line business: it takes huge capex to develop
the opportunities remain enormous with this low
infrastructure and roll out the service, while tariffs are
penetration rate, we believe increased competition will
pretty much controlled by the Government, making the
saturate the market. While we don't expect any significant
returns on the business pretty unattractive.
impact within the next year or two, we believe increased
competition will begin to hamper incumbent operators Despite fierce competition in all segments of the
in the longer term. telecoms sector, we remain bullish and place an
Overweight rating on the sector. We believe any impact
Meanwhile, the reallocation of canals in the 800Mhz
frequency used for Fixed Wireless Access (FWA) has of competition should not kick in within the next couple
now been resolved, with TLKM and ISAT allocated slots of years. Meanwhile, we expect the counters rated in
in the 800Mhz band to accommodate the migration of the sector, TLKM and ISAT, to post satisfactory total top
their slots from the 1900Mhz frequency. To compensate line growth of 19.4% with bottom line growth of 17.5%.
them for their canal losses, the Government has granted Valuations also remain favorable, with sector 2007 P/E
a new national license to BTEL. This should provide and EV/EBITDA of 15.5x and 5.4x. Both counters in our
increased competition to TLKM, ISAT and FREN, the universe, TLKM and ISAT, are rated BUYs, although
current national and cellular license holders. Expect TLKM remains our preferred stock with a 2007 P/E
aggressive expansion, and we believe FWA will eventually and EV/EBITDA of 15.2x and 5.4x.
replace conventional fixed line as tariffs are similar.
GSM Market Share 2004-2008F 2007 Valuation Matrix
EV/EBITDA(x)
70.0% 100.0
14.0
90.0
60.0% Shin Corp
80.0 12.0
Sing Tel
50.0% 70.0
10.0 BTEL
40.0%
60.0 Pilipino Telephone
8.0 Star Hub
50.0
Sector EXCL
30.0% Maxis
40.0 6.0 TLKM
20.0% 30.0
Global Telecom Telekom Malaysia
4.0 ISAT
20.0
10.0%
10.0 2.0
0.0% -
2004 2005 2006E 2007F 2008F - P/E (x)
Total Subscribers (RHS) ISAT (LHS) EXCL (LHS) TLKM (LHS) - 10.0 20.0 30.0 40.0 50.0 60.0
Source: Company & Trimegah Research Source: Bloomberg & Trimegah Research
p.49
2007 Stock Picks
BUY
Astra Agro Lestari Price Rp12,600
Harvesting Time! Sector Plantation
Reuters / Bloomberg : AALI.JK/ AALI IJ
House View & Valuation

A plantation at prime age, land bank expansion, and a CPO price increase are the major drivers for the
company's expanding revenue and margins in 2007.
Although AALI's share price has appreciated by 142.3% in 2006, we believe there is still gas left in the
tank. Currently the counter trades at 2007 P/E ratio of 13.3x, while the sector trades at 14.4x 2007 earnings.
We initiate with a DCF-derived TP of Rp14,900.
Forecast & Rating Recent Developments & Outlook

AALI not only has the largest plantation area, at an
Year end Dec 2004 2005 2006E 2007F 2008F average twelve years of age, its plantation is in the
midst of its prime growth, implying higher plant
Net Profit (Rpbn) 801 790 883 1,490 1,849 productivity. We expect FFB Yield to increase from
EPS (Rp) 511 502 560 946 1,174 20.0tons/ha in 2006 to 21.1 in 2007 and to peak at
EPS Growth (%) 180.6 1.8 11.7 68.8 24.1 21.7 in 2008. A combination of a 5.5% increase in FFB
Yield and a 4.9% increase in mature area should result
CFPS (Rp) 101 84 (39) 66 44
in a 10.6% increase in harvested FFB. The company
DPS (Rp) 511 502 560 946 1,174 will also complete two CPO mills in 1Q07, which should
BVPS (Rp) 1,312 1,665 1,893 2,366 2,953 raise the quantity of CPO produced from purchased
P/E (x) 24.7 25.1 22.5 13.3 10.7 FFB. Overall, we expect CPO production growth of
P/CF (x) 14.9 24.5 14.8 10.2 9.2 12.4% in FY07F to 995,739tons.
P/BV (x) 9.6 7.6 6.7 5.3 4.3 We also expect the average CPO Rotterdam (CIF) price
EV / EBITDA (x) 13.5 14.3 11.9 7.1 5.9 to rise by 16.3% in 2007 to US$552/ton, before peaking
Div Yield (%) 2.0 2.6 2.2 3.8 4.7 at US$580/ton in 2008. Volume and price increases
together are the best recipe for revenue growth, which
we expect to surge by 32.7% in 2007. On the cost side,
Profile higher labor, fertilizer, and transportation costs are the
main contributors to a cash cost increase of 3.9% in
Astra Agro Lestari (AALI) is the plantation division of the 2006 to Rp2,129.7/kg, but we expect a decline of 0.3%
widely-diversified Astra International. Founded in 1981, the in 2007 to Rp2,122.3/kg, because of higher plant
company currently has a total palm oil planted area of productivity and weaker oil prices. We expect gross
212,140 ha.; comprised of 158,467 ha. of nucleus and margin to expand from 46.6% in 2006 to 54.0% in 2007
and to peak at 57.4% in 2008.
53,673 ha. of plasma plantations, making it the largest
publicly listed palm oil producer in Indonesia. The company In trying to sustain its production expansion, AALI has
also owns small areas of rubber and cocoa plantations. remained dedicated to its organic growth strategy. We
project the company to open 15,000ha. of land bank
annually for the next five years, with expected annual
capex needs averaging Rp450.5bn for the respective
period. Despite the aggressive expansion, free cash
Price Chart flow for the period 2007-2011 would still record an
impressive CAGR of 135.7%. As the company's cash
Price (Rp) Volume mounts, we believe management will either return
14000 7 more profits to shareholders or opt for a more
aggressive growth strategy through acquisitions of
12000 6
producing plantations, particularly rubber.
10000 5
In the past year, AALI has indicated several times its
8000 4 interest in building a biodiesel plant, possibly through
6000 3
a joint venture with a European partner. Recently the
company has retracted its optimism, due to the fixed
4000 2
CPO purchase price generally demanded by potential
2000 1 partners. We believe management shares our view
that it should focus on CPO upstream processing, with
0 -
27-Dec-05 03-Mar-06 11-May-06 17-Jul-06 21-Sep-06 30-Nov-06
the cooking oil division and potential ventures such as
VOLUME (RHS) PRICE (LHS)
biodiesel to be considered non-core businesses.

p.52
Forecast & Rating Balance Sheet (Rpbn)
Year end 31 Dec 2004 2005 2006E 2007F 2008F Year end 31 Dec 2004 2005 2006E 2007F 2008F
Revenue 3,473 3,371 3,784 5,021 5,520 Cash & Deposits 970 317 479 1,283 2,061
Other curr. assets 273 375 402 524 552
% growth 36.5 (2.9) 12.3 32.7 9.9
Net fixed assets 1,064 1,295 1,510 1,538 1,412
COGS 1,947 1,908 2,020 2,309 2,350
Other assets 1,076 1,206 1,437 1,768 2,185
Gross Profit 1,526 1,463 1,764 2,712 3,170
Total assets 3,383 3,192 3,828 5,112 6,211
Op. Profit 1,285 1,199 1,484 2,405 2,854
ST debts 568 42 15 66 33
EBITDA 1,449 1,372 1,639 2,631 3,036
Other curr. Liab. 461 366 515 685 709
% growth 59.8 (5.3) 19.4 60.5 15.4
LT debts 56 19 109 48 20
Net int. inc./(exp.) (97) (6) 1 4 34
Other LT liabilities 145 62 106 447 632
Gain/(loss) forex 47 3 (22) - - Minority interest 87 81 103 140 167
Other inc./(exp.) 0 (46) (28) (25) (29) Total Liabilities 1,317 569 848 1,387 1,561
Pretax Profit 1,235 1,150 1,435 2,384 2,860 Shareholders' Equity 2,065 2,623 2,980 3,725 4,650
Tax (404) (333) (521) (845) (954) Net (debt)/cash 346 256 355 1,168 2,008
Minority Int. (30) (26) (31) (49) (57) Total cap. empl. 2,140 2,471 2,979 3,996 5,023
Extra. Items - - - - - Working capital 215 284 352 1,055 1,872
Net Profit 801 790 883 1,490 1,849
% growth 185.3 (1.3) 11.7 68.8 24.1 Key Ratio Analysis
Year end 31 Dec 2004 2005 2006E 2007F 2008F

Cash Flow (Rpbn) Profitability
Gross Margin (%) 43.9 43.4 46.6 54.0 57.4
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Op. Margin (%) 37.0 35.6 39.2 47.9 51.7
Net Profit 801 790 883 1,490 1,849 EBITDA Margin (%) 41.7 40.7 43.3 52.4 55.0
Depr. / Amort. 162 173 153 224 180 Net Margin (%) 23.1 23.4 23.3 29.7 33.5
Others 309 35 187 177 133 ROE (%) 25.7 24.0 25.1 33.3 32.7
Chg in Working Cap. 61 (187) 121 49 (5) ROA (%) 44.7 33.7 31.5 44.4 44.2
CF's from ops 1,333 811 1,344 1,940 2,157 Stability
Capex (300) (461) (618) (566) (422) Current ratio (x) 1.2 1.7 1.7 2.4 3.5
Others 35 (129) (22) (39) (67) Net. Debt/Equity (x) nc nc nc nc nc
CF's from investing (265) (590) (640) (604) (489) Int. Coverage (x) 11.1 37.5 132.8 166.6 281.5
Net change in debt (87) (563) 63 (10) (61) Efficiency
Debtors' turnover (days) 19 21 23 24 28
Others (373) (311) (605) (522) (828)
Creditors' turnover (days) 8 8 9 8 9
CF's from financing (460) (875) (541) (532) (889)
Inventory turnover (days) 32 32 38 41 46
Net cash flow 607 (653) 163 803 779
Cash at BoY 363 970 317 479 1,283
Cash at EoY 970 317 479 1,283 2,061 Key Assumptions
Free Cash Flow 1,032 350 726 1,374 1,735
Year end 31 Dec 2006E 2007F 2008F
CPO Price Rotterdam - CIF (US$/ton) 474.7 552.0 579.6
Interim Results (Rpbn) CPO Selling Price - FOB (US$/ton) 423.0 495.0 522.6
FFB Harvested Volume ('000 ton) 3,701.5 4,094.3 4,271.5
3Q05 4Q05 1Q06 2Q06 3Q06
CPO Sales Volume ('000 ton) 845.3 950.3 986.6
Sales 840 952 873 985 941 FFB Yield (ton/ha) 20.0 21.1 21.7
Gross Profit 363 388 345 404 389 CPO Extraction rate (%) 22.9 22.9 23.0
Operating Profit 294 312 277 336 319 Kernel Extraction rate (%) 4.4 4.4 4.4
Net profit 204 201 182 232 189
Gross Margin (%) 43.3 40.8 39.5 41.0 41.4
Opr Margin (%) 35.0 32.8 31.7 34.1 33.8
Net Margin (%) 24.2 21.2 20.9 23.6 20.0
Capital History & Stock Data
Date Event
Price and Valuation History
Dec-97 IPO of 1258.0m shares @ Rp 1,550 per share
2002 2003 2004 2005 2006 May-02 1 : 5 Bonus shares
Price (Rp) Stock Data
-High 2,275 1,900 3,325 6,000 12,600 Issued Shares (m) 1,574.7
-Low 850 1,125 1,575 2,875 4,900 Par Value (Rp) 500
EV/EBITDA (x) Market Cap (Rp bn) 19,842
- High 4.7 2.3 3.6 3.0 6.6 12-month High/Low 12,600/4,900
- Low 2.2 1.5 1.6 1.4 2.5 12-month Average Daily t/o (m) 0.98
p.53
BUY
Bank Mandiri Price Rp2,900
NPL to Let Loose Sector Banking
Reuters / Bloomberg : BMRI.JK/ BMRI IJ
We expect FY07 gross NPL to fall to 13.1%. No reversals expected from recovered off-balance sheet NPL
amounting to Rp12.0tr. Recovered funds, which we estimate to amount to Rp3.0tr, would be used for
provisioning further writeoffs, normalizing future provisioning expense.
Although the shares gained 76.8% in 2006, we believe the 2007 PABV of 2.5x remains attractive and BMRI
trades at par to the sectors' 2007 PABV of 2.8x. We are bullish on the shares, with a target price of
Rp3,239 per share. BUY.

The Government's decision to revise PP No. 14/2005
Year end Dec 2004 2005 2006E 2007F 2008F and PMK No. 31/2005 through PP No. 33/2006 and
Net Profit (Rpbn) 5,256 603 1,334 3,205 4,713 PMK No. 87/2006, enables BMRI to resolve its NPL by
means available for private banks. Management has
EPS (Rp) 250 29 64 153 224
targeted gross NPL to decline to 10.0% by 2007.
EPS Growth (%) 14.6 (88.5) 121.2 140.2 47.1 However, we are less aggressive in our estimates,
BVPS (Rp) 1,187 1,105 1,190 1,301 1,449 hence we estimate gross NPL to decline to 13.1% in
DPS (Rp) 125 14 32 76 112 2007, down from our 2006 estimate of 24.9%. We
Div Yield (%) 4.3 0.5 1.1 2.6 3.9
believe the bank's exposures to Kiani Kertas and
Garuda Indonesia, amongst others, obstruct any further
Adj BVPS (Rp) 1,058 967 1,034 1,155 1,303 declines in gross NPL.
P/E (x) 11.6 100.9 45.6 19.0 12.9
As part of steps in resolving its NPL, BMRI plans to
P / Adj. BVPS (x) 2.7 3.0 2.8 2.5 2.2
restructure or sell its off-balance sheet NPL, which
amount to Rp25.5tr, of which Rp8.5tr is managed by
the state collection agency. The indicative recovery rate
Profile on those loans is somewhere in the 20.0%-30.0% level.
Assuming a 25.0% recovery rate on the Rp12.0tr off-
PT Bank Mandiri Tbk. (BMRI) was formed in 1998 by the balance sheet NPL under its own management, BMRI
merger of four state-owned banks. Currently, BMRI is is set to report gains of Rp3.0tr over the next couple of
Indonesia's largest commercial bank, with total assets in years. These gains will be used as provisioning for
excess of Rp260.2tr. BMRI holds the largest market share further writeoffs. Hence, while it's unlikely we'll see
in loans and TPF, estimated at 14.6% and 18.3%, reversals, we do expect more normalized provisioning
respectively. BMRI offered its shares to the public through expenses in the future. We estimate 2007 and 2008
provisioning expenses of Rp1.0tr and Rp916.8bn,
an IPO in June 2003, listing 19.8bn shares on the JSX. The
respectively.
Republic of Indonesia owns 68.9% of BMRI, with the
remaining 31.1% in the hands of the public. We project 2007 loan growth of 16.5% to Rp128.1tr on
the back of favorable economic conditions. Expect
renewed demand for consumer credit, while several
Price Chart infrastructure projects and plantation expansion plans
represent good corporate lending opportunities. We
(m)
(Rp)
believe interest income from loans is insufficient to
3,500 500 offset the fall in interest income from its Government
3,000
450 bond holdings, so we forecast net interest income to
400 grow by 3.1% to Rp10.7tr, up from our 2006 estimate
2,500 350 of Rp10.4tr. Nevertheless, with lower provisioning
2,000
300 expenses 2007 net profit should jump by 140.2% to
250 Rp3.2tr, well above our 2006 estimate of Rp1.3tr.
1,500
200
150
NIM is expected to remain steady at 4.5% as average
1,000
100
yield on EA is expected to reach 10.3% while CoF
500
50
declines to 5.8%. 16.5% loan growth in 2007 compared
0 0
to TPF growth of only 2.6% should see LDR increase
23-Dec-05 1-Feb-06 13-Mar-06 22-Apr-06 1-Jun-06 11-Jul-06 20-Aug-06 29-Sep-06 8-Nov-06 18-Dec-06 to 59.8% from 52.7% (estimated) for 2006. On the flip
VOLUME (RHS) PRICE (LHS) side, 2007 CAR should weaken to 19.9% from 22.1%
in 2006.
p.54
Income Statement (Rpbn) Balance Sheet (Rpbn)
Year end Dec 2004 2005 2006E 2007F 2008F Year end 31 Dec 2004 2005 2006E 2007F 2008F
Interest Income 19,213 20,798 25,824 24,165 24,968 Cash, Due fr. BI and Banks 19,077 23,525 25,998 26,709 25,424
Interest Expense 9,679 12,044 15,456 13,478 12,239 Interbank Placement 14,180 23,617 14,227 10,995 10,239
Net interest Income 9,534 8,754 10,368 10,686 12,728 Mkt. Securities 12,505 10,504 13,329 10,587 9,639
Other Opr. Income 4,047 2,690 2,309 2,652 3,196 Government Bonds 93,081 92,056 92,008 88,880 85,753
Gross Income 13,581 11,444 12,677 13,339 15,924 Gross Loans 94,403 106,853 109,953 128,060 155,817
Operating Expenses 6,036 6,868 7,304 7,802 8,335 Net Fixed Assets 5,484 5,305 5,766 6,042 6,330
Pre-provision Profit 7,545 4,576 5,373 5,537 7,590 Others 9,427 1,523 (1,052) (4,589) (12,974)
Provision Expenses 24 3,389 3,516 1,013 917 Total assets 248,156 263,383 260,229 266,683 280,229
Non-operating Income 4 45 49 54 60 Third Party Funds 175,838 206,290 208,516 214,018 221,298
Pre-tax Profit 7,525 1,233 1,906 4,578 6,733 Borrowings 8,320 4,280 4,016 3,669 3,533
Tax 2,269 628 572 1,373 2,020 Securities & Sub-debts 10,821 8,388 8,024 7,400 4,413
Minority Int. (0) (1) - - - Other Liabilities 28,241 21,211 14,891 14,278 20,556
NetProfit 5,256 603 1,334 3,205 4,713 Equity 24,935 23,215 24,781 27,319 30,429
Funding Composition (Rpbn) Key Ratio Analysis
Demand Deposit 41,083 46,410 46,133 47,258 49,292 Net Int. Inc. growth (%) 19.1 (8.2) 18.4 3.1 19.1
Saving Deposit 53,533 47,153 49,613 54,088 58,951 Oth. Opr. Inc. growth (%) 10.4 (84.2) 56.3 143.6 47.5
Time & Cert. Deposit 81,222 112,726 112,769 112,671 113,055 Pretax Profit growth (%) 7.0 (83.6) 54.7 140.2 47.1
Securities Issued 10,821 8,388 8,024 7,400 4,413 Net Profit growth (%) 14.6 (88.5) 121.2 140.2 47.1
Borrowings 8,320 4,280 4,016 3,669 3,533 ROAE (%) 23.2 2.5 5.6 12.3 16.3
Total Funding 194,980 218,958 220,556 225,087 229,244 ROAA (%) 2.1 0.2 0.5 1.2 1.7
Blended Gross Spread (%) 4.1 3.4 4.3 4.5 4.8
NIM (%) 4.3 3.8 4.5 4.5 4.8
NPLs Breakdown (Rpbn) Cost to Inc. Ratio (%) 44.4 60.0 57.6 58.5 52.3
Straight LDR (%) 51.9 50.0 52.7 59.8 70.4
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Liquid Assets Ratio (%) 19.0 22.9 19.3 17.7 16.2
Substandard 2,370 5,699 6,055 5,343 5,866 Gross NPL Coverage Ratio (%)120.9 41.5 56.0 97.5 141.8
Doubtful 441 5,378 2,721 2,013 1,559 CAR (%) 25.3 23.7 22.1 19.9 18.7
Bad Debt 3,893 15,936 18,625 9,415 4,758
Total NPLs 6,704 27,014 27,402 16,771 12,183
NPL/Gross Loans (%) 7.1 25.3 24.9 13.1 7.8
Key Assumptions
Year end 31 Dec 2006E 2007F 2008F

Interim Results (Rpbn)
BI Rate (%) 9.75 8.00 8.00
3Q05 4Q05 1Q06 2Q06 3Q06 Market Share in Loan (%) 13.5 13.3 13.3
Net Interest Income 2,226 2,071 2,210 2,640 2,627 Market Share in TPF (%) 16.9 15.9 15.0
Other Opr. Income 783 471 908 389 751 Loan growth (%) 2.9 16.5 21.7
Operating Expenses 2,023 3,342 2,337 2,634 2,782 Deposit growth (%) 1.1 2.6 3.4
Net Profit 611 (623) 510 305 372 Blended Yield on EA (%) 11.1 10.3 9.9
Net Int. Margin (%) 4.2 4.0 3.9 4.3 4.4 Blended Cost of Fund (%) 6.8 5.8 5.1
NPLs (%) 23.0 25.0 25.6 24.5 24.1
CAR (%) 23.6 23.7 25.2 25.1 25.4
Date Event
14-Jul-03 IPO of 2.9bn shares @ Rp675 per share
2002 2003 2004 2005 2006

- High - 1,050 2,000 2,050 2,950 Issued Shares (m) 21,000.0
- Low - 700 975 1,100 1,500 Par Value (Rp) 500
P/Adj. BVPS Mkt Cap (Rpbn) 60,900
- High - 1.1 1.9 2.1 2.9 12 - Months High / Low (Rp) 2,950 / 1,500
- Low - 0.7 0.9 1.1 1.4 12 - Months average daily t/o (m) 66.8
p.55
Holcim Indonesia BUY

Price Rp670
Set To Recapture Lost Market Sector Cement
Reuters / Bloomberg : SMCB.JK/ SMCB IJ

Prospects are abound for the most laggard company, SMCB, in its sector. A turnaround is in store as re-
branding to Holcim and aggressive new outlets expansion will increase sales by 17.3% in 2007. Operating
efficiency should also improve with operating margin increasing to 4.9% from 2.2%, while core profit is
expected to improve from Rp134.3 net loss in 2006 to Rp48.8 net gain in 2007.
The counter offers the highest upside (+17.9%) compared to its peers, as we have set a DCF price target
of Rp790 per share, reflecting 2007 P/E and EV/EBITDA of 193.3x and 16.3x, respectively. While on a EV/Ton
basis, we expect improvement to US$100.4 from US$102.5.

Management's decision to change the company's
Year end 31 Dec 2004 2005 2006E 2007F 2008F name to Holcim Indonesia earlier this year came as a
Net Profit (Rpbn) (533) (334) 198 27 157 shock. As part of the name change, SMCB re-branded
EPS (Rp) (70) (44) 26 3 20 its products. In the short term, the re-branding caused
EPS Growth (%) nm nm nm (86.6) 491.0 confusion in the market, which may have contributed
CFPS (Rp) 25.2 39.6 66.1 63.2 80.8
to declining market share of 3.2% to 12.2% in 2006E.
DPS (Rp) - - - - -
However, we believe re-branding its products will help
sales in the longer term.
BVPS (Rp) 281 240 266 269 290
P/E (x) nm nm 26.0 193.3 32.7 To regain its loss market share, SMCB has started to
P/CF (x) 26.6 16.9 10.1 10.6 8.3 aggressively increase their promotion spending, from
P/BV (x) 2.4 2.8 2.5 2.5 2.3 Rp15.5bn in 2005 to Rp21.7bn in 2006E. One of the
EV / EBITDA (x) 29.3 18.8 19.2 16.3 11.2 company's breakthroughs is the architectural clinic for
Div Yield (%) - - - - - the masons. We believe this imperative as 70.0% of
domestic sales is derived from retail sales where
masons have a large influence in this market. SMCB
Profile also plan to add 2,000 new outlets to 8,000 outlets
Holcim Indonesia (SMCB), the third largest cement producer next year. Combination of the plans above should help
in Indonesia, was the first cement company listed in JSX in in market share recovery from 12.2% this year to 13.0%
1977 under the name of PT Semen Cibinong Tbk. In early in 2007.
2006, the company changed its name to Holcim Indonesia. Taken all the factors above, we expect 2007 sales
SMCB currently operates 2 plants in Narogong, West Java, growth of 17.3% from Rp2.9tr in 2006 to Rp3.4tr. Going
and in Cilacap, Central Java, with total annual production beyond 2007, opportunity of higher sales growth is
capacity of 9.7m tons. Currently, about 60.0% of the there to be taken as SMGR and INTP are expected to
company's products are sold in Java and 30.0% allocated have reached their full capacity level by 2008 and 2010.
for export market. The current shareholding structure: Holcim Margin wise, higher sales will lead to improved
Group 78.2% and Public 22.8%. operating efficiency (lower breakdown time and
FC/unit) resulting in improvement of operating margin
Price Chart from 2.2% in 2006 to 4.9% in 2007, which translate to
a 162.2% jump in 2007 operating profit to Rp165.8bn
(m)
(Rp) from Rp63.3bn in 2006. In 2007, we forecast lower net
800 250
profit of Rp26.6bn compared to our 2006 estimate of
700
200
Rp197.8bn, due to a Rp332.1bn forex gain in 2006
600 versus a Rp 22.2bn forex loss for 2007. Excluding the
500 150 forex effects, net profit actually increased significantly
400 from an Rp134.3bn net loss in 2006 to Rp48.8bn net
100
300 gain in 2007.
200
50 SMCB announced the restructuring of its US$195.7m
100
subsidiary loan, whereby the grace period of
0 0
27-Dec-05 27-Mar-06 27-Jun-06 27-Sep-06 27-Dec-06
chargeable interest was extended from Aug 06 to Aug08.
Hence, we have revised our 2007 net profit forecast to
Rp26.6bn from an expected loss of Rp147.0bn.

p.56
Cash & Deposits 289 267 279 166 71
Revenue 2,368 3,018 2,909 3,412 4,083
Other curr. assets 688 855 789 895 1,028
% growth 5.7 27.4 (3.6) 17.3 19.7
Net fixed assets 6,394 6,086 5,779 5,556 5,327
COGS 2,197 2,618 2,605 2,989 3,432
Other assets 149 116 110 103 101
Gross Profit 172 399 304 423 651
Total assets 7,520 7,324 6,958 6,719 6,527
Op. Profit (70) 119 63.3 166 376
ST debts - - - - -
EBITDA 325 513 470 539 755 Other curr. Liab. 351 369 394 452 521
% growth (13.1) 57.8 (8.4) 14.8 40.1 LT debts 4,684 4,770 4,138 3,838 3,387
Net int. inc./(exp.) (105) (131) (155) (148) (211) Other LT liabilities 332 343 388 364 397
Gain/(loss) forex (407) (247) 332 (22) 18 Minority interest - - - - -
Other inc./(exp.) 50 53 42 42 42 Total Liabilities 5,367 5,482 4,919 4,655 4,305
Pretax Profit (533) (205) 282 38 225 Shareholders' Equity 2,154 1,842 2,038 2,065 2,222
Tax - 146 84 12 68 Net (debt)/cash (4,395) (4,503) (3,859) (3,673) (3,316)
Minority Int. - 1 2 2 2 Total cap. empl. 7,020 6,839 6,453 6,164 5,906
Extra. Items - 17 - - - Working capital 338 486 396 443 508
Net Profit (533) (334) 198 27 157
% growth nm nm nm (86.6) 491.0 Key Ratio Analysis
Year end 31 Dec 2004 2005 2006E 2007F 2008F

Cash Flow (Rpbn)
Profitability
Year end 31 Dec 2004 2005 2006E 2007F 2008F Gross Margin (%) 7.2 13.2 10.5 12.4 16.0
Op. Margin (%) (3.0) 3.9 2.2 4.9 9.2
Net Profit (533) (334) 198 27 157 EBITDA Margin (%) 13.7 17.0 16.1 15.8 18.5
Depr. / Amort. 359 362 376 339 340 Net Margin (%) (22.5) (11.1) 6.8 0.8 3.8
Others 507 489 (156) 160 181 ROE (%) (24.8) (16.7) 10.2 1.3 7.3
Chg in Working Cap. (140) (213) 90 (41) (59) ROA (%) (7.1) (4.5) 2.8 0.4 2.4
CF's from ops 193 304 507 484 619 Stability
Capex (125) (85) (100) (150) (150) Current ratio (x) 1.4 2.4 2.5 2.5 2.0
Others (11) 21 (1) 1 - Net. Debt/Equity (x) 2.0 2.4 1.9 1.8 1.5
CF's from investing (136) (64) (101) (149) (150) Int. Coverage (x) 4.5 4.8 4.4 4.6 3.9
Net change in debt (2) (165) (899) (1,070) (1,319) Efficiency
Others (78) (96) 504 622 755 Debtors' turnover (days) 50 43 40 40 40
CF's from financing (80) (261) (394) (448) (564) Creditors' turnover (days) 26 26 30 30 30
Net cash flow (23) (22) 12 (113) (95) Inventory turnover (days) 48 53 50 50 50
Cash at BoY 311 289 267 279 166
Cash at EoY 289 267 279 166 71 Key Assumptions
Free Cash Flow 68 218 407 334 469
Year end 31 Dec 2006E 2007F 2008F
Interim Results (Rpbn) Domestic sales volume (m tons) 31.0 32.6 34.8
SMCB's domestic sales volume (m tons) 3.8 4.2 4.9
3Q05 4Q05 1Q06 2Q06 3Q06 SMCB's exports sales volume (m tons) 1.6 1.7 1.9
Sales 861 747 685 694 820 Domestic selling price (Rp'000/kg) 529 555 583
Gross Profit 242 (128) 71 195 195 Exports selling price (US$/ton) 36 37 40
Operating Profit 90 50 (2) (33) 30
Net profit 653 (770) 220 (81) (14)
Gross Margin (%) 28.1 (17.2) 10.3 28.1 23.8
Opr Margin (%) 10.4 6.7 (0.3) (4.8) 3.7
Net Margin (%) 75.9 (103.0) 32.1 (11.6) (1.8)
Date Event
Jul-94 4:5 Rights Issue @Rp5,500

Jul-97 2:1 Stock Split
2002 2003 2004 2005 2006 Sep-97 5:2 Bonus Issue
- High 510 490 575 670 730 Issued Shares (m) 7,662.9
- Low 105 125 260 310 475 Par Value (Rp) 500
EV/EBITDA (x) Market Cap (Rpbn) 5,134
- High 40.0 20.6 27.1 18.8 20.1 12-month High/Low Rp730 / Rp475
- Low 25.0 13.1 19.7 13.4 16.0 12-month Average Daily t/o (m) 16.9
p.57
BUY
INCO Price Rp31,000
Pure Exposure Sector Mining
Reuters / Bloomberg : INCO.JK/ INCO IJ

We like INCO's pure exposure to nickel and its position as the largest nickel miner in the country. Our
nickel price projection for 2007 is US$11.1/lb.; conservative compared to a current price of US$15.2/lb.
The market is over-discounting the stock for production declines and delays at the Karebbe dam project.
We believe the risk has tilted to the upside on both issues, while a possible tender offer by CVRD could
provide further gains. BUY with a DCF-driven TP of Rp35,300.

Of Indonesia's nickel producers, we like INCO for its
Year end Dec 2004 2005 2006E 2007F 2008F higher operating efficiency (evidenced by stronger
margins) and purer exposure to nickel. We assume
Net Profit (US$m) 289 272 582 614 579 another increase of 5.0% in the nickel price next year
EPS (US$) 0.29 0.27 0.59 0.62 0.58 to US$11.1/lb. However, we have chosen a more
EPS Growth (%) 177.0 (5.7) 114.0 5.5 (5.7)
conservative volume assumption of only 155.0m lbs.
or 6.1% below normal, to take into account the El Nino
CFPS (US$) 0.40 0.28 0.47 0.80 0.72 weather phenomenon, which would lower the water
DPS (US$) 0.11 0.11 0.23 0.25 0.23 level at INCO's dam.
BVPS (US$) 1.08 1.30 1.65 2.02 2.37 Brazil's Cia Vale de Rio Doce of Brazil acquisition of
P/E (x) 11.9 11.6 5.8 5.5 5.8 Inco Canada can only mean good news for the
P/CF (x) 8.3 11.2 7.2 4.2 4.8 company and its shareholders. There are two
P/BV (x) 3.1 2.4 2.1 1.7 1.5
possibilities: 1). A tender offer, which is still up in the
air as the regulator (Bapepam) has yet to make its
EV / EBITDA (x) 6.7 6.1 3.5 2.9 2.7 final decision; and 2). Higher dividends to help the
Div Yield (%) 3.2 3.5 6.9 7.3 6.8 parent company's cash flow. INCO's average dividend
payout ratio for the last three years is 41.9%, which we
believe could rise above 50.0%, considering the
company's net cash position.
Profile
Potential shortfall in 2006 production will have a
INCO is Indonesia's largest nickel producer, with operations negligible impact on profits and valuation. We currently
assume 159.0m lbs. of nickel in matte production, 1.6%
dating back to 1968. It sells nickel-in-matte, an intermediate above the company's revised forecast. Realigning our
product sold to Japan under long-term contracts. The forecast in-line with the company's would reduce net
company is majority owned by Inco Ltd. of Canada (61.0%), profit by 2.1% and valuation by 0.3%.
which was acquired by CVRD of Brazil in 2006. The company A key project in the company's pipeline is a capacity
expansion of 40.0 m lbs. or a 24.2% increase. The
has been listed on the JSX since 1990.
need to obtain permission from the Ministry of Forestry
for a 20.0% expansion of the dam area has delayed
the project, but we remain confident of its realization.
Management is currently negotiating the replacement
Price Chart area for the forest. We are forecast the dam and smelter
expansions to be completed in 2010. The additional
volume should increase 2011 net profit by 21.5%.
Price (Rp) Volume
35000 8
We believe the market has been overly focused on
potential production declines and project delays. Risk
7
30000 is more on the upside on production, given reports of
25000
6 rain in the last few days. Our sensitivity analysis shows
5 that an extra 1.0m lbs. of production would add 0.6%
20000
and 0.8% respectively to 2007 revenue and net profit.
4
15000 An extra US$1.0/lb. in the average nickel price would
3 add 9.7% and 15.6% respectively to 2007 revenue and
10000
2 net profit. rain in the last few days. Our sensitivity
5000 1
analysis shows that an extra 1m lbs. of production
would add 0.6% and 0.8% to 2007 respective revenue
0 -
and net profit. An extra US$1.0/lb. in average nickel
price would add 9.7% and 15.6% to 2007 respective
revenue and net profit.

p.58
Income Statement (US$m) Balance Sheet (US$m)
Revenue 792 885 1,329 1,362 1,316 Cash & Deposits 293 249 418 889 1,324
% growth 55.6 11.7 50.1 2.5 (3.4) Other curr. assets 216 209 437 385 361
COGS 357 443 483 471 484 Net fixed assets 1,036 1,178 1,222 1,292 1,328
Gross Profit 435 442 846 890 832 Other assets 6 6 6 6 6
Op. Profit 417 422 825 868 808 Total assets 1,551 1,642 2,083 2,571 3,019
EBITDA 484 479 891 938 882 ST debts - - 38 145 250
% growth 93.9 (1.0) 86.1 5.3 (6.0) Other curr. Liab. 203 126 139 147 144
Net int. inc./(exp.) (2) 3 4 8 17 LT debts 55 9 11 12 11
Gain/(loss) forex (1) (1) 0 (0) 0 Other LT liabilities 218 218 255 259 257
Other inc./(exp.) (3) (36) - - - Minority interest - - - - -
Pretax Profit 411 388 829 875 825 Total Liabilities 476 353 443 562 663
Tax (122) (116) (247) (261) (246) Shareholders' Equity 1,075 1,289 1,641 2,009 2,356
Minority Int. - - - - - Net (debt)/cash 180 212 278 637 973
Extra. Items - - - - - Total cap. empl. 1,342 1,511 1,901 2,274 2,618
Net Profit 289 272 582 614 579 Working capital 306 333 679 983 1,290
% growth 177.0 (5.7) 114.0 5.5 (5.7)
Key Ratio Analysis

Cash Flow (US$m)
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Net Profit 289 272 582 614 579 Gross Margin (%) 54.9 50.0 63.7 65.4 63.2
Depr. / Amort. 66 57 66 70 74 Op. Margin (%) 52.7 47.7 62.1 63.7 61.4
Chg in Working Cap 38 (118) (215) 61 22 EBITDA Margin (%) 61.0 54.1 67.0 68.9 67.0
Others 5 69 37 53 45 Net Margin (%) 36.4 30.7 43.8 45.1 44.0
CF's from oprs 397 280 470 798 720 ROE (%) 29.8 23.0 39.7 33.7 26.5
Capex (99) (106) (97) (127) (102) ROA (%) 20.3 17.0 31.3 26.4 20.7
Others 1 - - - - Stability
CF's from investing (98) (106) (97) (127) (102) Current ratio (x) 2.5 3.6 4.8 4.4 4.3
Net change in debt (64) (86) (36) 2 (2) Net. Debt/Equity (x) nc nc nc nc nc
Others (76) (132) (168) (202) (180) Int. Coverage (x) 93.8 87.4 267.4 86.3 50.4
CF's from financing (140) (218) (204) (200) (182) Efficiency
Net cash flow 160 (44) 169 471 435 Debtors' turnover (days) 43 35 37 77 71
Cash at BoY 133 293 249 418 889 Creditors' turnover (days) 30 31 36 46 43
Cash at EoY 293 249 418 889 1,324 Inventory turnover (days) 69 71 110 143 126
Free Cashflow 298 175 373 671 617
Key Assumptions
Interim Results (US$m)
Year end 31 Dec 2006E 2007F 2008F
3Q05 4Q05 1Q06 2Q06 3Q06
Average LME 3M nickel futures (US$/lb.) 10.60 11.13 10.02
Sales 219 231 182 259 308 Average nickel in matte realized price (US$/lb.) 8.23 8.65 7.86
Gross Profit 91 123 69 117 183 Average nickel in matte cash cost (US$/lb) 2.63 2.60 2.50
Operating Profit 86 117 62 111 176 Total nickel in matte sales volume (m lbs.) 159 155 165
Net profit 121 151 44 80 168
Gross Margin (%) 41.4 53.0 37.8 45
. 3 59. 6
Opr Margin (%) 39.1 50.4 35.3 43.0 57.1
Net Margin (%) 55.2 65.3 24.0 30.8 54.7
Date Event
May-90 IPO @ Rp9,800 per share
2002 2003 2004 2005 2006 Aug-04 4 : 1 Stock Split
- High 7,523 8,725 12,850 16,250 32,750 Issued Shares (m) 993.6
- Low 4,280 4,440 5,875 11,300 13,000 Par Value (Rp) : 500
EV/EBITDA (x) Mkt Cap (Rp bn) : 30,803
- High 7.9 4.1 2.6 3.0 3.7 12 - months High/Low : Rp32,750 /Rp13,000
- Low 5.1 2.2 1.0 2.0 1.3 12 - months Average Daily t/o (m) 0.79
p.59
BUY
Indofood Price Rp1,350
Unlocking Value Sector Consumer
Reuters / Bloomberg : INDF.JK/ INDF IJ

We expect INDF's instant noodle market share to rebound to 80.0% in 2007 despite fierce competition.
Higher wheat prices in 2007 would have limited impact on noodle production costs, which we estimate
to increase by 2.5%. We believe cost increases would be more than compensated by a 5.0% hike in the
selling price for instant noodles.
The shares currently trade at 2007 P/E and EV/EBITDA of 15.1x and 5.2x, well below the sector's valuation
P/E and EV/EBITDA of 22.2x and 11.4x, respectively. Furthermore, we believe the fundamental of INDF is
still appealing given its recent strategy to maintain and expand the business. Therefore, we continue to
recommend INDF shares as a BUY, with 29.5% upside potential from our DCF price target of Rp1,749 per
share.

The combination of a rebound in purchasing power
Year end Dec 2004 2005 2006E 2007F 2008F
and the company's plan to extend its distribution stock
Net Profit (Rpbn) 387 124 656 760 1,028 points from around 860 locations to approximately
EPS (Rp) 45 15 77 89 121 1,000 locations, should increase instant noodles
EPS Growth (%) (35.9) (68.0) 429.3 15.8 35.3 sales volume by 5.4% YoY, reaching 11.9bn packs in
CFPS (Rp) 219 98 235 250 186 2007. We also project a 5.0% YoY increase in selling
DPS (Rp) 18 5 23 27 36 price, resulting in 10.7% YoY growth for noodle division
revenues to Rp7.0tr.
BVPS (Rp) 491 505 501 563 648
P/E (x) 29.8 92.9 17.5 15.1 11.2 INDF's consolidated sales should grow by 8.4% to
P/CF (x) 6.2 13.8 5.7 5.4 7.3 Rp22.1tr in 2007. In our view, INDF's noodles have
P/BV (x) 2.7 2.7 2.7 2.4 2.1 superior brand power, as reflected by their recent market
EV / EBITDA (x) 7.3 8.0 6.3 5.2 4.8 share rebound despite fierce competition from
Div Yield (%) 1.3 0.4 1.7 2.0 2.7 Wingsfood. After a low of 73.0% in 2005, market share
should return to the 80.0% of the pre-Wingsfood era by
2007. The flour division should also perform well;
Profile hence, an overall growth rate above Indonesia's annual
PT Indofood Sukses Makmur (INDF) was established in population growth of 2.0%-3.0%.
August 1990 and listed its shares on the JSX in July 1994. Although wheat prices are expected to rise in 2007,
The company's core businesses include the production of the impact on noodle production costs should be more
instant noodles and flour, contributing an average of 33.8% than compensated for by selling price increases. We
and 30.3% of total revenue, respectively. Since 1998, INDF forecast the wheat price to grow by 7.5% YoY, reaching
has increased its installed capacity by 12.3% to 13.5 billion an average of US$215.00/tonne in 2007. However, as
flour cost constitutes 33.0% of total noodle production
packs of instant noodles, while the flour division's production
costs, we only expect total production cost to increase
is up by 6.5% to 3.8 million tons per year. Currently, CAB by 2.5% in 2007. Given our 5.0% projection for a noodle
Holdings Ltd. owns 51.5% of INDF. price increase, INDF's noodle division's gross margin
should expand by 2.5% in 2007.
Price Chart
The planned Reverse Takeover Transaction (RTO)
(Rp) (m)
1,600 140
between the company's palm-oil subsidiary and City
Axis should allow INDF to raise US$250m-US$300m.
1,400 120
The fund will be used to rejuvenate its palm-oil
1,200
100 plantation, (current age is near the end of prime at
1,000
80
14.0 years) and also to expand the planted area from
800 63,552ha to reach 250,000ha by 2015. We believe the
60
600 transaction adds value to the company, considering
400
40 current CPO production only fulfills 50.0% of internal
20
requirements. What's next? After listing the plantation
200
division, we believe the flour division is next, in order to
0 0
18-May-06 17-Jun-06 17-Jul-06 16-Aug-06 15-Sep-06 15-Oct-06 14-Nov-06 14-Dec-06
unlock the value and for the company to obtain cheap
VOLUME (RHS) PRICE (LHS) funding through the equity market.

p.60
Revenue 17,919 18,765 20,417 22,135 23,304 Cash & Deposits 1,394 971 2,150 1,107 114
% growth 0.3 4.7 8.8 8.4 5.3 Other curr asset 5,021 5,501 5,751 6,214 6,620
COGS 13,313 14,342 15,386 16,924 17,627 Net fixed asset 6,013 6,042 5,633 5,728 5,658
Other asset 3,245 2,273 1,752 545 599
Gross Profit 4,605 4,423 5,030 5,210 5,678
Total asset 15,673 14,786 15,286 13,594 12,992
Opr Profit 2,098 1,662 1,969 2,050 2,180
ST debt 2,400 2,152 4,625 3,813 3,379
EBITDA 2,564 2,222 2,609 2,925 3,129
Other curr liab 1,938 2,260 2,320 2,467 2,649
% growth 1.8 (13.3) 17.4 12.1 7.0 LT debt 5,478 4,682 2,558 1,073 97
Net int inc/ (exp) (818) (812) (926) (771) (496) Other LT liabilities 912 944 827 762 719
Gain/ (loss) forex (297) (478) 86 6 (3) Minority interest 756 435 683 673 623
Other inc/ (exp) (120) 53 - - - Total Liabilities 11,483 10,478 11,012 8,788 7,466
Pre-tax Profit 863 426 1,129 1,285 1,681 Shareholders Equity 4,190 4,308 4,274 4,806 5,526
Tax 324 189 339 385 504 Net (debt)/cash (7,081) (6,170) (5,033) (3,779) (3,362)
Extra. Items - - - - - Total cap employed 12,665 11,449 11,457 9,692 9,001
Net Profit 387 124 656 760 1,028 Working capital (50) (93) 195 261 116
% growth (35.9) (68.0) 429.3 15.8 35.3
Key Ratio Analysis
Cash Flow (Rpbn) Year end 31 Dec 2004 2005 2006E 2007F 2008F
Profitability
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Gross Margin (%) 25.7 23.6 24.6 23.5 24.4
Net Profit 387 124 656 760 1,028 Op. Margin (%) 11.7 8.9 9.6 9.3 9.4
Depr. / Amort. 466 560 640 875 950 EBITDA Margin (%) 14.3 11.8 12.8 13.2 13.4
Others 1,061 58 907 760 (275) Net Margins (%) 2.2 0.7 3.2 3.4 4.4
Chg in Working Cap (50) 93 (195) (261) (116) ROAE (%) 9.3 2.9 15.3 16.7 19.9
CF's from oprs 1,864 834 2,008 2,134 1,587 ROAA (%) 2.5 0.8 4.4 5.3 7.7
Capex (961) (520) (566) (956) (867) Stability
Others (391) 447 - - Current ratio (x) 1.5 1.5 1.1 1.2 1.1
CF's from investing (1,351) (73) (566) (956) (867) Net. Debt/Equity (x) 1.7 1.4 1.2 0.8 0.6
Net change in debt (266) (1,161) (115) (2,024) (1,485) Int. Coverage (x) 2.7 2.7 2.8 3.7 6.1
Others (383) (23) (149) (197) (228) Efficiency
CF's from financing (648) (1,184) (264) (2,221) (1,713) Debtors’ turnover (days) 46 33 35 36 37
Net cash flow (136) (423) 1,179 (1,043) (993) Creditors’ turnover (days) 39 46 46 44 42
Cash at BoY 1,530 1,394 971 2,150 1,107 Inventory turnover (days) 62 63 62 62 62
Cash at EoY 1,394 971 2,150 1,107 114
Free Cash Flow 1,085 711 1,510 1,323 1,642
Key Assumptions
Year end 31 Dec 2006E 2007F 2008F

Instant Noodle Volume (bn pack) 11.3 11.9 12.7
3Q05 4Q05 1Q06 2Q06 3Q06 Price of Instant Noodles (Rp per pack) 558 586 597
Sales 4,920 5,236 4,909 5,233 5,896 Flour Volume (m tons) 2.6 2.7 2.8
Gross Profit 1,159 1,125 1,074 1,229 1,474 Flour Price (Rp per kg) 2,812 2,903 2,963
Operating Profit 431 347 430 502 539
Net profit 28 82 174 94 238
Gross Margin (%) 23.5 21.5 21.9 23.5 25.0 Capital History & Stock Data
Opr Margin (%) 8.8 6.6 8.8 9.6 9.1
Net Margin(%) 0.6 1.6 3.5 1.8 4.0 Date Event
Jul-94 IPO of 21m shares @ Rp6,200 per share

Aug-96 2 : 1 Stock Split
Apr-97 1 : 5 Right Issue @ Rp3,300 per share
2002 2003 2004 2005 2006 Sep-00 5 : 1 Stock Split
Stock Data
Price (Rp)
Issued Shares (m) 8,528.6
- High 1,250 950 925 1,360 1,450
Par Value (Rp) 100
- Low 475 550 600 670 810
Mkt Cap (Rpbn) 11,514
EV/EBITDA (x)
12 - months High / Low (Rp) 1,450 / 810
- High 7.5 5.6 5.8 8.0 6.7
12 - month Average Daily Turnover (m) 30.9
- Low 4.7 4.2 4.8 5.3 4.6
p.61
BUY
Kalbe Farma Price Rp1,190
Nutritional Growth Sector Pharmaceutical
Reuters / Bloomberg : KLBF.JK/ KLBF IJ
Accelerated growth at the pharmaceuticals division, from a flat 1.3% in 2006 to 8.5% in 2007, will positively
impact total revenues in 2007. Another attraction is a continuation of double-digit growth in the nutritional
division, at around 20.0% from 2007 onwards.
KLBF currently trades at a fair 2007 P/E and EV/EBITDA of 14.5x and 7.2x, which we view as reasonable
given its dominant position in the industry. At current share price, the stock offers 21.2% upside potential;
we maintain our BUY recommendation with a DCF-derived target price of Rp1,442.

KLBF's pharmaceuticals division, which currently holds
Year end Dec 2004 2005 2006E 2007F 2008F a combined market share of approximately 11.7% in
Net Profit (Rpbn) 451 653 744 833 939 OTC and ethical medicines, is set to post a significant
EPS (Rp) 44 64 73 82 92 improvement from the rather flat growth of 1.3% in 2006
EPS Growth (%) na 46.2 13.9 12.0 12.7
to 8.5% in 2007. We believe KLBF's OTC segment will
continue to prosper in 2007, with flagship products
CFPS (Rp) 31 54 119 78 124
such as Promag and Waisan to maintain its dominant
DPS (Rp) 1 3 6 8 9 87.0% market share for antacid products. To support
BVPS (Rp) 197 235 306 380 464 higher growth in 2007 onwards, KLBF will also regularly
P/E (x) 27.0 18.5 16.2 14.5 12.9 launch two to three new OTC products and 20 ethical
P/CF (x) 38.2 22 10 15.2 9.6 drugs. Overall, we project 2007 revenue for the
P/BV (x) 6.0 5.1 3.9 3.1 2.6 pharmaceutical division to reach Rp3.4tr.
EV / EBITDA (x) 10.0 9.8 8.5 7.2 6.0 We are very excited by the outlook for the company's
Div Yield (%) 0.1 0.3 0.5 0.7 0.8 nutritional division. KLBF will complete a 12,000 ton
capacity powdered milk factory in 1Q07, a 50.0%
Profile increase from 2006 production. This should also result
in higher margins for the division, as the company
KLBF, established in September 1966, has heavily should cease to outsource milk production. KLBF has
restructured its operations, resulting in better integration also begun expanding into niche markets such as
between business units. Besides its position as one of the clinical foods. It launched diabetasol, a milk for those
leading players in the pharmaceuticals sector, its who have diabetes, in 2002. We expect total revenues
commitment to build a business in nutritional foods has at the nutritional division to increase by 20.0% to Rp1.4tr
set the company on a more solid footing going forward. in 2007. Furthermore, as upper income customers
contribute between 20.0% and 25.0% of revenues, we
After successfully merging with DNKS and Enseval Holding
believe this market segment stabilizes long-term
in 2005, KLBF has increased its market capitalization
revenue growth for the division due to its lower price
substantially to above US$1.0bn. elasticity.
Price Chart Looking to 2007 and beyond, we believe any volatility

in the Rupiah's exchange rate against the US Dollar
(Rp) (m) would concern KLBF less, as the company has repaid
1,800 300
its outstanding US$66.5m loan ahead of schedule.
1,600
250
Hence, its Dollar cost exposure will be more or less
1,400 balanced by its Dollar asset exposure. According to
1,200 200 our model, a 5.0% appreciation in the Dollar would
1,000 result in a 1.1% decrease in gross margin, but only a
150
800 slimmer 0.6% decrease in net margin for 2007.
600 100
As a step to improve internal efficiency, KLBF is in the
400
50 process of implementing a single-warehouse inventory
200
system, which will eliminate overlap across business
0 0 units. Based on our calculations, a cut of KLBF's cash
23-Dec-05 23-Mar-06 23-Jun-06 23-Sep-06 23-Dec-06
cycle by a single day would increase pretax profit by
almost Rp0.95bn.

p.62
Revenue 5,043 5,871 6,291 6,994 7,767 Cash & Deposits 725 918 977 1,469 2,390
% growth na 16.4 7.2 11.2 11.0 Other curr. asset 2,585 2,737 2,818 3,147 3,448
Net fixed asset 694 859 794 841 890
COGS 2,594 2,861 3,026 3,391 3,760
Other asset 227 214 101 96 92
Gross Profit 2,449 3,010 3,265 3,603 4,008
Total asset 4,231 4,728 4,690 5,554 6,820
Opr Profit 924 1,106 1,196 1,347 1,522
ST debt 31 17 46 23 27
EBITDA 1,036 1,243 1,355 1,533 1,735 Other curr. Liab. 764 733 669 743 830
% growth na 20.0 9.0 13.2 13.2 LT debt 1,396 982 345 345 645
Net int inc/ (exp) (38) (3) 48 5 6 Other LT liabilities 92 90 79 94 109
Gain/ (loss) forex (102) (18) (37) 1 (2) Minority interest 348 517 438 485 503
Other inc/ (exp) 38 (23) 8 8 8 Total Liabilities 2,632 2,339 1,577 1,691 2,112
Pre-tax Profit 822 1,062 1,215 1,361 1,534 Shareholders’ Equity 1,599 2,389 3,113 3,863 4,708
Tax 278 311 364 408 460 Net (debt)/cash (736) (102) 587 1,101 1,718
Total cap. empl. 3,060 3,409 3,503 4,231 5,380
Extra. Items (0) - - - -
Working capital 2,514 2,905 3,080 3,850 4,982
NetProfit 451 653 744 833 939
% growth na 44.9 13.9 12.0 12.7
Key Ratio Analysis
Cash Flow (Rpbn) Year end 31 Dec 2004 2005 2006E 2007F 2008F
Year end 31 Dec 2004 2005 2006E 2007F 2008F Profitability

Gross Margins (%) 48.6 51.3 51.9 51.5 51.6
Net Profit 451 653 744 833 939 Op. Margins (%) 18.3 18.8 19.0 19.3 19.6
Depr. / Amort. 101 121 143 170 197 EBITDA Margins (%) 20.5 21.2 21.5 21.9 22.3
Others (299) 97 62 (97) 74 Net Margins (%) 8.9 11.1 11.8 11.9 12.1
Chg in Working Cap na (321) 260 (113) 47 ROAE (%) na 32.8 27.1 23.9 21.9
CF's from oprs 253 550 1, 209 794 1,258 ROAA (%) na 14.6 15.8 16.3 15.2
Capex (174) (402) (174) (219) (244) Stability
Others 181 285 - - - Current ratio (x) 2.9 4.0 5.3 6.0 4.0
CF's from investing 7 (117) (174) (219) (244) Net. Debt/Equity (x) 0.5 0.0 nc nc nc
Net change in debt (268) (288) (903) - - Int. Coverage (x) 11.0 11.9 30.8 23.7 26.7
Others (20) 48 (73) (83) (94) Efficiency
CF's from financing (288) (240) (976) (83) (94) Debtors’ turnover (days) 37 36 37 36 37
Net cash flow (27) 193 60 492 920 Creditors’ turnover (days) 45 39 39 39 39
Cash at BoY 752 725 918 977 1,469 Inventory turnover (days) 130 140 135 137 136
Cash at EoY 725 918 977 1,469 2 ,390
Free Cash Flow 477 228 755 732 904 Key Assumptions
Year end 31 Dec 2006E 2007F 2008F

Sales Breakdown (Rpbn)
3Q05 4Q05 1Q06 2Q06 3Q06 Pharmaceuticals 3,158 3,426 3,645
Sales 1,559 1,441 1,432 1,529 1,532 Health Food 1,179 1,415 1,727
Gross Profit 822 753 722 773 797 Packaging 205 229 252
Operating Profit 313 217 316 267 270 Distribution 1,749 1,925 2,144
Net profit 198 142 200 198 142
Gross Margins (%) 52.7 52.3 50.5 50.5 52.0 Capital History & Stock Data
Opr Margins (%) 20.1 15.0 22.1 17.4 17.6
Net Margins(%) 12.7 9.9 14.0 13.0 9.3 Date Event
Sep-99 5:1 Stock Split

Dec-00 Bonus Issue
Jan-04 2:1 Stock Split
2002 2003 2004 2005 2006 Dec-05 Conversion PT Dankos & PT Enseval
Stock Data
Price (Rp)
Issued Shares (m) 10,156.0
High na na 625 1,020 1,570
Par Value (Rp) 50
Low na na 325 550 970
Mkt Cap (Rpbn) 12,086
EV/EBITDA (x)
12 - months High / Low (Rp) 1,570 / 970
- High na na 5.6 8.4 11.3
12 - month Average Daily Turnover (m) 23.3
- Low na na 3.3 4.6 6.8
p.63
BUY
Perusahaan Gas Negara Price Rp11,600
Double-Barreled Growth Sector Oil & Gas
Reuters / Bloomberg : PGAS.JK/ PGAS IJ

The start of SSWJ II gas flow should remove doubts over the company's project management. After full
completion of both SSWJ pipelines in 2007, transmission and distribution volumes should rise by 51.0%
and 81.6%, respectively.
We believe the market is currently over apprehensive about the risks of open access and maintain our
stance on price increases to US$6.5/mmbtu by 2009 from a current price of US$5.0/mmbtu. BUY with a
DCF-driven TP of Rp16,900, assuming a WACC of 10.1% and a LT growth rate of 2.0%.

Full completion of both SSWJ pipelines in 2007 is the
Year end Dec 2004 2005 2006E 2007F 2008F major short-term catalyst for the stock. It will add
305.0mmscfd, or 79.0% of total distribution volume in
Net Profit (Rpbn) 474 862 1,961 3,214 4,969 2006. By 2010, both pipelines should add
EPS (Rp) 105 190 432 708 1,095 916.7mmscfd, a 237.4% increase over 2006 volume.
EPS Growth (%) (7.7) 81.8 127.4 63.9 54.6 Confirmation of SSWJ II gas flow should restore the
market's confidence in the company's management,
CFPS (Rp) 250 371 566 1,135 1,469
considering previous delays.
DPS (Rp) 53 105 229 375 588
BVPS (Rp) 700 925 1,118 1,459 1,967 Some of the negative sentiment surrounding the stock
P/E (x) 111.0 61.0 26.8 16.4 10.6 since the resolution of the East Java pipeline explosion
P/CF (x) 46.4 31.2 20.5 10.2 7.9 and the change of directors. It only took four days to
redirect the gas from Pertamina's to PGAS' pipeline,
P/BV (x) 16.6 12.5 10.4 7.9 5.9
and Pertamina recently indicated that the relocation
EV / EBITDA (x) 35.4 25.6 18.3 9.6 6.5 might be completed inside the three months we have
Div Yield (%) 0.5 0.9 2.0 3.2 5.1 assumed, which should allow Santos gas to ramp up
from the current flow of 80mmscfd to 100mmscfd.
Completion by the end of January 2007 would result in
Profile a 2007 net profit increase of 0.3%.
PGAS controls 74.0% of the gas transmission business Pricing for PLN's potential 100mmscfd contract with
and 91.0% of the distribution business in Indonesia. PGAS remains unconfirmed. We believe it is highly
Distribution provides the bulk of revenue, currently selling unlikely the company will acquiesce to PLN's proposal
gas at US$5.0/mmbtu, or equivalent to oil at US$29.0/barrel. of US$3.5/mmbtu. The Government has clarified it to
The company's business model is characterized by rigid be a business to business transaction and will not
interfere, which is a good sign, considering the current
costs (mostly depreciation) and selling price flexibility (due
domestic market price of US$5.0/mmbtu.
to its bargaining power). Its current major project is the South
Sumatra - West Java (SSWJ) pipeline. The Ministry of State-Owned Enterprises has submitted
plans for divestment of a further 2.3% of the
Government's holding in PGAS, which should add
Price Chart liquidity and is generally viewed as positive for the
shares in the short-term. The Government felt its latest
Price (Rp) Volume sale of a 4.1% block at Rp11,350 was a
16000 45
disappointment, and they are clearly eager to fetch
40
more this time.
14000
12000
35
Open access is an important issue, but it is overrated.
10000
30
It will take at least two years to generate the required
25 law and the necessary technology to make open
8000
20 access possible. BPH Migas (the downstream gas
6000
15
regulator) announced plans to auction gas distribution
4000
10
licenses in several Sumatran markets in early
2000
November, but there has yet to be any progress
5
reported. We are still confident in our monopolistic
0 - model for PGAS, which allows it the bargaining power
to raise prices by 30.0% to our long-term assumption
of US$6.5/mmbtu in 2009.

p.64
Year end 31 Dec 2004 2005 2006E 2007F 2008F Year end 31 Dec 2004 2005 2005 2006E 2007F
Revenue 4,458 5,434 7,343 13,716 19,108 Cash & Deposits 3,347 3,972 552 2,873 6,166
% growth 24.0 21.9 35.1 86.8 39.3 Other curr. assets 1,458 1,099 1,461 2,363 3,119
COGS 2,379 2,652 3,270 6,530 9,319 Net fixed assets 6,068 7,109 15,501 16,777 16,257
Gross Profit 2,079 2,781 4,074 7,187 9,789 Other assets 167 394 394 394 394
Op. Profit 998 1,552 2,761 4,982 7,210 Total assets 11,040 12,575 17,908 22,407 25,937
EBITDA 1,550 2,141 3,373 6,300 8,764 ST debts 320 317 286 381 1,123
% growth 27.3 38.1 57.6 86.8 39.1 Other curr. liab. 957 1,097 1,285 2,731 3,593
LT debts 5,855 6,068 9,675 10,582 9,990
Net int. inc./ (exp.) (157) (178) (121) (337) (275)
Other LT liabilities 168 201 871 1,344 1,528
Gain/ (loss) forex (242) (91) 128 (83) 137
Minority interest 562 694 720 748 779
Other inc./ (exp.) 84 80 70 70 70
Total Liabilities 7,862 8,376 12,837 15,786 17,012
Pretax Profit 683 1,364 2,837 4,633 7,142
Shareholders’ Equity 3,178 4,198 5,071 6,621 8,925
Tax (202) (479) (851) (1,390) (2,143)
Net (debt)/cash (2,245) (2,238) (9,236) (7,917) (4,773)
Minority Int. (7) (23) (26) (28) (30)
Total cap. empl. 9,595 10,767 15,943 18,900 20,827
Extra. Items - - - - -
Working capital 3,527 3,658 441 2,124 4,570
Net Profit 474 862 1,961 3,214 4,969
% growth (7.7) 81.8 127.4 63.9 54.6
Key Ratio Analysis
Cash Flow (Rpbn) Year end 31 Dec 2004 2005 2005 2006E 2007F
Year end 31 Dec 2004 2005 2006E 2007F 2008F Profitability

Gross Margin (%) 46.6 51.2 55.5 52.4 51.2
Net Profit 474 862 1,961 3,214 4,969
Op Margin (%) 22.4 28.6 37.6 36.3 37.7
Depr. / Amort. 541 570 612 1,318 1,554 EBITDA Margins (%) 34.8 39.4 45.9 45.9 45.9
Others (287) 164 171 71 39 Net Margin (%) 10.6 15.9 26.7 23.4 26.0
Chg in Working Cap 407 89 (174) 544 105 ROAE (%) 14.7 23.4 42.3 55.0 63.9
CF's from oprs 1,135 1,685 2,569 5,148 6,667 ROAA (%) 4.7 7.3 12.9 15.9 20.6
Capex (752) (919) (9,004) (2,594) (1,034) Stability
Others 139 156 4 5 42 Current ratio (x) 3.8 3.6 1.3 1.7 2.0
CF's from investing (613) (763) (8,999) (2,589) (993) Net. Debt/Equity (x) 0.7 0.5 1.8 1.2 0.5
Net change in debt 1,474 213 3,607 907 (592) Int. Coverage (x) 4.4 6.2 12.0 13.8 20.4
Others (577) (509) (598) (1,145) (1,790) Efficiency
CF's from financing 898 (296) 3,009 (238) (2,382) Debtors turnover (days) 33 30 33 31 32
Net cash flow 1,420 626 (3,421) 2,322 3,293 Creditors turnover (days) 49 46 42 39 44
Cash at BoY 1,927 3,347 3,972 552 2,873 Inventory turnover (days) 8 5 3 1 1
Cash at EoY 3,347 3,972 552 2,873 6,166
Free Cash Flow 383 766 (6,434) 2,555 5,632
Key Assumptions
Year end 31 Dec 2006E 2007F 2008F

Transmission Volume (mmscfd) 614.4 927.7 1,236.0
3Q05 4Q05 1Q06 2Q06 3Q06
Transmission tariff (US$/mmbtu) 0.62 0.64 0.65
Sales 1435 1464 1717 1657 1602 Distribution volume (mmscfd) 386.1 700.9 903.1
Gross Profit 693 805 989 971 956 Distribution sales price (US$/mmbtu) 4.74 5.23 5.93
Operating Profit 395 436 731 668 665 Distribution purchase price (US$/mmbtu) 2.55 2.77 3.14
Net profit 81 435 694 406 466 Distribution margin 2.2 2.5 2.8
Gross Margin (%) 48.3 55.0 57.6 58.6 59.7
Opr Margin (%) 27.5 29.8 42.6 40.3 41.5
Net Margin (%) 5.6 29.7 40.4 24.5 29.1
Date Event
Dec-03 IPO of 4,321m shares @ Rp1,500
2002 2003 2004 2005 2006
-High na 1,750 1,950 7,350 13,950 Issued Shares (m) 4,537.0
-Low na 1,500 1,850 1,790 6,800 Par Value (Rp) : 500
EV/EBITDA (x) Market Cap (Rp bn) : 52,629
-High na 8.2 7.2 16.6 21.5 12 - months High/Low Rp13,950 / Rp6,800
-Low na 7.3 6.9 4.8 11.9 12 - months Average Daily t/o (m) 9.58
p.65
BUY
Telkom Price Rp10,100
Undisputed Heavyweight Sector Telecommunication
Reuters / Bloomberg : TLKM.JK/ TLKM IJ
Increased competition in cellular and CDMA is expected, but will no significant adverse effect on profits.
New players in the cellular business does not have enough resources (finance and time) to mount a
challenge, while there is enough room for all in the CDMA segment due to low penetration. Hence, we
expect TLKM to post 2007 revenue of Rp60.1tr, 19.1% growth, with net profit of Rp13.4tr.
Counter is trading at attractive 2007 P/E and EV/EBITDA of 15.2x and 5.4x. With a target price of Rp11,588
and dividend yield of 3.3%, total return is an impressive 18.0%. We placed a BUY rating.

Telkomsel has continued to post strong subscriber
Year end Dec 2004 2005 2006E 2007F 2008F
growth: 9M06 subs growth of 38.4% YoY exceeded our
Net Profit (Rpbn) 6,615 7,994 11,722 13,430 16,005 previous expectation of 28.8%. Hence, we have
EPS (Rp) 328 397 581 666 794 upgraded our 2006 growth estimate to 43.5%,
EPS Growth (%) 8.7 20.8 46.6 14.6 19.2 translating to 2006 subscribers of 34.8m, while 2007
CFPS (Rp) 807 1,045 1,056 1,232 1,472 growth is revised to 29.2% from our previous 24.2%
growth forecast. We thus expect 2006 market share of
DPS (Rp) 145 219 291 333 397
57.8%, strengthening further to 58.9% in 2007 with
BVPS (Rp) 899 1,155 1,518 1,894 2,355
45.0m subscribers. We believe Telkomsel's extensive
P/E (x) 30.8 25.5 17.4 15.2 12.7 network coverage (US$1.5bn in annual capex) and
P/CF (x) 12.5 9.7 9.6 8.2 6.9 promotions will win the subscriber battle for the simple
P/BV (x) 11.2 8.7 6.7 5.3 4.3 reason of economy of scale.
EV / EBITDA (x) 10.2 8.6 6.8 5.4 4.5 With strong subscriber growth, we estimate
Div Yield (%) 1.4 2.2 2.9 3.3 3.9 consolidated revenue from the cellular division to grow
by 31.2% and 32.3% for 2006 and 2007, which
Profile translates to revenues of Rp19.1tr and Rp25.3tr. We
also expect strong growth in data & internet usage of
PT Telekomunikasi Indonesia Tbk (TLKM), also known as 31.2% and 35.6% for 2006 and 2007. As such, we
Telkom, was established in 1991. However, its origins date calculate consolidated TLKM revenue for 2006 and
back to 1884 during the Colonial period. TLKM is Indonesia's 2007 up 20.8% and 19.1% to Rp50.5tr and Rp60.1tr,
largest telecommunications operator, offering services in respectively.
the fixed line, domestic long distance, international long
distance, fixed wireless access, cellular, data Increased competition in the fixed line, domestic long
communications, internet and leased line fields. Currently distance (SLJJ) and international connection (SLI) that
TLKM has 8.7m fixed lines in service, 4.1m fixed wireless may arise after the Government tenders new licenses
access, and 24.3m cellular subscribers. The Republic of in those segments will not have any significant adverse
Indonesia currently owns 51.2%, with the remainder held effect on TLKM. We base our position on: 1) funds
by the public. needed to develop the necessary infrastructure to
compete in the fixed line business combined with a
Price Chart regulated tariff make it unattractive for new investors;
(Rp) (m)
2) fixed line revenue contribution continues to decline,
12,000 80 indicating a shift in telephone usage to the mobile
age; and 3) revenue contributions of SLJJ and SLI are
70
10,000 only 6.6% for 2007.
60
8,000
50
Meanwhile, talk of competition in the GSM/3G segment,
with the expected entrance of Hutchinson and Maxis,
6,000 40
is also overhyped. We do not expect increased
4,000
30 competition to adversely affect Telkomsel. The fact is
20 Telkomsel's grip on the market is so tight that we do
2,000
10
not believe any single competitor will have enough
clout to dent profits. This is evident from Telkomsel's
0 0
22-Dec-05 10-Feb-06 1-Apr-06 21-May-06 10-Jul-06 29-Aug-06 18-Oct-06 7-Dec-06 ability to withstand competition from the two other
incumbent operators: ISAT (Buy, Rp7,119) and EXCL
(Not Rated).

p.66
Revenue 33,948 41,807 50,491 60,142 70,637 Cash & Deposits 5,098 5,397 8,287 5,788 9,599
% growth 25.2 23.2 20.8 19.1 17.4 Other curr. assets 4,328 4,908 5,652 6,725 7,930
Operating Expense 19,360 24,636 28,249 33,505 39,326 Net fixed assets 39,572 45,643 50,591 59,097 65,710
% growth 21.8 17.7 29.5 19.8 17.5 Other assets 7,403 6,223 5,197 4,182 3,176
Op. Profit 14,588 17,171 22,242 26,638 31,310 Total assets 56,179 62,171 69,726 75,792 86,416
EBITDA 21,026 24,741 30,662 38,016 44,869 ST debts 3,402 2,401 7,012 2,467 2,246
% growth 25.5 17.7 23.9 24.0 18.0 Other curr. Liab. 8,275 11,112 11,198 12,344 13,435
Net int. inc./(exp.) (952) (833) (983) (809) (318) LT debts 13,214 11,332 5,746 5,405 3,718
Gain/(loss) forex (1,221) (517) 378 (42) 52 Other LT liabilities 8,222 7,728 7,569 8,530 9,688
Other inc./(exp.) 334 420 - - - Minority interest 4,938 6,305 7,589 8,865 9,857
Pretax Profit 12,749 16,241 21,637 25,787 31,044 Total Liabilities 38,051 38,879 39,114 37,610 38,944
Tax 4,179 5,184 6,491 7,736 9,313 Shareholders’ Equity 18,128 23,292 30,613 38,181 47,472
Extra. Items - - - - - Net (debt)/cash (11,760) (8,359) (5,355) (2,969) 2,750
Net Profit 6,615 7,994 11,722 13,430 16,005 Total cap. empl. 34,744 37,026 44,233 46,916 54,298
% growth 8.7 20.8 46.6 14.6 19.2 Working capital 12,540 16,017 15,987 18,207 20,503
Key Ratio Analysis

Cash Flow (Rpbn)
Year end 31 Dec 2003 2004 2005E 2006F 2007F
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Profitability
Net Profit 6,615 7,994 11,722 13,430 16,005
Op. Margin (%) 43.0 41.1 44.1 44.3 44.3
Depr. / Amort. 6,439 7,571 8,420 11,379 13,558
EBITDA Margin (%) 61.9 59.2 60.7 63.2 63.5
Others 2,520 2,029 1,176 (2,191) (2,190)
Net Margin (%) 19.5 19.1 23.2 22.3 22.7
Chg in Working Cap. 692 3,477 (30) 2,219 2,296
ROAE (%) 37.3 38.6 43.5 39.0 37.4
CF's from ops 16,265 21,071 21,289 24,837 29,669
ROAA (%) 12.4 13.5 17.8 18.5 19.7
Capex (8,569) (12,107) (11,830) (17,290) (17,290)
Stability
Others (1,029) (106) (22) - -
Current ratio (x) 0.8 0.8 0.8 0.8 1.1
CF's from investing (9,598) (12,213) (11,852) (17,290) (17,290)
Net. Debt/Equity (x) 0.6 0.4 0.2 0.1 nc
Net change in debt (3,073) (3,563) (2,147) (4,185) (1,853)
Int. Coverage (x) 16.6 21.0 23.8 35.7 78.4
Others (3,832) (4,777) (4,400) (5,861) (6,715)
Efficiency
CF's from financing (6,905) (8,339) (6,547) (10,046) (8,568)
Net cash flow (238) 519 2,890 (2,499) 3,812 Debtors’ turnover (days) 34 31 30 30 30
Cash at BoY 5,094 4,856 5,375 8,265 5,765 Creditors’ turnover (days) 44 42 40 35 30
Cash at EoY 4,856 5,375 8,265 5,765 9,577 Inventory turnover (days) 2 2 2 2 2
Free Cash Flow (6,466) (7,084) 2,208 3,809 8,036
Key Assumptions
Interim Results (Rpbn) Year end 31 Dec 2006E 2007F 2008F

3Q05 4Q05 1Q06 2Q06 3Q06 Fixed Wireline Subs (m) 8.9 9.1 9.3
Revenue 10,769 11,653 11,817 12,180 13,203 Fixed Wireless Subs (m) 4.2 5.0 6.0
Operating Profit 4,521 4,560 5,577 5,234 6,371 Telkomsel Subs (m) 34.8 45.0 55.9
EBITDA 5,912 6,978 7,898 7,678 8,240 GSM Market Share (%) 57.8 58.9 59.9
Net profit 1,873 2,317 3,460 2,359 3,404 ARPU Blended ('000) 86,149 79,271 72,902
Opr Margin (%) 42.0 39.1 47.2 43.0 48.3
EBITDA Margin (%) 54.9 59.9 66.8 63.0 62.4
Net Margin (%) 17.4 19.9 29.3 19.4 25.8
Date Event
14-Nov-95 IPO of 3.3bn shares @ Rp2,050 per share

25-Jun-99 4 : 50 Bonus Shares
2002 2003 2004 2005 2006 28-Sep-04 2 : 1 Stock Split
- High 2,362 3,450 5,300 6,250 10,850 Issued Shares (m) 20,160.0
- Low 1,175 1,575 3,175 4,100 5,950 Par Value (Rp) 250
EV/EBITDA (x) Mkt Cap (Rpbn) 203,616
- High 4.5 4.7 5.5 5.3 7.3 12 - Months High / Low (Rp) 10,850 / 5,950
- Low 2.6 2.6 3.7 3.7 4.1 12 - Months average daily t/o (m) 19.8
p.67
BUY
Total Bangun Persada Price Rp650
The Rising Star Sector Construction
Reuters / Bloomberg : TOTL.JK/ TOTL IJ

As one of the biggest construction companies with a reputation as a quality and on-time builder, have
resulted in many repeat customers (75.0% of revenues). As such, TOTL command a premium fee for its
services. 2007 revenue growth estimated at 26.6% to Rp1.4tr on the back of Rp1.6tr in new project signings.
Fall in 2007 gross margin is no surprise as its historical average hovers in the 10.0% level.
Although the shares price has increased substantially since its first inception, valuation wise, the counter's
prospect is still abound. Hence, our BUY call with 12-months DCF price target of Rp975 per share (2007
P/E of 19.9x), reflecting 50.0% upside potential.
Recent Developments & Outlook

Forecast & Rating
Widely recognized as one of the best builders in the
Year end 31 Dec 2004 2005 2006E 2007F 2008F
country, TOTL is widely sought after to build several
projects. As such, the company commands a premium
Net Profit (Rpbn) 43 62 102 90 111 for its services, which most high-end property
EPS (Rp) 16 23 37 33 40 developers are obliged to meet. One such developer
EPS Growth (%) 32.4 45.1 63.5 (11.6) 23.8 is Agung Podomoro Group, which is developing the
CFPS (Rp) (20.4) 23.1 15.3 29.2 34.3 high-end apartment building The Peak. Quality of its
DPS (Rp) - 58 27 15 13 construction has led to many satisfied customers,
BVPS (Rp) 62 112 100 115 140 resulting in repeat orders, we estimate 75.0% of its
P/E (x) 41.8 28.8 17.6 19.9 16.1
revenue is generated from repeat customers. Hence,
profitability and revenue stream is secured.
P/CF (x) nm 28.1 42.6 22.2 18.9
P/BV (x) 10.4 5.8 6.5 5.7 4.7 With a healthy balance sheet (2007 D/E = 0.01x) plus
EV / EBITDA (x) 30.1 19.3 10.8 12.5 9.8 fresh injection of capital, amounting to Rp103.6bn,
Div Yield (%) - 8.9 4.2 2.3 2.0 raised from its IPO, has left the company in great
financial state to compete in the construction sector.
For 2007, TOTL has indicated that it has signed several
Profile projects valued at Rp1.6tr. These projects include:
Latumenten City (valued at Rp600.0bn), The
Established in 1970, Total Bangun Persada (TOTL) has
Convention Hall (Rp200.0bn), Sangatta Islamic Centre
become one of the largest construction company in
(Rp165.0bn), and Boutique Pakubuwono
Indonesia, focusing its services on the high-rise building (Rp150.0bn).
and private construction projects. The company listed its
shares in JSX on July 24, 2006, offering 300.0mn new As such, we estimate 2007 revenue growth of 26.6%
shares to the market as well 612.0mn shares from the to Rp1.4tr up from our 2006 estimate of Rp1.1tr.
founder's ownership. Currently, the current shareholding Profitability wise, we expect gross margin to be under
structure: Total Inti Persada (56.5%), Commissioners pressure, declining from 14.0% to 11.1%. This decline
(10.3%) and Public (33.2%). should come as no surprise as its historical gross
margin stood at 10.0%. Conservatively, we estimate
no joint operation (JO) profit in 2007 versus an expected
Profile Rp20.0 bn in JO for 2006. Hence, we are estimating a
(Rp) (m)
11.6% net profit fall in 2007, from Rp101.5bn to
1,000 300 Rp89.5bn. Should TOTL post JO revenues in 2007, it
900 should be a nice bonus.
250
800
TOTL's prudent business practice in choosing their
700
200 clients and forming terms of agreement in projects
600
taken, has led to low posting of bad receivables and
500 150
400
safeguarding its working capital. Currently their
300
100 receivable day is roughly 5 months, which is lower
200
than its peer, namely ADHI, whose receivable days toy
50
100
in the 6 months time frame. Furthermore, its
0 0
conservative capital structure has left the company
24-Jul-06 18-Aug-06 12-Sep-06 7-Oct-06 1-Nov-06 26-Nov-06 21-Dec-06 almost debt free as we estimate TOTL to have a net
cash position of Rp247.8bn by 2007.

p.68

Revenue 1,077 1,163 1,139 1,442 1,730 Cash & Deposits 120 168 231 259 306
% growth 40.7 8.0 (2.0) 26.6 19.9 Other curr. assets 315 471 330 471 603
COGS 993 1,046 980 1,282 1,537 Net fixed assets 22 107 103 98 94
Gross Profit 84 116 160 161 193 Other assets 42 45 55 57 60
Op. Profit 52 80 139 117 146 Total assets 499 791 719 885 1,063
EBITDA 55 84 144 122 151 ST debts - - 5 5 5
Other curr. Liab. 292 426 381 491 587
% growth (4.5) 51.7 71.3 (15.0) 23.6
LT debts - - - - -
Net int. inc./(exp.) 5 6 6 10 12
Other LT liabilities 36 56 58 73 88
Gain/(loss) forex 3 0 (1) - -
Minority interest - - - - -
Other inc./(exp.) 1 (0) (1) (2) (1)
Total Liabilities 328 482 443 569 679
Pretax Profit 60 86 142 125 156
Shareholders' Equity 172 309 275 316 384
Tax 18 24 41 36 45
Net (debt)/cash 120 168 226 254 301
Minority Int. - - - - -
Total cap. empl. 46 152 52 78 111
Extra. Items - - - - - Working capital 24 46 (50) (20) 16
Net Profit 43 62 102 90 111
% growth 32.4 45.1 63.5 (11.6) 23.8
Key Ratio Analysis

Cash Flow (Rpbn)
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Year end 31 Dec 2004 2005 2006E 2007F 2008F
Profitability
Net Profit 43 62 102 90 111 Gross Margin (%) 7.8 10.0 14.0 11.2 11.1
Depr. / Amort. 10 13 12 11 12 Op. Margin (%) 4.8 6.9 12.2 8.1 8.4
Others (1) (3) (3) (1) (1) EBITDA Margin (%) 5.1 7.2 12.6 8.5 8.7
Chg in Working Cap. (108) (8) (70) (20) (27) Net Margin (%) 4.0 5.3 8.9 6.2 6.4
CF's from ops (56) 64 42 80 94 ROE (%) 24.9 25.8 34.8 30.3 31.8
Capex (2) (14) (1) (2) (2) ROA (%) 8.6 9.6 13.5 11.2 11.4
Others (5) (77) (4) - - Stability
CF's from investing (6) (91) (6) (2) (2) Current ratio (x) 1.5 1.5 1.5 1.5 1.5
Net change in debt - - 5 - - Net. Debt/Equity (x) nc nc nc nc nc
Others (0) 75 22 (51) (45) Int. Coverage (x) - - 346.3 155.7 194.2
CF's from financing (0) 75 27 (51) (45) Efficiency
Net cash flow (62) 48 63 28 48 Debtors' turnover (days) 102 143 150 150 150
Cash at BoY 182 120 168 231 259 Creditors' turnover (days) 11 30 30 30 30
Cash at EoY 120 168 231 259 306 Inventory turnover (days) - - - - -
Free Cash Flow (58) 50 40 79 93
Key Assumptions
Year end 31 Dec 2006E 2007F 2008F
3Q05 4Q05 1Q06 2Q06 3Q06
Sales 331 292 na na 310
New projects acquired (Rpbn) 783 1,625 1,950
Gross Profit 30 37 na na 37 Construction revenue (Rpbn) 1,132 1,435 1,722
Operating Profit 22 23 na na 40 Rental revenue (Rpbn) 7 8 8
Net profit 15 19 na na 29 Profit from joint operation projects (Rpbn) 20 - -
Gross Margins (%) 9.1 12.8 na na 11.9
Opr Margins (%) 6.6 7.9 na na 12.9
Net Margins (%) 4.6 6.4 na na 9.3
Date Event
Jul-06 IPO of 300.0m new shares @Rp345
2002 2003 2004 2005 2006

- High na na na na 930 Issued Shares (m) 2.750.0
- Low na na na na 350 Par Value (Rp) 100
EV/EBITDA (x) Mkt Cap (Rpbn) 1,788
- High na na na na 18.1 12 - months High / Low (Rp) Rp930 / Rp350
- Low na na na na 6.7 12 - month Average Daily Turnover (m) 45.6
p.69
Debt Market Outlook
Debt Market Outlook

The Turning Year Had Happen Analyst : Dian Abdul Hakim
Key Macroeconomic and Capital Markets

Indicators
Easing interest rates in 2H06 …. After sitting on its hands for the first four months of the year, Bank Indonesia (BI)
lowered its BI Rate by 25bp in May, and then upped the ante in the final five months
of the year, when each subsequent easing was by a more aggressive 50bp. BI
moved to this easing stance at a time when almost every other country was
tightening their reference rates, and this can be seen as a readjustment following
the mini-crisis in 2005 when fuel prices almost doubled.
BI Rate Declines and Average Treasury (SUN) 1-10 Years Yield

(%)
13.0
12.5
12.0
11.5
11.0
10.5
10.0
9.5
9.0
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06
BI Rate Average Yield 1-10 Years
Source: BI, Bloomberg, & Trimegah Research
…. supported by improving As we and a number of commentators had predicted, month-on-month inflation

economic indicators since the levels have been under control since the start of the year, providing a sound footing
start of the year for capital to continue the economy's improvement in the years to come.
Nevertheless, it must be remembered that inflation throughout 2006 has been
helped by the lack of any new shock in energy prices and the stagnation in
consumer spending.
YoY Inflation SBI 1-month/BI Rate

21.0%
19.0%
17.0%
15.0%
13.0%
11.0%
9.0%
Monetary Policy
'Gap'
7.0%
5.0%
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07
Inflation YoY SBI 1-month/BI Rate
Source: BI, BPS, & Trimegah Research
p.72
GDP YoY 2003 - Sep 2006

(%)
7.0
6.5
6.0
5.5
5.0
4.5
4.0
May-03
May-04
May-05
May-06
Mar-03
Mar-04
Mar-05
Mar-06
Nov-03
Nov-04
Nov-05
Jan-04
Jan-05
Jan-06
Jul-03
Jul-04
Jul-05
Jul-06
Sep-03
Sep-04
Sep-05
Sep-06
Source: BPS
Indonesian credit risk profile The upgrade of Indonesia's sovereign credit risk rating by both Moody's and
improves Standard & Poors, points to an acknowledgment by the agencies of the
improvements in both Indonesia's economy and capital markets. With improved
ratings comes a reduction in the risk of holding Indonesian financial assets and
fixed income securities, and a consequent jump in Indonesian borrowers tapping
the international markets and thus reducing the liquidity risk for investors holding
Indonesian paper.
Re-rating of Indonesian Sovereign Credit

Agency Currency Maturity Dec-05 Nov-06 Notes
Moody's Rupiah ST N/R N/R -

LT B2 B1 Upgrade
Foreign ST N/R N/R -
LT B2 B1 Upgrade
S&P Rupiah ST B B Hold
LT BB BB+ Upgrade
Foreign ST B B Hold
LT B+ BB- Upgrade
Fitch Rupiah ST N/R N/R -
LT BB- BB- Hold
Foreign ST B B Hold
LT BB- BB- Hold
Source: Bloomberg
Indonesian sovereign spreads The higher credit ratings for Indonesian debt were mirrored by the trend in the
have narrowed against their yield-to-maturity (YTM) of the international issues denominated in US Dollars,
benchmarks which have tended to narrow in spread against US Treasuries of equivalent maturity.
The RI017 bond (issued at the start of 2006 to mature in 2017) is a case in point:
its spread against the 10-Year US T-Bond had narrowed from 230bp at its secondary
market debut to 140bp by the end of the year, indicating the improved perception of
Indonesian paper in international markets. Global investors have been willing to
accept a somewhat reduced yield to hold Indonesian debt, and secondary market
prices have risen commensurately.
p.73
Sovereign Spread RI017 v. US 10-year T-Bond

(%)
2.6
2.4
2.2
2.0
1.8
1.6
1.4
1.2
2 24-Mar-06
10-Mar-06
07-Apr-06
21-Apr-06
05-May-06
19-May-06
02-Jun-06
16-Jun-06
30-Jun-06
14-Jul-06
28-Jul-06
11-Aug-06
25-Aug-06
08-Sep-06
22-Sep-06
06-Oct-06
20-Oct-06
03-Nov-06
17-Nov-06
01-Dec-06
15-Dec-06
Source: Bloomberg & Trimegah Research
Trading volumes have risen in Month-on-month Government debt trading volumes have risen in line with the
line with market sentiment improved market conditions since the beginning of 2006. Total trading in January
2006 was Rp48.0tr by value, rising to Rp60.0tr per month in the September to
November period. Compared to monthly trading volumes in 2005 which averaged
Rp43.3tr, trading in 2006 (January-November) reached an average monthly value
of Rp58.7tr, showing the market's continued attractiveness to investors.
SUN Trading Volumes 2005 - Nov 2006

(Rptr)
80
70
60
50
40
30
20
10
0
May-05
May-06
Mar-05
Mar-06
Nov-05
Nov-06
Jan-05
Jun-05
Jan-06
Jun-06
Jul-05
Jul-06
Aug-05
Aug-06
Apr-05
Apr-06
Oct-05
Oct-06
Sep-05
Sep-06
Feb-05
Dec-05
Feb-06
Source: Surabaya Stock Exchange
The yield curve has been easing As market conditions have strengthened and ratings improved, the yield curve has
throughout the year … eased throughout the year. The yield curve for 1-10-year Government debt began
the year in the 13.3% - 13.7% range, but this had moved sharply lower to the 8.0%
- 10.0% bracket by the end of 2006 i.e. a significant narrowing of yields of 370bp -
530bp. Long-term yields were shifting down in a similar manner, but shorter-
dated rates were moving more quickly, thus widening the spread between short-
and long-term rates from 40bp to 200bp.
p.74
Yield Curve Movement 2006

(%)
15
14
13
12
11
10
8
Maturity
7 (years)
1 2 3 4 5 6 7 8 9 10
2006 2005
Source: Bloomberg
… and consequently secondary Government bond prices corrected sharply after the mutual fund industry collapse in
market prices have 2005, but have since rebounded on the back of the easing in interest rates during
strengthened the second half of 2006. The Himdasun/IDMA Government Bond Price Index opened
the year at 87.34 and has risen to 103.22 YTD, thus investors have realised an
18.1% gain on their holdings in price appreciation alone.
The "mini-shock" in May shows The bond market's upward trajectory hit a bump in the road in May - June when
the integration of the domestic prices stalled in the face of global intereset rate and oil price high. The IDMA Index
and global capital markets slipped to 89.77 from 94.64, a 5.1% correction. Nevertheless, the confidence levels
in the market, allied to expectations of easing interest rates, stopped the sort of
panic we might have been braced for in the past; investors kept their nerve and the
market returned to its upward trend.
IDMA Government Bond Index 2005-2006

105
100
95
90
85
80
5-Sep-06
8-Mar-05
15-Nov-05
27-Dec-05
7-Feb-06
25-Jan-05
19-Apr-05
31-May-05
12-Jul-05
14-Oct-05
21-Mar-06
2-May-06
17-Oct-06
28-Nov-06
13-Jun-06
25-Jul-06
23-Aug-05
Source: Himdasun
Foreign bond holdings increase Government bond holdings remain dominated by local banks (with a combined
portfolio in excess of Rp400.0tr), but the composition of the non-bank investor portion
has changed. At the start of 2006, foreign investors held a total of Rp31.0tr, or 31.1%
of the total non-bank holdings of Rp99.5tr. By the end of November 2006, this balance
had risen to Rp51.6tr, or 37.5% of non-bank holdings. Foreign investor holdings
peaked in August at Rp58.1tr or 41.5% of total non-bank holdings. Foreign investors
were strong net buyers of Government paper at the start of the year when prices
were at a relative discount, and the rating upgrades in 2006 helped keep the
proportion of foreign holdings relatively stable throughout the year.
p.75
Non-bank SUN Investors

(Rpm)
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Domestic Non-bank Foreign
Source: DPSUN DepKeu
Mutual fund holdings rebound As mutual funds collapsed in 2005 they dumped their bond holdings, but 2006
saw a rebound in mutual fund investment, dominated by protected funds.
Straight fixed income funds showed only a slight increase in funds under
management. The return of asset under management was only to listed
fixed income funds, as Bapepam maintained its ban on new fixed income
investment vehicles throughout 2006. However, Bapepam relaxed its ban at the
end of 2006 and new bond funds may now receive approval again.
Non-bank Government Bond Holdings

(Rpm)
60,000
50,000
40,000
30,000
20,000
10,000
0
Insurance Mutual Fund Pension Fund Others
Source: DPSUN
Assets Under Management (AUM) & Issued Units - Fixed Income and Pro-
tected Funds
(Rptr) (bn unit)
35.0 26.0
24.0
30.0
22.0
25.0 20.0
18.0
20.0 16.0
14.0
15.0
12.0
10.0 10.0
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06
AUM (LHS) Issued Unit (RHS)
Source: Capital Market Supervisory Agency
p.76
High investor interest all year Each Government bond auction in 2006 attracted higher investor interest than
forecast. This trend was only strengthened by the easing of rates in the second
half, as evidenced by bidding levels, which averaged 2.3x the actual amounts
issued. This bid to cover ratio peaked at 9.1x for the FR41 series (due 2008)
auction, as it was the last auction in 2006.
Government Bond Auction Bids and Acceptances 2006

(Rpbn)
12,000
10,000
8,000
6,000
4,000
2,000
0
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06
Bid Amount Accepted Bid
Source: DPSUN Depkeu
Strong retail appetite for The first Government bonds (ORI001) designed for retail investment were issued
Government debt broadens the this year, and received a very warm welcome from the investing public in both the
investor base primary and secondary markets. The 3-year Notes carried a 12.05% coupon, and
the strong retail appetite led the Government to increase the issue from an initial
Rp2.3tr to Rp3.2tr in August.
Price and yield movements in line The possibility for institutional investors to buy the ORI001 series in the secondary
with other issues …… market in addition to individual investors supported prices. The yield gap with the
FR002 bonds, the nearest benchmark issue, has moved between -10bp and
20bp since the bond's debut. The narrowness of this yield gap showed the market's
acceptance of the ORI001 series relative to existing paper available in the secondary
market.
Yield Spread ORI001 v. FR0002

(%)
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
-0.10
-0.20
1-Nov-06
8-Nov-06
15-Nov-06
22-Nov-06
29-Nov-06
26-Jul-06
2-Aug-06
9-Aug-06
16-Aug-06
23-Aug-06
30-Aug-06
4-Oct-06
6-Sep-06
11-Oct-06
18-Oct-06
25-Oct-06
6-Dec-06
13-Sep-06
20-Sep-06
27-Sep-06
13-Dec-06
20-Dec-06
Source: Bloomberg
p.77
….though this only held true for The narrow spread between ORI001 and FR002 only held true for trades in ORI001
high volume trades that approached the size of normal secondary market deals. The yield gap widened
for retail trades of lower value, though this also shows retail investors' propensity to
hold the issue until maturity rather than trade on the hope of price appreciation,
naturally leading to a widening of the bid-offer spread on the small number of retail
trades.
Corporate Bond Market:

New issues stable by value, but Conditions at the start of the year were not conducive for new issues, but the total
fewer issuers level of new issues for the year as a whole was comparable to 2005, rising in value
from Rp8.2tr to Rp11.4tr, or an increase of 39%. Despite this increase in new issue
value, the number of issuers fell from 20 to 13. Unsurprisingly, this meant that the
average amount raised per issuer increased from Rp412.5bn in 2005 to Rp882.6bn
in 2006. The larger total issue value indicates investors' increased confidence to
absorb larger blocks of securities into their fixed income portfolios.
Corporate Bond Issues 2005-2006

2005 (Rpbn) 2006 (Rpbn)
Astra Sedaya Finance 900 Summit Oto Finance 1,000

Bank Mayapada Tbk. 250 Federal International Finance 600
Panin Sekuritas Tbk. 75 Perum Pegadaian 500
Otto Multiartha 600 Adira Dinamika Multi Finance Tbk. 750
Bank NTB 200 WOM Finance Tbk. 825
Apexindo Pratama Duta Tbk. 750 Astra Sedaya Finance 500
BPD Sulut 200 PLN (Persero) 2,400
WOM Finance Tbk. 500 Kalbe Farma Tbk. 300
Citra Marga Nusaphala Persada Tbk. 400 Jasa Marga (Persero) 1,000
Indomobil Finance 350 BTN (Persero) 1,000
Bank Ekspor Indonesia (Persero) 500 Bank Ekspor Indonesia (Persero) 500
Indosat Tbk. 1,100 Bumi Serpong Damai 600
Ricky Putra Globalindo 125 Bank Jabar 1,000
BTN (Persero) 750 Bank Permata Tbk. 500
Swadharma Indotama Finance 300
Tunas Financindo Sarana 350
BPD Lampung 200
PAM Lyonnaise Jaya 650
U Finance 50
Total 8,250 Total 11,475

Source: Bapepam
Rating upgrades outnumber Of the 77 issuers rated by Pefindo, 16 received upgrades in 2006. Of these 16, nine
downgrades … issuers are banks rated A or A- after their upgrades. Only five issuers were
downgraded during the year, of which three now carry credit ratings of BBB or lower.
The two issuers who listed bonds for the first time were PT Kalbe Farma Tbk. and
PT Bank Permata Tbk. Overall, corporate credit ratings indicate a moderation in the
domestic corporate bond market's risk profile.
p.78
Corporate Bond Rating Upgrade & Downgrade 2006

Emiten Upgrade 2005 2006 Emiten Downgrade 2005 2006
Bank NISP (Sub) A- A Unggul Indah Cahaya A A-

Bank Jabar A- A Swadharma Indotama Finance BBB BBB-
Bank Panin (Sub) BBB+ A- Pembangunan Perumahan BBB BBB-
Bank Jatim BBB+ A- Matahari Putra Prima A+ A
Bank BNI A- A Indosiar Visual Mandiri BBB+ BBB
Bank Bukopin BBB+ A-
Bank BTN A- A
Bank Syariah Muamalat BBB- BBB
Bank Ekspor Indonesia BBB+ A-
Summarecon Agung Tbk BBB BBB+
Bumi Serpong Damai BBB- BBB
Berlian Laju Tanker A A+
Tjiwi Kimia D BBB-
Ciliandra Perkasa BBB BBB+
Jawa Pos A- A
Charoen Pokphand Ind. BBB- BBB
Source: Pefindo
…. since domestic fixed income Rating changes in 2006 is not giving a significant change in overall composition,
portfolios continue to be compare to 2005. The two largest rating bands, each accounting for 22.0% of the total,
dominated by investment grade area A and A- paper with a nominal issued value of Rp11.5tr and Rp11.1tr each.
paper
Outstanding Corporate Bond's Breakdown based on Rating
A A- A+ AA+ AA- BBB AA AAA BBB+ BBB- D BB+
Source: Pefindo & Bloomberg
p.79
Outlook for 2007
Government Bonds:
Coupon rates to continue to The downward trend in coupon rates is set to continue, though at a more moderate
moderate … pace than in 2006. We forecast a target interest rate of 8.0% - 8.5% for the end of the
year, particularly as our inflation target for the end of 2007 of 6.5% YoY gives a
real interest rate of 1.5% - 2.0%.
… and the same goes for the yield The Government bond yield curve will follow the downward trend in coupon rates,
curve placing YTM for the 1-10-year curve in the 7.0% to 9.0% range. The flipside of this
moderation of the curve will be a price gain in the secondary market up to 7.0%,
excluding the return from coupons.
Demand for shorter-dated paper We don't see any change to the shape of the yield curve during 2007. We expect a
to remain strong steeper slope at the shorter end of the curve (1-5-year) flattening for maturities of
5-years and beyond, as demand for shorter-dated paper as an alternative to time
deposits remains stronger than for longer maturities.
Forecasted Yield Curve Movements 2007F

(%)
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0 Maturity
(years)
1 2 3 4 5 6 7 8 9 10
Current 2007P
Source: Bloomberg & Trimegah Research
The 2007 approved budget has already outlined a Government borrowing requirement
New Issues …
of Rp40.6tr budget deficit financing, with a further Rp22.0tr of bonds maturing
in 2007. The Government is thus looking at Rp62.6tr to Rp65.0tr in total issuance
in 2007.
Net Government Bond Issuance 2005-2007F

Budget Period Net Issuance Details
2005 Rp30.8tr Issued

2006 Rp35.9tr Revised Budget
2007 Rp40.6tr Approved Budget
Source: Government Budget Report 2005 & Budget Statistics 2006 - 2007
p.80
Government Bond Maturity Profile

(Rpm)
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Dec 05 Nov 06
Source: DPSUN DepKeu
… that the market can absorb The market can handle the Government's plans for a gross Rp65.0tr or so in new
… issues in 2007, particularly with a resurgent mutual fund sector that is crying out for
new paper. The new issues will be biased towards mid- to longer-term maturities
(above ten years) in order to retire the high coupon bonds that fall due within the next
two to three years. These longer-dated bonds should continue to provide investors
with relatively attractive yields.
… and a wider range of In addition to plain vanilla issues, the Ministry of Finance has signalled its readiness
investment options for other structures to broaden the investor base in 2007 and beyond. We can expect
another ORI bond issue for retail investment, and the new syariah sukuk instrument
(for either institutional or retail investors) should finally become a reality. Future
plans also include the issue of T-bills (Surat Perbendaharaan Negara/SPN).
More conducive conditions for In addition to the increased issuance and broadening of the security types on offer,
higher trading turnover trading in the secondary market should also improve as the exchange and other
stakeholders work towards building a more conducive environment for debt trading.
Improving price transparency and accessibility for all parties involved, perfecting the
reporting system and procedures, and strengthening primary dealer licensing
requirements should all act as incentives for investors to enter the market and trade
with greater confidence. Increased secondary trading should help to increase market
liquidity.
Corporate Bonds:
Moderate expectations A moderation in interest rates should prove a compelling incentive for issuers to tap
the markets in 2007 for both debt repayment and business capital requirements.
Lower interest rates should be reason enough for issuance levels of Rp20.0tr to
Rp25.0tr in 2007, which also covers the Rp10.2tr in bonds falling due in the period.
p.81
Corporate Bond Maturity Profile

(Rptr)
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2007 2012 2017 2022 2027 2032
Source: Bloomberg & Surabaya Stock Exchange
A downward trend in rates should The softening rate environment should prove beneficial to interest-rate sensitive
see financials dominate new sectors like the banks, finance houses and property companies. Nevertheless,
issuance don't expect much movement in the primary market from these issuers before the
second quarter, as we expect them to sit tight until 2006 GDP figures have been
confirmed in the first quarter of 2007 before pulling the trigger.
With investment grade bonds We don't expect the composition of the primary market in 2007 to differ much from
dominating, any yield gap will be the past year in terms of issuer rating. Investment grade bonds are currently
small dominant in the market, so any yield gap against Government paper of similar
tenor is likely to remain small throughout 2007, in the range of 100bp to 200bp.
Fixed Income Strategy 2007

Forget about price discounts and The rebound in the Rupiah fixed income markets means that investors should not
focus on interest rates be wasting their time looking for discounted prices. The decline in the yield curve
is a clear indication that secondary market prices are on an upswing. Focus instead
on the direction of interest rates, as well as the possibility of short-term arbitrage
opportunities between securities that have the same investment horizon.
Liquidity, coupon rates and tenor Investors should ideally be looking for securities with a combination of longer
should be your major maturity and higher coupon rates. Look for fixed coupons, and try to lock in capital
considerations gains if there's any price fluctuation. Market liquidity should also be a consideration
if investors need to trim their long positions in the short-term.
High duration at starting quarters, For the 1Q07, investors may consider to pick the high duration bonds in order to
high YTM at the following ones catch the opportunity of cointinuing decrease in interest rate, as the price in
secondary market is keep uprise. When the expectation for interest rate downward
is diminished, expected to come circa 3Q07 or 4Q07, switch to the high YTM
bonds to securing a stable coupon income.
Liquidity factor for the trading or For trading strategy or shorter term holding period, select the bonds which are
shorter term strategy frequently traded for reducing the liquidity risk. This strategy also giving another
advantage, when we need to switch our existing portfolio with new issuance is
giving more attractive yield. However, investors must watchover the movement of
foreign bondholders and quite rarely arbitrage price fluctuation .
p.82
APPENDIX
Appendix 1 - TRIMEGAH STOCK UNIVERSE
p.84
Price (Rp) Mkt Cap (%) R e c . Target Chg. Net Earnings (Rpbn) EPS (Rp) PER (x) EV/EBITDA (x) PBV (x)
28-Dec-06 (Rpbn) to JCI Price (Rp) (%) 2006E 2007F 2006E 2007F 2006E 2007F 2006E 2007F 2006E 2007F
AUTOMOTIVE 65,397 5.2 4,536 5,481 629 760 14.4 11.9 9.0 7.3 2.6 2.5
Gajah Tunggal Tbk 580 1,837 0.1 Hold 632 9.0 232 181 73 57 7.9 10.2 7.3 5.1 0.8 0.8
Astra International Tbk* 15,700 63,559 5.1 Buy 17,603 12.1 4,304 5,300 1,063 1,309 14.8 12.0 9.1 7.5 2.7 2.7
BANKING 236,377 18.8 12,144 16,541 187 255 19.5 14.3 N/A N/A 3.2 2.8
Bank Central Asia Tbk 5,200 64,274 5.1 Buy 5,776 11.1 4,200 4,820 340 390 15.3 13.3 - - 3.5 3.0
Bank Rakyat Indonesia Tbk 5,150 63,618 5.1 Buy 5,894 14.4 4,337 4,931 351 399 14.7 12.9 - - 4.0 3.4
Bank Danamon Tbk 6,750 34,642 2.8 Hold 7,040 4.3 1,507 2,574 294 502 23.0 13.5 - - 3.5 3.0
Bank Mandiri (Persero) Tbk 2,900 60,900 4.9 Buy 3,239 11.7 1,334 3,205 64 153 45.6 19.0 - - 2.5 2.2
Bank Niaga Tbk 920 12,944 1.0 Buy 1,085 17.9 766 1,013 54 72 16.9 12.8 - - 2.4 2.1
CEMENT 47,833 3.8 2,287 2,425 192 203 20.9 19.7 11.7 9.6 3.5 3.1
Indocement Tunggal Prakasa Tbk 5,750 21,167 1.7 Buy 6,340 10.3 853 939 232 255 24.8 22.5 12.4 10.2 3.4 3.0
Holcim Indonesia Tbk 670 5,134 0.4 Buy 790 17.9 198 27 26 4 26.0 193.3 19.2 16.3 2.5 2.5
Semen Gresik (Persero) Tbk 36,300 21,531 1.7 Buy 40,820 12.5 1,236 1,460 2,083 2,462 17.4 14.7 9.4 7.7 4.0 3.3
CONSUMER 63,113 5.0 2,418 2,849 143 168 26.1 22.2 13.5 11.4 8.4 7.5
Indofood Sukses Makmur Tbk 1,350 11,514 0.9 Buy 1,749 29.6 656 760 77 89 17.5 15.1 6.3 5.2 2.7 2.4
Mayora Indah Tbk 1,620 1,242 0.1 Hold 1,770 9.3 93 112 121 146 13.4 11.1 4.9 3.2 1.3 1.2
Unilever Indonesia Tbk* 6,600 50,358 4.0 Hold 6,070 (8.0) 1,669 1,977 219 259 30.2 25.5 23.6 19.6 22.1 19.8
HEAVY EQUIPMENT 19,434 1.5 1,073 1,113 291 302 18.1 17.5 8.7 7.4 3.8 3.3
INDONESIA
Hexindo Adiperkasa Tbk 900 756 0.1 Buy 1,000 11.1 69 89 82 106 11.0 8.5 5.3 4.6 2.0 1.7
United Tractors Tbk 6,550 18,678 1.5 Buy 7,660 16.9 1,005 1,024 352 359 18.6 18.2 9.0 7.7 4.0 3.5
MINING 71,650 5.7 9,198 10,922 374 444 7.8 6.6 5.1 4.0 3.0 2.3
Aneka Tambang (Persero) Tbk 8,000 15,262 1.2 Hold 8,100 1.3 1,774 2,688 930 1,409 8.6 5.7 5.9 3.7 3.9 2.9
Bumi Resources Tbk 900 17,464 1.4 Hold 890 (1.1) 1,555 1,969 80 102 11.2 8.9 7.7 5.9 5.6 3.7
International Nickel Ind .Tbk 31,000 30,803 2.5 Buy 35,300 13.9 5,297 5,592 5,331 5,628 5.8 5.5 3.5 2.9 2.1 1.7
Tambang Batubara Bukit AsamTbk 3,525 8,122 0.6 Buy 4,100 16.3 572 673 248 292 14.2 12.1 8.2 6.4 3.5 3.0
OIL & GAS 52,629 4.2 1,961 3,214 432 709 26.8 16.4 18.3 9.6 10.4 7.9
Perusahaan Gas Negara Tbk 11,600 52,629 4.2 Buy 16,900 45.7 1,961 3,214 432 709 26.8 16.4 18.3 9.6 10.4 7.9
PHARMACEUTICAL 16,136 1.3 1,049 1,181 72 81 15.4 13.7 8.0 6.7 3.2 2.7
Kalbe Farma Tbk 1,190 12,086 1.0 Buy 1,442 21.2 744 834 73 82 16.2 14.5 8.5 7.2 3.9 3.1
Tempo Scan Pacific Tbk 900 4,050 0.3 Buy 1,039 15.4 304 347 68 77 13.3 11.7 6.7 5.6 2.1 1.9
PLANTATION 19,842 1.6 883 1,490 560 946 22.5 13.3 11.9 7.1 6.7 5.3
Astra Agro Lestari Tbk 12,600 19,842 1.6 Buy 14,900 18.3 883 1,490 560 946 22.5 13.3 11.9 7.1 6.7 5.3
PROPERTY 8,390 0.7 544 367 59 40 15.4 22.8 8.6 11.1 3.0 2.8
Adhi Karya (Persero) Tbk 800 1,441 0.1 Buy 980 22.5 90 145 50 81 15.9 9.9 7.6 5.7 3.3 2.6
Ciputra Surya Tbk 980 1,939 0.2 Hold 1,060 8.2 217 77 109 39 9.0 25.1 5.1 13.6 1.7 1.7
Summarecon Agung Tbk 1,170 3,222 0.3 Hold 1,250 6.8 135 55 49 20 23.9 58.5 12.4 20.8 3.4 3.3
Total Bangun Persada Tbk 650 1,788 0.1 Buy 975 50.0 102 90 37 33 17.6 19.9 10.8 12.5 6.5 5.7
RETAIL 10,070 0.8 553 636 47 54 18.2 15.8 7.1 5.9 1.9 1.8
Mitra Adiperkasa Tbk 910 1,511 0.1 Buy 1,051 15.4 83 162 50 97 18.3 9.4 5.8 4.4 1.3 1.2
Matahari Putra Prima Tbk 800 2,165 0.2 Buy 973 21.6 192 153 71 57 11.3 14.1 4.2 3.7 1.0 0.9
Ramayana Lestari Sentosa Tbk 870 6,395 0.5 Hold 952 9.4 279 321 38 44 23.0 19.9 13.1 11.0 3.3 3.0
TELCO 240,312 19.1 13,189 15,503 515 606 18.2 15.5 6.8 5.4 5.2 4.4
Indosat Tbk 6,750 36,696 2.9 Hold 7,119 5.5 1,467 2,073 270 381 25.0 17.7 6.5 5.3 2.4 2.2
Telekomunikasi Indonesia Tbk 10,100 203,616 16.2 Buy 11,588 14.7 11,722 13,430 582 666 17.4 15.2 6.8 5.4 6.7 5.3
TOBACCO 19,626 1.6 1,790 2,094 930 1,088 11.0 9.4 7.4 6.9 1.2 1.0
Gudang Garam Tbk* 10,200 19,626 1.6 Hold 10,715 5.0 1,790 2,094 930 1,088 11.0 9.4 7.4 6.9 1.2 1.0
TRIM UNIVERSE 870,807 69 51,623 63,816 260 321 16.9 13.6 8.0 6.4 3.7 3.2
TRIM UNIVERSE (Excl. Banking) 634,430 51 39,479 47,275 295 354 22.1 18.4 8.0 6.4 4.0 3.4
Source: Trimegah Research
Note: * Based on Bloomberg Market Consensus
Appendix 2 - Corporate Bonds
INDUSTRY ANNOUNCE MATURITY RATING COUPON TOTAL ISSUED

DATE DATE (%) (Rp)
Indosat III/2003 Seri A Telecommunication 13-Oct-03 22-Oct-08 idAA+ 12.5 1,860,000,000,000

Medco Energi I/2004 Mining 12-Jul-04 12-Jul-09 idAA- 13.125 1,500,000,000,000
PLN VII/2004 Infrastructure 03-Nov-04 11-Nov-14 A 12.25 1,500,000,000,000
PLN VIII/ 2006 Seri A Infrastructure 12-Jun-06 21-Jun-16 idA 13.6 1,335,100,000,000
Subordinasi I Bank Panin 2003 Banking 09-Jun-03 18-Jun-13 idA- 14 1,300,000,000,000
Indofood Sukses Makmur II/2003 Consumer Goods 30-May-03 10-Jun-08 idAA 13.5 1,226,500,000,000
Jasa Marga XI/2003 Infrastructure 02-Oct-03 10-Oct-13 idA+ Cp1-20:12.3%;Cp21-40:13% 1,000,000,000,000
HM Sampoerna III/2004 Consumer Goods 15-Oct-04 26-Oct-09 idAA+ 10.75 1,000,000,000,000
Bank BTN XII/2006 Banking 08-Sep-06 19-Sep-16 idA 12.75 1,000,000,000,000
Jasa Marga XII/2006 Seri Q Infrastructure 27-Jun-06 06-Jul-16 idA+ 13.5 1,000,000,000,000
Bank BNI I/2003 Banking 27-Jun-03 10-Jul-11 idA 13.125 1,000,000,000,000
Telkom I/2002 Telecommunication 20-May-02 16-Jul-07 idAAA 17 1,000,000,000,000
Bank Jabar V/2006 Banking 27-Nov-06 08-Dec-11 idA 11.25 1,000,000,000,000
Indofood Sukses Makmur III/2004 Consumer Goods 01-Jun-04 13-Jul-09 idAA 12.5 976,000,000,000
PLN VIII/2006 Seri B Infrastructure 12-Jun-06 21-Jun-21 idA 13.75 865,000,000,000
Indosat IV/2005 Telecommunication 13-Jun-05 21-Jun-11 idAA+ 12 815,000,000,000
Indosat II/2002 Seri A Telecommunication 30-Oct-02 06-Nov-07 idAA+ 15.75 775,000,000,000
Bank BTN XI/2005 Banking 29-Jun-05 06-Jul-10 idA- 12 750,000,000,000
Bank BTN IX/2003 Banking 23-Sep-03 02-Oct-08 idA 12.5 750,000,000,000
Bank BTN X/2004 Banking 10-May-04 25-May-09 idA 12.2 750,000,000,000
Bank DKI IV/2004 Banking 04-Jun-04 17-Jun-09 idBBB 12.5 700,000,000,000
Indosiar I/2003 Trade, Service & Invest. 15-Jul-03 08-Aug-08 idBBB 12.8 696,207,050,000
Bank Jabar IV/2004 Seri B Banking 05-Oct-04 05-Oct-09 idA 12.5 690,000,000,000
Jasa Marga X/2002 Infrastructure 27-Nov-02 04-Dec-10 idA+ 16.15 650,000,000,000
Indosat III/2003 Seri B Telecommunication 13-Oct-03 22-Oct-10 idAA+ 12.875 640,000,000,000
BSD Kota Mandiri II/2006 Property 09-Oct-06 20-Oct-10 idBBB 15 600,000,000,000
HM Sampoerna II/2000 Consumer Goods 03-Nov-00 17-Nov-07 idAA+ 17.5 600,000,000,000
PLN VI/1997 Seri B Infrastructure 27-Jun-97 08-Aug-07 idA ATD6mo+1% 583,500,000,000
Adira Finance II/2006 Seri A Finance 24-May-06 08-Jun-09 idA 14.4 570,000,000,000
Unggul Indah Cahaya I/2003 Seri A Basic Industry 20-Oct-03 28-Oct-08 idA- 12.875 556,000,000,000
Pupuk Kaltim I/2002 Seri A1 Basic Industry 16-Apr-02 06-Jun-07 idA+ 18 511,800,000,000
Apexindo Pratama Duta I/2005 Mining 04-Apr-05 08-Apr-10 idA- 12.25 510,000,000,000
Indah Kiat I/2004 Seri B Basic Industry 01-Oct-04 01-Oct-17 idD SBI 3mo + 2% 500,000,000,000
Lontar Papyrus 2004 Seri B Basic Industry 01-Oct-04 01-Oct-17 idD SBI 3mo + 2% 500,000,000,000
p.85
Appendix 2 - Corporate Bonds (cont’d)
p.86
INDUSTRY ANNOUNCE MATURITY RATING COUPON TOTAL ISSUED
DATE (%) (Rp)
Danareksa I/2003 Finance 18-Jun-03 27-Jun-08 idA- 14.125 500,000,000,000

Bank Permata I/2006 Banking 04-Dec-06 14-Dec-16 idA- 12.25% until Nov2011, 500,000,000,000
22.5% if call option not excercised
Bank BRI I/2003 Banking 24-Dec-03 09-Jan-14 idA+ 13.5% until Jan 2010, thereafter 23.5% 500,000,000,000
Charoen Pokphand I/2003 Basic Industry 23-Jun-03 02-Jul-08 idBBB 14 500,000,000,000

Wahana Ottomitra III/2006 Seri B Finance 24-May-06 07-Jun-09 idA- 15.15 465,000,000,000
Bank NISP 2003 Seri A1 Banking 04-Mar-03 12-Mar-13 idA 17.125% until Mar 2008, thereafter 26% 455,000,000,000
Matahari Putra Prima I/2002 Retail 16-Sep-02 25-Sep-07 idA 17.875 450,000,000,000
Adira Finance 2003 Seri B Finance 25-Apr-03 06-May-08 idA 14.125 437,000,000,000
Surya Citra Televisi I/2003 Trade, Service & Invest. 12-Jun-03 25-Jun-08 idA- 13.75 425,000,000,000
Oto Multiartha III/2004 Finance 08-Mar-04 17-Mar-07 idA+ 13.125 400,000,000,000
Bank Global International I/2003 Banking 21-May-03 06-Jun-13 NR 14.5 400,000,000,000
INDONESIA
Duta Pertiwi IV/2003 Property 02-Jul-03 10-Jul-08 idBBB- 15.675 400,000,000,000

Lontar Papyrus 2004 Seri A Basic Industry 01-Oct-04 01-Oct-14 idD SBI 3mo + 2% 400,000,000,000
Jasa Marga IX/2002 Seri N1 Infrastructure 03-Apr-02 12-Apr-07 idA+ 18.5 397,000,000,000
Rajawali Citra Televisi I/2003 Trade, Service & Invest. 15-Oct-03 23-Oct-08 idA- 13.5 385,000,000,000
Indah Kiat 2004 Seri A Basic Industry 01-Oct-04 01-Oct-14 idD SBI 3mo + 2% 365,766,459,463
Summit Oto Finance I/2006 Seri B Finance 01-Mar-06 09-Sep-08 idAAA 13.06 350,000,000,000
Summit Oto Finance I/2006 Seri C Finance 01-Mar-06 09-Mar-09 idAAA 12.89 350,000,000,000
Indomobil Finance II/2005 Finance 09-Jun-05 17-Jun-08 idA- 13.325 350,000,000,000
Bank Bukopin II/2003 Seri A Banking 02-Jul-03 10-Jul-08 idA- 13.375 319,000,000,000
Maspion I/2003 Consumer Goods 02-Jul-03 08-Jul-08 idA- 13.5 308,000,000,000
Oto Multiartha IV/2005 Seri B Finance 18-Mar-05 01-Oct-07 idA+ 10.625 300,000,000,000
Federal International Fin. V/2005 Seri E Finance 05-Jan-05 12-Jan-08 idA+ 10.75 300,000,000,000
Summit Oto Finance I/2006 Seri A Finance 01-Mar-06 09-Mar-08 idAAA 13.22 300,000,000,000
Tunas Baru Lampung I/2004 Agriculture 14-Jun-04 24-Jun-09 idBBB 14.75 300,000,000,000
Kalbe Farma I/2006 Pharmaceutical 19-Jun-06 28-Jun-09 idAA- 13.625 300,000,000,000
Matahari Putra Prima II/2004 Retail 04-May-04 11-May-09 idA 13.8 300,000,000,000
Federal International Fin. VI/2006 Seri C Finance 07-Apr-06 21-Apr-09 idA+ 14.75 300,000,000,000
Bank Buana I/2004 Banking 14-Jul-04 14-Jul-14 idA- 13.25 297,000,000,000
Bank Ekspor Indonesia I/2003 Banking 25-Jun-03 08-Jul-08 idA- 13 295,000,000,000
Berlian Laju Tanker II/2003 Seri A Transportation 14-May-03 28-May-08 idA+ 14.75 294,800,000,000
PTPV V 2003 Seri A Agriculture 04-Nov-03 12-Nov-10 idA 12.875 294,000,000,000
Ciliandra I/2003 Agriculture 26-Sep-03 26-Sep-08 idBBB+ 14.75 290,000,000,000
Source: Bloomberg
APPENDIX 3 - Outstanding Government Securities
As of December 8, 2006
No Series Issued Date Maturity Date Coupon Nominal Amount

(Rp)
A. TRADABLE SECURITIES
1. Rupiah Denominated
a. Fixed Coupon
1 FR0002 28-May-99 15-Jun-09 14.0000% 17,455,057,000,000
2 FR0005 31-May-00 15-Jul-07 12.2500% 11,747,245,000,000
3 FR0010 20-Nov-02 15-Mar-10 13.1500% 11,419,678,000,000
4 FR0011 20-Nov-02 15-May-10 13.5500% 800,000,000,000
5 FR0012 20-Nov-02 15-May-10 12.6250% 2,425,141,000,000
6 FR0013 20-Nov-02 15-Sep-10 15.4250% 5,287,601,000,000
7 FR0014 20-Nov-02 15-Nov-10 15.5750% 1,349,947,000,000
8 FR0015 20-Nov-02 15-Feb-11 13.4000% 6,534,938,000,000
9 FR0016 20-Nov-02 15-Aug-11 13.4500% 6,237,937,000,000
10 FR0017 20-Nov-02 15-Jan-12 13.1500% 10,257,063,000,000
11 FR0018 20-Nov-02 15-Jul-12 13.1750% 7,209,062,000,000
12 FR0019 20-Nov-02 15-Jun-13 14.2500% 11,856,341,000,000
13 FR0020 20-Nov-02 15-Dec-13 14.2750% 11,856,341,000,000
14 FR0021 24-Dec-02 15-Dec-10 14.5000% 2,909,000,000,000
15 FR0022 10-Apr-03 15-Sep-11 12.0000% 8,939,000,000,000
16 FR0023 11-Sep-03 15-Dec-12 11.0000% 13,432,500,000,000
17 FR0024 6-Nov-03 15-Oct-10 12.0000% 5,155,000,000,000
18 FR0025 29-Apr-04 15-Oct-11 10.0000% 8,803,000,000,000
19 FR0026 26-Aug-04 15-Oct-14 11.0000% 11,382,000,000,000
20 FR0027 27-Jan-05 15-Jun-15 9.5000% 5,000,000,000,000
21 FR0028 24-Feb-05 15-Jul-17 10.7500% 3,000,000,000,000
22 FR0029 28-Apr-05 15-Apr-07 9.5000% 3,706,000,000,000
23 FR0030 19-May-05 15-May-16 10.7500% 5,330,000,000,000
24 FR0031 16-Jun-05 15-Nov-20 11.0000% 11,469,000,000,000
25 FR0032 1-Sep-05 15-Jul-18 15.0000% 1,560,000,000,000
26 FR0033 26-Jan-06 15-Mar-13 12.5000% 9,945,000,000,000
27 FR0034 26-Jan-06 15-Jun-21 12.8000% 10,379,000,000,000
28 FR0035 16-Feb-06 15-Jun-22 12.9000% 6,600,000,000,000
29 FR0036 20-Apr-06 15-Sep-19 11.5000% 3,711,000,000,000
30 FR0037 18-May-06 15-Sep-26 12.0000% 2,450,000,000,000
31 FR0038 24-Aug-06 15-Aug-18 11.6000% 3,083,000,000,000
32 FR0039 24-Aug-06 15-Aug-23 11.7500% 4,175,000,000,000
33 FR0040 21-Sep-06 15-Sep-25 11.0000% 8,716,000,000,000
34 FR0041 12-Oct-06 15-Nov-08 9.2500% 1,100,000,000,000
35 ORI001 9-Aug-06 9-Aug-09 12.0500% 3,283,650,000,000
Total Fixed Coupon 238,564,501,000,000
b. Variable Coupon
1 VR0011 28-May-99 25-Feb-07 9.50000% 4,190,627,000,000
2 VR0012 28-May-99 25-Sep-07 11.35938% 4,850,199,000,000
3 VR0013 28-May-99 25-Jan-08 11.35938% 7,931,765,000,000
4 VR0014 28-May-99 25-Aug-08 9.50000% 9,332,111,000,000
5 VR0015 28-May-99 25-Dec-08 11.35938% 9,063,334,000,000
6 VR0016 28-May-99 25-Jul-09 11.35938% 9,799,580,000,000
7 VR0017 25-Jun-02 25-Jun-11 11.35938% 4,008,666,000,000
8 VR0018 25-Oct-02 25-Oct-12 11.35938% 1,065,483,000,000
9 VR0019 20-Nov-02 25-Dec-14 11.35938% 11,406,226,000,000
p.87
APPENDIX 3 - Outstanding Government Securities (cont’d)
No Series Issued Date Maturity Date Coupon Nominal Amount

(Rp)
10 VR0020 20-Nov-02 25-Apr-15 11.35938% 9,899,007,000,000

11 VR0021 20-Nov-02 25-Nov-15 9.50000% 7,546,328,000,000
12 VR0022 20-Nov-02 25-Mar-16 11.35938% 9,666,749,000,000
13 VR0023 20-Nov-02 25-Oct-16 11.35938% 8,652,056,000,000
14 VR0024 20-Nov-02 25-Feb-17 9.50000% 9,909,300,000,000
15 VR0025 20-Nov-02 25-Sep-17 11.35938% 6,909,300,000,000
16 VR0026 20-Nov-02 25-Jan-18 11.35938% 5,442,142,000,000
17 VR0027 20-Nov-02 25-Jul-18 11.35938% 5,442,142,000,000
18 VR0028 20-Nov-02 25-Aug-18 9.50000% 7,033,994,000,000
19 VR0029 20-Nov-02 25-Aug-19 9.50000% 12,212,320,000,000
20 VR0030 20-Nov-02 25-Dec-19 11.35938% 10,503,015,000,000
21 VR0031 20-Nov-02 25-Jul-20 11.35938% 25,322,354,000,000
Total Variable Coupon 180,186,698,000,000
Total Rupiah Denominated 418,751,199,000,000
2. US Dollar Denominated
a. Fixed Coupon
1 R10014 10-Mar-04 10-Mar-14 6.7500% USD 1,000,000,000
2 R10015 20-Apr-05 20-Apr-15 7.2500% USD 1,000,000,000
3 R10016 12-Oct-05 15-Jan-16 7.5000% USD 900,000,000
4 R10017 9-Mar-06 9-Mar-17 6.8750% USD 1,000,000,000
5 R10035 12-Oct-05 12-Oct-35 8.5000% USD 1,600,000,000
Total Fixed Coupon Rp5,500,000,000
Total US Denominated /equivalen in Rupiah (1) 55,000,000,000,000
TOTAL TRADABLE SECURITIES 473,751,199,000,000
B. NON-TRADABLE SECURITIES
1. Fixed Coupon
1 SU-002/MK/1998 (3) 23-Oct-98 2003-2018 1.00% 20,000,000,000,000
2 SU-004/MK/1999 (3) 28-May-99 2004-2018 3.00% 53,779,500,000,000
3 SRBI-01/MK/2003 (4) 7-Aug-03 1-Aug-33 0.10% 143,013,623,533,022
4 SU-007/MK/2007(5) 1-Jan-06 2007-2025 0.01% 54,862,150,308,421
Total Fixed Coupon 271,655,273,841,443
2. Variable Coupon
1 SU-005/MK/1999 (6) 29-Dec-99 2004-2009 3 mos. SBI 2,711,481,000,000
Total Variable Coupon 2,711,481,000,000
TOTAL NON TRADABLE SECURITIES 274,366,754,841,443
GRAND TOTAL 748,117,953,841,443
Source: Center for Government Bond Management (CGBM) Ministry of Finance - the Republic of Indonesia
p.88
RESEARCH TEAM
Arhya Satyagraha
Deputy Head of Research
(arhya@trimegah.com)
Sebastian Tobing Remalia Rachmawati Stanley Tjiandra

Equity Analyst Equity Analyst Equity Analyst
(sebastian.tobing@trimegah.com) (remalia@trimegah.com) (stanley@trimegah.com)
Dian Abdul Hakim T. Heldy Arifien

Fixed Income Analyst Market Analyst
(dian.hakim@trimegah.com) (heldy@trimegah.com)
Devina Erlita Rovandi

Research Assistant Research Assistant
(devina@trimegah.com) (rovandi@trimegah.com)
EQUITY CAPITAL MARKET TEAM
Sanny Gunawan Henry F. Jusuf

Head of Equity Retail Head of Equity Institutional
(sanny.gunawan@trimegah.com) (henry@trimegah.com)
Baskara Sutedja
Deputy Head of ECM
(baskara.sutedja@trimegah.com)
Andie Y Pena Dedy Efian Hartono Gunawan

Sudirman, Jakarta Pluit, Jakarta Kelapa Gading, Jakarta
(andiepena@trimegah.com) (dedy.efian@trimegah.com) (hartono.gunawan@trimegah.com)
Yuliawaty Tutik Suciati Andreas Dewanto

Mangga Dua, Jakarta Semarang, Jawa Tengah Solo, Jawa Tengah
(yuliawaty@trimegah.com) (tuty.s@trimegah.com) (andreas.dewanto@trimegah.com)
Nathanael Benny Prasetyo Rusdy Ni Luh Ketut Sri Agustini

Surabaya, Jawa Timur Medan, Sumatera Utara Denpasar, Bali
(benny.prasetyo@trimegah.com) (rusdy@trimegah.com) (sri.agustini@trimegah.com)
Hibzon Muntazor Linda Ayu Wibisono Asep Saepudin

Makasar, Sulawesi Selatan Malang, Jawa Timur Bandung, Jawa Barat
(hibzon@trimegah.com) (linda.ayu@trimegah.com) (asep.saepudin@trimegah.com)
Tantie Rivi Watie Dodi Koswara

Pekanbaru, Riau Palembang, Sumatra Selatan
(tantierw@trimegah.com) (dedi.koswara@trimegah.com)
DEBT CAPITAL MARKET TEAM
Agus Salim
Head of Debt Capital Market
(agus.salim@trimegah.com)

TRIM-Indonesia Strategy 2007

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TRIM-Indonesia Strategy 2007

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TABLE OF CONTENTS

List of Stock Recomendation 4

Equity Market Outlook 9

View From The Charts 31

Astra Agro Lestari

TRIM Stock Universe

Arhya Satyagraha - Deputy Head of Research

List of Stock Recommendation

No. Stock Reason

Closing price as per 28 December 2006

List of Stock Recommendation

No. Stock Reason

Closing price as per 28 December 2006

List of Stock Recommendation

No. Stock Reason

Closing price as per 28 December 2006

List of Stock Recommendation

No. Stock Reason

Closing price as per 28 December 2006

List of Stock Recommendation

No. Stock Reason

Closing price as per 28 December 2006

Equity Market Outlook

2006 Year in Review

JCI Index - Major Events

Fed increased 1,700

Thailand’s new foreign

2006 Regional Indices Performance

Code Country Index Yo Y Chg

Big Cap, Mid & Small Cap.

Big Cap Mid & Small Cap

Source : Jakarta Stock Exchange

JCI Volatility 1997-2006 Sectoral Performance 2006

1,195 Mining 8.6%

Source : Bloomberg Source : Bloomberg

Market Movers 2006 Indonesia Foreign Fund Flow 2003-2006

-62.5% ADMG 8.0

BBRI 73.1% -2.0

Source : Bloomberg Source : Bloomberg

2007 Market Outlook

Current Market Cap (Rpbn) 1,238,503

Regional & JCI Indices - est. P/E & Div. Yield

(1) Economic fundamentals improving

BI Rate Movement 2006

Source : Bank Indonesia

Further improvements in the domestic economy may also support continued

Infrastructure Projects & Value

Toll road 2 1,037 18 4,303 20 5,340

(3) Domestic investor appetite increasing through direct or indirect investments

AUM Equity Mutual Fund & % to JCI Market Capitalization

(4) Foreign investor appetite continues to rise

Indonesia Equity Foreign Fund Flow 2006

Government Bond Holders 2002-2006

Source : Bank Indonesia

(5) IPO's of Jasa Marga, Indonesia Power amongst others

PT Jasa Marga Toll Road IPO

(5) 2007 corporate earnings to remain strong, albeit at slower growth

We remain unconcerned by the expected weaker corporate earnings growth in

Earnings Growth per Sector CAGR 2006E - 2008F

HEAVY EQUIPMENT 13.0

Source : Trimegah Research

Capital Inflow by Type (US$m)

Mar- 2005 415 395 -1,374

Although economic growth remains relatively weak, we should see a healthier