May 27, 2015 23:40:09
ASII: Early signs of improvement Six specific catalysts investors should heed for Astra: 1) Purchase ahead of Idul Fitri holiday (Lebaran in July) 2) Increase in government spending 3) Indo Auto Show in August, automakers say this usually contributes 5-7% to annual sales. 4) Lower financing rate. BCA targeting 20% growth in auto loans in 2015 5) Potentially 10% higher LTV. Central bank has been entertaining relaxation of LTV for autos as well as mortgages by 10%. If so, LTV for 4W may be raised to 80% from current 70%. 6) New Product cycle. New Model of Innova tentatively out in Aug 2015, and new MPV actually in 2016. We always like to look forward but present conditions must also make sense. Some noteworthy developments: BCA saw a +35% MoM in new bookings for auto loans in April post lowering borrowing rate in the sector (~100bps in Feb 2015) – prove that this well-run bank can still dictate a few things when they said their mind to (has one of the lowest cost of funds in the market). (Sales Desk likes BBCA) 4W market share recovering? Could Honda’s momentum be fading? Myth that Astra financing very dependent on auto sales….is a myth. Growth in financing has actually surpassed 4W sales and earnings from financing is now 30% vs. 4W’s 23%. That means ASII’s financing business is taking market share from competitors. Valuation reasonable – below market and again breaking 1std band vs. historical In short, whilst the stock may not be a screaming buy because headwinds still persist, it is one we definitely need to monitor. The potential catalysts and early signs of improvements mentioned above translate to a solid thesis to buy Astra (ASII).