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P H
Feb 22,2017 11:24:39

Indonesia market update: Here comes the rain
 
Ahok, floods & stocks

Bad news for Ahok in the lead-up to the Jakarta Governor race: In spite of efforts by Jakarta’s governor, Basuki “Ahok” Tjahaja Purnama, to prepare for and prevent flooding, 54 areas around the capital were paralyzed as water prevented travel (exhibit 3-4) given the water depth of up to two and a half meters in some places on the back of around 180mm rain intensity (2016: 157mm) in the past 24 hours. The weather bureau (BMKG) predicts the peak intensity of La Nina to stay until March 2017.  
   
2nd round Jakarta Governor campaign has started early: Dressed in a red parka (exhibit 2), Anies, Ahok’s competitor in the final round of the Jakarta Governor race, has managed to capitalize on the floods to raise his popularity ahead of the planned campaign scheduled for 6-15 April 2017.

Demonstration still took place despite flooding: The Jakarta floods did not deter an estimated 10,000 protestors (although much lower than the 100k participants previously forecast) from turning up in front of the parliament (exhibit 1), asking the government to remove Ahok from his Governor post. The rally was reportedly headed by Muslim forum FUI.    

Positively affected stocks: While all distribution channels are adversely affected by the floods, we believe there are sectors and stocks that could perform better than others under these conditions. Siloam Hospitals ($SILO) should see increased traffic as people get sick while the pharmaceutical sector is also likely to see some uptick from higher purchases of medicine to treat wide-ranging illnesses such as flu and skin diseases, benefiting Kalbe ($KLBF) and Sido Muncul ($SIDO). Additionally, during floodings, households and evacuation centers typically stock up on staple foods such as noodles, which would benefit Indofood Consumer Branded Products ($ICBP). During these times, smokers also have the propensity to smoke more, so we could see increased stick sales for Sampoerna ($HMSP). Within the commodities space, assuming continued downpours at Sumatra’s plantation estates, higher CPO prices might occur due to decreased output. This would benefit our favored plantation plays: Eagle High ($BWPT) and Tunas Baru ($TBLA).  

Adversely affected stocks: With the rains, cement, construction and coal companies could face operational delays. We also expect bread maker Nippon Indosari ($ROTI) to suffer (c.70% of sales in Greater Jakarta), as spoilage may be an issue due to the fresh nature of its products. Retailers could also be affected by the reduced traffic, particularly Ramayana ($RALS) whose low-end target customers lack cars for commuting. Traffic jams caused by flooding should spell bad news for transportation, adversely affecting both Blue Bird ($BIRD) and Express ($TAXI), as well as Garuda Indonesia ($GIAA), as flights may be delayed or cancelled.   

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P H
Feb 06,2017 14:20:29

Blue bird targets 10% revenue growth this year

Blue bird ($BIRD) targets revenue growth of 10% YoY this year after passing a difficult period in 2016. Previously, the company reportedly start collaborating with Go-Jek. Besides that, the company would also develop some new features and services in its own app “My Blue Bird”. In addition, the company is not planning to add new fleet in Jakarta, except cities which have a high demand such as Bali and Lombok. (Bisnis Indonesia)

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P H
Oct 25,2016 00:15:13

Blue Bird ($BIRD): 3Q16 results preview: Up q-q & y-y

§ Expecting 22.5% higher q-q revenue in 3Q16 due to Lebaran: At this stage, we expect BIRD to book higher 3Q16 revenue of IDR1,466bn, up 22.5% q-q, or 7.1% y-y as this year’s Lebaran season, which reduced people’s activities in 2Q16. We also believe the recent implementation of odd-even license plate number policy (exhibit 9) has effectively encouraged people to increase taxi usage relative to private cars, resulting in additional support for BIRD’s top line. In addition, we think the rainy season which commenced at the beginning of 3Q16 should have raised the utilization rates of BIRD’s regular fleets during the period. 

§ Conflicting on the ground channel check regarding driver shortage: Our on the ground channel check was not conclusive enough on current conventional taxi driver shortage. While we believe the worst may be over, lingering driver shortage could persist on low commission of IDR6.3mn/ driver in 2015, down 21% from IDR8.0mn in 2013, based on the historical breakdown of drivers’ implied base salaries and commissions (exhibit 6). This suggests fewer incentives for conventional taxi drivers, particularly given possible higher incomes and work-time flexibility involved in working for online-based taxi companies. Thus, we expect BIRD to experience limitations on driver-hiring, resulting in just 1.8% y-y fleet growth to 27,219 units in 2017 (exhibit 5), especially given continued intense rivalry. 

§ Law no. 32 likely to favor growth in online taxis: Recent protests from online taxi drivers have resulted in the postponement of Transportation Law no. 32/2016 to 2017 with likely revisions favoring online transportation companies (exhibit 8). Previously, one major point stipulated by the law was the use of 1.3liter engine cars or above for app-based transportation fleets. Based on recent discussions, we understand that the government is likely to allow online transportation companies to utilize the Low Cost Green Cars (LCGCs) with lower engine capacity of 1.0 liter. This more affordable vehicle requirement for online taxi drivers could increase competitive pressure on BIRD, in our view. This note marks a transfer of analyst coverage. 

Rating: Upgrade to HOLD, but cutting earnings and TP to IDR2,975 
On the back of intense competition, BIRD’s share price has been one of the worst performers in our coverage universe, significantly underperforming the JCI by 73% ytd (exhibit 4). As a result, BIRD’s valuation has fallen considerably, and is currently trading at 10.9x 2016F PE, far below its 2-year average PE of 23.3x (exhibit 10), and is at 41% discount to market valuation. While most bad news is probably reflected in the share price of BIRD, we are concerned that the competitive disruption by online taxis in the company’s operating environment has completely altered and deteriorated its business fundamentals. Hence, we cut our earnings by around 16% in 2016-17F, resulting in our lower TP of IDR2,975 from IDR3,500, implying 2017F PE of 10.3x, slightly below the average of its regional peers’ valuation at 10.6x (exhibit 12). Given limited upside to our new TP, we upgrade our rating from Reduce to HOLD, particularly as we expect BIRD to continue to face tough challenges ahead. Government policies remain as the biggest risk to our call.
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P H
Jul 13,2016 09:34:17
Adi Sarana Armada ($ASSA): Wheels not turning
 
Online taxi opportunity unlikely to boost earnings: Our recent meeting with ASSA’s management to discuss a potential new source of growth from the online taxi business was disappointing, as the company is not keen to expand in that segment. As of now, ASSA has only secured a contract with UBER Indonesia for 25 cars, with a contract period of 2 years and a monthly rental price of IDR5mn/car. Besides that, ASSA has no plan to increase the number of contracts due to management’s belief that the online taxi business is unlikely to benefit the company. Online taxi companies are only interested in renting cars without driver leases, posing operational risk in terms of lower utilization rates, as online taxi drivers can unexpectedly leave and cars would be returned to ASSA. This note marks a transfer of analyst coverage.

Used car price trend only up on seasonality: Higher competition in the low MPV segment in the past 2 years has lowered the used car price for Avanza models, which form the majority of ASSA’s fleet (45-50%), which has resulted in a lower used-car revenue contribution from 19.7% in 2013 to only 11.9% in 1Q16 (exhibit 5). The trend in Avanza’s used car price (exhibit 6) shows stagnant pricing in the past year, which has only increased due to high demand for cars in the lead-up to the Lebaran festivities. Thus, management thinks the used-car segment is unlikely to boost the company’s income from the fleet disposal of its car rental business.
   
Focusing on logistics and auction business to support growth: Despite the economic slowdown, ASSA managed to book flat 1Q16 logistics revenue of IDR70.1bn, +0.7% y-y (exhibit 7). On a more positive note, ASSA’s revenue related to its newly operated auction business rose 156% y-y in 1Q16 (exhibit 8). Thus, the logistics and auction businesses, which contributed 19.2% and 0.6% of 1Q16 revenue, remain growth supports for ASSA, particularly given the current unfavorable rental and used car sales outlook.

Outlook: Lower cost of funds   
ASSA’s outstanding debt mostly uses a floating rate scheme, with a net gearing level of 202% as at 2015. According to management, ASSA currently has a cost of debt of 9.5%, much lower compared to the industry’s average of 11%. This lower interest rate trend is likely to persist to the benefit of ASSA, according to management. A lower cost of funds would cut ASSA’s car rental business IRR, creating greater opportunity to increase its fleet size and help maintain the company’s position as the second-biggest car rental operator in Indonesia (exhibit 9).
 
Recommendation: Downgrade to REDUCE with lower TP of IDR90
Given ASSA’s disappointing decision to not to pursue opportunities in online taxi rentals, we now expect 2016 earnings to grow just 3% y-y, although rising more substantially by 24% y-y in 2017. As such, we lower our 12M TP to IDR90 (from IDR130) based on a 2017F PE of 7.0x, around a 30% discount to TAXI’s ($TAXI) valuation at its TP. With 22% downside potential, we cut ASSA to REDUCE from Buy. Risks: higher used-car prices and a larger revenue contribution from the online taxi business.

$ASSA $TAXI $BIRD

Bear
P H
May 02,2016 16:43:10
BIRD – Still flying
 
BIRD’s share price has fallen by 39% Ytd because of multiple headwinds the company are facing. However, analyst Janeman believes that the stock has priced in the worst case scenario. He cut his forecast by 38-54% in 16-17CL due to the first-ever tariff cut and lower fleet growth. He lowered his rec to O-PF (from prev BUY) and his TP to Rp5,000 (from prev Rp8,100).
 
- The transportation ministry issued a decree No.32/2016 in early April with the main outcome of protecting conventional taxi operators, including BIRD, by essentially making it less likely for taxi-hailing apps to expand or add new fleets. The rule is to start by 1 Oct 2016.
 
- The Jakarta government and land transportation agency (Organda) cut taxi tariffs for the first time, by 13%. While this certainly cuts revenue and earnings in 2016, going forward this will make the company’s tariff more competitive with Uber/Grab/Go-car.
 
- We had a meeting with BIRD’s management recently and came away with confidence in its plan to improve its performance by buying fewer new cars (less capex) and focusing more on improving its utilization rate. It is also going to introduce a new and revamped mobile app in 2Q16, replacing its outdated app.
 
- We believe the current price already reflects all the headwinds and we are ahead of consensus to cut our numbers. We maintain our positive view but cut our rating to O-PF from BUY with a new Rp5,000 TP, derived by applying a 20x target multiple to the average of 2016-17CL EPS. This is in line with the stock’s historical PE mean of 20x.

$BIRD

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P H
Apr 20,2016 15:46:42
Go-Jek introduced 4W transport service ‘Go-Car’ by Janeman Latul
 
Indonesia’s leading taxi-motorcycle app Go-jek introduced its own 4W transportation services Go-Car.
 
The introduced the services today along with the new interface and design of its app. Interestingly, Go-car put its pricing on par with Blue Bird (BIRD) at Rp3,500/km. No details on its fleets.
 
Our view:

1)    We think the greater Jakarta market is already overcrowded for a new entrant without any significant edge. This is a first-mover market and we don’t think Go-car has any edge and it already placed its price point above Uber and Grab.

2)    With the new Transportation ministry decree No.32/2016, the expansion of rental companies as partners of taxi-hailing apps will be clamped down by Oct16. So unless there’s any changes in the rule before Oct16 that in favor of taxi-hailing app, the conventional taxi operator is going to benefit from the new rule.

3)    The share price has been battered (-30% Ytd) by the negative news on destructive taxi demonstration, bad PR campaign, tariff cut by 15% and expectation of weak result in 1Q16. However, if we absorbed all the bad news, we think its future will not be as bad as expected given the ministerial decree is guarantee their long-term prospect.

4)    We are currently reviewing our numbers but we have a BUY call on BIRD, now trading at a cheap valuation of 13x forward P/E.

$BIRD $TAXI
Bear
P H
Apr 20,2016 09:44:20
New transportation regulation bans individual car owners to join taxi application
The minister of transportation releases a new regulation no 32/2016 governing non-route people transport services. In article 18 par 3 letter c, the regulation states that rental transportation needs to be equipped with vehicle registration certificate (STNK) with the company’s name. The cars used for transport will be issued a special plate, identifying stickers and inspection card. This means that individual car owner will not be able to provide transportation services through information technology company such as Uber or GrabCar. Moreover, transportation or car rental companies must be able to provide a pool and maintenance facilities to maintain its fleets’ roadworthiness. The regulation will come into effect on 1 September 2016. (Kontan)
 
Comment: We understand that online ride application companies (eg Uber and Grab) are violating several laws in Indonesia. Furthermore, the Ministry of Transportation also concerned about the users’ safety and privacy when hailing through these applications. For Uber, the company only has a license for a foreign representatives office in Indonesia issued by the Investment Coordinating Board (BKPM). This type of license does not give Uber the right to operate or conduct any business activity in Indonesia.
 
In the previous regulation, it stated that every vehicles that is used for public with payment is categorised as public transportation. And every public transportation driver is obligated to bring the vehicle registration document, pass a roadworthiness test, and to hold a business permit and an operating permit monitoring document. In the previous regulation, it regulated only the public transportation with the yellow plates. Meanwhile, now the online ride application operators still use the normal plates – so the Government is planning to issue a special license to control them. Thus, the online ride operators have to undergo and pass a regular inspection.
 
In our view, for the Government, it seems that tax is the main concern. As now the Government gives an option for the online ride operators to establish a permanent office in Indonesia and pay taxes, either as public transportation or technology service companies. Both companies Uber and Grab have vowed to comply with the Government’s regulation and have started to undergo the process of establishing a ccoperative, as a legal umbrella for the drivers. However, we think that the process will not be smooth, as it would require individual car owners to let the ownership of their cars be under the name of cooperative, which we think many of them reluctant to do so. Rental companies who are the partner of the Uber or Grab will also be reluctant to follow the regulation as the new regulation could increase their capex to build the pool and maintan the facilities; we foresee decline in profitability for the rental companies if they need to provide those facilities.
 
The decision from the Government to give an option for the online ride operators to regulate the business in Indonesia is not a positive signal in the short to medium term for the conventional taxi industry. As we think the online operators most likely will choose to be the technology service companies. This would still give the online operators a considerable advantage over conventional taxis as they would not need to abide by the taxi price set by the Government.

$TAXI $BIRD
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P H
Apr 18,2016 09:00:02
Blue Bird: Look Beyond The Near-Term Speed Bump
 
We maintain our BUY call on Blue Bird with a revised IDR7,500 TP (from IDR8,500, 29% upside) given its potential earnings improvement from higher average daily revenue and improved utilisation rates. We foresee the short- to medium term overhang from online ride operators to continue haunting conventional taxis. It is not likely to be set in stone, as we believe the 33% price discount price vis-à-vis conventional taxis would not be permanent. Thus, we lower our FY16-17F earnings by 11-15% respectively due to such circumstances.

¨ The Government’s two options. The Transportation Ministry has provided two options for ride-sharing application (app) operators, namely to be a transport operator or an app provider. If the online operators opt to be transportation operators, then the app players must have a public transport operating license. This means that such fleets should be metered. If they opt to be an app provider, the online ride operators should cooperate with official transportation companies or cooperatives that are already registered. We foresee that the online ride operators would probably choose option two as it is not likely to give a positive impact to the domestic taxi industry in the short to medium term. This is because unequal pricing still exists.

¨ Short- to medium-term overhang remains. In our opinion, the current euphoria over online ride apps should not last over the longer period. Customers are currently interested to use the online ride apps due to their promotional packages. We foresee the steep discounts from the online ride operators (33% when compared to conventional taxis) would not be permanent. As we have seen in other Asian countries, the tariffs were gradually adjusted.

¨ 4Q15 results slightly below our estimate. Blue Bird reported a IDR5.47trn revenue (+15% YoY), ie in line with our IDR5.49trn estimate. Topline was supported by higher average daily revenue in FY15 of IDR633,000 (+7% YoY). Meanwhile, FY15 utilisation rates were relatively flat at 74.3% (FY14: 74.8%). However, its earnings came in at IDR824bn (+12% YoY), ie slightly below our IDR872bn estimate, or 94.4% of our forecast. Earnings were dragged by the lower gains from the sale of property, plant and equipment (PPE) by 40% YoY, which was due to the softening condition in the second-hand car market.

¨ Maintain BUY. We lower our earnings estimates by 11-15% in FY16-17 respectively due to the short-term headwind from the online ride operators – the unequal price remains. We maintain our BUY call with a lower IDR7,500 (from IDR8,500) on Blue Bird given its potential earnings growth from higher average daily revenue and improvement in utilisation rates, strong brand equity, healthy balance sheet, high ROEs vs peers, and standardised quality of services and infrastructure.

$BIRD $TAXI
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P H
Apr 04,2016 14:49:18
Jakarta gov’t announced tariff cut for taxi operator by 13% by Janeman Latul
 
Jakarta government over the weekend announced that it will cut taxi tariff by 13% across the board. The tariff will apply once governor Ahok signed the paperwork, which is expected by early this week.
 
What’s the impact to taxi BIRD?
 
- The tariff cut for Taxi never happened before in Jakarta since its inception in the early 2000s. However, the cut could possible help the company face tough competition against Uber and Grab as the pricing gap narrows.
- Base-case Scenario: On Revenue, if we assume the company still adding new regular taxi fleet by 2000 units and revenue per car still up by 5%, the impact of tariff cut will hit revenue down by 11% to Rp5.4tn in our 16CL model. Its NPAT will be hit down by 12% to Rp900bn, assuming the fuel cost down by 10-11% after gov’t recent fuel cut.   
- Worst-case Scenario: On Revenue, if we assume the company only add new regular taxi fleet by 500 units due to severe competition with taxi-hailing apps and revenue per car flat, the impact of tariff cut will hit revenue down by 19% to Rp4.9tn in 16CL model. Its NPAT will be hit down by 28% to Rp734bn, assuming the fuel cost down by 10-11% after gov’t recent fuel cut.
- We have a BUY Call on the stock at Rp8,100/share. The company is now trading at 14.9x forward

$BIRD $TAXI
Bear
P H
Mar 21,2016 11:17:46
Transportation: Clock Is Ticking For Online Ride Applications

Though the Government does not ban the use of online ride applications (apps), we believe the threat they pose to conventional taxis is exaggerated. Based on our interview with Uber drivers, we find their monthly income has declined, due to the phasing out of incentives. Our findings indicate that the key reason for the drivers to use online ride apps was the incentives. We also foresee that online ride apps’ cheaper tariff will not be permanent, as we have seen in other countries, where the tariff gets adjusted gradually to be on par with that of the conventional system.

¨ Maintain OVERWEIGHT rating on Transportation. Whether the Government decides to ban their use or not, in our opinion, the threat from online ride apps has been exaggerated. We believe the euphoria over their use has so far been based on the current promotional period, and once this ends, online ride app market share may likely decline. We maintain our BUY call on Blue Bird given its: i) potential earnings growth from higher average daily revenue and utilisation rates, ii) strong brand equity, iii) healthy balance sheet, iv) high ROE vs peers, and v) a standardised quality of services and infrastructure.

¨ Waiting for the Government’s decision on online ride apps to see how they will be regulated. As the legal status of online ride apps is still debatable, we built our scenario analysis assuming either a ban on online ride apps, or no ban. In the first scenario, we think that there will be an overhang over the short to medium term – not for the long term, because we think Uber’s steep 33% discount to standard taxi tariffs will not permanent. As we have seen in other countries’ experiences, the tariff then gets gradually adjusted to be on par with that of conventional taxis. Furthermore, we think the lower incentives to drivers could become an issue as well. In the second scenario, we foresee a direct positive impact on the taxi industry, especially for Blue Bird ($BIRD), as we will discuss later. The second scenario would not have a significant impact on Express Transindo Utama (Express Transindo) ($TAXI) as the company has a high gearing level and would need to reduce it before expanding their fleet, in our view.

¨ Uber drivers impart that their monthly income declined. The incentives are the key tools from online ride apps to attract and motivate the drivers. Based on our interviews with Uber drivers, we found out that the incentives from Uber make up a huge portion of their earnings. Without these incentives, we foresee a deterioration in drivers’ earnings and it could make the driver quit. Some of the drivers that we interviewed mention that their monthly income has declined, due to the expiry of the incentives.

¨ Conventional taxi system likely to remain drivers’ preferred option. For those depending on driving a taxi as their primary source of income, we think that the conventional taxi system providesmore stable and higher earnings compared with using online ride apps (without incentives). Based on our ground check, we discovered that some drivers who use online ride apps as a source of income use them as a second job or for an additional source of income. The earnings of online ride apps drivers are very dependent on the incentives given from the companies, which showed a declining trend since last year.
Bear
P H
Mar 16,2016 09:39:31
Sebanyak 3000 taxi Express ($TAXI) sudah tidak beroperasi sejak satu tahun lalu, akibat kompetisi tidak sehat dari “taxi” online. Dan sekitar 6.000 supir pun kehilangan pekerjaannya akibat tak bisa memenuhi target pendapatan per hari. Demikian dikatakan oleh Direktur Taksi Express, Shafruhan Sinungan.

Kemarin pemerintah lewat MenKeu dan Menkominfo sepakat untuk memblokir aplikasi taxi online.

$TAXI $BIRD
Bear
P H
Feb 28,2016 12:11:08
Blue Bird ($BIRD)
Counterattack Strategy From Blue Bird


Maintain BUY and IDR8,500 TP (47% upside) on Blue Bird’s potential earnings growth from improving utilisation rates. As FY15 growth slowed amid an economic slowdown and a slight impact from online ride apps, Blue Bird aims to scale back its expansion plan and focus on improving utilisation rates this year. It has also launched a new mobile app to compete with online ride apps. We expect FY16F margin expansion to be limited as lower fuel cost would be slightly offset by other costs (ie daily fixed commission).

? Blue Bird’s response to challenge from online ride applicatons (apps). Blue Bird has upgraded its mobile app to be similar with Uber’s. The new features are more user-friendly (with credit card payment, e-voucher and more accurate maps) and the company may look into the possibility of promotional pricing. In order to compete in an unequal war with online ride apps, Blue Bird plans to introduce new strategies like loyalty cards to offer promotional packages to its customers.

? Competitive pressure may wane over time. With online ride companies like Uber, Grab Taxi and Gojek cutting their drivers’ incentives for profitability, we foresee more ex-taxi drivers who were previously attracted by incentives from online ride companies to rejoin Blue Bird. This has been reflected in the company’s improving utilisation rates since 2H15. According to CFO Robert Rerimassie, Blue Bird’s average blended utilisation rate in FY15 was 74.3% (in line with our 74.3% estimate). For FY16, the company expects to ramp up its utilisation rate to around 77-78% (our estimate: 75.3%).

? Softened spending and competition a double blow in FY15. Mr Robert cited two reasons for the slowdown in the taxi business in FY15: i) softened purchasing power, and ii) competition from online ride applications.

? Blue Bird scaled back its expansion in FY15 and would continue to do so in FY16 (target of adding 1,700-2,000 taxis). While this is largely in response to a slowing economy, Mr Robert mentioned that there is also some impact from online ride apps. In FY16, Blue Bird would focus on maintaining its market share in the taxi industry as well as its utilisation rates.

? We maintain our BUY call and DCF-derived IDR8,500 TP (WACC: 11.3%, TG: 3%) on Blue Bird on the back of: i) its potential earnings growth from an improvement in utilisation rates and average daily revenue, ii) high market share in the industry, iii) healthy balance sheet, and iv) high ROE compared to its local and regional peers’.

$BIRD $TAXI
Bear
P H
Aug 12,2015 20:37:39
Indonesian Transportation: In a jam

Threats from private-car taxis and … : On the back of new transportation mobile application services, the Indonesian taxi business is facing a plethora of challenges ahead in the form of fewer drivers available and weaker customer demands (exhibit 5). Based on our study, UBER’s normal tariff, with no traffic jam, is around a third cheaper than taxi fares (exhibit 10). Additionally, these new competitors are here to stay as the transportation ministry has granted temporary operational licenses, while the government is still drafting new regulations for e-commerce business. UBER, operating in 57 countries (exhibit 9), commenced its Indonesian operations in mid-2014 focusing on Jakarta. Now it has around 700 operating units in Jakarta with expansions to Bali and Bandung. UBER collaborates with rental companies in Indonesia and taps into their under-utilized cars for its operations. Normally, UBER collects a 20% service fee on all passenger payments with the rest going to drivers, which may be split with owners of car rental companies in some cases.

… motorcycle-taxi mobile services: On the motorcycle-taxi front, we expect new applications to gain government support, especially in Jakarta, as they may help reduce the number of cars on the streets and ease traffic jams. Go-Jek, an Indonesia-based local mobile application, has experienced phenomenal growth (exhibit 14) due to high consumer demand for its services (exhibit 13), and is now supported by around 14k drivers in Jakarta. In fact, our channel checks reveal that many taxi drivers have migrated to become Go-Jek drivers due to its flexi hours and up to 50% higher incomes for drivers (exhibit 10). A Go-Jek driver can generate a net income of around IDR5-7mn/month, assuming 25 working days and a daily income of around IDR200k-IDR280k. On the contrary, a taxi driver may only earn a monthly income of around IDR2.7mn-IDR3.5mn, based on our market survey. Hence, Go-Jek is extremely popular, forcing the company to limit the number of driver applications to 300 drivers per day due to the high interest from potential joiners. We believe this concept has a great deal of potential going forward, as Jakarta’s Governor, Ahok, is supportive of this service, which he sees as aligned with his vision of making Jakarta a smart-city with less traffic congestion. We think that this application is attractive to low-to-middle-income people as a “business-partnership”, charging only 20% of total revenue as service fees, with simple requirements to join (exhibit 12).

Reiterate sector UNDERWEIGHT, cutting all TPs
The threat from these mobile services is worse for Blue Bird ( $BIRD ) than Express Transindo Utama ( $TAXI ) as BIRD’s revenues are 100% based on its drivers’ incomes, which would decline as UBER and Go-Jek enter the fray. As we also expect fewer drivers to be available, we forecast lower utilization rates ahead, causing earnings downgrades (exhibits 6 and 7). We lower our TPs for BIRD to IDR5,500 (from IDR7,400) and TAXI to IDR520 (from IDR820). Thus, we retain our UNDERWEIGHT sector rating with unchanged REDUCE ratings for BIRD and TAXI, despite their severe market underperformances ytd (exhibit 4). For Adi Sarana Armada ( $ASSA ), we trim our 2016F earnings (exhibit 8) as we expect more difficult operating conditions, resulting also in a lower TP of IDR140 (from IDR150). However, we retain our BUY rating on ASSA due to the cheap PE valuation of 6x for 2016F and 18% upside potential to our new TP.
Bear
Quotes delayed, except where indicated otherwise.
BIRD
4,560.00 0.00 (0.00%)
Blue Bird Tbk.
Last Update 02:54:10