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Jul 24,2018 14:22:25

Dividend is the key driver
- If the cigarette stocks continue to be driven by relative dividend yields, GGRM should continue to outperform HMSP.
- 1H18 cigarette industry volume data suggest that HMSP’s volume declined 0.4% vs. GGRM's c.2% yoy volume growth during the period.
- Factoring in a 4% decline in HMSP’s 2018F earnings and GGRM’s higher 2019F capex (airport construction), we estimate GGRM’s yield at c.4% vs. HMSP’s 2.8%.
- Maintain sector Overweight. We now prefer GGRM over HMSP, though we maintain that HMSP is still the better long-term play on cigarette consumption trend.

Dividend yield as key to stock outperformance
In the past three years, GGRM’s share price has outperformed HMSP’s. Our analysis found the relative share price performances of the two stocks correlated strongly with dividend yields. GGRM started to outperform HMSP when its dividend yield rose sharply in 2016, resulting in higher returns vs. HMSP. The normalisation of GGRM’s capex and HMSP’s weak earnings momentum should allow the former to maintain a higher relative dividend yield, in our view.

Smokers continue to prefer high- and mid-tar cigarettes
According to Philip Morris International (PMI), the industry’s volume declined 1.5% yoy in 1H18, reflecting soft consumer purchasing power and higher-than-inflation excise tax hikes on cigarettes. Among the segments, high- and mid-tar cigarettes continued to support the industry’s growth, while hand-rolled and mild segments, and white cigarettes lost popularity.

GGRM consistently seizing market share
The consumers' smoking pattern plays into GGRM’s strength, as evidenced by its ability to expand its volume; much like what happened last year in 2017. Findings from our channel checks suggest that GGRM’s 1H18F volume grew c.2% yoy (vs. industry’s - 1.5%, according to PMI), despite c.8% yoy price increases. We project 1H18 sales growth of c.10% for GGRM vs. c.4% for HMSP. GGRM’s flagship, GG Surya, has been performing well (5M18 volume up 1.5% yoy, according to Nielsen).

HMSP remains a better long-term play
Indonesia smokers would likely shift back to the mild segment when purchasing power normalises; such is the trend globally. Economic uncertainties in the past few years and introduction of the mid-tar segment (effectively discounted cigarettes) led to market share shifting to ‘value’ cigarettes. Producers are incentivised to phase out such products eventually, in our view. HMSP’s firm position in the mild segment suffered, with its flagship A Mild hit (volume down 8% yoy in 1H18). Its 0.3% pt yoy market share gain in 1H18 to 33.2% was driven by low-margin products.

For now, GGRM is a superior stock
Assuming that value cigarettes stay trendy, GGRM should post relatively higher earnings CAGR of c.8% in 2017-20 vs. HMSP’s c.7%. We expect GGRM’s dividend yield in 2019F to remain superior to HMSP’s, unless its payout falls to less than c.43% (past three-year average: 72%). GGRM currently trades at 17x 2018F P/E, a discount of 52% vs. HMSP’s. Meanwhile, the government’s approval of e-cigarettes which have a 57% excise tax and could be sold from Jul 2018, has little impact on GGRM and HMSP, for now.


Jul 10,2018 07:48:46

Indonesia Telco: Pricing is not up in 2Q18, but healthier trends observed vs. 1Q18

We conducted an on-the-ground review of telco tariffs across: 1) traditional channels, and 2) distributors. Our key takeaways are: a) data yields remained down in June vs. May but this is likely due to telco channel stuffing, with June Lebaran actual demand strong especially in rural areas, b) Strong demand is prompting telcos and distributors to raise their ASPs in July, c) starter packs are incrementally deemphasized (vs. reloads) at Telkomsel. Our thesis of a better recovery in 2H18 is starting to take shape; hence, we see 2Q18 as another “wash-out” quarter due to a ‘lost’, subscriber base (see our report “Indo Telco – The State of Play: 1Q18 Wrap up” , 16 May 2018).

All in all, this suggests 2 key findings: a) 2Q18 revenue probably has yet to recover owing to continued data-yield pressure, while subscriber overhang remains due to SIM card deregistration, b) however, the overall trend is definitely getting healthier, especially with market leader Telkomsel since late June deemphasizing high-churn starter packs. This suggests its focus has turned towards lower-churn customers, which is positive for the longer-term tariff trend (ie, it is easier to maintain tariffs in an ecosystem of recharges vs. one of starter packs), and paves the way for trend improvements in 2H18.

Data yield down from average of IDR8k/GB to average of IDR6k/GB in June; but demand was strong during Lebaran. Our research across traditional shops in Jakarta, Jogja, Bandung and Makassar (700+ data points in 3 months) suggests data yields continue to trend lower across different absolute price ranges. Our market research looked at 3 price points i) below IDR25k, ii) IDR25-70k, and iii) above IDR70k. Our key findings are as follows:

1) Data yield overall declined for Telkomsel, EXCL and Fren, while for ISAT, Axis and Tri it is stabilizing-to-rising. In 1Q18 we observe data yields falling sharply to IDR8-10/MB (4Q17: IDR9-14/MB); in 2Q18 our market research suggests a further decline potentially to IDR6-8/MB on a blended basis. A data yield decline is, in our view, natural and we also understand demand (consumption) during Lebaran was especially strong for telco packages, which offsets data the yield decline. Our official view is that tariffs will continue to decline, but at a less rapid pace, which bodes well vs. the 2H17-1H18 rapid-declining tariff season.

2) SmartFren data yield gap significant vs. others. Fren data yield ranges from IDR4k-5.5k/GB or a good 10-20% gap vs. others. Smartfren is the only player we see turning more aggressive in July; we think this is a logical move given Fren’s sparse network and see this is one factor limiting tariff upside continuously. Our meeting with Smartfren suggests they have a peak utilization below 50% (lowest in the sector); indeed the recent OpenSignal June Indonesia report ranks Smartfren’s 4G availability and overall download speed to be the fastest, even above Telkomsel’s. We believe Smartfren’s network does put a cap on overall tariff increases (see next section for more thoughts on Smartfren).

3) Telkomsel likely exited low-priced packages (below IDR25k) in July. This tallies with our market research and we understand it is management’s strategy to shift towards reloads and less churn. We believe this is healthy for the industry, and with the exception of Smartfren, we are indeed seeing less competition in this segment.


Jul 10,2018 07:45:39

Good morning,

Dow rallies more than 300 points as banks post best day since late March

Bank stocks rose at least 2.5 percent, led by Bank of America, Citigroup, Goldman Sachs and J.P. Morgan Chase.

The SPDR S&P Bank ETF (KBE) rose 2.3 percent and posted its best day since March 26, when it gained 3.3 percent.

Equities also got a boost from stronger-than-expected jobs data released last week, which diverted attention away from a global trade war.

Dow.......24777 +320.1 +1.31%
Nasdaq...7756 +67.8 +0.88%
S&P 500..2784 +24.4 +0.88%

FTSE........7688 +70.3 +0.92%
Dax........12544 +47.7 +0.38%
CAC.........5398 +22.3 +0.42%

Nikkei.....22052 +264.0 +1.21%
HSI..........28689 +372.9 +1.32%
Shanghai..2815 +67.9 +2.47%
ST Times..3229 +37.0 +1.16%
Indo10Yr..7.7902 -0.1553 -1.95%
INDOBex236.4260 +2.0457 +0.87%
US10Yr........2.86 +0.029 +1.02%
VIX..............12.69 -0.68 -5.09%

USDIndx ....94.077 +0.114 +0.12%
Como Indx198.2340 +0.1817 +0.09%
(Core Commodity CRB)
DJUSCL......68.17 +1.31 +1.96%
(Dow Jones US Coal Index) 

IndoCDS....126.375 -7.29 -5.45%
(5-yr INOCD5) 

IDR........14330 -45 -0.31%
Jisdor....14332 -77 -0.53%
IDR Fut..14321 -8 -0.06%

Euro.........1.1749 -0.0001 -0.009%

TLKM.......27.44 +0.47 +1.74%
EIDO.........23.48 +0.57 +2.49%
EEM..........44.19 +0.78 +1.80%

Oil...........74.02 +0.04 +0.05%
Gold ......1258.60 +2.40 +0.19%
Timah...19612.50 +227.50 +1.17%
Nickel...14067.50 +107.50 +0.77%

Coal price.116.10 unch +0%
Coal price.112.75 +0.10 +0.09%
Coal price.101.95 +1.75 +1.75%
Coal price.101.05 +2.15 +2.17%
(Agt/ Rotterdam)

CPO(Sept) 2268 -12 -0.53%
Corn...........354.00 -6.25 -1.73%
SoybeanOil 29.26 -0.20 -0.68%
Wheat.......508.00 -7.25 -1.41%

Rubber.......173.90 +5.15 +3.05%

Pulp(BHKP) 1050.00 unch +0%
(03Jul - 09Jul)

* : weekly

(DE/ls 10-07-18)

Feb 01,2018 19:06:51
Astra International 

($ASII) akan memacu bisnis properti melalui kolaborasi dengan investor Hong Kong (HK) Land untuk proyek-proyek residensial serta komersial strata. Kerja sama patungan ASII dengan HK Land dilakukan dengan komposisi saham masing-masing sebesar 60% berbanding 40%.

Oct 23,2017 07:31:39

Bukit Asam ($PTBA)’s strong 3Q17 net profit is above consensus expectations. We think the strong earnings should continue, as high coal prices are likely to be sustained. Based on our discussion with its CFO, the firm is confident that PLN’s request to use a cost-plus margin formula for determining the coal selling price to domestic power plants is unlikely to be implemented. We maintain our assumptions and reiterate BUY with an unchanged IDR17,400 TP (58% upside). Bukit Asam’s FY17F-18F P/Es of 6.8x and 5.8x respectively are the cheapest among our coal universe.

  • Management is confident that the cost-plus margin formula is unlikely to be implemented. Based on our discussion with Bukit Asam’s chief financial officer Mr Orias Petrus Moedak, he is confident that Perusahaan Listrik Negara’s (PLN) request to use a cost-plus margin in determining the coal selling price to domestic coal power plants is unlikely to happen. 

  • Using conservative accounting to record coal selling prices to PLN. Bukit Asam booked revenue from selling coal to PLN in 9M17 using the ASP the latter requested for in negotiations. These negotiations are still ongoing.
    If the final agreed selling price with PLN in the yet-to-be-signed agreement uses 4Q16 ASP (as per the former agreement), there should be a positive surprise. This is because Bukit Asam would record a higher selling price and make a retroactive adjustment to its revenue from PLN since the start of 2017. 
  • Banko Tengah (Sumsel 8) power plant should commence its commercial operation date (COD) in 2021. On 19 Oct, Bukit Asam subsidiary PT Huadian Bukit Asam Power and PLN signed an amendment to their power purchase agreement (PPA) for the 2x620MW Banko Tengah (Sumsel 8) mine mouth coal-fired power plant. The COD of this plant is scheduled for 2021. 
    The Sumsel 8 power plant is slated to consume 5.1m tonnes of coal pa, 100% of which would come from Bukit Asam’s coal mine. This should increase its coal sales by 5.1m tonnes (FY17F: 23.1m tonnes) from 2021 onwards.
  • 3Q17 earnings are above consensus expectations (9M17: ~77% and ~82% of our and street’s estimates). Bukit Asam booked strong 3Q17 earnings of IDR902bn (+165% YoY, +5.7% QoQ) on the back of higher revenue and gross margins (3Q17: 40%, 2Q17: 37%, 3Q16: 24%). This was partly contributed by a lower stripping ratio in 3Q17.
  • Reiterate BUY with an unchanged IDR17,400 TP. We maintain our assumptions and reiterate our BUY call on this counter with an unchanged DCF-derived IDR17,400 TP. This implies P/Es on our FY17F-18F EPS of 10.8x and 9.2x respectively.
    Currently, Bukit Asam is trading at FY17F-18F P/Es of 6.8x and 5.8x, respectively, making it the cheapest coal stock in our universe. Key risks are the Government’s decision to change the domestic coal price formula, a delay in expanding railway capacity, a significant drop in coal prices, weaker-than-expected coal demand, and a strengthening IDR. (Hariyanto Wijaya, CFA, CPA, CMT)

Oct 13,2017 12:08:28

Halal – An Earnings Boost Strategy

Over the next two decades, the global Muslim population is expected to rise to almost twice of that of the non-Muslim population. Such growth would trigger the vast development of the halal market. We found that companies, which implement halal practices as part of their strategy, are delivering robust earnings growth with high respective ROAEs, asset turnover, and EBIT margins. Our Top Picks are Bangkok Dusit Medical, BIMB, Mengniu, Indofood CBP, and Malee.

  • Robust Muslim population growth boost halal market. According to Pew Research Centre’s Forum on Religion & Public Life (Pew Study), the global Muslim population is expected to rise to about twice of that of the non Muslim population over the next two decades. We see this demographic growth triggering the vast development of halal products. Based on the International Monetary Fund (IMF), the average projected growth of the Organisation of Islamic Cooperation’s (OIC) GDP between 2015-2021 is expected at 4.2% pa, faster than the rest of the world’s GDP growth’s 3.6% pa.
  • Huge market with tremendous potential. According to the State Of The Global Islamic Economy Report 2016/17 developed and produced by Thomson Reuters, global Muslims spent over USD1.9trn across industries in 2015. This figure is estimated to grow to USD3trn in 2021 (7.9% CAGR). The largest halal products consumption is halal food, which accounted for 62% of the halal market in 2015. Globally, the Muslim population spent a total of USD1.2trn on food & beverage (F&B), while halal-certified F&B products sales were estimated at merely USD415bn as at 2015. This means that there is an ample room for halal certified F&B products to grow, at least to be equal with global Muslim spending figures. Furthermore, Thomson Reuters estimates Muslim spending on F&B to reach USD1.9trn by 2021, a CAGR of 9% from 2015.
  • Delivered robust earnings. Our Halal Thematic report consists of companies in the RHB regional universe – included in the respective countries’ securities’ shariah compliant list or Dow Jones Islamic Index – that implement halal practices on some of their products or services. Having the halal certificate is part of these companies’ respective strategies to boost revenue and expand market base. In our universe, we found 13 companies implementing the halal standards, sectors which include banking & finance, F&B, personal care products, hospital, and logistics. In FY18F, these companies are estimated to deliver robust earnings with c.17.4% ROAE and c.25% YoY earnings growth, in average. In terms of productivity, asset turnover is estimated to average at 1.12x with a 13% EBIT margin.
  • Top Picks. Our Top Picks are Bangkok Dusit Medical, BIMB, China Mengniu Dairy (Mengniu), Indofood CBP (Indofood), and Malee. Among the companies in our Halal Thematic coverage, Malee offers the highest ROAE and asset turnover, while Matahari Department Stores (Matahari) provides the highest EBIT margin. (Andrey Wijaya)


Oct 13,2017 12:02:27

Kinerja $AISA 1H 2017 Sesuai Estimasi

2Q 2017 Menopang Kinerja 1H 2017
Penjualan PT. Tiga Pilar Sejahtera Food Tbk. ($AISA) per 1H 2017 turun 7,5% YoY menjadi Rp 3,30 miliar. Penjualan bisnis Rice (Beras) turun 12,2% YoY menjadi Rp 2,1 triliun. Padahal bisnis Rice memberi kontribusi terbesar terhadap total penjualan perseroan, yaitu sekitar 62,4% per 1H17. Sedang penjualan dari bisnis Food Manufacturing hanya tumbuh 5,8% YoY di 1H17 menjadi Rp 1,27 triliun. Perseroan sudah mendivestasi divisi Agribisnis, sehingga tidak mendapat benefit dari kenaikan harga CPO di tahun 2017. Penjualan perseroan per 1H17 itu sesuai dengan estimasi penjualan (gross) perseroan sebesar Rp 3,37 triliun.
Penjualan di 2Q17 turun 3,4% YoY, tetapi lebih tinggi 26,1% QoQ.
Laba yang dapat diatribusikan ke pemilik entitas induk AISA per 1H 2017 turun 25,4% YoY menjadi Rp 191,07 juta. Penurunan laba AISA itu terutama disebabkan oleh turunnya penjualan. Operating income turun 13,8% YoY menjadi Rp 529,93 miliar. Operating Profit Margin dan Net Profit Margin turun masing-masing menjadi 16,1% dan 5,8% di semester I 2017. Gross Profit Margin masih lebih tinggi dibanding 1H16 yaitu 25,2%.

Harga Eceran Tertinggi Beras
Pasca kasus PT. Indo Beras Unggul, anak usaha perseroan, pemerintah akhirnya menetapkan Harga Eceran tertinggi (HET) untuk beras yang berlaku mulai 1 September 2017. Dalam aturan tersebut, HET beras diklasifikasikan berdasarkan jenis beras dan wilayah. Dengan adanya aturan baru itu, maka Peraturan Menteri Perdagangan (Permendag) No. 27 tahun 2017 tentang Penetapan Harga Acuan Pembelian di Petani dan Harga Acuan Penjualan di Konsumen dicabut.

Strategi di Bisnis Beras

Pasca penetapan HET beras, PT. Indo Beras Unggul (IBU) menyatakan akan melakukan penyesuaian kualitas produk berasnya dengan standar beras yang dipersyaratkan. Selain itu Tiga Pilar Sejahtera Food berencana melakukan divestasi atas anak usahanya di bisnis beras. Kami memperkirakan divestasi baru dilaksanakan pada tahun 2018, jika disetujui dalam RUPSLB.
Kami menunggu informasi lebih lanjut dari perseroan tentang kelangsungan usaha bisnis perusahaan, terutama bisnis beras, dan strategi perusahaan ke depan. Termasuk rencana divestasi anak usaha di bisnis beras.

PE Rendah, Cerminan Fundamental ?
Saat ini AISA diperdagangkan pada PE 6,66x atau di bawah rata-rata PE 3 tahun di 13,64x. Pada rata-rata PE 3 tahun dan EPS’17est. perseroan Rp 148,63, mentranslasikan harga saham AISA Rp 2030. Berdasarkan konsensus Bloomberg, PE’17F AISA sebesar 7,73x atau paling rendah dibandingkan PE’17F konsensus emiten konsumer lain serta di bawah rata-rata PE’17F sektor konsumer konsensus Bloomberg di 28,32x. Valuasi yang relatif rendah itu lebih mencerminkan ketidakpastian perusahaan saat ini akibat kasus IBU dan penurunan kinerja.
Sejak Mei 2017 harga saham AISA tidak searah dengan IHSG, yang diperkirakan mencerminkan kondisi internal perseroan, dimana kinerja 1Q 2017 turun.

Oct 13,2017 11:59:42

  • Pendapatan bersih LPKR 1H17 mengalami penurunan 3% YoY
  • Peningkatan divisi healthcare menopang tumbuhnya recurring income
  • Masih lemahnya performa 1H17 menyebabkan kami mempertahankan rekomendasi HOLD

LPKR bukukan laba bersih Rp487 miliar pada 1H17

Pendapatan bersih LPKR meningkat 3% YoY menjadi Rp4,9 triliun pada 1H17. Sementara GPM perseroan turun dari 43,2% pada 1H16 menjadi 41,1% pada 1H17 yang disebabkan oleh meningkatnya penjualan dari divisi large scale integrated development yang memiliki margin lebih rendah dibandingkan urban developement serta adanya kenaikan beban pokok jasa tenaga ahli, gaji, dan kesejahteraan karyawan dari divisi healthcare sebesar 6,4% YoY. Sementara itu, OPM LPKR mengalami penurunan dari 17,2% pada 1H16 menjadi 12,4% pada 1H17 yang disebabkan oleh kenaikan biaya iklan dan pemasaran sebesar 59,4% YoY. Adapun pada 1H17, perseroan membukukan laba penjualan aset yang tersedia untuk dijual sebesar Rp119 miliar dan mengalami penurunan beban bunga sebesar 57,2% YoY menjadi Rp68 miliar. Untuk itu, laba bersih LPKR hanya mengalami penurunan sebesar 2,1% YoY menjadi Rp487 miliar pada 1H17

Recurring income 1H17 meningkat 8% YoY

Recurring income tumbuh 8,0% YoY menjadi Rp3,6 triliun sehingga kontribusi terhadap total pendapatan meningkat dari 65,3% pada 1H16 menjadi 73% pada 1H17. Pertumbuhan itu didukung oleh meningkatnya pendapatan divisi healthcare sebesar 7,9% YoY menjadi Rp2,8 triliun pada 1H17, yang berasal dari 31 rumah sakit yang dikelola LPKR. Pertumbuhan recurring income tersebut juga didukung oleh meningkatnya pendapatan ritel mal sebesar 16,8% YoY menjadi Rp191 miliar pada 1H17, yang ditopang oleh meningkatnya kontribusi dari Lippo Mall Puri, Baubau, dan Jambi. Hingga 1H17, LPKR mengelola 47 mal yang tersebar di seluruh Indonesia. Sementara itu, pendapatan aset managemen meningkat 9,4% YoY menjadi Rp205 miliar pada 1H17 yang didukung oleh bertambahnya aset yang dikelola serta meningkatnya fee dan pendapatan dividen. Di sisi lain, development revenue mengalami penurunan sebesar 24,7% YoY menjadi Rp1,3 triliun pada 1H17 yang disebabkan oleh turunnya pendapatan segmen urban development sebesar 41,0% YoY menjadi Rp687 miliar. Sedangkan pendapatan segmen large scale integrated development meningkat 6,2% YoY menjadi Rp648 miliar pada 1H17 yang didukung oleh peningkatan pengakuan pendapatan dari Orange County, Millenium Village, dan perkantoran Lippo Thamrin.

LPKR raih marketing sales Rp2,6 triliun

LPKR membukukan marketing sales sebesar Rp2,6 triliun pada 1H17, meningkat signifikan hingga di atas 4x lipat dari 1H16. Kenaikan ini ditopang oleh pertumbuhan yang signifikan dari segmen residensial hingga 36x menjadi Rp2,4 triliun pada 1H17. Kendati demikian, jika dibandingkan dengan target hingga akhir tahun sebesar Rp10 triliun, pencapaian marketing sales ini masih rendah, yakni sebesar 27%. Di sisi lain, perseroan telah mendapatkan persetujuan dari pemegang saham terkait akuisisi properti integrasi di Buton. Perseroan akan mengakuisisi Siloam Hospitals Buton yang menyatu dengan retail mall plaza Buton.

Kami memberikan rekomendasi HOLD dengan target harga 800/saham

Kendati mengalami peningkatan yang signifikan, pencapaian marketing sales LPKR hingga 1H17 masih jauh dari target 2017. Di samping itu, performa segmen urban development juga masih membukukan pelemahan sehingga menghambat pemulihan kinerja LPKR. Untuk itu, kami menurunkan target harga dari Rp865/saham menjadi Rp800/saham. Positifnya, perseroan masih diuntungkan oleh model bisnisnya yang mayoritas dikontribusikan oleh recurring income, yang terutama berasal dari segmen healthcare. Kami juga berharap adanya aksi penjualan aset ke REIT yang dapat memberikan dana segar bagi perseroan. Untuk itu, kami tetap mempertahankan rekomendasi HOLD atas saham LPKR.


Oct 13,2017 11:54:55

RHB Investor Gathering – Economic and Political Outlook Towards 2019 Election

Yesterday, we held an Investor Gathering with keynote speaker Mr. Faisal  Basri, discussing Indonesia’s economic and political outlook towards 2019 election.

Mr. Basri sees a solid macroeconomic situation for Indonesia. There is risk  in the fiscal deficit due to limited government revenue, but it is still manageable by lowering capital spending. Slower growth in households consumption is likely to be driven by shifting to saving from spending by consumers. Political condition is conducive with a high electability for President Joko Widodo. Overall, Indonesia’s democracy situation is more stable than its neighbouring countries.

Below are keys takeaways:

  • Solid macroeconomics. Indonesia’s macroeconomic condition is solid which is indicated by low inflation (3.7% in Sep), lower Central Bank 7-day repo rate (4.25% in Sep), stable IDR/USD exchange rate (IDR13,500/USD), and high foreign reserves (USD129.4bn in Sep). 
  • There is risk in fiscal deficit, but it is manageable. From the fiscal side, limited government revenue affects the economy. Ambitious 2017 tax revenue target (+16% vs 2016 realisation) is unlikely to be achieved, thus will likely cause fiscal deficit to be higher than its target (above 2.9%). Mr. Basri suggested slower capital spending, such as rescheduling infrastructure projects and reducing state capital injection. Otherwise, macroeconomic stability may be disturbed. 
  • Slower consumption growth, but not purchasing power. In middle-to-high income households, there is indication of shifting to saving from consumption. Households saving-to-income ratio increased to 20.8% in 2Q17 (from 18.6% in 2Q16).

    For low-income consumers – e.g. farmers, construction workers, and other informal workers – their purchasing power generally have declined for quite some time. Moreover, the delay of social assistance disbursement to this group worsened the situation. Nevertheless, this group has a small contribution of 17% of the national private consumption. 
  • President Joko Widodo’s electability is high. Despite slower growth in  consumer spending – especially in low-end segment – President Joko Widodo’s electability is high, increasing to 41.6% in Apr-17 (from 36.3% in  Apr-16), according to a Kompas survey. In addition, satisfaction rate on Joko Widodo administration is high, stable at around 65%. Overall, Indonesia’s  democracy situation is more stable than its neighbouring countries. (Andrey Wijaya, Rizki Fajar)

Oct 13,2017 11:49:42

Building Materials – Infrastructure Projects Boost Bulk Cement Sales Growth

9M17 domestic cement sales came in at 47m tonnes (+6.6% YoY), driven by  bulk cement sales. We believe the main sales growth driver was the rampup  in infrastructure projects. Cement sales are cyclically higher in 2H of the  year, and our ground checks indicate that cement makers slowed down the  rate of their price reductions in 3Q17. However, in the long term, we expect  competition in the cement industry to remain intense. National un-utilised  production capacity is likely to increase, as production capacity is growing  faster than demand. Maintain NEUTRAL on the sector.

Bulk cement sales growth improves. We believe the ramping-up of  infrastructure projects is likely the main sales growth driver for Indonesia’s  cement industry. 9M17 domestic cement sales increased to 47m tonnes  (+6.6% YoY). This was driven by bulk cement sales – which accounted for  c.25% of 9M17 domestic cement sales – which grew 13.6% YoY.  In Java, cement sales, which accounted for 57% of 9M17 domestic sales,  grew faster (+11.3% YoY) than that of ex-Java, which were flat (+1% YoY).  3Q17 domestic cement sales jumped to 18.4m tonnes (+29.5% QoQ,  +21.1% YoY). We opine that this significant sales increase was partly driven  by the longer working days in the absence of the Lebaran holiday in June.

Indocement’s market share is stable, while Semen Indonesia’s (SI)  slipped. We estimate that Indocement was able to maintan its 3Q17 market  share at 25.4% (2Q17: 25.5%). During the quarter, it widened the sales  coverage of its second-tier brand, Rajawali, which is now available in 30  cities in Jakarta, Banten, West Java and Central Java. Previously, Rajawali  cement was only available in a few cities in Banten and West Java.  SI’s 3Q17 market share dipped to 40.3% (2Q17: 41.1%), likely due to the  slow rate of its ASP reduction.

Slower ASP reduction. Cement sales are cyclically high in 2H of the year  – which leads to easing competition. Hence, cement makers slowed down  in reducing their selling prices. SI’s ASP reduction decelerated – its domestic  ex-factory ASP declined by just 1.2% QoQ in 3Q17 (2Q17: -2.4% QoQ) This  is in line with on-the-ground checks we conducted on retail selling prices, at  building materials stores in Jakarta, Bali and Makasar. Our latest ground  checks suggest that cement retail selling prices were flat MoM in September.

Expect competition to remain intense in 2018. Despite the slower price  reduction in 3Q17, competition in Indonesia’s cement industry likely to  remain intense over the long term. In 2018, national cement production  capacity is estimated to reach 113m tonnes (+9% YoY), while we estimate  national cement demand to increase to 70m tonnes (+7% YoY).  In our calculation, the national cement overcapacity is likely to increase to  43m tonnes in 2018F (vs 39m tonnes in 2017F), while un-utilised production  capacity may rise to 38% in 2018F (vs 37.1% in 2017F).

Maintain NEUTRAL. The announcement of higher monthly cement sales in 4Q17 may improve investor sentiment on the cement companies’ respective share prices. However, we expect competition to remain tough over the long term. Premised on this, we keep our NEUTRAL weighting on the cement sector. (Andrey Wijaya)


Oct 13,2017 11:45:14

Alam Sutera ($ASRI) – 9M17 Marketing sales below estimate

Alam Sutera booked 9M17 marketing sales at IDR1,261bn (-55% YoY). This achievement only accounted for 34% of our fullyear  target of IDR3,728bn (25% from company’s target of IDR5,000bn) and below  its 4-year historical average of 81%. Presales in 3Q17 was weak as it fell 30%  QoQ & -66% YoY.

Based on our latest discussion, the management has no plans to revise its target  marketing sales. We have also confirmed that it has not recorded the agreed land  sales to China Fortune Land Development (CFLD) (600340 CH, NR) in 3Q17  because there were ~5% of the land yet to be acquired, thus we estimate this will  be booked in 4Q17.

Furthermore, management has yet to close the IDR2trn Office Tower sale with  the negotiation still ongoing amongst three potential buyers. Based on 5-year historical data, we estimate the average achievement in 4Q was IDR755bn,  combined with 9M17 numbers and land sales to CFLD in 4Q17 we estimate  marketing sales by the end of the year will be ~IDR3.02trn excluding the Office  Tower sale. Currently we have a BUY call on the counter with TP of IDR540,  however we will be revisiting our assumptions to better reflect current condition.  (Yualdo Tirtakencana)

Oct 09,2017 11:45:18

We visited Agung Podomoro ($APLN) to learn more about the  company’s plans regarding the reclamation island and here are the key  points:

Media has reported that moratorium on G island will be lifted soon following  C & D island and currently management is waiting for the Regional  Regulation (Raperda) to be issued by the local government. Management  conservatively estimate that Raperda will be issued in 2018.

Land Bank on Pluit City reaches 160 ha. Though around 25% of that has  been sold, it was recorded as Customer Advances due to the moratorium  status.

Once Raperda for land reclamation is issued, the company will be able to  resume marketing sale on its Pluit City project. We think this will be the near  term catalyst for the company.

The company has signed a Sales Purchase Agreement with Thai-listed  Strategic Property Investors Company Limited (REITS) regarding the sale  its Pullman Jakarta Central Park Hotel for ~IDR1.3trn. Management  estimate the company will received around IDR800bn of the proceeds and  the company effectively still owns 18% of the hotel through the REIT.

Land bank for future developments stood at 403 ha where 285 ha of it are  industrial lands that has been agreed to be sold to China Fortune Land  Development (600340 CH, NR) in 2019 – 2020 once the company has  cleared all the land certifications.

Marketing sales until 1H17 has reached IDR2.4trn or 80% from its IDR3trn  target this year. Management is guiding 10% growth for this year’s top line  and bottom line.

Using management’s guidance, we estimate that the stock is trading at 8x  FY17F P/E, Not Rated. (Yualdo Tirtakencana)

Sep 24,2017 09:14:35

Bukit Asam ($PTBA) – Assesing PLN’s Request On The Coal Price Formula

PLN is requesting for the coal selling price to domestic coal-fired power plants to be at costs plus a 15-25% margin formula amidst the recent strong coal prices. We view such a probability as small, as the Indonesian Government has allocated a higher budget for electricity subsidies in the 2018 proposed state budget. We maintain our assumptions that coal selling prices to domestic power plants would still be linked to international coal prices. Maintain BUY with an unchanged IDR17,400 TP (43% upside).

  • Cost plus margin formula? According to Detik, Perusahaan Listrik Negara’s (PLN) procurement director, Nickye Widyawati, has requested that coal prices for domestic power plants be determined via a cost-plus formula instead of using international prices as a benchmark. We view such a probability as small, considering the Government of Indonesia has allocated a sufficient state budget for electricity subsidies in its 2018 proposed state budget. Also, the decision maker on implementing the coal domestic price formula is the Ministry of Energy and Mineral Resources (MEMR), not PLN.
  • Sufficient budget for an electricity subsidy in the 2018 proposed state budget. The Indonesian Government has allocated a 15.2% higher electricity subsidy in its 2018 proposed budget, which would increase to IDR52.2trn (2017: IDR45.3trn). In 6M17, PLN obtained the Government’s electricity subsidy of IDR23.9trn, which turned PLN’s operating losses before subsidy of IDR6.3trn to an operating income after subsidy of IDR17.5trn. We think PLN’s 6M17 operational costs have already been exposed to the current high coal prices. Therefore, we think 2017 and 2018F’s allocated electricity subsidy from the Government should be sufficient to accomodate the current high coal prices.
  • Scenario analysis. PLN has requested for the coal selling price to domestic power plants be at a formula of costs plus margins of between 15% and 25%. Bukit Asam’s 1H17 gross margin was 37.3%. Around 57% of Bukit Asam’s total coal sales volume is to PLN. If MEMR decides to implement the coal selling price formula to domestic power plants at costs plus a 25% margin, then Bukit Asam’s FY18F-19F earnings could decrease by 18% and 15% respectively from our current earnings forecasts. If MEMR decides on the costs plus 15% margin formula, then Bukit Asam’s FY18F-19F earnings could decrease by 37% and 36% respectively from our current earnings forecasts (Figure 3). 
  • Maintain BUY. We maintain our assumptions that coal selling prices to domestic power plants would continue to be linked to international coal prices. We maintain an unchanged IDR17,400 TP as we view the possibility of PLN’s request to be granted as unlikely. Our TP implies FY17F-18F P/Es of 10.8x and 9.2x, respectively. Key risks are the Government’s decision to change the domestic coal price formula, a delay in expanding railway capacity, a significant drop in coal prices, weaker-than-expected coal demand and a strengthening IDR. (Hariyanto Wijaya, CFA, CPA, CMT)

Sep 24,2017 09:11:39

Matahari Department Store – Moving From Growth To Dividend Play

We upgrade Matahari to BUY (from Neutral) with a revised DCF-derived TP of IDR10,950 (from IDR16,000, 9% upside). At current levels, we believe the downside is limited and that it offers decent risk-reward trade-offs, moving from growth to dividend play. We are projecting profit growth of 4-7% (2012- 2015: 23-49%) and dividend yields of 4-5% during 2017-2019. The dividend yield and upside to our revised TP give a total potential return of 13-14%, while the stock is trading at much lower valuations vs its peers. Our lowerend valuation for the stock is IDR9,850, derived from a dividend discount model, assuming a 100% payout ratio in 2020F from 70% during 2017F- 2019F. We trim our 2017F-2019F profits by 3-8% to factor in lower SSSG on weakness across the industry.

  • Well managed. Matahari Department Store (Matahari) is one of the wellmanaged retailers in Indonesia. We like its past 5-year track record, and efforts to increase store productivity consistently since 2010. It now plans to utilise big data analytics to continue raising productivity and better serve its customers. So far, the plan has shown good progress as loyal members’ contribution has increased to about half of total sales, from around two-fifths last year.
  • From growth to dividend play. Financial deleveraging was Matahari’s biggest source of profit growth during 2013-2015. At that time, revenue and EBIT registered CAGR of 14%, but profit posted a much stronger CAGR of 32%. Without financial deleveraging, it would have only posted low to midteen earnings growth. As Matahari had completed its debt repayment in 4Q15, we expect slower single-digit profit growth during 2017F-2019F. Nevertheless, with the extra cash flow, we expect Matahari to offer dividend yield of 4-5%.
  • Merits of investment in e-commerce business, Matahari-mall. Post financial deleveraging, Matahari has extra cash flow that can be allocated for more dividends or investments. We believe an allocation for investment signals management’s confidence in the industry’s prospects, and the converse for dividend allocations. The bulk of lucrative opportunities in the retail sector can be found in the online channel, which has mouth-watering long-term promise but hazy economic returns in the foreseeable future. Given the cash flow muscle, we think Matahari can afford to venture into investments such as Matahari-mall, to strengthen its longer-term strategic position.
    On the flipside, we understand that related-party transactions are not ideal, especially when one of the businesses is still struggling. Yet, we do see some merits for its investment in
  • Potential total return is ahead of our JCI upside. At current levels, Matahari offers a total potential return of 13-14%, which is above our expected JCI return of 6% (based on index target of 6,150). Our lower-end valuation for the stock is IDR9,850, derived from our 10-year dividend discount model, and assuming a 100% payout ratio in 2020F from 70% during 2017F-2019F. Upgrade to BUY given the limited downside from current levels and relatively attractive potential total return of the stock.
    Downside risk includes weaker-than-expected SSSG. (Stifanus Sulistyo)


Sep 24,2017 09:08:15

We have visited PT Elnusa ($ELSA) yesterday to get some colors of its 2H17-FY18F outlook after a dismal 1H17. It has secured a meaningful land seismic contract and deployed its drilling rig since JunJuly and expect these new developments to lift FY17F earnings into the region of IDR150-200bn (1H17: IDR14bn), translating into FY17F PER of 11- 8.5x at current price.

We believe it is about time for a bottom fishing given a better 2H17 outlook. Further, being a subsidiary of PERTAMINA, the recovery of job flows from Mahakam block after the Total – PERTAMINA transition and a significant boost of ELSA’s given contracts/ earnings thereafter will likely lift share prices, although the exact timing is hard to gauge.

  • 1H17 net margin declined on lower revenue from upstream and downstream O&G support segment. Elnusa’s 1H17 revenue grew 16% YoY but gross profit saw a YoY decline of 51%, driven by 10-15% drop of revenue from these segments, segmental gross margins were also lower due to the expiry of higher margins contracts at Mahakam block and the non-deployment of its drilling rig during 1H17. Elnusa managed to increase the given fuel distribution volume from PERTAMINA, with this segment’s revenue/gross profit grew 75/65% YoY but it was insufficient to make up for the other segments due to inherently lower margins (single digit) of this business segment.
  • Revenue and margins of upstream segment to improve in 2H17. Elnusa has secured a land seismic at West Papua (working from July 2017 to 1H18) and another Marine Seismic contract at Aceh (working from August-Nov 2017) with a indicative contract value of IDR3-4tril. Its drilling rig was also employed by PERTAMINA EP at East Kalimantan from Jun-Des 2017. Management guided gross margins of 15-20%, meanwhile, trying to further increase the fuel distribution quota of PERTAMINA.
  • Mahakam block handover is a big medium term catalysts. Contracts from Mahakam block used to contribute more than 50% of revenue in both upstream/downstream support services in FY14-16 and saw a significant decline due to the Mahakam block handover. Elsa targeted FY18F net profit of at least IDR200bn without improvement from Mahakam, however, expect net profit to swing back to IDR300bn when job flows of Mahakam kicks in next year, Elnusa expects higher job flows from PERTAMINA due its subsidiary status.
    The handover proves to be lengthy so far due to conflict of interests between TOTAL and PERTAMINA, that said, the block contributes to 20% of the nation’s total natural gas output and national’s interest is at stake.
  • Key risks are Mahakam handover delay in FY18F and margin squeeze. Elnusa’s share price has corrected 50% YTD and given a better outlook going forward, downside should be limited. That said, FY18F earnings growth will be limited if job flows from Mahakam Block does not recover. Elnusa acknowledge that contract margins from PERTAMINA were higher than foreign oil and gas players, whose are increasingly sensitive on production costs after the new gross split PSC regime. (Norman Choong, CFA)

Sep 24,2017 09:04:18

We met with Summarecon Agung’s ($SMRA) management to get the latest insight on the company’s performance with the following key takeaways:

Management maintain FY17 presales target at IDR3.5trn and remain confident target will be achieved through several new launches in this 2H17. 8M17 presales was booked at IDR1.84trn or 53% from company’s target and 68% from our target.
o Several upcoming new launches in this 2H17 are:
o Bekasi – Burgundy phase 2 in 23 Sept, with total target proceeds of IDR210bn
o Serpong – Symphonia landed houses in Oct, with total target proceeds of IDR 450bn
o Bandung – residential and commercial launches in 4Q17, with total target proceeds of around IDR660bn.
o Karawang – Residential launch in 4Q17, with total target proceeds of IDR200bn.

Though confident for this year, management’s view towards 2018 was rather conservative with flat target marketing sales as it is near election year.

Regarding gearing position, there will IDR900bn of bonds due in 2018. The company plans to refinance the bond by using its several of internal cash plus issuing another bond. The company targets to lower its debt/equity ratio to 90%.

Maintain Neutral call with TP of IDR1,125 implying 60% discount to NAV. (Yualdo Tirtakencana)

Sep 24,2017 09:03:02

Despite intensifying competition from Mitsubishi’s Xpander and Wuling’s Confero, Astra’s 4W vehicle wholesales still increased MoM. YTD, its 8M17 4W vehicle wholesales grew 8.7% YoY, while its market share widened to 55.7% in 8M17 (8M16: 53.2%). Its motorcycle wholesales also improved in August (+4% MoM, +8% YoY). Going forward, we expect competition in the domestic 4W market to stay intense. SGMW is likely to launch a new medium-sized MPV – either with a 1.5L or 1.8L engine – which may compete with Toyota’s Avanza or Innova. However, the conglomerate’s robust heavy equipment sales and mining contracting business should partially offset its lower earnings from the auto division. Astra would benefit from the replacement cycle for heavy equipment as well. Premised on this, we maintain our BUY recommendation and IDR9,200 TP (18% upside), which implies 17x FY18F P/E.

Wholesale numbers improve in August. Astra’s 4-wheel (4W) wholesales increased to 52,000 units (+9% MoM). YoY, 4W wholesales declined, as wholesales of low-cost green car (LCGC) multi-purpose vehicles (MPV) sales normalised. Astra’s LCGC-MPV was launched in Aug 2016, while there are no significant new product launches slated for this year. YTD, its 8M17 4W wholesales rose to 399,000 units (+9% YoY).

For 2-Wheel (2W) vehicles, its wholesales for August increased to 419,000 units (+4% MoM, +8% YoY). In our calculation, its market share increased to 75.5% in August (July: 75%). We expect Astra to continue dominating the domestic 2W market, thanks to its strong products, distribution and net worth of its motorcycle financing business. (Andrey Wijaya)


Sep 21,2017 09:15:21

We think the consensus still has not fully factored in the sizeable growth of United Tractors’ mining heavy equipment sales in FY18F-19F, due to the replacement cycle for such equipment coming into effect post the 2010- 2012 sales boom. Its heavy equipment sales margin should improve, as the industry is now in a seller’s market. Maintain BUY, with a new DCF-derived TP of IDR35,600 (from IDR32,900, 16% upside) implying 15.1x P/E on FY18F EPS. Our FY18F EPS is 12.8% higher than the consensus’. A consensus earnings estimate upgrade would be a share price catalyst.

Komatsu sales to the mining sector to keep growing in the coming years. We expect the sizeable increase in mining heavy equipment sales units in 2017 to continue until 2019, as mining heavy equipment sales – which went through a boom in 2010-2012 – has just entered the replacement cycle. Also, we believe Indonesia increasing its FY17 coal production target by 9.9% YoY to a peak of 474m tonnes would boost demand for mining heavy equipment.

After-sales revenue to increase in the coming years. The company’s after-sales revenue, ie spare parts sales and after-sales services revenue, should increase in the coming years as well, after the guarantee periods for new mining heavy equipment end. This should lift its revenue and profit margins, as after-sales services have lucrative profit margins – higher even than that derived from selling heavy equipment.

Profit margins from selling heavy equipment should improve. United Tractors’ profit margins from selling heavy equipment should improve, as:
i. The heavy equipment industry is now back to being in a seller’s market;
ii. Selling mining heavy equipment generates higher profit margins, since this segment (ie units weighing 50 tonnes or more) has less competitors;
iii. Selling new mining heavy equipment should lift after-sales revenue (spare parts and after-sales services revenues), which carry lucrative profit margins.

BUY, with a IDR35,600 TP. We fine-tune our assumptions on mining heavy equipment units and their profit margins and tweak our FY18F-19F earnings by 5.2-8.7% respectively. Our new DCF-derived TP of IDR35,600 (WACC:13.4%; LTG: 2%) also implies 15.1x and 13.2x P/Es on FY18F-19F EPS respectively. Reiterate BUY, as we think the consensus still has not factored in the sizeable increase in mining heavy equipment sales in 2018F- 2019F. Equipment purchased during the sales boom of 2010-2012 has a replacement cycle that starts in 2017 and ends in 2019. We think the improvement in monthly heavy equipment sales would be a share price catalyst for the near term.

Key downside risks to our call are: a significant drop in coal prices, weaker-than-expected coal demand and a strengthening IDR. (Hariyanto Wijaya, CFA, CPA, CMT)


Sep 21,2017 09:12:21

Indonesian Telecommunications Regulatory Authority (BRTI) has announced that the upcoming spectrum auction of 2 x 5MHz (2.1GHz band) and 1 x 30MHz (2.3GHz band) will be held in October. Our previous channel check with BRTI officials suggests that the 2.1Ghz band was transacted at about USD40m per 5MHz at the previous auction. Assuming that the price does not change, this implies that the 5MHz and 30MHz blocks would account for approximately 3%/10%/10% and 10%/50%/50% of Telkom, XL and Indosat’s FY17F capex respectively. PT Telkom and XL may bid for both blocks, while Indosat would only bid for one block. A likely scenario of the auction results may be Telkom winning one block, while the remaining block would be won by either XL or Indosat.

Telkom and XL Axiata (XL) have the highest data traffic/spectrum owned and financial muscle. Representatives from Telkom and XL have both indicated that the companies are willing to bid for both blocks, while Indosat would only bid for one block. This is understandable – as Telkom has the biggest balance sheet, its data traffic/spectrum is also the highest in Indonesia. This is followed by XL and Indosat. In terms of flexibility to bid for the blocks, according to their net gearing levels, the descending order would be as follows: Telkom (0.14x), XL (0.6x) and Indosat (1.5x). We also believe Indosat would be the least flexible player, as it may be pressured to raise capex to build base transceiver stations (BTS). It currently has the least BTS, among the top three telco operators. (Norman Choong, CFA)


Sep 18,2017 09:09:37

Pasca Divestasi WTR dan Jalan Tol Tidak Tercapai

1H 2017 Result Review
Pendapatan PT. Waskita Karya Tbk. (WSKT) per semester I 2017 tumbuh 92,3% YoY menjadi Rp 15,55 triliun. Pendapatan dari bisnis konstruksi memberikan kontribusi terbesar atas total pendapatan perseroan. Pada semester I 2017 bisnis konstruksi berkontribusi sekitar 62% terhadap pendapatan perseroan. Kontribusi pendapatan dari jalan tol (toll-road) dan beton pracetak (precast) menyumbang masing-masing 26% dan 12% di semester I 2017. Kontribusi pendapatan dari konstruksi dan precast turun dibanding pada semester I 2016, karena meningkatnya kontribusi dari toll road. Meski demikian secara nominal pendapatan dari masing-masing unit bisnis itu mencatatkan kenaikan, bahkan hingga double digit. Pendapatan dari toll road naik hingga 73% YoY.

Laba usaha semester I 2017 meningkat 83,9% YoY menjadi Rp 2,44 triliun dan laba bersih (yang dapat diatribusikan ke entitas induk) naik 120,5% YoY menjadi Rp 1,28 triliun. Gross Profit Margin dan Operating Profit Margin turun di semester I 2017 tapi masih double digit. Sedang Net Profit Margin meningkat menjadi 9,2% dari 7,2%.

Pencapaian Kontrak

Hingga minggu I September 2017 WSKT telah membukukan kontrak baru senilai Rp 43 triliun. Kontrak baru proyek tersebut masih didominasi oleh proyek infrastruktur, khususnya jalan tol. Terdapat peningkatan kontrak baru sekitar Rp 15 triliun dari akhir Juli 2017 yang tercatat sebesar Rp 28 triliun. Waskita mencatatkan carry over dari tahun 2016 sekitar Rp 84 triliun. Dengan demikian hingga minggu I September 2017 Waskita Karya telah membukukan total kontrak sebesar Rp 127 triliun atau mencapai sekitar 88% dari target total kontrak tahun 2017. Waskita Karya menargetkan total kontrak (order book) sebesar Rp 144 triliun hingga akhir tahun 2017.

Saat ini Waskita Karya memiliki 5 proyek terbesar. Nilai kontrak untuk 5 proyek tersebut mencapai Rp 24,38 triliun. Perseroan masih membutuhkan dana untuk membiayai proyek-proyek perseroan. Sementara beberapa proyek Waskita Karya merupakan proyek dengan skema turnkey (turnkey project). Oleh karenanya dibutuhkan dana besar untuk menalangi pengerjaan proyek-proyek turnkey tersebut. Per Juni 2017 posisi piutang usaha perseroan mencapai sekitar Rp 3,4 triliun.

Divestasi WTR dan Jalan Tol
Waskita Karya melalui anak usahanya yaitu PT. Waskita Toll Road (WTR) awalnya berencana melakukan divestasi atas 10 ruas jalan tol. Selain itu perseroan juga menawarkan saham WTR melalui mekanisme rights issue. Kedua aksi korporasi itu bertujuan untuk memenuhi pendanaan proyek-proyek infrastruktur perseroan selanjutnya, terutama jalan tol. Hal itu untuk memperkuat WSKT sebagai developer jalan tol. Selain itu WSKT tidak ingin menguasai atau menjadi operator jalan tol dalam jangka panjang.

Namun dalam keterbukaan informasi di BEI pada 12 September 2017, manajemen menyatakan belum ada calon investor yang memenuhi target sesuai yang diharapkan oleh manajemen WTR. Dikabarkan bahwa penawaran yang masuk di bawah ekspektasi manajemen yaitu 2x PBV. Sebelumnya manajemen WSKT mensyaratkan atas divestasi itu sebagai berikut :
1. Pembangunan tetap dilakukan oleh WSKT
2. Pemilik baru harus bisa diterima oleh kreditur dari WSKT. Apabila pemilik baru tidak bisa menerima, maka pemilik baru harus membayar utang ke Bank Negara Indonesia.

Meski rencana divestasi belum sesuai rencana, WSKT dan WTR tetap berencana untuk melakukan divestasi ruas jalan tol tersebut. Skema divestasi tersebut masih dalam kajian manajemen. Waskita Karya memutuskan untuk tidak melanjutkan proses lelang 10 ruas tol dan menggantinya dengan skema negosiasi langsung one on one (satu per satu) dengan calon mitra strategis. Langkah itu ditempuh karena harga yang diajukan investor calon pembeli di bawah ekspektasi. Rencana divestasi itu dapat direalisasilan paling lambat pada semester I 2018, baik dengan skema menggandeng mitra strategis mau pun mendorong anak usaha melangsungkan penawaran umum saham perdana (Initial Public Offering/IPO). Perseroan memastikan akan tetap menjadi pemegang saham pengendali WTR dengan kepemilikan paling sedikit 51%.

Opsi penawaran umum perdana saham (Initial Public Offering/IPO) PT. Waskita Toll Road menjadi strategi terakhir apabila hasil rights issue dan divestasi tidak memuaskan. Manajemen menyatakan jika saham baru yang dikeluarkan WTR tidak ada peminat, maka perseroan akan menempuh opsi penawaran umum saham perdana (IPO). Rencana IPO tersebut baru dapat diputuskan pada semester I 2018.

Perseroan optimis akan divestasi jalan tol tersebut. Sebelumnya manajemen menyatakan bahwa nilai investasi jalan tol bisa meningkat 200%-300% dalam 2-3 tahun ke depan. Hal itu karena tidak ada land acquisition (lagi) dan jumlah mobil bertambah.

Saat ini Waskita Karya memiliki 18 ruas tol dan diperkirakan bertambah 3 ruas tol pada tahun 2017. Ruas jalan tol akan bertambah lagi pada tahun 2018, sesuai dengan kecepatan tender yang diikuti. Perseroan memperkirakan kebutuhan dana perusahaan mencapai Rp 10 triliun yang akan digunakan untuk membangun ruas tol baru.

Sumber Pendanaan Waskita Karya
Selain divestasi WTR dan jalan tol, untuk mendanai proyek-proyeknya Waskita berencana menerbitkan obligasi dengan mekanisme penawaran umum berkelanjutan (PUB) III senilai Rp 10 triliun. Tahap I akan diterbitkan sebesar Rp 3 triliun di tahun 2017. Sedang tahap II sebesar Rp 3 triliun pada semester I 2018 dan tahap III senilai Rp 2 triliun semester II 2018. Dana hasil emisi obligasi sebesar Rp 3 triliun itu akan digunakan untuk modal kerja perseroan. Sebesar 80% untuk pekerjaan konstruksi bangunan sipil, gedung serta rekayasa, pengadaan dan konstruksi (EPC) dan sebesar 20% untuk investasi di anak usaha dalam bentuk penyertaan modal. Seluruh investasi ke entitas anak dalam rangka ekspansi usaha yang diharapkan memberi kontribusi bagi kelangsungan bisnis perusahaan. Pada semester I 2017 kas dan setara kas perseroan tercatat sebesar Rp 7,5 triliun. Per Juni 2017 Waskita Karya posisi pinjaman bank perseroan sebesar Rp 5,4 triliun dan dana dari emisi obligasi Rp 6,5 triliun.

Waskita Karya pada tahun 2015 telah memperoleh pendanaan dengan mekanisme Penanaman Modal Negara (PMN) melalui rights issue. Waskita Karya memperoleh dana senilai Rp 5,3 triliun dari rights issue, yang terdiri dari Rp 3,5 triliun PMN pemerintah dan Rp 1,8 triliun dari publik. Peluang untuk memperoleh kembali pendanaan dari pemerintah rendah.

Sumber pendanaan (financing) perusahaan-perusahaan konstruksi, terutama BUMN, menjadi concern investor. Tidak terkecuali Waskita Karya. Ambisi pemerintah untuk merealisasikan program percepatan pembangunan infrastruktur terbentur pada anggaran pemerintah (APBN). Sementara BUMN karya juga menghadapi keterbatasan. Peluang pendanaan yang dimungkinkan adalah melalui penerbitan obligasi/surat utang, pinjaman bank atau skema B to B.

Kebutuhan dana Waskita Karya untuk pembangunan jalan tol yang diperkirakan sebesar Rp 10 triliun semestinya bisa tercover oleh emisi obligasi dari penawaran umum berkelanjutan (PUB) III. Emisi obligasi tahap I senilai Rp 3 triliun itu diperkirakan bisa mengatasi pendanaan untuk mencapai target operasional di tahun 2017. Dana dari emisi obligasi sisanya sebesar Rp 7 triliun dapat dialokasikan untuk pendanaan di tahun berikutnya, sementara memproses persiapan divestasi WTR dan toll road atau IPO WTR.

Selain itu perseroan masih memiliki ruang pendanaan. Per Juni 2017 Debt (bank loan) to Equity Ratio Waskita Karya sebesar 2x. Sementara DER covenant bond sekitar 3x. Namun sejauh ini perseroan bersikap prudent dengan mempertahankan DER 2x. Perseroan juga memiliki interest coverage dan likuiditas yang baik. Mengingat keterbatasan pendanaan saat ini, bisa jadi dapat membatasi target perseroan di tahun 2018. Oleh karenanya target kontrak baru di tahun 2018 diperkirakan akan lebih konservatif, dengan asumsi rencana divestasi tidak terealisasi pada tahun 2018. Dengan kondisi saat ini, maka dalam pandangan Kami perseroan akan mempertimbangkan proyek-proyek berbasis non-turnkey. Perseroan yakin bahwa tertundanya divestasi tersebut tidak akan mengganggu target operasional perusahaan di tahun 2017. Perseroan menargetkan kontrak baru sebesar Rp 60 triliun, pendapatan Rp 22 triliun dan laba bersih Rp 3,5 triliun di tahun 2017.

Relative Valuation

Dengan pendekatan relative valuation, Kami menggunakan estimasi PE’17F konsensus sektor konstruksi sebesar 13,5x dan EPS’17F Rp 173 yang mentranslasikan harga saham WSKT Rp 2300. Valuasi ini, dibandingkan harga saham WSKT Rp 1890 (12/9/17), dapat menjadi pertimbangan investasi.

Multiple Valuation
Saat ini WSKT diperdagangkan pada PE 10,9x atau di bawah rata-rata PE 3 tahun di 16,4x.

Harga saham WSKT terkoreksi 23,79% dalam setahun ini. Namun dalam periode 3 tahun saham WSKT telah naik 52,07% dibandingkan dengan IHSG yang menguat 14,84%.


Sep 18,2017 08:26:51

Local media, Kontan, reported yesterday on Bekasi Fajar ($BEST)’s plan to divest its stake in the warehouse JV with Daiwa. We have confirmed this news with management, but significant details have not been disclosed at the moment. We view this divestment as positive for the company as the divestment proceeds can be used for its core business. Currently the stock is trading at an attractive 5.1x FY17F P/E and 84% discount to NAV. Maintain BUY with a TP of IDR490 (86% upside) reflecting a 65% discount to NAV.

  • Warehouse JV. Bekasi Fajar currently owns 51% of the JV company, PT Daiwa Manunggal Logistik Properti (DML), while Daiwa House Industry (Daiwa) (1925 JP, NR) owns 49%. During our discussion with management, we learnt that Daiwa intends to increase its stake in the warehouse JV company while maintaining its partnership with a local partner, which is Bekasi Fajar. Therefore, we believe the former may not divest all of its shares in DML.
  • Divestment value. Unfortunately, management has not disclosed significant details regarding the divestment plan. In its 1H17 financial statement, we see that Bekasi Fajar’s acquisition cost for its 51% stake was IDR278.15bn. Based on this information, we estimate that Bekasi Fajar has the potential to receive IDR545bn worth of proceeds should it decide to fully divest its shares, assuming that Daiwa would pay a fair value.
  • Implication for Bekasi Fajar. We view this as a positive to the company’s contribution from the JV company, which has been providing insignificant earnings to Bekasi Fajar’s bottomline (2% in FY15, -1% in FY16, and 1% in 1H17). The divestment would allow the company to use the proceeds to acquire new land for future sales. As at 1H17, the company has acquired new land of about 26 ha, which is in line with its target new acquisition of 50-60 ha for FY17, and with the blended acquisition cost at around IDR1.5m/sqm. Nonetheless, the high average acquisition cost was due to a one-off transaction from a related party. Excluding this transaction, the average acquisition cost would be around IDR600-800,000/sqm (in line with our assumptions).
  • Industrial land inquiries. Inquiries for land YTD have reached 61 ha. These inquiries came from a total of 11 companies, of which 45% were locals, 39% were from Japan, and the rest, mixed. Management mentioned that around half of the inquiries came from consumer companies. Currently, the company is also trying to close a 20-ha deal from a single buyer, possibly from the consumer industry. Backed by these inquiries, management is confident that the company would be able to achieve this year’s land presales target of 30-40 ha.
  • We reiterate our BUY call with a TP of IDR490 based on a 17% CAGR for earnings in FY16-19F, on the expectations of an improved economic outlook that could lead to higher industrial land demand, the company’s competitive advantage of being in close proximity to Jakarta, Tanjung Priok seaport, and the Soekarno-Hatta International Airport. We make no change to our assumptions. We believe the company would be able to maintain its performance in 2H17F. (Yualdo Tirtakencana Yudoprawiro)


Sep 12,2017 18:29:14

Plantation – Is The Current CPO Price Strength Sustainable?

Malaysian inventory levels are now at 1.94m tonnes, translating to an annualised stock/usage ratio of 10.3%. This is above the historical average of 9.5%, signalling that stock levels are officially in a surplus. With demand continuing to disappoint, with most of the main markets in negative territory YTD, we do not expect the current strength in CPO prices to persist. This would coincide with an anticipated softening of soybean prices once the initial impact of hurricanes in the US wear off and weather normalises. No change to our UNDERWEIGHT stance on the sector.

  • Malaysia’s CPO production rose 13.6% YoY in YTD-Aug, although August’s output was down by a slight 0.9% MoM from July. We believe production would pick up in the next couple of months, as most planters are expecting peak output to be in September/October. For the whole of 2017, we expect Malaysia’s CPO output growth to moderate to 10-12% YoY. 
  • Exports rose by 6.4% MoM in August, bringing YTD exports to a 2% increase YoY. In YTD-Aug, exports saw a rise to Pakistan (+14% YoY) and Philippines (+6%). This was offset by a decline in exports to China (-4% YoY) India (-29%) and the US (- 20.5%), while exports to the EU was flat YoY.
  • Inventory rose 8.8% MoM to 1.94m tonnes in August, despite a dip in output. Annualised stock/usage ratio for August is now at 10.3% (up from 9.5% in July), which is now above the 15-year historical average of 9.5%. This means that stock levels are now officially in a surplus situation. We expect to see a continuation of rising inventory levels, as production resumes its recovery during the peak seasonal period. 
  • 2Q17 results disappointed, as six companies (IOI Corp, Genting Plantations, TSH Resources, Kuala Lumpur Kepong, IJM Plantations and Felda Global Ventures) reported results that were below expectations. Two (Sime Darby and Sawarak Oil Palms) reported results above expectations, with only CB Industrial Product in line. We continue to see strong YoY FFB output growth in 2Q17, although most companies saw lower QoQ production growth. We observe Indonesia continuing to drive this growth, despite most companies guiding for growth to start moderating in 2H17. In Malaysia, while the growth recovery has not been consistent throughout the country, most companies are guiding for output to pick up more strongly in 2H17, with the peak output slated to be in September/October for Malaysia. Most companies continued to guide for strong double-digit FFB growth in 2017, coming from a low base in 2016. For those with downstream operations, we saw stronger QoQ margins, as feedstock prices fell. Most companies continue to guide for stronger margins at their downstream divisions, as selling prices have risen, while feedstock prices continue to weaken.
  • We maintain our UNDERWEIGHT rating on the sector, on the back of a strong output recovery and weak demand dynamics. Catalysts include a positive change to global demand and any extreme weather occurrences that would have an impact on global vegetable oil output. Our Top BUY is Sarawak Oil Palms while our Top SELL is London Sumatra. (Hoe Lee Leng)


Sep 12,2017 17:57:25

Our ground checks suggest the retail selling price for instant noodles remained stable, while the selling price for dairy increased, probably as a result of a higher skimmed milk price. While the cost of flour remains manageable, which is positive for instant noodles, we see increased competition in the RTD-tea, indicated by its lower selling price YTD. A main challenge on input costs is the potentially higher refined sugar price after the implementation of a new regulation by the Ministry of Trade. The impact of the new policy is still unclear thus we maintain our forecasts and BUY recommendation on Indofood with an IDR10,300 TP (18% upside) which implies 21x FY18F P/E.

  • Retail selling prices for instant noodles were relatively flat. Our ground checks during August suggest that the retail selling prices for Indofood’s instant noodles Indomie Kari Ayam and Goreng Special were relatively flat MoM. For premium instant noodles, the sales volume of Indomie Real Meat is likely to increase, as its retail selling price is below that of its competitors. On the cost side, over the past two months the international wheat price was in a declining trend. As there is a timelag between the international selling price of wheat to that of the domestic flour (the main raw material of noodles) the input costs of instant noodles should remain manageable over the next two-three months. Noodles accounted for c.62% of Indofood’s total sales in 1H17 (Figure 1).
  • Due to higher raw material costs, a higher retail selling price for dairy. Indofood’s dairy price for Indomilk in small pack (190ml) began to increase in August following Indomilk’s price increase for its large pack (1ltr). In our view, this is likely due to a higher cost of its raw material (ie skimmed milk). Dairy products accounted for c.19% of Indofood’s total sales in 1H17 (Figure 1).
  • Our ground checks suggest that competition in the ready to drink (RTD) tea market remains intense which is indicated by a declining retail selling price of the major RTD-tea brands which include Indofood’s Ichi Ocha, Sinar Sosro’s Teh Sosro, ABC President’s Nu Tea and Coca Cola’s Frestea.
  • New policy impacting the refined sugar. Following the implementation by the Government of a new Trade Regulation (No. 16/2017) the main challenge going forward on RTD-teas and dairy products is the potentially higher cost of refined sugar. However, the impact is still unclear. The Vice Chairman of Indonesian Farmers Concern Association (HKTI) said this policy may increase the cost of refined sugar by c.2%. The Association of Soft Drinks Industry estimates the price of refined sugar may increase instead by 15%-30%.
  • Maintain BUY with an IDR10,300 TP (18% upside) which implies a 21x FY18F reported P/E. We maintain our forecast on Indofood for now as the impact of the new policy is still unclear. The main risk to our call is the magnitude of the increase in the cost of refined sugar which may result in added pressure on the earnings of dairy and beverage products. Beverages accounted for c.5% of Indofood’s total sales in 1H17 (Figure 1). (Andrey Wijaya)


Sep 06,2017 14:28:38

Perusahaan Gas Negara ($PGAS) – Another Downside Surprise On Distribution Margin

PGN recorded a 2Q17 net loss of IDR41.2m – below our and consensus estimates – driven by a high quarterly ETR and contractions in both its gas distribution volume and distribution dollar margin, which were below management’s guidance. Other than the disappointing performance, we do not see any positive catalysts for the immediate term. Thus, we downgrade our recommendation to NEUTRAL (from Buy) and cut our DCF-based TP to IDR2,000 (from IDR3,450, 6% downside), post the corresponding 40% reduction in our FY17-18 earnings estimates.

- Volume declined after non-renewal of Muara Tawar contract. Perusahaan Gas Negara’s (PGN) distribution volume as of 6M17 declined 8.2% QoQ or 5.9% YoY. This was due to the non-renewal of Perusahaan Listrik Negara’s (PLN) Muara Tawar power plant gas purchase agreement which expired in March (the contracted amount was approximately 100mmscfd at USD7.90/mmbtu). While PGN did not officially announce this, the market was informed through PLN’s announcement and analysts speaking to management separately. Thus, we believe the market has priced in the decline in volume, but not the further erosion in distribution margin.

- Distribution margin at a new low, back-loading of opex and high effective tax rate (ETR). PGN's 2Q17 revenue/gross profit fell 10.9%/28.8% QoQ respectively, and it recorded a net loss of USD41.2m. Its gross margin narrowed to 23.7% (1Q17: 29.7%). Based on our calculation, its 2Q17 blended gas distribution margin hit a new low of USD2.32/mmbtu (1Q17: USD2.58/mmbtu) on a lower distribution ASP of USD7.95/mmbtu (1Q17: USD8.56/mmbtu). Opex surged 82.4% QoQ. PGN also recorded another impairment loss of USD16.7m on its oil and gas assets.

- Gas distribution price is declining without intervention. PGN's declining ASP is a major headwind in sustaining its guided distribution margin of USD2.60-3.00/mmbtu, even without direct intervention. There is still pressure from industrial users asking for a lower natural gas price – and the issue is further exacerbated by pressure from the power sector which forms the bulk of its demand. From our conversation with some business owners and judging from PGN's distribution volume breakdown, both industrial and power sector demand for natural gas remains weak.

- No visible positive catalyst; downgrade to NEUTRAL. PGN is now trading at 15.5x/13x FY17F/FY18F P/Es, on our revised estimates - ie valuations are no longer cheap. We roll over our DCF base year to FY18, while our new TP of IDR2,000 implies 12.5x FY18F P/E. We believe PGN may eventually become a high crude oil beta stock, due to the expansion of its exploration and production arm, Saka Energi (which now contributes to 15% of revenue but is not profitable). That said, its gas distribution business outlook remains unclear at this juncture. (Norman Choong, CFA)

Sep 06,2017 11:57:06

Ground checks – Indofood’s higher flour retail selling price MoM, but flat noodle selling price

Based on our ground checks in a Hypermart store in Jakarta, Indofood Sukses Makmur’s (Indofood) ($INDF) flour Segitiga Biru and Kunci Biru retail selling price increased by 9% MoM and 8% MoM respectively – possibly to pass on higher wheat price which jumped at end of June. Meanwhile, Cakra Biru’s retail selling price remain flat.

Indofood’s instant noodle retail selling prices was also flat MoM. For premium instant noodle, Mayora ($MYOR)’s Bakmi Mewah retail selling price increased by 8% MoM which is now level with Indomie Real Meat’s price. Since its price difference to its competitors narrowed, we see Indofood’s premium instant noodle sales is likely to increase.

Instant noodles accounted for c.52% of Indofood’s consolidated 1H17 EBIT, while flour (Bogasari) contributed 14% to EBIT. We maintain BUY on Indofood with IDR10,300 TP (23% upside) which implies 16x FY18F P/E.

Sep 06,2017 09:12:40

Pasar Hari Ini

Ekonomi :

- Pemerintah akan memacu belanja di 2H17 dan memastikan tidak ada penghematan anggaran di akhir tahun dalam rangka menggerakkan perekonomian. Agar belanja tidak berlebihan (tidak terjadi defisit di atas 2.9%), pemerintah akan mengevaluasi penerimaan dan pengeluaran setiap bulan. Sampai Agust'17, penerimaan pajak tumbuh 10.2% YoY namun hanya mencapai 53% dari target APNB-P 2017. Ada sentimen positif terutama untuk sektor Infrastruktur

Berita penting di koran pagi ini :

- Pemerintah menargetkan perjanjian pinjaman (dari Jepang) untuk proyek pelabuhan Patimban senilai Rp13.7 triliun akan ditandatangani pada Sept'17. Setelah perjanjian tersebut selesai, lelang kontraktor dan konsultan dapat dilaksanakan pada Okt'17. Ada sentimen positif untuk SSIA karena SSIA punya kawasan industri Subang dan sedang mengusulkan ruas tol Patimban - Subang

- $PGAS (-) menurunkan estimasi laba bersih 2017 menjadi Rp2 triliun dari awalnya Rp3.7 triliun seiring dengan banyaknya kendala yang dihadapi seperti penurunan volume distribusi gas, penurunan harga gas dan isu penggabungan usaha dengan Pertamina

- $BTPN (+) melanjutkan transformasi usaha menjadi bank digital agar lebih efisien setelah sejak 2013 mengembangkan platform bank digital (BTPN Wow!) dan Jenius sejak 2016. Transformasi tersebut tidak merubah fokus untuk melayani masyarakat menengah bawah terutama pensiunan

- $CTRA (+) menargetkan Marketing Sales senilai Rp1 triliun dari proyek klaster terbaru di Surabaya (Northwest Hill) sebanyak 500 unit rumah tapak dan 100 unit ruko

Sep 04,2017 08:28:18


1. Menteri Energi dan Sumber Daya Mineral (ESDM) Ignasius Jonan, Kamis (31/8), melakukan ground breaking proyek Pembangkit Listrik Tenaga Uap (PLTU) Jawa 4 di Jepara, Provinsi Jawa Tengah. PLTU Jawa 4 merupakan bagian dari proyek ketenagalistrikan 35.000 MW.

2. Ground breaking ini merupakan bentuk keseriusan pemerintah dalam meningkatkan akses masyarakat terhadap listrik dan menunjang pertumbuhan ekonomi nasional.

3. PLTU Jawa 4 atau PLTU Tanjung Jati B Unit 5 & 6 ini, memiliki kapasitas 2 x 1.000 MW, dan lokasinya berdekatan dengan PLTU Tanjung Jati B Unit 1, 2, 3 & 4, dengan kapasitas 4x660 MW.

4. Financial Closing proyek PLTU Jawa 4 telah dilaksanakan pada 31 Maret 2017. Jangka waktu konstruksi PLTU Jawa 4 diperkirakan memakan waktu 54 bulan, dengan rencana Commercial Operation Date (COD) Unit 5 pada Mei 2021 dan Unit 6 pada September 2021. Apabila dapat beroperasi sesuai rencana, maka kawasan PLTU Tanjung Jati B akan menjadi salah satu fasilitas PLTU terbesar di Asia.

5. Dengan penambahan kapasitas sebesar 2.000 MW dari PLTU Jawa 4, maka total kapasitas di kawasan PLTU Tanjung Jati akan menjadi 4.640 MW dan sangat strategis dalam menopang sistem kelistrikan Jawa-Madura-Bali.

6. Proyek pembangunan PLTU Jawa 4 dilaksanakan oleh konsorsium PT. Bhumi Jati Power yang terdiri dari Sumitomo Corp (50%), Kansai Electric (25%), dan PT United Tractors Tbk (25%) dengan nilai investasi sekitar USD 4 miliar. Pelaksanaan proyek dilakukan dengan skema Build, Operate and Transfer (BOT) dengan off taker PT. PLN (Persero). Perjanjian Jual Beli Listrik telah dilaksanakan pada 21 Desember 2015 dengan jangka waktu 25 tahun setelah operasi komersial proyek.

7. PLTU Jawa 4 mengadopsi Teknologi Ultra Super-Critical (USC) dengan Tekanan Uap utama sebesar 26 Mpa dan suhu 605 derajat. Sebagai hasil dari teknologi USC, pembakaran akan lebih efisien karena material dikonversikan dengan panas dan tekanan yang lebih tinggi. Pada kondisi ini, CO2 dan emisi gas lainnya akan berkurang akibat turunnya konsumsi batu bara.

8. Proyek PLTU Jawa 4 akan memberi manfaat langsung kepada masyarakat, di antaranya melalui penyediaan lapangan kerja maupun lapangan usaha bagi masyarakat sekitar. Dukungan dari PT Bhumi Jati Power, Gubernur Jawa Tengah, dan Bupati Jepara pun diperlukan untuk peningkatan kompetensi tenaga kerja dan mendorong masyarakat agar dapat mendukung dan berpartisipasi.

9. Sebagai perlindungan serta pemberdayaan terhadap tenaga kerja setempat, Kementerian ESDM telah menerbitkan Peraturan Menteri (Permen) ESDM Nomor 46 Tahun 2017 tentang Standardisasi Kompetensi Tenaga Teknik Ketenagalistrikan. Pemberlakuan standar kompetensi sangat dibutuhkan untuk mewujudkan keselamatan ketenagalistrikan. Dengan memiliki sertifikat kompetensi tenaga teknik, maka para tenaga kerja di subsektor ketenagalistrikan memiliki bukti terhadap kemampuan formal yang dimiliki dan dapat meningkatkan nilai tambah para tenaga teknik saat bekerja di luar negeri. Selain itu, sertifikat kompetensi juga berfungsi sebagai batasan dalam menyeleksi tenaga kerja asing yang masuk ke Indonesia, terutama di era Masyarakat Ekonomi ASEAN saat ini.

(Source : ESDM, Groundbreaking PLTU terbesar di Jawa, Related $UNTR)

Aug 30,2017 15:53:44

Mining – Deal between Freeport Indonesia (FI) and the Indonesian government

1. Legal base between the Indonesian government and FI is Special Mining Business Permit (Izin Usaha Pertambangan Khusus / IUPK), not Contract of Work (Kontrak Karya / KK)

2. 51% stake divestment of FI is for Indonesia’s national interest. Further details on the implementation will be discussed further.

3. FI will build processing and refinery facility in next five years which should be completed by October 2022 at the latest

4. Under IUPK, the Indonesian government’s revenues would be higher and more stable than under the previous contract (KK).

5. FI will obtain extended contract with a maximum operational period of 2x10 years, or up to 2041.

Based on our channel checks, at the moment all state-owned mining companies - including Antam ($ANTM) – are interested to acquire stakes in FI. Media sources reported that Antam’s CEO met with the Minister of Maritime Corrdinator Luhut Panjaitan yesterday morning, after the Minister of Energy and Mineral announced that FI will divest some of its stakes.

We see that Antam and Inalum are among the strong candidates to buy the stake of FI. In terms of mining expertise, Antam has better experience in mining, refinery, and various metal mining materials processing. Inalum's expertise is on processing alumina into aluminum, and it does not have experience in mining activities.

However, our source said that current government's plan is to create a National Resources Holding company which include Antam, Inalum, Freeport, etc. Hence, Freeport is likely to be a sister company of Antam. (Andey Wijaya)

Aug 15,2017 13:18:39

We paid a visit to Sentul City ($BKSL), here are the key highlights:

- Sentul City currently has over 1,900 ha of landbank with 335.6ha available
for near-term future development.

- This year the company will deliver several landed house projects, high rise
apartments, and commercial projects where majority of the products will
have price in the range of IDR280mn – 3bn per unit.

- Management targets FY17 marketing sales of IDR1.2trn, 7M17 achieved
IDR620bn. Management also mentioned that recently Sampoerna group
has bought 10ha of land in the area for IDR240bn that will go into 3Q17
marketing sales.

- There will be LRT station crossing over Sentul City. Thus, the company is
building TOD nearby the station called Centerra superblock with total
saleable area of ~29ha that will consist of:
o Currently operating Pertamedika hospital and Giant Supermarket
o AEON Mall – Operational in Mid 2018 (GFA of 103,414sqm)
o Saffron Residence apartment – 2019
o Office tower
o 5 star hotel

- AEON mall is under long-term rental agreement with the company with
rental fee of
o USD12/sqm – First 5 years
o USD15/sqm – next 5 years
o USD30/sqm – next 5 years

- BKSL’s balance sheet is quite healthy with net gearing of 9%. In addition,
the company targets topline growth of 14.9% CAGR (FY13-21F) while
EBITDA margin is forecasted to contract to 33% in 2021F.

- Using management’s assumption, the stock is currently trading at 36x
FY17F P/E. However, the company did not gave out dividends in the past
except 2013 & 2014. (Yualdo Tirtakencana)

Aug 14,2017 15:51:15

Although presales have improved in 2Q17, we cut our target FY17F
marketing sales to IDR2.7trn following its downward presales target
revision to IDR3.5trn along with the disappointing results in 2Q17.
Therefore, our FY17F-18F earnings are slashed by 20% and 21%
respectively, which lead to a lower new TP of IDR1,125 (from IDR 1,422, 3%
upside), implying a 60% discount to NAV. We remain cautious of
Summarecon because of its high gearing level and high interest costs.
However, we expect its performance to improve next year. Maintain

- Target presales cut. As at 1H17, Summarecon Agung (Summarecon)
booked marketing sales of IDR1,438bn (-16% YoY, +118% QoQ) or
equivalent to 32% and 39% of the company’s and our initial target. 1H17’s
presales achievement was lower than its 5-year historical average trend of
52% during the first semester. Meanwhile, the latest 7M17 presales data
came in at IDR1,540bn or 20% lower compared to 7M16 and only accounted
for 41% from our initial target.
We believe that management was aware of the challenge and have revised
down its FY17 target marketing sales to IDR3.5trn from IDR4.5trn. After
taking into account the company’s revision and its soft presales in 7M17, we
too revise our target FY17F-18F presales to IDR2,895bn and IDR3,249bn
respectively. Currently, management’s plan for 2H17F product launches
comprise of the following:
i. IDR900bn from two launches in Serpong;
ii. IDR900bn from two launches in Bandung;
iii. IDR200bn from a shoplot launch in Karawang (Aug 2017);
iv. IDR500bn from two launches in Bekasi.

- Weak 2Q17 results & earnings adjustment. 2Q17’s topline grew 18%
QoQ mostly driven by apartment and retail sales while house, commercial,
and landplot sales were slow. Higher apartment sales led to higher cost of
goods sold (COGS), and combined with the higher marketing expenses in
opex, have eventually eroded 2Q17’s bottomline into negative territory. As
a result of the cut to target presales, we lower our earnings assumptions by
-20% and -21% for FY17F-18F respectively with net margins falling to 2.6%
this year (-313.6bps).

- Maintain NEUTRAL. We remain cautious on Summarecon due to its high
gearing and interest costs, as well as soft presales during 7M17 that led to
management lowering its targets. However, we expect improvements to
come in the next year with a 7% topline CAGR growth for FY17F-19F. Our
IDR1,125 TP implies a 60% discount to RNAV.

- Risks to our call include the depleting prime landbank, deteriorating capital
structure with gearing on the rise, weaker presales, project delivery delays,
regulation changes affecting the sector, and better-than-expected demand.
(Yualdo Tirtakencana)


Aug 14,2017 15:49:29

Indonesia’s current account in its BOP registered a higher deficit of USD5bn, or 2% of GDP in 2Q17. Moving forward, we expect the CAD to widen to USD19.4bn or 2% of GDP in 2017, from a deficit of USD16.9bn (- 1.8% of GDP in 2016). This is on expectations of:

1. A smaller surplus in the merchandise trade account due to growing imports;

2. A larger deficit in the services account.

- Financial account recorded a lower surplus. The financial account, meanwhile, recorded lower inflows of +USD5.9bn in 2Q17, from +USD8bn in 1Q17. It stood at +USD7.9bn in 4Q16. This was due to higher other investment deficit, especially due to foreign debt repayment need and the banks anticipation of meeting the temporary liquidity needs in Lebaran's long holiday.

- Surplus in the balance of payments (BOP) declined. As a result, the surplus in BOP remained declined to USD0.7bn in 2Q17, from +USD4.5bn in 1Q17 and 4Q16. (Rizki Fajar)

Aug 09,2017 14:48:02

Financial Technology – Embracing The Disruptor

Love it or hate it, we believe fintech is here to stay. Relative to Western
countries, the evolution of fintech is still in its early stages across the
ASEAN region and China. We see strong growth potential in fintech, and
believe that forward-looking banks and telcos are rightly positioning
themselves to ride the fintech wave as part of their growth strategies. As of
now, China has the highest fintech adoption in the region, followed by
Singapore, Thailand, Malaysia and Indonesia. Potential winners in the
fintech race include UOB, CIMB, KBank, BTPN, Singtel, China Unicom,
Axiata Group and True Corp.

- Fintech adoption rising... The evolution of financial technology (fintech)
from institutional-focused to consumer-facing, increasing ownership of
smartphones, and a thriving e-commerce ecosystem have catalysed the
adoption of digitalised consumer financial offerings over the past two years.
Telcos have joined the fray with their offerings of mobile financial services
(MFS), as they seek to strengthen the overall data proposition and provide
strategic monetisation opportunities over the longer term. Still, fintech
adoption within the ASEAN-4 markets remains below the global average,
although China has emerged as the world leader.

- …could leapfrog with government support. We believe fintech adoption
would rise rapidly over the next few years, particularly in ASEAN-4. New
technologies such as blockchain, Application Programming Interfaces and
artificial intelligence are driving fintech innovations. Governments and
regulators are also supportive of technological developments to drive their
countries towards digitally advanced nations (Singapore/Thailand) or
improve financial inclusion (Indonesia).

- Digital disruption evolving beyond payments. Currently, fintech products
and MFS offered in China and ASEAN-4 are typically centred around
payment and remittance solutions. Digital disruption, we believe, would
gradually move into alternative financing (eg peer-to-peer (P2P) lending and
equity crowdfunding (ECF)), wealth management, stockbroking and
insurance segments. The pace of adoption would vary across the markets,
reflecting developments in banking and telecommunication industries, as
well as country demographics.

- Banks rising to the challenge, telcos sharpening customer
engagement. Faced with the risk of losing as much as 20-30% of their
revenues to new digital business models, traditional banks are embracing
digital technology and seeking partnerships with fintech start-ups to create
their own online presence. For telcos, while there are synergies in
collaborating with independent fintech firms, current MFS models also see
them incubating investments as part of their focus on adjacent businesses
with the objective of staying relevant in the digital age.

- Markets and stocks to watch. We believe Singapore banks are most
advanced in efforts to stem the migration of consumer banking revenues.
By comparison, China’s state-owned enterprise (SOE) banks are moving at
a slower pace. In Malaysia, Indonesia and Thailand, incumbent banks in
general have better planned digital strategies. Still, regulatory guidelines
aimed at preserving financial stability could restraint growth in fintech
offerings. Bank stocks to watch are UOB, CIMB, KBank and BTPN. We see
larger telcos benefitting owing to their vast subscriber population, market
knowledge across footprints, strong framework for digitalisation, and
partnerships forged with fintech stalwarts – factors we believe are essential
to drive MFS adoption. Singtel, Axiata Group, True Corp and China Unicom
are well positioned in this regard, in our view. (Fiona Leong, Jeffrey Tan)

Jun 13,2017 18:18:49

Our recent conversation with management of Indofood Sukses Makmur ($INDF) revealed more details on the recent Pluit land transaction:

  • Indofood revealed that Mr. Salim had previously received an offer from an independent third party to acquire the land for commercial development, priced at premium price. Hence, the company believes that the land price on the transaction (IDR51m per sqm) should be fair and reasonable. The transaction price is in line with independent valuator assessment.
  • Mr. Salim have opted to sell the land to AIM (Indofood subsidiary) as, in doing so, Salim Ivomas would be able to continue running its cooking oil production facility there. Then, Salim Ivomas will pay land rental fee to AIM which fee determined on arm-length basis. AIM will finance the acquisition via equity injection and debts.
  • AIM is owned by Indofood Sukses Makmur, Indofood CBP ($ICBP), London Sumatra ($LSIP) and Indofood Sukses Makmur ($INDF). The company is consolidated on Indofood Sukses Makmur’s balance sheet. INDF just increased its ownership on AIM, partly to finance the land acquisition.
  • Indofood does not have plan to convert the Pluit land into commercial areas, so far. According to the management, based on Jakarta’s local government permit, the Pluit land can still be used for manufacturing activities until around 2020. According to Jakarta’s zoning and spatial maps, which are issued by the local government, the purchased lands are in the K1 zone – where space is designated for office, commercial and service buildings. Mixed-use buildings can also be built on K1- zone land, with land spanning 20,000 sqm at minimum.
  • Since the announcement of this inter-companies transaction, INDF share price down 5%, which we believe mainly pressured on investor’s concern on how fair the price of the land may be.

  • We maintain BUY on Indofood Sukses Makmur, with a DCF-based IDR10,300 TP (22% upside) that also implies 19x/17x FY17F-18F P/Es respectively. (Andrey Wijaya)

Apr 25,2017 11:23:01

We expect BRI ($BBRI) to maintain its focus on the micro and SME segments going forward through the KUR and Kupedes programmes. As such, we project a 15.4% YoY growth for the micro lending segment. Fee income would also be an additional income source, particularly from loan administration fees. Credit cost would remain manageable at 255bps this year on the back of substantial exposure to micro lending. Maintain BUY and our GGM-derived TP of IDR14,500 (13% upside).

  • Fee income as another source of income. Bank Rakyat Indonesia’s ($BBRI) strategy to push non-interest income as an additional growth engine should materialise starting this year. We expect loan administration fees to have a higher contribution at 13.7% of total fee income in FY17 (FY16: 12.7%). All in, we assume a 22% growth in fee income to IDR11.3trn.
  • Asset quality remains under control. BRI’s 1Q17 credit cost of 314bps was part of the bank’s front-loading strategy with regards to its asset quality. Looking ahead, we assume asset quality would remain manageable with a stable credit cost of 255bps and 2.3% gross NPL ratio by year-end. These assumptions would result in a LLC ratio of 171.5%.
  • Focus on KUR programme. BRI’s People’s Business Credit (KUR) target of IDR71trn this year would be its key focus. The bank would upgrade potential KUR borrowers to its commercial micro lending under the General Rural Credit (Kupedes) programme. We expect a 15.4% growth in micro lending this year.
  • Maintain BUY and IDR14,500 TP. The GGM-derived TP implies a 2.18x 2017F P/BV multiple. Key risks are a higher-than-expected contribution from the KUR loans-to-total loan book and higher-than-expected credit cost. (Eka Savitri)

Apr 25,2017 11:16:29

We reiterate our BUY recommendation on PGN ($PGAS) with unchanged DCF-based TP of IDR3,450 (43% upside). We believe its low annualised ROE of 11.8% – and free cash flow generation that is merely sufficient for capex and dividend payment – should deter any intervention with its ASP. PGN recorded 1Q17 earnings of USD96.8m, 24-28% of our and consensus estimates respectively, driven by lower QoQ opex and higher profitability on oil and gas production.

  • Distribution segment sees a new norm. Perusahaan Gas Negara’s (PGN) blended distribution spread has stabilised at USD2.60/mmbtu since 3Q16. Its distributed volume of 816mmcfd reflects its new supply agreement to state power producer Perusahaan Listrik Negara’s (PLN) Muara Tawar power plant at a lower price, but higher volume. 1Q17 distribution volume was flat YoY, which shows weak industrial usage, specifically in the textile, ceramic, glass, and cement sector. Transmission volume saw a 14.2% YoY decline, but overall, the impact is small.
  • Potential intervention on price remains a drag on valuation. We continue to observe pressure from industrial users asking for a lower natural gas price. Recall that in late March, the Ministry of Energy and Mineral Resources was in a discussion to regulate the distribution margin at 7% of upstream gas cost, which poses further downside to ASP. However, PGN has maintained its blended margin guidance of USD2.60-3.00/mmbtu, which we believe is reasonable, as its FY16 free cash flow of USD650m was merely sufficient to maintain its USD500m capex target and usual dividend payout of 40-50%.
  • Oil and gas lifting to increase by 30% YoY. PGN had earlier guided that its oil and gas lifting target of 30% YoY increased after Muara Bakau started production in 2H17. This segment only broke even in 2016, but recorded a gross profit of USD15m in 1Q17. Due to its low base, PGN earnings have become more sensitive towards the contribution from this segment, while a higher YoY average crude oil price should bode well.
  • 1Q17 results were above consensus, on the back of 61% QoQ decline in quarterly opex while the oil and gas production segment recorded QoQ gross profit, also compared to gross losses of USD5.5m in 1Q16. Net gearing decreased to 0.43x (4Q16: 0.50x).
  • Reiterate BUY on undemanding valuation and decent results. PGN now trades at 10.7x FY17F earnings compared to its 5-year historical mean of 13x. Meanwhile, FY17F earnings are set for high double-digit growth, due to the low base effect of FY16. Potential catalysts are a higher crude oil price and improvement in distribution volume to the industrial users. Our DCF TP (WACC: 8.5%, TG: 3%) implies 15x FY17F P/E.
  • Downside risks would mainly be on the negative news from the potential merger with Pertamina, news flow on this has been quiet since mid-2016. (Norman Choong, CFA)

Apr 18,2017 13:16:18

Key takeaways from meeting with Gajah Tunggal ($GJTL)

  • Gajah Tunggal aims revenue growth of 5% - 10% this year. However, its gross margin will be normalized at 15% - 20%, lower than23.4% in FY16.
  • Gajah Tunggal will do refinancing on its debt this year, which company expects to have better interest rate for the company.
  • Its plants utilization currently stood at 66%-78%. Moreover, the company will expand its TBR tire capacity to 2,200pcs/day this year, from only 1,000pcs/day last year.
  • Domestic market will still be the biggest contributor to revenue with 55% of revenue this year, while the rest will be from exportmarket.
  • Gajah Tunggal has annual contract with raw material suppliers based on volume and its price will use average price from previous month.
  • Currently, the stock is trading at 5.95x FY16 PE. (Dony Gunawan)
Apr 18,2017 13:14:59

Astra International ($ASII)’s robust 1Q17 vehicles wholesale YoY growth, both 4W and 2W

  • Astra’s 4W vehicle market shares increased to 57% in 1Q17 (1Q16: 48%). Astra’s 1Q17 cars wholesale grew 26.8% YoY (to 161,000 units) – driven by strong LCGC sales growth, while national 4W vehicle wholesale grew 5.7% YoY (to 283,000 units).
  • Astra’s 2W vehicle market shares increased to 77% in 1Q17 (1Q16: 73%) despite its 1Q17 motorcylces wholesale declined 1.6%YoY (to 1,073,000 units). During same period, national 2W vehicles wholesale declined 6.8% YoY (to 1,402,000 units).
  • QoQ, both Astra’s 4W and 2W vehicles 1Q17 wholesale came lower which we see this is likely due to lower sales discount. Notably, vehicles dealers commonly give more sales discount for inventories clearance at end of year.

Our DCF-based TP on Astra is IDR9,100 (19x/16x FY17/18F P/Es) offers a 9% upside. (Andrey Wijaya)

Apr 18,2017 13:13:51

Yesterday afternoon BTN ($BBTN) held its 1Q17 result. Our GGM-derived TP are 1.27xP/BV multiple for 2017F.

Key highlights:

1Q17 performance:

  • Net interest income represents 21.3% of our forecast as BTN still use cashbasis (instead of accrual-basis method for interest income) thus has not received the payment from Government on interest rate subsidy for subsidised mortgage of IDR80bn.
  • Reported net interest margin (NIM) compressed to 4.3% due to lower asset yield of 9.3% (1Q16: 10.4%) despite 80bps reduction in blended CoF from 1Q16’s figure of 6%.
  • Cost to income ratio (CIR) uptick to 61.9% from 59.3% due to lower YoY operating income growth.
  • Gross non-performing loans (NPL) ratio stood at 3.3% (Mar-16: 3.6%).
  • Credit cost remain manageable at 33bps with 11.7% special Mention loan (Mar-16: 13.8%).
  • Net profit of IDR594bn accounted for 18.9% of our forecast, inline with lastyear’s cyclicality of 1Q contribution at 18.8% of full year’s net profit.

What to expect:

  • BTN’s management emphasised that interest income payment from government would all be received by end of year given that such amount already allocated in government’s state budget.
  • Subsidised mortgage scheme would remain unchanged with 90-10 funding split between government and bank. This year government allocate total c.IDR15trn for subsidised mortgage consists of funding scheme (90-10), interest rate subsidy (12month SBI), and subsidy on down payment for eligible potential borrowers.
  • We expect moderate loan growth figure at 17.1%. We still expect strong growth coming from subsidised mortgage segment as BTN continue its commitment to support government’s one million houses program.
  • Asset quality would improve in our view to 2.5% by end of year with 48bps credit cost (2016: 2.8% gross NPL and 47bps credit cost).
  • Asset yield would fall to 9.5% in FY17 (FY16: 9.7%) due to higher portion of subsidised mortgage in loan portfolio. We assume 21% YoY growth in subsidised mortgage resulting to 35.7% contribution to total loan book (end- 16: 34.6% of loan book).
  • NIM would be flat at 4.6% for FY17 (FY16: 4.6%) in our forecast as we expect lower both on asset yield and blended CoF of 5% (FY16: 5.2%).
  • Funding should remain manageable aside from customer deposits. For wholesale funding, BTN would continue to issue bonds and NCD as a strategy to diversify the maturity profile of its funding structure given that most of its loans book dominated by long-term tenure (more than five years maturity profile). (Eka Savitri)
Apr 12,2017 12:48:49

Intiland Development ($DILD), Meeting Notes:

  • This year the company will launch two projects; Kebon Melati and Darmo Harapan, which was delayed from its original schedule in 4Q16.
  • The company formed a joint-venture with GIC Singapore to manage South Quarter mixed-use complex. The announcement was released on 3 April2017.
  • Intiland will have 60% in the JV and GIC 40%. The JV will develop South Quarter Phase 2 which comprises of two condominium towers and expected to launch in 4Q17 or 1Q18 the latest.
  • Management also indicates there were inquiries for more than 10 ha of industrial lands that is potential to be closed soon.
  • 1Q17 marketing sales has yet to come out, but management gave a hint it may be less than IDR300bn.
  • This year, the company targets marketing sales to reach 2.3trn (+41% YoY)with revenue to reach IDR2.5trn (+10% YoY) - 2.7trn (+19% YoY).
  • Capex is allocated around IDR1trn – 1.5 trn that will be used to construct currently on-going high rise projects such as Praxis tower 4, Spazio Tower, 1 Park Avenue tower 4, and Regatta Phase 2.
  • Currently the stock is trading at 12.3x FY17F P/E. We have yet to make adjustments to our forecasts. Maintain BUY with TP IDR675 implying 50% discount to RNAV.

Cancellation of Property Progressive Tax Plan:
Regarding the regulation about progressive tax, the Government has said that they will not implement progressive tax for unoccupied property due to the weakness in the sector. The regulation will be reconsidered and there are currently no immediate decisions. The Ministry of Agraria and Spatial Planning said that the notion of progressive tax must be appropriate with the economic condition, and it will be discussed with other ministries.

We view this as positive news for property sector because we see the progressive tax to be a burden for property owners and buyers. We understand that the Government wishes to increase their tax revenue through property sector, however we have not seen any clear direction by the Government regarding the planned progressive tax. We also view that the plan for progressive tax overlaps current policies such as LTV and final sales tax for property. Therefore, the cancellation of this plan brings relief to the property sector. (Yualdo Tirtakencana)

Apr 12,2017 12:39:33

Bank Jatim ($BJTM): Unjustified Valuation, Downgrade to REDUCE

- Second-largest regional development bank, but valuation looks stretched: Bank Pembangunan Jawa Timur ($BJTM) is the second largest regional development bank in terms of market cap (after $BJBR), owned by East Java Provincial and Municipal Governments (80% of outstanding shares); its main purpose is to provide financial services for East Java civil servants. BJTM’s share price has rallied by 21.2% in the past one month, now reaching 1.4x FY17F PBV (at 15% ROE), notably higher than its small cap bank peers’ of 0.6-1.1x PBV, and also more expensive than BBNI at 1.3x PBV. BJTM’s PBV is currently more than +2SD above its 5yr mean, which we find too expensive. As such, we downgrade our recommendation to REDUCE (from HOLD) with a new target price of IDR600.

- Low-risk payroll a majority of loan book: More than half of BJTM’s loan book was dominated by consumer loans (2016: 67%), which consist of payroll and mortgage loans. Due to its nature as a low-risk loan segment, payrolls deliver excellent asset quality with an NPL ratio of 0.44% in 2016. Helped by its status as a regional development bank, BJTM gained exposure in providing payroll services to regional civil servants of the East Java government, which accounted for >50% of its total outstanding consumer loans in 2016. Going forward, we believe civil servants’ payroll loans will remain as a core asset driver, accounting for 68.2% of total loans in 2017F. Given the growth in the consumer segment, we expect loan growth to reach c.7% y-y in 2017F and 2018F, slightly higher than 4.4% y-y in 2016.

- High NPL ratio in SME & Commercial (10-13%) remains key concern: Despite its asset growth being supported by strong payroll loans, BJTM is dragged down by the non-consumer division on poor asset quality. The SME and commercial segments have worsened the overall NPL ratio to 4.77% (2015: 4.29%). The SME segment’s NPL ratio stood at 9.6% (2015: 22.7%) while that of the commercial segment stood at 12.77% (2015: 9.97%). We believe that BJTM’s current valuation (at more than +2SD above mean) looks unjustified with the current elevated NPL level.

- Earnings likely to grow slower on the back of higher provisioning expenses: Given that the high NPL ratio will remain an issue in 2017F, we expect earnings growth to slow to 7% y-y in 2017F (2016: 16% y-y) on higher provisioning expenses of IDR553bn in 2017 (vs. 2016: IDR510bn). In addition, we expect the NII to grow slower at 5.3% y-y in 2017F vs. 9% y-y in 2016, and the NIM to come down to 6.7% in 2017F (2016: 6.9%) before further declining to 6.5% in 2018F.

Downgrade to REDUCE; prefer $BNGA and $PNBN for Small Cap Banks
BJTM is currently trading at 1.4x 2017F PBV, at more than +2SD of its 5yr mean. We downgrade BJTM to REDUCE with a revised TP of IDR600 (from IDR475), now based on a PBV multiple of 1.16x, at 1SD above its 5yr mean, on the new 2017F BVPS of IDR513 (previous TP based on 1x PBV on previous 2017F BVPS of IDR475 – see exhibit 10). We prefer BNGA (IDR1,215, BUY) and PNBN (IDR935, BUY) within the Indo Small Cap banks universe. Risks to our call include: 1) Stronger-than-expected economic growth, 2) NPL improvement, and 3) Lower-than-expected provisioning.

Apr 12,2017 12:37:07

Adi Sarana Armada ($ASSA): Moving forward

Improving used car prices since 2016, positive for rental business: Based on our market research, ASPs in the last few months on used Toyota Avanza (exhibit 5), the highest-selling MPV in Indonesia, are supportive of our view of a recovery in the secondary-car market in 2017. We note that the ASP on second-hand 2012 Toyota Avanzas in March improved 4.7% m-m or 5.5% y-y, to IDR134mn. Going forward, we expect the used car price improvement prevalent at the moment to be sustained, paving the way for a positive catalyst for ASSA’s vehicle-rental and auction businesses in 2017.

Strong rental growth likely to sustain utilization of 93.4% in 2017F:
For 2016 ASSA booked strong earnings of IDR62.1bn, up by 82% y-y, beating our and consensus expectations by 18% and 13%, respectively. The solid earnings improvement was largely attributable to higher operating profit of IDR256.2bn, up 20.5% y-y, on a strong performance from ASSA’s vehicle-rental segment. ASSA managed to increase its utilization rate to 93.4% in 2016, from 92.6% in 2015, with total fleet up 6.7% y-y to 19,199 units (from 17,991) (exhibit 6), supported by the company’s ability to retain long-term contracts, coupled with an efficient fleet-management system. For 2017, we expect ASSA to maintain its rental utilization rate at 93.4% and grow its fleet size to 20,900 units (+8.9% y-y), resulting in rental-segment revenue of IDR1.0tn (+15.7% y-y).

BidWin’s expansion likely into another 3 cities in 2017: ASSA’s car-auction segment, BidWin, plans to add new auction locations in 3 cities, namely Pekanbaru, Lampung and Banjarmasin. Currently, BidWin holds auction in 10 major cities, with weekly events in Jakarta and bi-monthly auctions in Surabaya, Medan and Balikpapan. BidWin managed to post strong performance in 2016 with the number of cars sold reaching 5,969 units (exhibit 7), in-line with our estimates. We expect BidWin to continue its solid performance and sell 7,000 cars (+17% y-y) in 2017. Moreover, BidWin is currently developing its own e-auction system in order to support its major expansion plans. This would increase BidWin’s economies of scale, target market as well as flexibility in the auction process without having to spend a sizeable amount on capital expenditures.

Recommendation: Reaffirm BUY call with a higher TP of IDR330
At this stage of the cycle, we continue to like ASSA given the recent improvement in secondary-car market prices, which we believe will drive the company’s rental segment growth over the medium term. Hence, we expect ASSA’s sharp YTD market outperformance to continue (exhibit 4), particularly as the outlook for the car-rental and auction businesses remain intact, in our view. We raise our 2017-18F earnings (exhibit 9) by 17-20% due to lower interest cost on the debt at 9.2% (from 9.75%), leading us to lift our 12-month TP to IDR330 (from IDR280), based on an unchanged 2017F PER of 12x. With 36% upside potential to our new TP, we reaffirm our BUY rating. Risks to our call would be lower-than-expected secondary market prices, a slower fleet expansion and lower utilization rates.

Apr 12,2017 10:07:37

Geopolitics Continue to Traffic Stocks

With little in the way of news on both the equity and economic fronts, uncertainty surrounding the geopolitical landscape appeared to drive U.S. equities lower in another volatile session. Treasury yields continued to move lower and the U.S. dollar lost ground, while crude oil prices showed some signs of resiliency, getting a slight lift on headlines regarding a possible discussion of an expansion of OPEC production cuts, and gold jumped.

Apr 11,2017 15:09:36

Post-China Minzhong divestment, Indofood’s balance sheet became healthier with lower debt. Net gearing declined to 0.2x as at end-Dec 2016 (from 0.5x end-Sep 2016). Our ground checks suggest Indofood’s flour and CBP retail selling prices increased in Dec 2016 and January. These higher ASPs are likely the result of the pass on costs from the increase costs especially cost of goods sold (COGS) in 4Q16. We maintain our BUY recommendation with a DCF-based IDR10,300 TP (28% upside), implying 19x and 16x FY17F-18F P/Es respectively.

  • Healthier balance sheet. Indofood Sukses Makmur’s ($INDF) balance sheet is healthier after the China Minzhong divestment, which was completed at end 2016. Proceeds from the divestment were used to pay its debt, which saw a decline to IDR22trn (-30% QoQ) at end-Dec 2016 (from IDR32trn at end-Sep 2016). Net debt-to-equity ratio declined to 0.2x (from 0.5x) with its foreign currency debt exposure declining to 37% (from 50%) in the same period. Going forward, we also expect financing costs to decline.
  • Raised ASPs. Our ground checks indicate that the retail selling price of Indofood’s flour Cakra Kembar and Segitiga Biru rose by around 10% and 5% MoM, respectively in Dec 2016. Furthermore, in January the retail selling prices of its subsidiary, Indofood CBP ($ICBP)’s products such as instant noodle and RTD-tea also increased. These higher ASPs are likely to improve EBIT margin. Notably, Indofood’s flour and consumer branded products’ (CBP) 4Q16 EBIT margin narrowed, driven by higher costs. Maintan BUY with IDR10,300 TP, implying 19x/16x FY17F-18F P/Es respectively.
  • 4Q16 earnings in line. Indofood’s 4Q16 earning came in at IDR905bn (- 10.4% QoQ), in line with expectations. EBIT margin widened to 13.9% in 4Q16 (from 12.2% in 3Q16) thanks to its improved agribusiness earnings. However, it was offset by lower financing income and lower income from associates. (Andrey Wijaya)
Apr 11,2017 15:05:35

Despite the recent strong share price outperformance, we believe Delta Dunia’s expected sharp improvement in financial performance has yet to be fully reflected in consensus numbers and its share price. We reinitiate coverage with a BUY call and DCF-derived TP of IDR1,500 (40% upside), which implies 2017F P/E of 10.1X on our projections. Our 2017F EPS is 21.8% higher than consensus. We like the stock given its undemanding valuations (2017F EV/EBITDA of 4x vs United Tractors’ 7.5x), improving ROAE, and strong projected 2017F earnings growth of 142% YoY.

  • 2017F earnings projected to surge 142% YoY but yet to be reflected in consensus. Delta Dunia Makmur ($DOID) is not well covered (consensus numbers reflect only one local broker) – this suggests that the projected sharp improvements in its 2017F operational and financial performance have yet to be reflected in consensus and its share price. We expect a sharp turnaround in Delta Dunia’s operational and financial performance in 2017F, as we project a 142% YoY increase in 2017F earnings on the back of a sizable increase in mining contracting volumes, and improvements in its coal mining contracting fees. Our 2017F EPS is currently 21.8% higher than consensus.
  • Spike in 2017F mining contracting volume. Delta Dunia owns 100% o fPT Bukit Makmur Mandiri Utama (Bukit Makmur), the second largest coal mining services contractor in Indonesia in terms of volume. We estimate its 2017F overburden removal volume and coal production to grow by 19.1% and 24.8% respectively. Volume growth in 2017F would mostly come from a ramp-up in coal production at Berau Coal ($BRAU), Sungai Danau Jaya (a subsidiary of Geo Energy Group, and Tadjahan Antang Mineral.
  • Stabilising coal price above USD70/tonne favours its mining fees. Most of Bukit Makmur’s mining contracting fees have three tiers, which are reviewed every month and determined based on the rolling average for coal prices over the last three months. Coal mining fees in the first tier (when average coal price <USD60/tonne) is 6% and 12% lower than second tier (when coal price is between USD65-75/tonne) and third tier (when coal price is >USD75/tonne) respectively. Due to weak coal prices, Delta Dunia’s mining fees were in the first tier (the cheapest) during 8M16. Its mining contracting fees moved up to the second tier in Aug 2016 and the third tier (the highest) since Sep 2016. As we project coal prices to sustain above USD70/tonne, we expect Delta Dunia to continue to enjoy higher profit margins from higher mining fees.
  • Reinitiating coverage with BUY and TP of IDR1,500. We reinitiate coverage on Delta Dunia with BUY as we think its upcoming sizable improvements in operational and financial performance are still not fully reflected in its share price. Our TP of IDR1,500 is derived using DCF (WACC: 9.8%, TG: 1%), and implies 2017F P/E of 10.1x and EV/EBITDA of 5x – this compares with United Tractors’ ($UNTR) FY17F P/E of 16.7x and EV/EBITDA of 7.5x. Near-term catalyst is a potential sharp upgrade in consensus earnings. Key risks to our call include a slump in coal prices. (Hariyanto Wijaya, CFA, CPA)
Mar 08,2017 08:51:12

JASA MARGA ($JSMR) - Long-term play

Road to prosperity
Underdeveloped infrastructure has become a major drag on Indonesia’s economic growth. Unsurprisingly, one of the first reforms by President Jokowi was eliminating the fuel subsidy program. By switching from idle spending to productive spending, Jokowi has secured fiscal flexibility to implement his reform agendas, in particular, infrastructure projects that will spur economic growth. The government has increased its infrastructure budget, and President Jokowi has rolled out a number of economic packages and presidential decrees aimed at reducing bottlenecks and helping to expedite construction of government projects, including toll roads.

Short-term remains challenging…
As the capex cycle is in expansionary mode, we believe that Jasa Marga (JSMR) still needs to escalate its leverage position. As long-term debt increases, we expect to see higher gearing level in FY17F. We also anticipate its debt-to-equity ratio to continue to climb, as we expect the company to secure financing via syndicated bank loans and/or bond issuance, on top of other announced financing schemes.
Our back-of-a-napkin calculation shows that JSMR could deploy around IDR65tr of total capex for fifteen new routes. Furthermore, pressure on the firm’s bottom-line is inevitable, as we expect to see higher interest burden. We do not expect the company to book a net loss, however, as its topline growth will stay robust on the back of bi-annual tariff adjustment and new routes commencement. Nonetheless, negative bottom-line growth seems plausible, in our view.

… but the future looks promising (if solid strategies are implemented)
During the current expansionary period, JSMR will rely on the bi-annual tariff hike scheme and new routes to drive its topline. Ergo, well-planned financing schemes and prudent cost control will act as imperative buffers to absorb extraordinary expenses. If the strategies can be implemented effectively, we are optimistic about the future of the company, as route additions will act as a positive catalyst for JSMR’s growth in the long run.

Attractive long-term prospect despite short-term challenges
All in all, we believe that JSMR’s capex expansion would prove fruitful in the long run, as construction of new toll roads will drive revenue growth in the coming years. However, financing remains a major hurdle for the company. Still, with support from the government, as well as solid financing plans and prudent cost controls, we believe that JSMR will be able to reach its long-term targets and remain the leader in the Indonesian toll road industry. Key risks to our call include: 1) unsupportive government regulations; and 2) higher-than-expected financing costs.

Mar 07,2017 09:21:00

Japfa Comfeed Indonesia ($JPFA) - Weaker Growth Outlook

We lower our earnings estimates and downgrade Japfa to NEUTRAL (from Buy) with a lower TP of IDR1,750 (from IDR2,700, 3% upside). The downgrade reflects several margin limitations at its key business segments, imposed by the Government since Nov 2016, which have prematurely halted its margin expansion cycle. In addition, we do not see any major upside catalysts at this juncture. As expected, Japfa closed 2016 with a decent set of results, with EPS up sharply by 4.4x YoY.

Margin expansion limited by government intervention, including the announcement to cap day-old chick (DOC) prices at IDR4,800/bird (implemented in West Java so far) and broiler prices at IDR18,000/kg, when DOC was trading at close to IDR6,000/bird during Oct 2016. In addition, corn imports by feed millers are banned – with feed millers arguing over insufficient domestic corn supply, we believe this may increase feed production costs.

Favourable supply/demand dynamics and improved capital structure should support earnings. Notwithstanding the above, Japfa Comfeed Indonesia's (Japfa) earnings should be insulated by stable broiler/DOC prices on better supply/demand dynamics, after the implementation of the culling programme and limited parent stocks import since 2014. Furthermore, Japfa's interest expenses for 2017F should decline by 30% due to its USD bond buyback and debt refinancing last year. Japfa is also looking to raise feed prices if feed costs escalate, given supportive broiler prices.

Downgrade to NEUTRAL on weaker growth prospects. We lower our 2017- 2018F core profit estimates by 11-19.3% to account for flat YoY DOC and broiler gross margins, and 2% reduction in feed gross margins. This translates to a lower DCF-derived TP of IDR1,700, which implies 2017F P/E of 11x, -1SD vs 5-year historical mean. Main upside risk is an implementation shortfall of the regulations. downside risks are IDR depreciation and margins compression.

DOC still strong but lower feed margins. On QoQ basis, the DOC segment still delivered a high EBIT margin of 22%. However, the feed segment’s 4Q16 EBIT margins of 11% was the lowest in 2016 (Figure 2).


Feb 27,2017 11:37:36

Wijaya Karya ($WIKA), FY16’s results above our estimate

  • Wijaya Karya (WIKA IJ, BUY, TP: IDR2,950) recorded IDR1trn (+61.9% YoY) net profit in FY16, above our and consensus estimates due to one off revenue from land plot selling worth IDR250bn, higher GM and lower interest expense than expected.
  • On the other hand, its revenue only reached IDR15.7trn (+15.0% YoY), only 87%/88.4% of our/consensus estimates. It was dragged down by delay in HSR project which was expected to contribute IDR2.5trn last year.
  • Its gross margin was expanded to 14.2% in FY16, improved from 12.1% in FY15. It was supported by IDR250bn land plot selling in revenue and higher gross margin from infra Building segment.
  • In quarterly basis, Wika obtain IDR610bn (+323.8%QoQ,160.2% YoY) net profit in 4Q16, while its revenue grew +91.5%QoQ, 14.5%YoY. Thus, Wika booked the highest level of GM of 17.5%, higher than 11.7% in 3Q16.
  • Up to third week of Feb’17, Wika has raked IDR7.14trn new contracts, 16.5% to its new contracts target and improved +255%YoY compare to same period last year.
  • We maintain our BUY call on the stock as the company will start to recognize HSR contract as revenue this year, its robust growth and healthier balance sheet post rights issuance. (Dony Gunawan)
Feb 27,2017 11:34:08

Nippon Indosari Corpindo ($ROTI) - More Tailwinds In FY17

Nippon indicated that its monthly sales – which were hurt in Dec 2016 due to a temporary products boycott – have returned to normal. This year, the company is likely to raise its selling prices, since there have been no price hikes for almost three years. On the flip side, flour prices (its main raw material purchased under semi-annual contracts) have declined. This year, Nippon has also started to move into new markets in Kalimantan and increased its GT sales forces. Maintain BUY and DCFbased IDR1,870 TP (22% upside), which implies 25x FY17F P/E.

Better sales in January after Dec 2016’s boycotts. Our channel checks on minimarts in Jakarta suggest that Nippon Indosari Corporindo’s (Nippon) sales have started to improve in January after a temporary products boycott in Dec 2016. Nippon’s general trade (GT) distribution is also strengthening. This can be seen by the number of Sari Roti hawkers (and their ubiquitous tricycle carts) already back on the streets. This year, Nippon aims to increase its GT channel sales force too by boosting the number of “Mbak Sari” (ladies selling Sari Roti products from trollies) by 3x. The company also aims to increase its GT sales contribution to 26% of total sales in FY17 (FY16: 24%).

New markets in Kalimantan. As at January, Nippon started selling its products in cities in Kalimantan. These urban centres include Pontianak, Banjarmasin and Samarinda. The firm delivers its bread products – which produced at its Java plants – to Kalimantan via air freight. Although the transportation costs are high, Nippon said its Kalimantan’s EBIT margins are same as the Java market. This is because all transportation costs are passed on to its customers.

Likely to increase ASPs while costs decline. Nippon has not increased its selling prices for almost three years. During this same period, other domestic consumer food products like biscuits, snacks and instant noodles have seen prices increase by 4-6% pa. The price gap between bread and other consumer food products has widened, and we believe Nippon has huge room for increasing its prices. On the flip side, contracted flour price (for purchase contracts in JanuaryJune) is set to decline by 4% from prices in the previous 6-month period, ie Jul-Dec 2016. Since flour accounts for ~25% of Nippon’s COGS, we see this lower input cost having a significant impact on its production costs.

Softened FY16 earnings likely, but it should recover this year. The temporary Sari Roti products boycott has caused sales disruption. Hence, some of its bread products expired at the minimarts, which resulted in higher 4Q16 sales returns. This could narrow its EBIT margins and conceivably soften earnings growth. However, such growth should accelerate this year, driven by lower input costs and higher selling prices. These factors should help Nippon improve its EBIT margins.

We maintain our call and DCF-based IDR1,870 TP (22% upside), which implies 25x FY17F P/E, on this stock. Key risks to our call include rising competition, higher sales returns and weakened consumer spending. (Andrey Wijaya)

Feb 27,2017 11:04:05

Bukit Asam ($PTBA) - Peerless As The Only SOE Coal Mining Company

As the only SOE engaging in coal mining, Bukit Asam is the only operator that would benefit from synergy between SOEs as:

1. Its coal sales volume to other SOEs keeps increasing;
2. It has long-term coal domestic commitments to other SOEs.

We think the combination of higher coal sales volume and coal price in FY17F should fuel earnings – which we think consensus has not fully factored in, as our FY17F EPS is 35% higher vs the street. We re-initiate coverage with TP of IDR17,600 (58% upside), implying FY17F P/E of 11.4x.

¨ Beneficiary of higher coal selling prices. We think FY17 coal prices should reach around USD70-75.00/tonne (FY16 average: USD63.00), as China – the world’s biggest coal consumer and producer – has an interest in its coal mining companies generating profit in order to service their sizeable bank loans. As such, we assume an average FY17F coal price of USD73.00/tonne, and USD70.00/tonne from FY18F onwards. Higher coal price in FY17 onwards should increase Tambang Batubara Bukit Asam Persero’s (Bukit Asam) profitability and earnings, as its earnings are sensitive to changes in coal price (every 10% change in coal price should lead to a 16% change in EPS).

¨ The only coal company benefitting from SOE synergy. Bukit Asam is the only state-owned coal mining company in Indonesia. The Ministry of State Owned Enterprises (SOEs) pushes synergy between SOEs, which is crystallised in a decree guiding SOEs in the procuring of goods and services. The decree is one of a few key factors leading to Bukit Asam’s sizeable yearly SOE coal sales volume, together with other SOEs’ long-term coal commitment of around 574m tonnes.

¨ Domestic power plant joint ventures (JVs) to increase coal sales volume over the coming years. In addition to receiving return on investment in power plants, the JVs should increase Bukit Asam’s coal sales volume through the purchasing of the required coal from the latter.

¨ Expanding to overseas power plants to increase coal sales volume. Bukit Asam is planning to expand into overseas power plants via JVs in South-East Asia, especially to Vietnam and Myanmar. The two countries are expanding their electricity capacity, which means an increased need for coal. Bukit Asam’s corporate secretary informs that the company has signed an agreement to supply 1.5m tonnes of coal to Vietnam annually from 2018.

¨ Re-initiating coverage at BUY with IDR17,600 TP. Our DCF-derived TP implies FY17F P/E of 11.4x (-0.25SD from its 6-year mean P/E). Our FY17F EPS is 35% higher vs consensus, as we think consensus has not yet fully factored in an increase in coal sales volume and higher coal prices.

¨ Risks to our call include:
i. Delay in expanding its railway capacity;
ii. A significant drop in coal prices;
iii. Weaker-than-expected coal demand;
iv. A strengthening IDR. (Hariyanto Wijaya, CFA, CPA)

Feb 22,2017 11:25:07

Indonesia Poultry: Derating expected 

Best-performing sector set to reverse on lower broiler and DOC prices 
With the poultry sector having outperformed the JCI by 51% in 2016 and 15.2% ytd (exhibit 4), we believe most of the good news related to supportive government regulation on supply control and solid earnings expectations has been priced in. In the recent run-up, JPFA shares (+27% ytd and testing their early November 2016 highs) have been the best-performing in the sector, in line with their status as our top sector pick. Although we saw day-old chick (DOC) ASPs falling below breakeven costs in December 2016, at IDR4,300/chick, DOC and broiler average prices were still strong in 4Q16, allowing for likely one-off high y-y earnings growth. In 2017, based on surveys in the West Java region, we expect January DOC and broiler prices to remain stable (broiler price IDR16,679/kg, -5% m-m, -21.4% y-y; DOC price: IDR4,300, flat m-m, -16.4% y-y). Note that DOC prices have remained below industry players’ breakeven levels at IDR4,600-4,700/DOC. With our weaker outlook for broiler and DOC prices, we expect the sector’s recent outperformance to reverse. 

New ruling on supply stabilization difficult; Possible price-capping 
In our view, the government’s latest regulation (Kementan No. 61 12/2016) to stabilize DOC and broiler supplies will prove difficult to implement given the fragmented nature of the industry. Also, MAIN should be at a disadvantage given that it has not met the requirement of this government ruling for the establishment of a slaughterhouse. MAIN is currently using third-party slaughter services due to lack of scale, coupled with an IDR80-100bn minimum investment for slaughterhouses and cold-chain distribution. Finally, we see a possible spread of the current price capping from West Java to other regions, which would apply further margin pressure to companies under our coverage. 

Downside risks: Bird flu and weaker poultry prices in February 2017 
Based on a survey conducted by online poultry distributor (Arboge), February 2017 DOC and broiler prices fell sharply m-m, in line with the seasonal trend of the past 2 years. Thus, we might see further margin contraction when 1Q17 results are released. Additionally, the recent avian influenza cases in China and the UK could not only lower poultry demand in Indonesia, but also force broiler farmers to cull their livestock, assuming another outbreak. 

Reiterate sector UNDERWEIGHT with continued preference for JPFA 
With the sector’s risk-reward tradeoff looking unfavorable, we reaffirm our UNDERWEIGHT stance. As we expect a sector derating, we cut our 12-month TPs and ratings across the board. We cut CPIN (CPIN IJ, IDR3,450) to REDUCE (from HOLD) and our TP to IDR2,900 (from IDR3,300), based on a 2017F PER of 15x (from 17x). JPFA (JPFA IJ, IDR1,900) goes to HOLD (from BUY) and our TP to IDR1,900 (from IDR2,400), based on a 2017F PER of 12x (from 15x). We cut MAIN (MAIN IJ, IDR1,305) to REDUCE (from BUY) and our TP to IDR1,100 (from IDR2,000), based on a 2017F PER of 8.5x (from 15x) given its: 1) sector-high leverage (83% net gearing); 2) need to invest in slaughterhouses and cold chain distribution, spurring higher leverage and lower ROEs. Risks to our call: successful government measures from supply stabilization and a stronger IDR.
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.   

Feb 22,2017 11:18:02

Bumi Serpong Damai to boost sales of commercial segment

Bumi Serpong Damai ($BSDE) increase revenue target of commercial segment by 71% through the launching of three apartment and office building projects including The Element in Rasuna Epicentrum area, South Jakarta, South Gate Tanjung Barat, South Jakarta as well as an mixed used project that consists of office building an AEON Mall. The company targets pre-sales of commercial projects could contribute around IDR2.85trn of total pre-sales target amounted to IDR7.22trn for 2017. Furthermore, the company allocates capex of IDR3trn -IDR4trn in 2017 that would be used to fund the projects. The company expects its recurring income to grow by 20%-25% in the next five years. (Kontan, Bisnis Indonesia)

Feb 22,2017 11:17:23

Jasa Marga aims 2% YoY increase in transaction volume

Jasa Marga ($JSMR) aims 2% YoY increase in transaction volume this year compared to 1.36bn transactions in 2016. The management is optimistic the transaction volume could grow in line with an improvement in economic growth. In 2016, the company recorded 1.36bn or grew by 3.8% YoY. Besides that, the company targets revenue of IDR10trn in 2017, up 13.6% YoY compared to IDR8.8trn in 2016. (Bisnis Indonesia)

Feb 22,2017 11:14:25

Property: Real Estate - Towards a More Positive 2017

The majority of companies we spoke with have expressed more positive views for 2017, as evident in the 34% YoY growth in targeted aggregate marketing sales to IDR31.6trn. This supports our OVERWEIGHT view on the sector for 2017, where the companies’ aggregate presales target is in line with our presales target of IDR31.7trn. Indonesian developers under our coverage booked an aggregate 15% YoY decline in marketing sales in 2016, due to weaker macroeconomic conditions and uncertainties prior to the implementation of the tax amnesty programme.

  • Political factors may impact presales in 1H17. The current nationwide governers’ elections may lead to soft presales in 1H17 in our view, as developers are unlikely to launch large projects due to political uncertainty (assuming two rounds of elections). We may see more project launches starting early 2H17 after the end of the elections. Other factors that may delay property launches include the Government’s plan to tax idle land, although this is still in discussions and we believe the companies’ confidence levels remain intact despite this issue.
  • 2016 performance review. We believe that the drop in 2016 marketing sales was due to several factors such as weakening macroeconomic conditions (4Q16 GDP at 4.9% vs 5.2% in 2Q16), the Government’s aggressive taxation drive, concerns on IDR stability, and uncertainty prior to the execution of the tax amnesty programme during 1H16.
  • Catalysts in place, ready for realisation. Throughout 2016, several positive drivers were launched in the sector including:
    i. Foreigners being allowed to purchase property under “rights to use” title;
    ii. Relaxation of loan-to-value (LTV) threshold;
    iii. “Off-plan” properties being allowed for second mortgages;
    iv. Reduction in final sales tax to 2.5%;
    v. Lower mortgage rates due to the declining Bank Indonesia (BI) rate.

    We believe that the impact from these catalysts were not fully translated into 2016 presales due to several events and the realisation of aforementioned risks. Nevertheless, we see limited downside given that the sector underperformed JCI by 8.5% as at the end of Dec 2016, reflecting investors’ concerns over the sector. Going forward we believe these uncertainties should clear with the above positive catalysts in place.
  • Increasing demand for mortgages. Based on data points (Figure 3) we see a shift in payment method from cash instalments to mortgages, as a result of the declining BI rate in 2016, as well as relaxation of the LTV threshold. We expect this trend to continue as mortgage rates are getting more competitive in the single-digit range (Figure 4). We are still of the view that BI would cut rates by another 25bps going forward.
  • Attractive valuations. The sector is currently trading at a 64% discount to RNAV, around -1.6SD from its past 3-year mean of 56%. We continue to favour companies with healthy balance sheets and sufficient landbank, as landed houses remain the most popular type of property to buy. Our Top Pick is Bumi Serpong Damai ($BSDE), which currently trades at a 64% discount to its RNAV, and is supported by a huge landbank totalling 4,092ha, a low net gearing level of 0.1x, and FY17F earnings growth of 20% YoY. (Yualdo Tirtakencana Yudoprawiro)

Feb 22,2017 11:11:40

Bank Tabungan Negara - A Good Year Indeed

Yesterday evening BTN had analyst meeting presentation on its FY16 performance. BTN currently trades at 0.97x 2017 P/BV multiple (-0.7SD of its historical mean). Maintain BTN ($BBTN) as one of our top pick in the sector.

Key highlights:

FY16 performance:

  • Net interest income represents 103%/105% of our/consensus forecasts.
  • Net interest margin (NIM) slightly expanded to 5% due to lower blended CoF by 6bps to 5.7% in FY16 (FY15: 5.8%).
  • Cost to income ratio (CIR) slightly elevated to 57.4% from 56.7% due to 22% YoY opex growth.
  • Credit cost improved significantly to 46.7bps indicating lower pressure in asset quality.
  • Restructured loan of IDR4.9trn accounted for 2.9% of total loans, still relatively manageable compared to other banks.
  • Lower corporate tax rate due to BTN already reach 40% free float (previously only c.39%).
  • Net profit of IDR2.6trn accounted for 109%/113% of our/consensus forecast.

4Q16 performance:

  • NIM expanded to 5.3% compared to previous quarter due to high growth in current account as BTN received substantial amount (c.IDR7.7trn in 4Q16) from government institutions’ fund as well as IDR546bn payment of 2015 FLPP’s claim from government.
  • Credit cost remain managable at 57.3bps as BTN’s loan mostly secured by the property themselves.
  • With stable credit cost and lower corporate tax rate, net profit grew by 71.2% QoQ.

What we miss:

  • Lower credit cost at 46.7bps as we expect higher gross NPLs ratio at 3.1% (vs 2.8%) and 63bps credit cost.

What to expect:

  • Loan growth would reach 19% this year as we expect that BTN would continue to channel subsidised mortgage through interest rate subsidy first while FLPP scheme is still under discussion with Government. Yet we expect the FLPP scheme would not changed significantly given that Government would still need to reduce the housing backlog in Indonesia.
  • We conservatively expect lower loan yield of 9.9% in FY17 (FY16:11%) on the back of higher subsidised mortgage portion into BTN’s loan book. (Eka Savitri)
Feb 22,2017 11:07:45

Retail - Tailwinds Trump Headwinds

We see stronger signs of improvement in consumer demand and expect the trend to continue, supported by better commodity prices, lower interest rates, and more investment inflows. In addition, rationalised expansion over the last few years should help retailers’ margins, in our view. As such, we believe retailers in general would do well this year. We reinitiate coverage on the sector with OVERWEIGHT. In particular, we like turnaround efforts at Mitra and Ramayana. Key risks include political instability and currency volatility that could prolong the recovery process.

  • Demand side: Gradual improvement along with economic recovery. We believe consumer confidence is key in supporting private sector spending, and we see the positive momentum potentially being boosted further by improving commodity prices in the near term, and more investment inflows in the longer term. As such, we expect retailers’ topline to grow at high single-digit to low double-digit levels in 2017F, from mid- to high single-digit growth rates in 2016.
  • Supply side: Rationalised expansion lowers pricing pressure. We think retailers’ margins should be underpinned by rationalised expansion and improved inventory levels. Retailers’ expansion over the past two years has been generally slower than previous years’, thanks to slower property completion and the weaker market. Retailers’ inventory positions have also generally improved, with some retailers already at comfortable inventory levels. We believe these conditions have eased pricing pressure and provided some upside to margins.
  • Online shopping a promising market in the longer term, but obstacles continue to drag the full unleashing of its potential in the near term. Rising income and a young population are long term key growth drivers, in our view. On the flipside, short term obstacles such as relatively high costs of good internet access and mobile devices, drag online shopping adoption. The online shopping format is set to grow as more Indonesians come online, and purchasing power grows. We believe this trend would have a disproportionately negative impact on Matahari Department Store ($LPPF) as incremental online shoppers are likely to come from Matahari’s target market segments, in our opinion.
  • Tailwinds trump headwinds. Overall, we expect profit acceleration in 2017-2018F, stemming from gradual topline growth, GP margin recovery, operating leverage as well as financial leverage. We forecast average topline growth of 10-11% in 2017-2018F, a slight improvement from previous years, supported by higher commodity prices and rising confidence level. We expect margin recovery as rationalised expansion and economic recovery gain pace. Politics and currency stability are macro wild cards, though we remain optimistic.
  • We like turnaround efforts at Mitra and Ramayana. Ideally, an investment case should be made on a company that is heading towards the fourth quadrant in Figure 1, or at least one that is pushing its asset turnover towards the first quadrant, or improving its profitability/margin towards the third quadrant. Ramayana Lestari Sentosa ($RALS) and Mitra Adiperkasa ($MAPI) are our Top Picks with relatively faster asset turnover growth and stronger margin improvements, a combination that would ultimately increase profitability. Both companies have undertaken business and management turnarounds, which were timed well with the improvement in general economic conditions. (Stifanus Sulistyo)
Feb 21,2017 09:45:23

Bank Permata’s FY16 losses are likely to slow group earnings growth. However, higher earnings from Astra’s automotive, agribusiness and heavy equipment units should partially offset the lower income from its financial units. We reduce our FY16F earnings but keep our FY17F forecast, as we expect its financial services arm to recover this year. In 2017, Astra should also benefit from improved consumer spending, as well as higher CPO and coal prices. Our SOP-based TP drops to IDR9,100 (from IDR9,250, 15% upside) implies 19x/16x FY17/18F P/Es. BUY.

  • Unexpected FY16 losses from Bank Permata. PT Bank Permata Tbk (Bank Permata) ($BNLI) – which is 44.6%-owned by Astra – surprisingly recorded a net loss of IDR6.5trn for FY16. This was driven by substantial new provision allocations for non-performing loans (NPL), which significantly increased in 4Q16. In 4Q16, the bank allocated IDR4.3trn in new provisions for allowances for impairment losses, which pressured FY16 earnings.
  • The increase in NPL was driven by loans to the manufacturing, agribusiness, wholesale & retail trading, as well as mining sectors. This year, we expect Bank Permata’s NPL to improve – especially for loans given to the agribusiness and mining sectors. These sectors are benefiting from the current increase in commodity prices, such as CPO, rubber and coal prices.
  • Lower FY16F earnings. Astra’s financial services unit – comprising PT Federal International Finance, PT Toyota Astra Financial Services, PT Astra Sedaya Finance, PT Surya Artha Nusantara Finance and Bank Permata – accounted for 18% of Astra’s 9M16 consolidated earnings. In our calculation, Astra’s financial unit is likely to book a net loss of IDR1.3trn in 4Q16 (from earnings of IDR750bn in 3Q16). Hence, we cut Astra’s FY16F consolidated earnings estimates by 19% to IDR14trn.
  • Tailwinds ahead. We see strong tailwinds for Astra’s mining, agribusiness and auto arms ahead, driven by:
    i. Higher coal prices and slower growth of labour costs for its plantation unit, which may lift earnings;
    ii. Its auto business is likely to maintain strong sales growth, boosted by lower financing costs;
    iii. Hidden value in its property arm (just launched in Oct 2016) which may be unlocked once its assets start to be monetised.

    In addition, in 2017, Bank Permata is likely to book lower new provisions for NPL. The bank’s allowances for its impairment losses coverage ratio increased to 75% at end-Dec 2016 (from 51% at end-Mar 2016).
  • Maintain BUY with a lower SOP-based TP of IDR9,100 (from IDR9,250, 15% upside) that also implies 19x/16x FY17F/FY18F P/Es respectively. While rising NPLs at Bank Permata are a key risk to our call, our sensitivity analysis indicates its impact on Astra’s value should not be significant. (Andrey Wijaya)


Feb 21,2017 09:41:14

While Semen Indonesia ($SMGR)’s FY16 earning was flat at IDR4.5trn, it accounts for 105%/112% of our/consensus full-year estimates. Above expectation earnings was largely driven by lower-than-expected effective tax rate. Based on our calculation, the company’s effective tax rate declined to only 10.8% in FY16 (from 22.7% in FY15). On operational basis, the situation remains challenging with Semen Indonesia’s sales and EBIT declined to IDR26trn (-3% YoY) and IDR5trn (-16% YoY), respectively.

It is worth noting that, on QoQ basis, Semen Indonesia recorded the lowest EBIT margin of 15.6% in 4Q16, down from 19.8% in 3Q16 mainly dragged down by both lower ASP and higher expenses, in our view. The company’s domestic average ASP (excl. Thang Long Cement) declined to IDR766,000/tonne in 4Q16 (-3% QoQ).

Outlook: In January, Semen Indonesia slightly raised its domestic cement ASP to IDR763,000 (+0.3% MoM, from IDR761,000/tonne in Dec-16), which we believe mainly to maintain EBIT margin on the back of pressure from higher energy costs. We expect energy cost – which account for around 25% of COGS – to further increase, after the renewal of new coal purchase contract, inline with higher international coal price trend. The majority of coal purchase is under 3-or-6 months contract term.

We maintain Neutral on Semen Indonesia with DCF-based TP of IDR9,800 (7% upside), implies FY17F P/E of 12x. (Andrey Wijaya)

Feb 06,2017 14:22:39

Mineral water producer with brand “Cleo” to conduct IPO

Mineral water producer with brand “Cleo”, Sariguna Primatira to conduct IPO amounted 500m shares, or equal to 22% of total paid-in capital. According to the mini expose on last Friday, the company will use Oct 2016 financial statement as a valuation basis. Currently, the company has 19 plants in several locations across Indonesia. Later on, most of the IPO proceeds would be used for expansion. The company target to be listed in mid this year. (Bisnis Indonesia)

Feb 06,2017 14:21:52

Sri Rejeki Isman eyes USD760m revenue in 2017

Sri Rejeki Isman ($SRIL) eyes USD760m revenue in 2017. According to is Corporate Secretary Welly Salam, there are three main efforts to boost sales this year, including normalisation of production capacity over new factory that slated to be commencing in mid-this year, product diversification, as well as focus on sales of high value products. This year, the company will be more conservation on its capex plan, allocating only USD15m in 2017 from USD60m in 2016. The capex would be used for maintenance purpose. (Kontan)

Feb 06,2017 14:21:24

Mitra Pinasthika sells 20% stake in MPM Finance

Mitra Pinasthika ($MPMX) plans to sell part of its stake in Mitra Pinasthika Finance (MPM Finance). The company announced its plan to sell 20% stake in MPM Finance to its strategic partner JACCS, a Japanese financing company. Through this plan, the company is going to sell approximately 20% of its shares to JACCS, and will reduce the portion of its stake from 60% to 40%. Concurrently, JACCS will increase the portion of its stake in MPM Finance from 40% to 60%. (Bisnis Indonesia)

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)

Feb 06,2017 14:18:46

Regional Plantation: Share Prices Lagging CPO Prices

Share prices of most plantation stocks have not performed in line with CPO prices, possibly due to the anticipated strong recovery in FFB output likely to come from Indonesia. It could also be due to the market’s cynicism that CPO prices would remain at current high levels. We continue to advocate a trading strategy for the plantation sector – buying liquid high beta stocks capable of surprising on the upside in terms of FFB output. NEUTRAL.

  • Share prices not moving in line with CPO prices. CPO prices remain above MYR3,000/tonne currently. We maintain that the current high prices are likely to remain up to end-1Q17. However, we note that despite the current high prices, only the Singapore Exchange (SGX)-listed and Jakarta Stock Exchange (JSX)-listed stocks have moved in a similar direction to CPO prices (Figures1 and 2). Most Malaysian-listed stocks have not performed in line with CPO prices, with the exception of Sime Darby (Figures 3 and 4). This could be due to:
    i. The valuation premium that Malaysian stocks command;
    ii. The anticipated strong recovery in FFB output which is likely to come more from Indonesia, rather than Malaysia;
    iii. The cynicism of investors that CPO price can hold on at current levels. This cynicism is also reflected in the CPO futures price (four months and above), which is trading at a 10% discount to spot prices.
  • Still reflecting prices of MYR2,400-2,600/tonne. It is also important to see what current share prices are reflecting in terms of CPO prices now (Figure 5). Based on our analysis, most stocks are still reflecting CPO prices of MYR2,400-2,600/tonne, which corroborates our view that the market does not expect current higher prices to sustain. Stocks reflecting CPO prices above those levels include IOI Corp (IOI), TSH Resources (TSH), IJM Plantations (IJMP) and Felda Global Ventures (FGV).
  • 4Q16 results likely mainly in line. We continue to advocate a trading strategy, given our expectation that CPO prices are likely to moderate post-1Q17. As such, we like stocks that are capable of surprising on the upside in terms of earnings and liquid high-beta stocks. For the upcoming results, we believe most earnings would come in within expectations, with four companies – IOIC, FGV, Sarawak Oil Palms (SOP) and TSH – likely to post disappointing earnings due to weaker-than-expected FFB output. We also up our forecasts for two stocks which look capable of posting better-than-expected earnings – Bumitama Agri and First Resources. We raised our forecasts to impute our latest in-house exchange rate assumptions, higher FFB output and PK prices.
  • Risks include extreme climate conditions, a change in demand and supply dynamics and extreme fluctuations of exchange rates and crude oil prices.
  • Still NEUTRAL. We expect volatility to be the name of the game in 2017, with the current strong CPO prices moderating after 1Q17, as CPO production recovers more significantly and soybean crop from South America starts being harvested. We keep our MYR2,500/tonne CPO price assumption for 2016-2017. Our regional Top Picks – Kuala Lumpur Kepong (KLK), Golden AgriResources and London Sumatra ($LSIP) – remain. We also like Sime Darby as a restructuring play. (Hoe Lee Leng)
Feb 06,2017 14:16:11

Logindo Samudramakmur: Key Takeaway From Analyst meeting

Last Friday, Logindo Samudramakmur ($LEAD) has organized an analysts meeting to explain on its impending rights issue plan and updates on its business outlook. We've came out with mixed bag view on the stock, although solvency risks of LEAD are now significantly lower than last year, earnings recovery is still farfetched due to insufficient numbers of jobs in the market, producers are not bullish on oil price yet, granted the higher YoY crude oil price, some key points as below:

  1. LEAD is aiming to raise USD10m/IDR135bn from this corporate exercise, which translate into a maximum of 63.5% of its current paid up and issued share capital. The rights are priced at IDR83-92/share, or 20% discount to Theoretical ex rights price in a fully subscribed scenario, according to share underwriter.
  2. LEAD's 35% shareholder, Pacific Radiance Ltd has committed to fully subscribe. Owner Pak Eddy Logam and his family owns 40% of LEAD, he has indicated his will to subscribe and is looking for funds to do so. The remaining 25% are owned by general public. All in, management expect to raise at least USD5-6m from this exercise.
  3. Throughout the meeting, owner has repeatedly emphasize on his willingness to sustain the business and the pain of doing a major rights issue at current valuation (0.17x P/B) . Having said, he believe business has seen its bottom point while improvement is noticeable due to the restructuring of LEAD's debt and the impending job flows from Tangguh Train 3 by BP, an USD8bn LNG project.
  4. Coming to the business, LEAD has extended and reduced the principal repayment of its debt from a monthly commitment of USD2.3m to USD890K. Management indicated net cash outflows as of November 2016 was USD200K/month, significantly lower than earlier 2016 due to combination of debt restructuring and cost cutting.
  5. LEAD is bidding for 15 long term charter contracts from Tangguh Train 3, mostly high tier OSV jobs, apart from that, the project's main contractor, Chiyoda will be offering numerals short term jobs from 3Q17 onwards. Competition for these jobs are likely to be steep, higher utilisation is possible but freight rate will remain depressed.

All and all, we see LEAD as an appealing 24-36 months investment case due to its depressed valuation of 0.17x P/B, significantly lowered solvency risks and higher utilisation rate from 2H17 and suggest shareholders to subscribe to the rights. On 12 months basis, profits (share price driver) will likely remains depressed due to an oversupplied OSV market, this is in combination of a new oil production sharing regime that might exert further pressure to the servicing players. (Norman Choong, CFA)

Feb 06,2017 14:11:09

Regional Oil & Gas: Keep a Vigilant Eye On Middle East Tensions

New sanctions that the US imposed against Iran are limited in scope and target specific individuals and entities. We believe the sanctions do not affect the nuclear deal that the six world powers and Iran agreed to last year. This therefore does not affect Iran’s oil production and exports at the moment. However, heightened tension and any threats of confrontation in the Strait of Hormuz could place a premium on crude oil prices. In addition, OPEC & non-OPEC’s production-cut deal may see historic high compliance levels. We maintain our OVERWEIGHT stance on the oil & gas sector.

  • New sanctions against Iran are limited in scope. The US added new sanctions on Iran’s weapons procurement network last Friday. The US Treasury Department published a list of 13 individuals and 12 entities that would face new restrictions for supporting the missile programme, having links to terrorism or providing support for Iran’s hard-line Islamic Revolutionary Guard Corps. The immediate trigger for these sanctions was Iran’s ballistic missile test last Sunday, that US believes that one day would be capable of carrying a nuclear warhead.
  • These new sanctions do not currently affect the nuclear deal that had been agreed to by Iran and the six world powers –UK, China, France, Germany, Russia and the US. This particular deal obliged Iran to curtail its nuclear weapons research in exchange for relief from the US and international sanctions. Under the UN resolution passed, the nuclear deal calls upon Iran not to undertake any activity related to ballistic missiles designed to be capable of delivering nuclear weapons, including launches using such ballistic missile technology.
  • Impact on oil markets. New sanctions that the US imposed against Iran are limited in scope in our view, and target specific individuals and entities. This therefore does not affect Iran’s current oil production and exports. However, heightened tension and any threats of confrontation in the Strait of Hormuz can put a premium on crude oil prices, as the strait represents one of the world’s most important oil chokepoints, with c.20% of the world’s crude oil passing through each day. Under current circumstances, we do not expect any significant actions to be taken at the moment. However, should political tension escalate from here, the possibility of significant actions by either side cannot be ruled out.
  • Historical deal to be followed by historical compliance rate. When the world doubted that the Organisation of Petroleum Exporting Countries (OPEC) deal was possible, we highlighted that it was in OPEC’s best interest to arrive at a deal to cut production. A historic OPEC and nonOPEC deal was made to cut 1.8mbpd in Dec 2016. When the world doubted OPEC’s compliance to a production cut (where historic compliance rate was 30%), we indicated that it would be OPEC’s credibility at stake and we would give it the benefit of doubt that the organisation would comply. We are now looking at a historic compliance rate of 60-80%. Over the next six months, production cuts would be officially announced on the 17thday of each month by OPEC.
  • Other supplies to enter. We are expecting around 300,000bpd of shale oil to enter in 2017, but this could be as high as 800,000bpd, depending on where crude oil prices are. Libya and Nigeria are exempt from the production cuts, therefore around 0.8mbpd could also be added to the supply over the next 12 months, should they be able to attain political stability. Hence, crude oil price is the major determining factor for US shale oil supply to enter the market, while politics is the major factor triggering supplies in Libya and Nigeria. (Kannika Siamwalla, CFA)
Feb 03,2017 15:13:15

Consumer Non-cyclical - Higher Selling Prices In January

Our ground checks suggest that some consumer companies have raised the retail selling prices of their products MoM, especially instant noodles, RTD-tea, ice cream and personal care products. This is likely a pass-on cost caused by the weakened IDR and rising commodity prices. While the price hike may pressure sales volumes, it should also improve profit margins. All in all, we see consumer companies now becoming more confident on domestic spending, going forward. Maintain OVERWEIGHT on the Indonesia consumer sector, with Indofood Sukses and Nippon Indosari as our Top Picks.

Jan 27,2017 09:42:16

TINS merupakan salah satu produsen timah terbesar di dunia. Porsi ekspornya hingga akhir tahun  mencapai 55%–60%. Mereka mengantongi izin usaha pertambangan sebanyak 117 unit, dengan total luas wilayah penambangan 511.361 hektare. Emiten pelat merah ini memiliki cadangan biji timah mencapai 328.392 ton dari total sumber daya 801.882 ton di darat dan laut.

Tak hanya jualan timah, TINS melakukan diversifikasi bisnis agar bertahan dari fluktuasi harga timah. TINS menggarap produk hilir, seperti tin chemical, tin solder, serta thorium. "Tahun depan pengembangan thorium untuk bahan bakar pembangkit listrik,

TINS juga mengembangkan bisnis jasa perkapalan, rumah sakit, properti, dan agribisnis. Bisnis jasa perkapalan  akan melakukan pembenahan graving dock di Selindung, Pangkal Pinang, serta membentuk bisnis pengerukan melalui PT Dok & Perkapalan Air Kantung.

TINS lewat PT Rumah Sakit Bakti Timah (RSBT) memiliki empat rumahsakit yang akan diubah jadi rumahsakit modern. Empat klinik utama akan disulap menjadi rumahsakit tipe D yang menelan biaya investasi Rp 397 miliar. RSBT direncanakan melantai di Bursa Efek Indonesia (BEI) pada 2018 atau 2019.

Lalu, PT Timah Karya Persada Property mulai menjual properti di Bekasi, Kelapa Dua, dan Iskandarsyah. Melalui PT Timah Agro Manunggal, TINS menyiapkan penggemukan sapi potong berkapasitas 1.000 sapi. "Tahun depan target jualan sapi 1.000 sapi per bulan,"


Jan 24,2017 08:55:37

Indonesia Civil Servant Cap Pushes Pension Fund to Embrace Risk

(Bloomberg) -- Indonesia’s second biggest pension fund is facing a problem it’s never had in its 54-year history. PT Taspen, which manages 160 trillion rupiah ($12 billion) of the compulsory savings of state workers, will see contributions dry up after a government plan to limit the size of the bureaucracy to 4.5 million for five years took effect. For President Director Iqbal Latanro, the solution to maintaining the 10.4 percent return the fund achieved last year is to buy more shares and property, he said. “The number of civil servants won’t increase but the number that retire will keep rising,” he said in an interview in his office in Jakarta on Monday. To maintain returns, Taspen will double its proportion of stock holdings to 15 percent and lift the amount in direct investments in companies and real estate to around 5 percent from less than 1 percent, he said. Taspen’s fund, which has a 60 percent allocation in bonds, will pare its holdings in bank deposits, said Latanro. Bank Indonesia’s aggressive rate-cutting cycle has also influenced his decision as deposit rates have plummeted, he said. The fund plans to spend 7 trillion rupiah this year on direct investments in private companies that are planning to list, real estate and power plants, said Latanro. It will also purchase a 13 percent stake in PT Waskita Toll Road, a unit of PT Waskita Karya that may be floated this year. Latanro said he was favoring bank, property and consumer stocks and that he’s confident that Standard and Poor’s will upgrade its assessment of Indonesian sovereign debt to investment grade this year. U.S. President Donald Trump’s policies and the Brexit negotiations are the biggest risks for the Indonesian economy this year, he said.

Jan 24,2017 08:53:55

PT Taspen will double its proportion of stock holdings to 15 percent and lift the amount in direct investments in companies and real estate

Jan 24,2017 08:51:19

Berikut ini langkah-langkah yang dilakukan Trump dalam 48 jam setelah resmi berkantor di Gedung Putih, seperti dilansir CNN, Senin (23/1).

1. Mengambil alih pemerintahan federal secara penuh.

2. Mengeluarkan perintah untuk menghapus kebijakan presiden terdahulu, Barack Obama, dalam bidang kesehatan (Obamacare).

3. Menghentikan pengurangan premi asuransi tahunan kredit perumahan dan menghapuskan fasilitas kredit perumahan dari pemerintah.

4. Memerintahkan lembaga-lembaga untuk membekukan kebijakan baru, agar pemerintahan Trump bisa melakuan kajian.

5. Mendapatkan persetujuan legal dari Departemen Kehakiman bagi menantunya, Jared Kushner, untuk menempati sebuah posisi di Gedung Putih.

6. Menemui para petinggi CIA. Trump juga mengambil alih kode nuklir yang berlaku.

7. Trump mengajukan Mike Pompeo, politikus Partai Republik dari Kansas, sebagai Direktur CIA.

8. Ketegangan di Irak meningkat gara-gara pernyataan Trump yang menyesal tidak menguasai minyak negara tersebut. "Mungkin kita punya kesempatan lainnya," kata Trump dalam pertemuannya dengan pejabat CIA.

9. Berbicara dengan Presiden Meksiko. Keduanya dijadwalkan bertemu pada akhir Januari. (Baca: Setelah Cina, Pemerintah Meksiko Ancam Balas Kebijakan Trump)

10. Berbincang dengan Perdana Menteri Kanada untuk membicarakan kerjasama ekonomi kedua negara.

11. Mengumumkan telah melakukan pertemuan dengan para pemimpin di Meksiko dan Kanada untuk memulai renegosiasi NAFTA.

12. Melakukan kunjungan perdananya ke luar negeri pada Jumat ini untuk menemui Perdana Menteri Inggris, Theresa May.

13. Mengisyaratkan perubahan hak warga sipil. Sebelumnya, Departemen Kehakiman meminta penundaan atas gugatan terhadap hukum yang berlaku di Texas, mengenai nomor identitas bagi pemilih.

14. Mempersiapkan lebih banyak kebijakan dalam pekan ini.

15. Meminta lembaga pengelola taman nasional (National Park Service) untuk tidak mengunggah konten apapun di Twitter. Sebelumnya, National Park Service me-retweet foto-foto yang memperlihatkan perbedaan jumlah pengunjung pada saat pelantikan Obama tahun 2009 dan inagurasi Trump pekan lalu.

16. Memulai pembicaraan rencana pemindahan kedutaan besar Amerika Serikat di Israel dari Tel Aviv ke Yerusalem.

Jan 24,2017 08:43:34

Global Trade Concerns Pressure Markets

U.S. equities finished modestly lower, with global sentiment being hampered by actions by President Donald Trump to make changes to trade agreements, particularly the Trans-Pacific Partnership (TPP). The energy sector saw some pressure as crude oil prices pared a recent run. Meanwhile Treasuries were higher amid a dormant economic calendar, as was gold, while the U.S. dollar fell. On the equity front, Dow member McDonald's declined despite topping earnings forecasts and Qualcomm saw pressure amid news of a patent dispute with Dow member Apple, while a federal judge blocked Aetna's takeover of Humana.

Jan 23,2017 15:59:43

Sarana Menara Nusantara ($TOWR): Towering above
Telecommunications: Indonesia
-  Inorganic and organic growth to maintain biggest tower status: At this stage, we are of the view that Sarana Menara Nusantara ($TOWR) will maintain its status as Indonesia’s biggest tower operator through both organic and inorganic growth. Currently, TOWR has 24,209 tenants and 14,529 towers (collocation rate 1.67x), slightly higher than its closest peer TBIG with 21,562 tenants and 13,463 towers (collocation: 1.60x). In 9M16, TOWR’s number of towers jumped 19.0% y-y versus TBIG’s growth of 9.5% y-y, helped by the acquisition of 2,500 towers from $EXCL.

-  Strengthening debt structure: TOWR has managed to lower its exposure to foreign currency debt from 59% to 45% (3Q16) and added a greater proportion of IDR debt through its latest bond issuance of IDR800bn (with tenor of 3.5 and 7 years) on 9 November 2016. We believe this will make TOWR’s cost structure more prudent given lower FX risks, although average interest rates jumped from 4.88% in 3Q15 to 6.53% in 3Q16, due to EUR55m and USD190m in debt repayments.

-  Support from operators’ data growth: Data growth of the 3 big operators have continued to accelerate, up 124% y-y in 3Q16 (2Q16: +99% y-y, 1Q16 +84% y-y), providing higher demand for TOWR. On the back of higher data usage (exhibit 8), which requires increased Base Transceiver Stations (BTS), we expect TOWR’s number of tenants to rise from 25,548 in 2016F to 26,568 in 2017F.

Outlook: Bad news mostly in the price
TOWR has severely underperformed the market by more than 40% in the past 12 months (exhibit 4) on less favorable industry outlook as large players such as $ISAT and $EXCL decided to share their capex, causing slower growth outlook. Additionally, we believe $TLKM will focus on its own internal tower projects. That said, we believe most of the bad news has been priced in, although there is still no signs of the operators selling their towers this year.

Recommendation: Reiterate BUY with unchanged TP of IDR5,600
On valuation, we apply a WACC of 9.2% to obtain our DCF-based 12-month TP of IDR5,600, reflecting 60% upside potential. At our TP, TOWR would trade at 13.0x 2017F EV/EBITDA, still at a c.20% discount to the current global average of 16.8x (exhibit 5). Risks to our call would be greater-than-expected competition and slower organic as well as inorganic growth.

Jan 23,2017 15:30:10

Indonesia Property
Another Day of Sun

Maintain POSITIVE view on Indonesia’s property sector despite disappointing pre-sales in 2016. We’re confident there’s still room for pre-sales to grow in 2017 even though we don’t expect any further interest rate cuts. Factors that support our view are the stable currency and interest rate from rising commodity prices and benign inflation. On aggregate, we are looking at +23% YoY pre-sales growth in FY17, to be mainly driven by low-middle residential segment. We are also positive on industrial estates from tax amnesty inflow and strong inquiries from corporations. Top BUYs: BSDE, CTRA and BEST.

Prefer mass market residential segment
Even with the current interest rate, major banks are still offering competitive single-digit mortgage rates. We believe this is sufficient to support affordability of the mass market residential segment. Full-year impact of LTV relaxation in 2017 will also help to encourage demand for this segment. On the other hand, we are still wary about the middle-high residential and office segments.

Positive outlook for industrial estates
We highlight industrial estates’ notable steady growth in quarterly sales volume in 2016. Several developers mentioned they have been receiving many inquiries from both foreign and domestic corporations which have boosted their confidence on 2017 pre-sales. Domestic corporations have benefitted from their participation in the tax amnesty program, allowing them to invest their assets through industrial land.

Valuation and risks to our view
Sector currently trades at -2SD of the average 1-year forward P/BV and a discount to RNAV. Risks to our positive view on the sector include political risk, uncertainty in global economic outlook, interest rate hike, regulatory risk, currency volatility and inability to increase land banks.

Jan 23,2017 12:36:50

Melemah 6 Poin, IHSG Ke Posisi 5248
Indeks Harga Saham Gabungan (IHSG) melorot pada rehat perdagangan hari Senin (23/1). IHSG drop -0,12% (-6,06 poin) ke posisi 5.248,25 poin.   
Indeks LQ45 -0,04% ke level 875 poin. Indeks JII -0,18% ke 686 poin. IDX30 -0,03% ke level 472 poin. Indeks Sri Kehati -0,11% ke posisi 306 poin. Indeks SM Infra18 +0,08% ke level 331 poin.   
Saham-saham yang paling aktif diperdagangkan adalah: ENRG, BRMS, DEWA, BBHI, LMAS, TLKM, PBRX, SRIL, INCO dan MYRX.

Jan 23,2017 12:14:32

Bumi Serpong Damai ($BSDE), Notes

Bumi Serpong Damai is a township developer with 5,950 ha area. The company is the largest property company in term of market capitalisation, IDR36trn/USD2.6bn. Accroding to Bumi Serpong, its mortgaged buyers increased to 70% of total customers in 2016 (versus 55% in 2012) thanks to lower mortgaged rate. Although increased significantly, mortgaged loan to GDP is still very small, is around 6% of total GDP. By end this week, Bumi Serpong likely to announce figure of FY16F presales number. Notably, Bumi Serpong's 11M16 presales achieved at around 90% of its target, achieved IDR6.2trn (versus IDR6.9trn target in FY16.

Jan 23,2017 12:14:13

Nippon Indosari ($ROTI), Notes

Nippon Indosari aims to increase its market shares in local bread market by launching more product variants in 2017. By having more product variants, it is looking to ensure that it has the first mover status on new bread types and flavours.

Jan 23,2017 12:13:41

Economic Updates:
Bank Indonesia Starts 2017 By Maintaining The Key Rate At 4.75%
Bank Indonesia (BI) board of governors’ meeting maintained the BI 7-day (Reverse) Repo rate, the benchmark policy rate, at 4.75% on 19 Jan 2017. Moving forward, we expect the BI to slash its key policy rate by another 25bps in 2017 to support economic growth under stable IDR circumstances on:
1. Moderate inflation;
2. Manageable current account deficit;
However, IDR volatility could delay key policy rate cut.

Jan 23,2017 12:13:35

Real Estate - Has The Dust Settled?
While sentiment in the property markets in China and Singapore have largely stabilised, we believe the markets in Indonesia, Thailand and Malaysia would still need some time given the existing macro headwinds. We expect upcoming elections in the region to potentially bring volatility to the sector. However, given sound fundamentals and continued infrastructure investments, we are OVERWEIGHT the property sector in Indonesia, Thailand and China and NEUTRAL on Singapore and Malaysia.

Jan 20,2017 11:32:42

Sido Muncul eyes IDR2.7trn revenue in 2017

Industri Jamu dan Farmasi Sido Muncul ($SIDO, BUY, TP: IDR650) eyes revenue of IDR2.7trn in 2017, +15% to 2016E. In 2016, SIDO’s revenue expected to reach IDR2.44trn. According to Finance Director, Venancia Sri Indrijati, expects management efforts to improve the distribution of goods to help the company to pursue the target. The company would push the sales of some dormant products such as Susu Jahe and Kopi Jahe. Furthermore, the company expects its bottom line to grow by 7%-8% in FY16. Besides that, the company prepares IDR200bn capex this year to support business operational. (Kontan)

Jan 20,2017 11:31:28

We have a quick update on Indonesia’s leading industrial estate developer, Bekasi Fajar – $BEST. It posted strong sales in last quarter of 2016 and decent start in 2017.

Strong 4Q: Bekasi Fajar booked 24.3ha marketing sales in 4Q16, 78% of its FY16 sales (~31ha). Strong 4Q16 allowed the company to meet company’s FY16 target of 30ha.

2016 ASP +23% YoY: 2016’s average selling price was IDR2.7mn/sqm, +23% YoY from IDR2.2mn in the previous year.

Indication: the company indicated relatively strong 2016’s revenue, which may reach ~IDR800bn (118% of consensus). EBITDA margin is expected to stable around 60% level. Based on the given info, we estimate 2016 bottom line may reach IDR340-400bn (121% - 143% from consensus).

2017 target: flattish volume & ASP. This year, management targets 25 – 30 Ha of marketing sales (similar to 2016 target). 2017 capex allocation will be IDR700 – 800bn that includes potential 20 Ha of land acquisition.

Decent start and outlook: Bekasi Fajar already booked 7 Ha marketing sales this January (23% of FY17 target) with similar ASP of 2.7mn/sqm. The company has received some inquiries for this year and expect to close another 10 Ha in 2Q17.

Currently Bekasi Fajar is traded at 11/9x consensus PER 2016/17 with consensus NAV per share of IDR573. (Yualdo Tirtakencana Yudoprawiro)

Jan 20,2017 11:30:04

Bumi Serpong Damai ($BSDE): Company visit: 2017 outlook
Property: Indonesia

-  Uptrend in quarterly marketing sales of c.IDR6.1tn in 2016: Supported by its “price amnesty program” for its BSD City project, BSDE recorded around IDR2tn of marketing sales in 4Q16, cementing an uptrend since 1Q16 (Exhibit 6). The company provided discounts of up to 15% during phase I (Oct–Nov), which resulted in c.IDR1.1tn of pre-sales, while another c.IDR900bn was achieved during phase II (Nov–Dec) given lower discounting. As a result, BSDE expects 2016 marketing sales to reach around IDR6.1tn, or 90% of its full-year original target, in line with our full-year estimate. We expect to see 9% y-y marketing sales growth in 2017, of which 72% of total sales would be derived from the BSD City project. This report marks a transfer of analyst coverage.
-  Additional 2017 top-line growth from 2 JV projects: Backed by BSDE’s two recent JVs – the Balaraja toll road and the Mitsubishi Smart Living project – we expect the company to book an additional c.IDR1.8tn of revenue this year. Total land sales value for the Balaraja toll road should be around IDR900bn (50ha area x IDR1.8mn/sqm ASP) for the first 10km out of 30km of total toll-road length. BSDE holds 50% equity in this project, while both Astratel and Kompas control the other 50%. The Mitsubishi project, which consists of landed and shop houses, has total estimated value of c.IDR1.4tn (19ha land area x IDR7.5mn/sqm ASP), of which IDR500bn was booked in 2016 with the remainder to be recorded in 2017.    

-  New project launches in Jakarta and Surabaya: Apart from BSD City, BSDE is expanding further into regional areas, having launched two apartments in Jakarta: (1) Southgate, located in Tanjung Barat, with starting prices at IDR30mn/sqm; a mixed-use development project with a retail mall, offices, apartments, a hotel and condos for sale; and (2) Aerium, located in Taman Permata Buana, with 1.8ha of land area comprised of a two-tower condominium and several townhouses for sale. This is a JV project with Itochu, a multinational general trading company based in Japan, with BSDE owning a 51% stake. In addition, the company is planning to launch one of six new apartment towers (1,000 units/tower) in Benowo, Surabaya, with starting prices of IDR300mn/unit.  

-  Benefiting from operation of UNVR’s new office: Unilever Indonesia ($UNVR) is moving its headquarters to BSD Green Office Park in January–February of this year, bringing some 7k workers to the benefit of BSDE’s residential area project in BSD city. As such, we expect the land ASP in BSD City to rise from IDR12mn/sqm at present to IDR13.5mn/sqm in 2017.    

BUY with unchanged IDR2,350 TP
Recent market outperformance (Exhibit 4) likely was based on solid pre-sales. We believe this is sustainable due to BSDE’s expansion beyond its property development in BSD City, providing longer-term growth and stability through geographic diversification. We apply a 55% discount to our end-2017F NAV to determine our unchanged IDR2,350 12M TP. Risks: BSD City infrastructure delays and higher high-rise property demand.

Jan 19,2017 20:31:18

MNC to increase its reliance on the property business to 50 percent of revenue by 2020
Tanoesoedibjo to attend Donald Trump’s inauguration tomorrow
MNC Group seeks to reduce its reliance on the media business to 40 percent of revenue in the next five years
MNC Group to invest US$2 billion on Trump’s related projects in Indonesia
MNC Group owner Hary Tanoesoedibijo will attend Donald Trump’s inauguration in Washington DC tomorrow. Hary had also planned to meet with Donald Trump’s sons Donald Trump Junior and Eric Trump to hold talks about the $2 billion projects in Indonesia. Hary is one of few Indonesians invited to Donald Trump’s inauguration.
Tanoesoedibjo’s MNC Land ($KPIG) plans to spend US$2 billion, to develop a lake resort and golf course in Lido, West Java as well as a resort in Tanah Lot, Bali. Both resorts will be managed by the company owned by U.S. President-elect Donald Trump. Trump Hotel Collection will manage about 700 hectares of the Lido site to operate a resort, a golf course by golfer Ernie Els, and a country club. Trump Hotel will also manage 100-hectare resort in Bali set across the water from Tanah Lot Temple, including its existing hotel and country club, and talks are being held with golfing champion Phil Mickelson to redesign the course, he said. Villas in the property will be renamed Trump Residences.  
The real estate developments are the main focus of Tanoesoedibjo, to diversify from his media business that now make up 80 percent of sales. The group aims to reduce its reliance on the media business to 40 percent of revenue in the next five years.
While some shares of MNC group’s listed companies advanced after Trump’s surprise win, they have since pared gains (see table 1). The only MNC group shares that retain its gain was Bank MNC International ($BABP) which increased 22% since November 8th, 2016. Shares of MNC Land, now remain unchanged to it’s pre-election level at ~Rp1,400, which we believe it’s a big opportunity for investment considering property will become the key revenue growth engine for the growth over the next five-years. The company will spend US$400 million for the first phase of the development (2016-18) in 2 Trump’s related projects in Indonesia, with our expectation is the company should get US$2 billion (Rp30 trillion) pre-sales over 2017-20F. This would bring property segment to contribute 50% of MNC Group’s revenue in 2020F.

Jan 16,2017 22:27:24

Investors are bracing for a massive stock-market selloff

Demand for February VIX calls with lofty strike prices has increased in the past week

If options traders are correct, stocks are in for a wild ride in February.

Demand for one-month call options tied to the CBOE Volatility Index, a popular gauge of stock-market volatility, has spiked in the past week, a sign that some are bracing for a sharp downturn following the inauguration of President-elect Donald Trump.

In that time, investors have purchased 250,000 VIX call options with a strike price at 21, and another 100,000 with the strike at 22, according to Brian Bier, head of sales and trading at Macro Risk Advisors, an options brokerage. The options cost roughly 49 cents per contract, Bier said.

By comparison, the CBOE Volatility Index VIX, -2.69%  was at 11.16 in midday trading on Friday as the Dow Jones Industrial Average DJIA, -0.03%  and the S&P 500 SPX, +0.18% were on track to record modest daily gains.

Jan 16,2017 11:04:02

$LSIP 4Q16 Preview; Profit recovery likely to boost shares

4Q16 looking good on higher prices and output
We estimate 4Q16 earnings of c.IDR210b (+32% QoQ, +34% YoY), the best quarter in FY16. This was likely driven by strong CPO and kernel price, and output recovery post El Nino, which should provide ST upside for the stock. This should bring FY16 net profit to c.IDR492b, in line with our forecast of IDR484b. Strong output growth post El Nino and continued recovery in rubber futures should offset our conservative CPO ASP for this year. Reiterate BUY and TP of IDR2,100 based on USD9,000 EV/ha, -0.5SD from its long-term mean in view of the muted CPO price outlook.

Boosted by strong CPO price and FFB output
We estimate 4Q16 nucleus production of c.0.38m tonnes (+17% QoQ, -1% YoY). This was despite the already high base in 3Q16 (+35% QoQ) as trees recovered post the El Nino stress. This should bring 2016 production to c.1.2m tonnes (-15% YoY). We also expect 4Q16 CPO ASP was higher QoQ and YoY, helped by low global stockpile and also higher seasonal demand. We also expect kernel price remained strong (also due to tight supply) and boost earnings in 4Q16.

Positive impact from rubber futures recovery
Rubber futures on the SICOM and TOCOM (Singapore and Tokyo Commodity Exchange) have advanced to a new high since 2013. We expect this recovery to be sustainable due to less global supply and low stockpiles in China (biggest consumer). We believe LSIP’s rubber division earnings drag may turn around and book a profit in 2017.

2017 outlook
CPO price started this year on a high note as stockpile remains low, and it should continue at least until 1Q17. But we remain conservative in our CPO price forecast (2017F: MYR2,400/t) as we believe it will correct in 2H17 as we approach the peak production season. However, we expect strong growth in output and rubber futures recovery to be the main drivers for LSIP, which can offset our conservative CPO ASP for 2017F.

Jan 16,2017 10:41:56

Bahana Bulls & Bears 2017/1: Commodities & Indonesia’s “G”
Strategy: Indonesia
A Pause in TRUMP Hype
Higher growth and inflation expectations driven by Trump “hype” has taken a breather post Dec FED rate hike. FED’s Dec’16 dot plot showing a median forecast of 3 rate hikes in 2017 seems to have reminded investors about the deflationary reality of higher US yields in the leveraged developed economies.
Being on the sell side, we can only note (but not yet completely quantify) a significant change in policy making between Obama and Trump. Financial (Dodd-Frank) and healthcare (Obama- care) reforms and potential regulatory changes for the energy sector can be seen as positive; while continued talks of Mexican wall and wrangling with China are negatives.
Overall, macro sentiment has remained positive, with global PMI surveys showing a pick-up in Global manufacturing activities. One key risk is the drop in China’s foreign reserves, leading to weaker CNY against the USD, interest rates. This reminds us of Jan’16 China Panic episode, post the first FED rate hike in Dec’15.
Overall, macro developments are net positive and market is awaiting details of Trumponomics before deciding on a firm medium term direction.
Indonesia – Commodities Resilience
The center of our bullish call on Indonesia’s cyclical recovery is the fact that commodities have bottomed, led by the oil market at USD30/brl in Feb 2016. As such, we do not expect coal to test its Jun’16 lows of USD48, CPO’s Aug’15 lows of USD480/ton etc.
This call has substantial implications as commodities has direct & indirect impact on Indonesia’s trade and current account, and indirectly on all GDP components such as “C”, “I”, and “G”. With oil >20% higher post Trump win (despite stronger USD and US yields), we urge investors to carefully think though commodities’ resilience in this new    market    correlation,    and its implications to investments in Indonesia.
Indonesia has been cautious and prudent in managing the economy, prioritizing stability over growth through 2016, evidenced by continued deficits, as well as reserve accumulation. Despite this, Indonesia showed a cyclical recovery of 5.0% GDP growth in 2016 from 4.7% in 2015.
We are cautiously optimistic, and continue to be long Indonesian cyclicals, while monitoring developments in Trumponomics and China reserves closely.

Jan 16,2017 09:55:37

Asia Bergerak Melemah, IHSG Berharap Dukungan Data Perdagangan RI
Mengawali pekan ini (Senin,16/1), bursa saham Asia dibuka bervariasi di tengah laju penguatan indeks dolar dan pelemahan harga minyak dunia.   
indeks Nikkei 225, Jepang melorot 0,64% (-123,51 poin) ke level 19.163,77, setelah dibuka turun 0,39% tertekan oleh kejatuhan harga saham Takata hingga 8,58% pada awal perdagangan, dan penguatan yen terhadap dolar AS. Indeks Kospi, Korea Selatan dibuka cenderung mendatar, dan bergerak turun 0,20% menjadi 2.072,61. Lanjutkan tren pelemahan Asia, indeks Hang Seng, Hongkong dibuka turun 0,18% di posisi 22.895, pada pukul 8:35 WIB. Indeks Shanghai Composite, China juga dibuka melemah 0,27% ke level 3.104,49.   
Tim Riset Indo Premier berpendapat, menguatnya bursa saham Wall Street pada penutupan akhir pekan, setelah masuknya musim kinerja laporan keuangan, diprediksi menjadi sentimen positif indeks. Di sisi lain melemahnya harga minyak mentah diperkirakan menjadi katalis negatif indeks. IHSG diprediksi bergerak melemah terbatas dengan target support di level 5.245 sedangkan resist pada level 5.300.

Jan 16,2017 09:55:18

KPPU suspected Yamaha Indonesia and Astra Honda did a cartel business

Yesterday, the Indonesia Business Competition Supervisory Commission (KPPU) announced its investigation result that Yamaha Indonesia Motor Manufacturing (YIMM) and Astra Honda Motor (AHM) are suspected of cartel practice. KPPU said that the two motorcycles makers have made "unwritten agreement" to control scooter's selling price in 2014.


Jan 16,2017 09:54:22

Cement, higher 4Q16 sales QoQ, as expected

Domestic cement sales increased to 17.3m tonnes in 4Q16 (+13.7% QoQ), inline with our expectation. On our calculation, Semen Indonesia’s domestic market shares fell to 40.7% in 4Q16 (from 42.4% in 3Q16), similarly Indocement also saw some compression on its market share, slightly declined to 25.5% (from 25.8%) in the same period.


Jan 16,2017 09:53:54

Pembangunan Perumahan Persero: Exciting Earnings Outlook Ahead

We maintain our BUY call with a new TP of IDR5,100 (from IDR5,400, 37% upside) based on unchanged P/E target of 22x, +1SD above its historical mean. This is on the back of a stronger outlook post the completion of its rights issue in Dec-16. $PTPP’s new contracts performance in FY16 was above our estimates and we expect new contracts to grow to IDR38trn in FY17F, fuelled by power plants, low cost housing and other infrastructure projects. We expect a lower interest expense due to stronger balance sheet and earnings to grow 54% YoY in FY17F.

Jan 16,2017 09:53:19

PP London Sumatra Indonesia ($LSIP), Beneficiary Of Rubber Price Upcycle

We believe the street has yet to factor in the recent rubber price rally and expect a round of consensus earnings upgrade ahead. Rubber prices have rallied 29.3% since Nov-16. We expect Lonsum’s rubber business to book operating profit of IDR2.6bn in FY17 despite having booked 9M16 operating losses of IDR99bn (25% of 9M16 consolidated operating profit). We raised our earnings forecasts by 6-9% for FY16-18F and reiterate our BUY call with a new TP of IDR2,200 (previous IDR2,050, 31% upside). Consensus earnings upgrade should be a positive catalyst for the stock.

Jan 16,2017 09:52:51

Aneka Gas Industri: Reaping The Rewards Of Its 4-Year Expansion
We initiate coverage on AGI with a BUY recommendation and a DCF-derived IDR1,300 TP (44% upside), which implies 22.5x FY17F P/E and 0.24x PEG. The firm is Indonesia’s largest industrial gas company that sells oxygen, nitrogen and argon – gases that are widely used in fast growing sectors like food packaging, medical and infrastructure. Looking ahead, AGI is set to record a very high growth rate and diversified growth exposure as the company stands to benefit from its aggressive expansion over the past four years.

Jan 16,2017 09:27:39

Auto: Stronger vehicles wholesales

Based on Indonesia Auto Industry Association (Gaikindo) and the Indonesia Motorcycle Industry Association, indicative FY16 cars and motorcycles wholesales reached 1.05m (+3.9% YoY) and 5.93m units (-8.5% YoY), respectively. We expect an improvement in demand for both 2W and 4W in 2017, mainly driven by:
i) Relaxation LTV threshold policy
ii) Lower financing costs
iii) Better consumer spending, boosted by higher commodity prices, such as CPO and coal


Jan 16,2017 09:27:25

ACES’ Dec-16 SSSG accelerated, led by growth in ex-Java

¨ $ACES’ December SSSG accelerated to 3.9% (from 0.9% in Nov) driven by strong sales in ex-Java which jumped to 6.8% in Dec from just 0.5% in Nov; it seems higher commodities price helped.

¨ The result is encouraging, showed an sales acceleration across the board in Indonesia.

¨ FY16 top-line reached Rp4.87tn, 96% of consensus.

¨ Basically same takeaway with $RALS’ SSSG figures.

¨ ACES trades at 19.5x 2017cons PE (Stifanus Sulistyo)

Jan 11,2017 11:36:12

Sentul City ($BKSL) plans to build AEON Mall in Centerra Sentul City Superblock, Bogor in 2017. Sentul City investor relation Andrew Kumala said that the mall will be built on a 103,000sqm of land. The company has appointed PP Property ($PPRO) as the contractor. Andrew Kumala added that the mall is expected to be completed by 2018.

Jan 11,2017 10:58:27

AKR Corporindo: Company Meeting Key Takeaways
We’ve met with AKR Corporindo ($AKRA) last week on business update, results preview and to ask reasons behind its recent share price correction. Key Point from the meeting;
i. Indicative full year FY16F result is expected to be relatively flat YoY and in-line with consensus (IDR1.089 tril), 5% below our estimate. This is on the back of 5% lower petroleum volume distributed and slight lower margin/litre due to 1Q16’s bad result.

ii. Share price has corrected >15% since 3 weeks ago due to a Chinese individual, not fund, hinted it to be family office. cleaning off his holding in AKRA, it is already finished.

iii. Company targeted FY17F net profit of IDR1.3trn, about 20% EPS growth in FY17F due mainly to higher sales volume to coal mining sector, higher sales volume in retail distribution, and higher margin/litre, similar to FY15F. However, guidance to analyst is only 15% YoY, to be conservative.

iv. Interesting update with the JV with BP (50.01% AKRA, 49.99% BP), BP doesn’t have distribution network, AKRA doesn’t have good brand, hence the JV.

Jan 11,2017 10:57:03

$ARNA: An attractive entry point

  • Arwana’s share price took a dive yesterday, down 21% with most of the correction happened just before market close. As we believe that fundamental remains unchanged, Arwana’s current share price offers an attractive entry points. The stock is currently trading at 19x 2017 PE, with 55% earnings growth.
  • Based on market data, the biggest seller on Arwana share yesterday was one of the local brokers, which is likely due to the rebalancing activity. Our conversation with the CFO yesterday revealed that company’s condition and operation are still largely intact, without any negative surprise update. As we highlighted in our recent report, Arwana indicated that 4Q16 sales are likely to reach 12.7m sqm (+16% QoQ, +11% YoY). Hence, FY16F sales volume may reach 47m sqm (+19% YoY), in line with our expectations. In addition, finished goods’ inventory days declined to 22-23 days in November (from 31 days in 3Q16). Arwana also recorded better sales mix with UNO sales (higher margin product) contribution continues to improve at the expense of lower margin product, Best Buy.
  • Arwana’s management also believes that this good performance is likely to continue in 2017, driven by: i. Higher sales volumes – estimated to reach 52-55m sqm (11-17% YoY growth); ii. Better sales mix – UNO and regular ceramic sales’ contributions to increase to 40% each, while Best Buy’s contribution to decline to 20%.
  • All in all, we see the recent sharp correction as an opportunity to enter. Maintain BUY on the counter with TP IDR550, offers 34% upside from current level. (Andrey Wijaya)

Jan 11,2017 10:53:15

Bank Mandiri: Waiting For The Improvements To Come

We reiterate our NEUTRAL call and GGM-derived IDR11,600 TP (3% upside) on Mandiri because we believe the share price performance remains capped by investor concerns over asset quality improvements. Additionally, its strategy to push consumer lending as its main growth engine, aside from the corporate segment, is also challenging. This is as other banks are more aggressive in offering attractive lending rates and with faster approval times. As such, we expect consumer lending to grow by 8.8%, ie below our 12.4% total loans growth projection for this year.

¨ NPLs remain the main concern, given Bank Mandiri’s (Mandiri) substantial loan book size. Nov 2016’s monthly provisions of IDR2.5trn (11M16 total provisions: IDR18.9trn) also suggest that Mandiri is still at an internal consolidation phase and needs more time for asset quality improvements. All in, we forecast anLLC ratio of 140.9% by end-2017, which should provide an ample buffer if the NPL ratio is higher than our 3.1% forecast.

¨ A challenging landscape to grow consumer lending, in our view. This is despite the regulators relax their policies (ie lower down payments and policy rate cuts totalling 150bps) and the Government’s ongoing tax amnesty programme. For vehicle ownership loans, Mandiri faces close competition with other banks and multi-finance firms like Bank Central Asia (BCA) (BBCA IJ, NEUTRAL, TP: IDR17,600) and Adira Dinamika Multi Finance (Adira Finance) (ADMF IJ, NR). The mortgage segment is also a tough market, given peers like Bank CIMB Niaga (CIMB Niaga) (BNGA IJ, NR) and Bank Permata’s (BNLI IJ, NR) aggressive strategies that include lower lending rates and faster approval processes. As such, we expect Mandiri’s consumer lending to grow by 8.8%, ie below our total loans growth of 12.4% for this year.

¨ High magnitude from wholesale depositors. With a 3.3% cost of deposits in 3Q16 (3Q15: 4%) – and a relatively stable customer deposits breakdown between the wholesale and retail segments – we opine that wholesale depositors still have higher bargaining positions when it comes to preferential rates. Furthermore, the time deposit (TD) composition between retail and wholesale is also quite stable. This indicates the stickiness of Mandiri’s wholesale TD rate amid the tight liquidity situation within the system. All in, we project 3% cost of deposits for FY17 (FY16: 3.4%).

¨ Maintain NEUTRAL and a IDR11,600 TP. We maintain our NEUTRAL call and GGM-derived IDR11,600 TP on Mandiri. This assumes:

i. 9.3% cost of equity (CoE);

ii. 12.9% sustainable ROAE;

iii. 3% long-term growth.

Our TP implies 1.6x 2017F P/BV, ie below -0.75SD from its historical mean). The upside and downside risks to our call are a higher number of government infrastructure projects, a lower-than-expected blended cost of funds (CoF), slower-than-expected assets quality improvement and soft GDP growth that would dampen loans demand, particularly for corporate lending. (Eka Savitri)

Jan 11,2017 10:51:18

Global Cenderung Menguat, IHSG Minim Sentimen Positif
Bursa saham Asia pagi ini (11/1) dibuka menguat di tengah kejatuhan harga minyak dunia dan penguatan harga komoditas pertambangan, jelang konferensi pers Presiden AS terpilih Donald Trump, hari ini.   
indeks Nikkei 225, Jepang naik 0,41% (78,74 poin) menjadi 19.380,18, setelah dibuka menguat 0,26% terpengaruh kenaikan indeks dolar pada pembukaan bursa Asia. Indeks Kospi, Korea Selatan dibuka naik 0,37% dan berlanjut melesat 0,80% ke level 2.061,42. Melanjutkan tren kenaikan di Asia, indeks Hang Seng, Hongkong dibuka naik 0,31% ke level 22.816,01 pada pukul 8:35 WIB. Namun indeks Shanghai Composite, China dibuka melemah 0,16% di posisi 3.156,69.   
Tim Riset Indo Premier berpendapat, bervariasinya bursa saham Wall Street serta turunnya harga komoditas diprediksi menjadi sentimen negatif indeks. Di sisi lain indeks yang masih ditopang dengan naiknya cadangan devisa negara diperkirakan menjadi katalis positif. IHSG diprediksi bergerak menguat terbatas dengan kisaran support pada level 5.275 sedangkan resist di level 5.345.

Jan 11,2017 10:50:56

Cement sector: Lower cement selling price in Papua

As reported in local media, during his speed on the PDIP party anniversary ceremony, President Jokowi contemplates to reduce cement selling price in Papua to IDR70,000/bag (from currently IDR800k-2.5m per bag). Notably, cement selling price in Papua is extremely high compared to other area in Indonesia, this is mainly due to bulky logistic costs.

Jan 11,2017 10:50:18

Nippon Indosari Corpindo ($ROTI), A Good Start To 2017

Early 2017 has seen two significant developments for Nippon, which came in the form of lower input costs and the acquisition of a Philippines-based bread company. The company signed a new 6-months (for Jan-Jun 2017) purchase contract on flour – its main raw material – at a lower price. In addition, its JV SFC, acquired a local bread company which we see as a strategic move for Nippon’s penetration in Philippines market. Maintain BUY with a DCF-based TP of IDR1,870 (13% upside), implying 25x FY17F P/E.

Jan 11,2017 10:49:56

Regional Plantation: Volatility Is The Name Of The Game

We expect yet another volatile year for CPO prices – similar to last year – due to the recovery in CPO output which we anticipate to start coming through after 1Q17. This should result in a moderation of prices. Demand remains unexciting, given China’s predilection for soybean which remains in abundance, while India has yet to get over its currency issues. We maintain our NEUTRAL sector call. We favour selected big-cap counters like KLK, Sime Darby, Golden Agri and London Sumatra – being high-beta stocks which would fare well in a volatile environment.


Jan 04,2017 15:22:42

Bukit Asam ($PTBA) to target completion of Sumsel 8 Power Purchase Agreement (PPA) revision by May-17

According to local press, PTBA is targeting to complete revision of Sumsel 8 Power Purchase Agreement (PPA) by May-17. With this, Sumsel 8 power plant is estimated to commence operation in 2021, delay from initial target of 2019. One of the issues to be discussed is PLN’s request to reconfigure Sumsel 8 specification from 2x620MW to 3X400MW. (Bisnis Indonesia)

Jan 04,2017 15:21:44

Bank Permata: 11M16 Results- Below Expectations ($BNLI)

Bank Permata reported 11M16 unconsolidated net loss of Rp1.9tn, -468%yoy, exceeding consensus and Mansek’s expected loss of Rp1.7tn for FY16. Significant net loss was due to increase in provision expense of +115%yoy and reduction in assets size. PPOP was flat as operating income and operating expenses declined by -1%yoy.The bank booked a net loss of Rp556bn in Nov alone vs. Rp141 net loss in Oct16.

Loan growth -17%yoy (-1% mom), deposit growth -6%yoy (+2%mom). YTD this translates to loan growth of -16% and deposit growth of -7%. Decline in deposits was mainly driven by decline in time deposits of -14%yoy. Meanwhile, demand deposits and savings deposits grew by +9%yoy and +17%yoy bringing CASA to 37% in Nov16 from 31% in Nov15. LDR stood at 79% in Nov16 vs 90% Nov15.

NIM remained stable at 3.8% in 11M16, as decline in asset yield was offset by decline in cost of funds. On a monthly basis, NIM declined to 3.7% in Nov16 from 4.0% in Oct16.

Provisioning expense increased by +115%yoy to Rp5.9tn, while in the month of Oct alone provisioning expenses increased by +95%mom/+51%yoy to Rp979bn. Mansek estimates total write-offs of Rp2.4tn in 11M16 and Rp17bn in Nov alone. Provisioning to total loans increased to 6.2% in Nov from 5.2% in Oct while cost of credit (gross) increased to 6.2% in Nov from 5.7% in Oct. With such a high level of provisioning, we expect substantial write offs in December.

Cost to income ratio remains stable at 57% in Nov16. On a monthly basis, cost to income ratio increased to 65% in Nov from 55% in Oct.

Maintain BUY with TP of Rp700. The stock is trading at 0.5x 2017 P/BV. Concentration on asset quality improvement resulted in net loss and negative loan growth to date. However, in line with management expectations, we expect loan growth and asset quality to see a turnaround in 2017.

Jan 04,2017 15:19:35

Inflation to Rebound From 2016’s Seven Years Low

In line outcome. Dec16 CPI increase of 0.42% MoM translates into decelerated inflation rate of 3.02% YoY (Nov16: 3.58% YoY), in line with our and consensus estimates. Holiday season sent up transportation costs to contribute the most to the monthly inflation (+0.15ppt). Again, we have yet to see turnaround in demand pressure provided that core inflation was flat at record low 3.07% YoY as opposed to expectations of a rise. It has been easing throughout 2016 from 3.95% YoY in YE15.

Expect rebound from 2016’s low note. YE16 inflation realization indeed undershoots our expectation of 3.3%. Being the least since 2009, benign inflation is supported by stable subsidized fuels prices amid globally low cost of oil, foodstuff import policy, and moderating domestic demand. We expect inflation rate to rise to 4.2% in YE17 on the back of administered price adjustment. Electricity tariff increase that has already started will be the main driver, contributing inflation by 0.8-1.0ppt by end-Jun17. On the other hand, demand pull inflation, measured by the core inflation, is expected to remain subdued at below 4% in 2017 because of flattish private consumption.

No room for easier monetary policy rate. We think that Bank Indonesia will have no room to cut its policy rate along 2017. Rising inflationary pressure would be exacerbated by gradually picking up expectation if international oil prices continue to creep up and resulted in higher domestic fuel prices. The prospect for a more aggressive federal funds rate hike also pose risk to the rupiah due to financial sector volatility. We maintain our flat 7-day reverse repo rate forecast at 4.75% in 2017.

Jan 04,2017 11:19:41

Resource Alam allocates capex US$1.5 million

PT Resource Alam Indonesia Tbk ($KKGI) will allocate the capital expenditure (Capex) of USD1.5 million to maintain the heavy equipment in order to boost the coal production in 2017.

Director of PT Resource Alam Indonesia Tbk, Agoes Seogiarto Suparman, said their coal production target was as much as 4.5 million ton in 2017. "To support the target, the company's capex will not be too big because the capex will be used to maintain and support heavy equipment," he said in Jakarta.

According to him, their coal production was mostly contributed from PT Insani Baraperkasa, the coal mining in East Kalimantan with the land concession of 24,477 hectares. In addition, PT Kaltim Mineral has conducted coal exploration and will support the coal production next year. PT Loa Haur will operate in 2017 and hopefully will increase the company's coal production. (LK)

Jan 04,2017 11:17:50

Global Menguat, IHSG Lanjutkan Upaya Uptrend Jangka Pendek
Bursa saham Asia pagi ini (Selasa, 4/1) dibuka mixed, berusaha melanjutkan tren kenaikan indeks di bursa saham Wall Street dan Eropa, di tengah kejatuhan harga minyak dunia.   
Perdagangan saham Asia hari ini dibuka dengan mencatatkan penurunan tipis indeks ASX 200, Australia, sebesar 0,02 persen pada sesi awal perdagangan, namun berlanjut menguat 0,10% (5,82 poin) di posisi 5.739,00 pada pukul 8:20 WIB. indeks Nikkei 225, Jepang bergerak melesat 1,77% (338,45 poin) ke level 19.452,82, setelah dibuka naik 1,2 persen.Indeks Kospi, Korea Selatan dibuka melemah 0,06% tertekan oleh kemelut politik dalam negeri.   
Tim Riset Indo Premier berpendapat, menguatnya bursa saham Wall Street serta indeks global dan regional diprediksi menjadi sentimen positif indeks. Di sisi lain melemahnya harga minyak mentah dunia diperkirakan menjadi katalis negatif indeks hari ini. IHSG diprediksi bergerak melemah dengan target support di level 5.245 sedangkan resist pada level 5.305.

Jan 04,2017 11:17:27

Inflation Moderates in December
The headline inflation decreased to 3.0% YoY in December, down from +3.6% in November, contributed by slower increases in prices of raw food products, housing & utilities and clothing. Going forward, we expect headline inflation to pick up slightly to 3.8% in 2016, from +3.5% in 2016, on:

1. Planned electricity tariff hike;

2. Modest pick-up in volatile food prices.

  • Key policy rate to be cut by 25bps. As the inflation will likely continue to be manageable, we expect Bank Indonesia to maintain its loose monetary and macroprudential policy. Hence, we expect Bank Indonesia (BI) to slash its key policy rate by 25bps in 2017 (to 4.5%) to support economic growth under stable IDR circumstances.
  • Fresh food price inflation was responsible for most of the moderation. This was led by manageable supply distribution on the staple food in the year-end holiday and government’s intervention on traditional food market.
  • Costs of transport heightened. Higher transport tariffs in holiday season and fuel prices adjustment contributed to the upside.
  • Core CPI grew 3.1% YoY in December. Core inflation held stable due to steady domestic demand and stable inflationary expectation. (Rizki Fajar)
Dec 28,2016 09:47:07

Barito Pacific ($BRPT) to acquire affiliate firm Star Energy

Indonesian petrochemical firm Barito Pacific has announced plans to acquire “majority shares” in affiliated-entity Star Energy Group Holdings Pte Ltd for an undisclosed amount.

The company said that it has signed a memorandum of understanding (MoU) with Star Energy that will be followed by a conditional sale and purchase agreement.

Both Barito Pacific and Star Energy are controlled by tycoon Prajogo Pangestu. Barito Pacific was established as PT Bumi Raya Pura Mas Kalimantan in 1979. Aside from Chandra Asri, Barito Pacific owns many subsidiaries in different industries, such as PT Royal Indo Mandiri in the crude palm oil industry and PT Griya Idola in the property sector.

Just last week, Star Energy signed a deal to purchase Chevron’s geothermal operations in Indonesia and Philippines. Star Energy Consortium includes Star Energy Group Holdings, Star Energy Geothermal, AC Energy (Affiliates of Ayala Group in Philippines) and EGCO (from Thailand).

For the acquisition of Chevron geothermal operations in Indonesia, Star Energy Group Holdings and Star Energy Geothermal holds majority ownership (68.31% ownership), followed by AC Energy (19.3%) and EGCO (11.89%).

Major Chevron geothermal assets in Indonesia includes, Salak and Darajat geothermal fields which generate 413 MW geothermal and supply 275 MW of steam. Chevron geothermal assets in Philippines includes Tiwi-Makban geothermal field which currently is producing approximately 326 MW of steam.

Dec 21,2016 11:35:57

Global Mediacom ($BMTR): Public Expose Takeaways
Media: Indonesia
What’s New?
Global Mediacom ($BMTR) recently hosted a public expose at its Jakarta headquarter, led by Director David Audy and CFO Oerianto Guyandi. BMTR is the holding company of $MNCN (c.59% stake) and $MSKY (c.88% stake), with other new media businesses including MNC Playmedia (100% stake). We have a REDUCE rating on BMTR at a IDR550 TP (8% downside potential); preferring MNCN within the MNC Media group and SCMA within the Indonesia media sector. Below are the key takeaways.
MNCN: 7-10% revenue growth for 2017E, MNC Pictures IPO in 2017
Mgmt remains bullish on the outlook for FTA TV, with MNCN continuing to be the dominant market leader with 44.4% prime time market share as per 11M16 (up from 35.1% in 11M15). Mgmt expects the industry to grow between 5-10% in 2017, with MNCN’s top line to grow between 7-10%. Capex for 2017 should be notably lower at around USD25m (maintenance), down from USD50m in 2016E, and USD100m in 2015, post the peak capex cycle as construction of the new studio buildings has been completed. This will translate to significantly higher FCF, which could be used to partially pay off its existing USD250m debt and boost dividend. Mgmt is also confident of a smooth refinancing of a USD250m loan which will be due in Sep 2017. Meanwhile, it targets a MNC Pictures (content arm) IPO by the end of 2017, potentially merging Star Media Nusantara (Talent Agency) into MNC Pictures to enlarge the company size before offering 20-30% to the public.
MSKY: Succesful debt refinancing in November 2016  
Mgmt refinanced MSKY’s USD250m debt in Nov 2016 with a new USD190m loan, while paying off USD61m from the proceeds of MSKY’s 10% right issue. Mgmt said that MSKY currently has 2.5m PayTV subscribers with around a 65-70% market share, via 3 brands: Indovision, OkeVision, and TopTV. We have a cautious view on the Satellite PayTV industry amid intense competition and the absence of broadband bundling vs. the cable players.
MNC Playmedia: Hits 1m home-passed milestone
Mgmt said that Playmedia (Cable FTTH Broadband) has hit the 1m home-passed rollout in Dec 2016 with around 10% penetration (100,000 subscribers). It is aiming for a 2m home-passed rollout by the end of 2018E with penetration ranging from 10-20% (200k-400k subscribers). The current ARPU is around USD23-35/mth, with >50% of subscribers based in Jakarta.
Sky Vision Network (SVN): Looking to sell 10-30%
SVN will be the new holding company for MSKY and Playmedia, aiming to be Indonesia’s leading player for both Satellite PayTV and Cable Broadband+Pay TV. Mgmt is currently in talks with 2 global investors for SVN, planning to raise up to USD300m by offering a 10-30% stake via a strategic partnership or IPO. Successful monetisation of SVN will be a key catalyst for BMTR, in our view, to fund its future expansion as well as de-leverage the balance sheet.

Dec 19,2016 11:50:43

Waskita Karya ($WSKT) - Key Takeaways From Solo-Ngawi Toll Road Site Visit
We visited the Solo-Ngawi toll road located in Central Java. It forms part of the Trans Java Toll road and is regarded as one of the national top priority projects. Initially, the toll road was expected to be operational in 2018. However, given the smooth land acquisition and construction progress, it aims to open the toll road in Oct 2017. We maintain our BUY recommendation with an unchanged TP of IDR3,750 (51% upside). This is as the faster land clearing process would definitely benefit it since Waskita is the country’s second biggest toll road concession holder.

¨ Solo-Ngawi toll road. The project was initiated back in 2009 with a total length of 90km connecting the cities of Solo and Ngawi city. It was first expected to be operational in 2014. The toll road is divided into three sections. The first 20.9km (Kartasura-Karanganyar) was subsidised by the Government using the state budget. The other two sections (Karanganyar-Mantingan and Mantingan-Ngawi) were constructed by Solo Ngawi Jaya (SNJ),previously owned by Thiess Contractors Indonesia (Thiess). However, due to a land acquisition issue, construction was at a standstill. Hence, Jasa Marga ($JSMR) and Waskita KaryaToll Road (WTR), a subsidiary of Waskita Karya Persero (Waskita), took over the concession from Thiess in FY15.The Government now expects the Solo-Ngawi toll road to be completed in FY18. However, given the aggressive infrastructure development boost by President Joko Widodo, the land acquisition has been expedited as a result of the new land acquisition law. The toll road is likely to be opened during the Eid Al-Fitr holiday in 6M17 and fully operational in October the same year. Construction has now reached 51.56% completion and there are only around 50 land plots left to be cleared.

¨ Toll road to support the growth. With a recent concession signing of the Krian Legun di Bunder toll road, Waskita currently has around 15 toll roads, most of which are in complete toll roads. Having said that, we think that Waskita would have the highest earnings visibility ahead. This is as we expect its total orderbook to likely easily hit around IDR120trn in FY17, which is sufficient for its revenue for the next three years. We also think that its imminent plan to divest WTR to Sarana Multi Infrastruktur (SMI) and national pension fund PT Taspen Persero would alleviate its burden on cash flow and balance sheet.

¨ Diminishing land acquisition risk. Given the new land law in early 2015, we see some progress on infrastructure development in Indonesia. While execution of the bill was lacking in the first six months after its issuance, there has been faster progress from the concession owner and Government in clearing the land area for the projects. We saw this during our site visit to the 2x1,000MW Batang power plant (Lower Execution Risk Underpins Positive Outlook)and Solo-Ngawi toll road. The law stipulates that if there are no counter charges from the land owner within 14 days of the submission of the land value appraisal to the court, an execution order would be issued to start construction over that land.

¨ BUY with TP of IDR3,750. Maintain OVERWEIGHT on the construction sector, with Waskita as our Top Pick. As the biggest toll road contractor in the country, itis slated to be a direct beneficiary of the faster land acquisition process. We maintain our BUY call with a TP of IDR3,750, based on 23x FY17F P/E. (Dony Gunawan)


Dec 16,2016 11:55:44

$ADHI berencana melakukan spinoff bisnis hotel. ADHI akan menggabungkan bisnis TOD dan hotel dahulu pada awal tahun 2017, baru setelah itu akan dilakukan spin off pada semester kedua tahun 2017. Kami merekomendasikan BELI dengan target harga Rp2.500.

Dec 16,2016 11:55:18

$SGRO dan Arkananta Cahaya Indah (ACI) melepas seluruh kepemilikan anak usaha, yaitu Pertiwi Lenggara Agromas (PLA) kepada Surya Nusantara Sawitindo (SNS) dengan nilai sebesar Rp. 447milyar. Tujuan penjualan karena 1) kurangnya economy of scale, di mana letak kebun dari PLA ini cukup jauh dari kebun SGRO; 2) hasil penjualan ini dapat membantu SGRO untuk memenuhi kebutuhan working capital dan capex, dengan budget 2017 sebesar Rp. 700-800 milyar.     

Dec 16,2016 11:53:51

ACES targets 10 new store openings in 2017

Aces Hardware ($ACES) will debut its 12th store this year at Mall Q Big, Tangerang later this week, surpassing initial target of opening 10 new stores in 2016. Its latest store has a selling space of 3,217m2 and will take the total number of stores to 128. According to Helen Tanzil, the corporate secretary, ACES, being conservative, will aim for another 10 new openings in 2017. (Kontan)

Dec 16,2016 11:53:16

CSAP launches Mitra10 in BSD city

Catur Sentosa Adiprana ($CSAP) will open its 3rd Mitra10 store this year at Mall Q Big, Tanggerang, taking the total number of stores to 24. The store itself has a space of 10,000m2, of which 7,000m2 will be used for selling whereas the remaining 3,000m2 will serve as a warehouse. (Bisnis Indonesia)

Dec 16,2016 11:52:33

SMRA: Marketing sales target cut by 14%

Summarecon Agung ($SMRA) cuts marketing sales target from IDR3.5tn to IDR3.0tn on the back of lower than expected ytd sales, reaching only IDR2.4tn in October. SMRA’s Chief Financial Officer, Michael Young, stated that the lagging property sales were due to the Nov 4 and Dec 2 rallies in Jakarta, causing consumers to hold off their money on liquid assets. (Tempo)

Dec 16,2016 11:51:53

DILD: The Rosebay construction commences

Intiland Development ($DILD) commences the construction of The Rosebay, a middle-income residential housing in Surabaya, which will establish 229 residential units. Recently, around 50% of its total units have been sold with an average selling price of IDR31.20mn/m2 . (Tempo)

Dec 16,2016 11:50:51

JSMR and WTR consortium plans IDR2.7tn investment

Solo Ngawi Jaya, the consortium of Jasa Marga ($JSMR) and Waskita Toll Road (WTR),a subsidiary of Waskita Karya ($WSKT), is planning IDR2.7tn investment on Salatiga-Solo toll road in 2017. Furthermore, this 29km toll road will be constructed within 18 months. (Investor Daily)

Dec 16,2016 11:49:26

Indonesia plans 5 strategies to face global economic uncertainties

Ministry of National Development released 5 strategies to face global economic uncertainties. Those strategies include ensuring credit rate stays below 10%, repatriated fund being used on the right purpose, improvement in budget absorption and realization, implementation of infrastructure projects, and improvement in government investment. (Investor Daily)

Dec 16,2016 11:48:13

Statistics Agency: November trade surplus at USD838mn, +1.1% y-y; Improved exports

Statistics Agency (BPS) stated that November trade balance amounted to USD838mn, +1.1% y-y or -32.2% m-m. This surplus was supported by USD13.5bn exports, +21.3% y-y or +5.9% m-m, due to non-oil and gas exports, which reached 28.8% y-y or 6.0% m-m. BPS’s Deputy Head Sasmito Wibowo stated that non-oil and gas exports would continue to remain robust in December and in 2017, both for goods and services. Separately, MoF Sri Mulyani stated that export prospects would improve due to higher commodity prices and demand volume. (Statistics Agency, Kontan, Tempo)

Dec 16,2016 11:47:37

BI: Maintains 7D RR rate at 4.75%

On 15 December, BI decided to maintain its benchmark rate at 4.75%, with 4.00% deposit facility and 5.50% lending facility. Juda Agung, BI’s Executive Director, stated that the monetary easing, which has implemented in the recent months, should be well transitioned to boost economic growth in 2017. Going ahead, BI will watch out for global risks, especially from the US and China, as well as effect of higher administered prices to the inflation. (Bank Indonesia, Kontan)

Dec 16,2016 11:46:17

Exports and Imports Accelerate in November

Exports surged 21.3% YoY in November, mainly on a pick-up in non-oil and gas exports. Moving forward, we envisage exports of goods and services to return to growth of 6.8% in 2017, from an estimate of -4.0% in 2016 on:

1. A more stable to modest pick-up in primary commodity prices; and

2. A gradual improvement in world merchandise trade volume.

¨ We expect the current account deficit to improve in 4Q16. In November, the trade surplus narrowed to USD0.8bn, from +USD1.2bn in October. Albeit lower, this points to a higher trade surplus in 4Q 2016, suggesting that the country’s current account deficit in the balance of payments could improve during the quarter.

¨ Exports accelerated in November. This was mainly on account of a pick-up in non-oil and gas exports, particularly the hard commodities due to rising prices,and a smaller decline in oil product exports.

¨ A pick-up in exports was broad-based. This was mainly on the back of a rebound in exports to the EU, India, Australia and Taiwan, along with a pick-up in exports to Japan, South Korea, China, ASEAN and US.

¨ Imports registered a faster growth during the month. Imports picked up pace, growing 9.9% YoY, pointing to recovery in domestic economic activities. (Rizki Fajar)

Dec 16,2016 11:45:14

Bank Indonesia Maintains The Key Rate At 4.75%

Bank Indonesia (BI) board of governors’ meeting maintained the BI 7-day (Reverse)Repo rate, the benchmark policy rate,at 4.75% on 15 Dec 2016. Moving forward, we expect the BI to slash its key policy rate by another 25bps in 2017 to support economic growth under stable IDR circumstances on:
1. Moderate inflation;

2. Manageable current account deficit;

However, IDR volatility could delay key policy rate cut.

¨ Similarly, deposit facility and lending rates were maintained at 4% and 5.5% respectively. BI believes that the move is consistent with efforts to optimise domestic economic recovery while maintaining macroeconomic stability. This is against a backdrop of uncertain global financial markets, especially relating to US and China policies, as well as domestic risks relating to administered prices inflation. BI considers the previous monetary and macroprudential policy easing would continue to boost domestic growth momentum. Furthermore, inflation in 2016 is expected to ease to near the floor of the target range of 3-5% in the 3-3.2% range.

¨ BI predicts the exports contraction persisted but has shown improvements in 4Q, which will bring growth to around 5% this year. Nevertheless, the economy is projected to expand in 2017, in the 5-5.4% range, buoyed by solid domestic demand an an export recovery.Overall, we areof the view that moderate inflation, recent government deregulation, the successful implementation of the tax amnesty bill, and BI’s aggressive monetary easing would likely boost consumption and private investment moving forward. In addition, prices of Indonesia’s major commodities are rising, such as crude palm oil (CPO), coal, and metal that would support rural household spending.

¨ On the global economic outlook, the BI expects global risks to demand vigilance. These include the uncertain fiscal and international policy direction of the United States, as well as the economic rebalancing and financial system restructuring process in China.The US growth has shown signs of recovery, on the back of a stronger labour sector and rising inflation. In line with that, the Fed fund rate was hiked in Dec 2016, with a tendency to increase further in 2017, potentially elevating the cost of borrowing in the global market. Meanwhile, growth in emerging economies, particularly China and India are predicted to continue to drive the global economy and recovery in several commodity prices

¨ Indonesian financial system remains stable. This was underpinned by a resilient banking system and relatively sound financial markets. In October, the capital adequacy ratio (CAR) of banks remained high at 22.9%, which is above the minimum threshold of 8%. At the same time, non-performing loans (NPL) remained relatively stable at3.2% (gross) or 1.5% (net) of total loans. Meanwhile, deposit and loan growth increased to 6.5% and 7.5% YoY in October, up from +3.2% and +6.5% in September.

¨ Going forward, we believe inflation would likely remain managebale in 4Q16 and in 2017 due to relatively low fuel prices and stable domestic demand. In addition, the current account deficit in the balance of payments would likely be moderate although IDR may continue to face external headwinds, as expectation on the US raising interest ratesfurther next year has increased. This would likely provide room, albeit limited, for the BI to maintain its loose monetary and macroprudential policy. For next year, we expect the BI to slash its key policy rate by another 25bps in 2017 to support economic growth under stable IDR circumstances. (Rizki Fajar)

Dec 16,2016 11:44:00

Semen Indonesia’s lower market shares in November

Semen Indonesia ($SMGR) November domestic cement sales fell to 2.3m tonnes (-9.5% MoM), steeper than domestic cement sales which declined to 5.7m tonnes (-5.4% MoM). In our calculation, Semen Indonesia market shares declined to 40.2% in November (October: 42%). In November, Semen Indonesia maintain its domestic selling price at IDR766,000/tonne (-0.3% MoM).
On cummulative basis, Semen Indonesia has lowered its average selling price to IDR803,000/tonne (-6.9% YoY), however it is not enough to boost its sales volume amid current weak domestic cement demand.
We maintain Neutral with DCF-based TP to IDR9,800 (5% upside), implying 12x FY17F P/E. (Andrey Wijaya)

Dec 16,2016 11:43:11

Arwana Citra Mulia ($ARNA), Improved Efficiency Likely Boost 4Q16 Earnings

We recently met with Arwana Chief Financial Officer and the management revealed that there are significant positive developments in 4Q16, on the back of: i) improved operating efficiencies, ii) better sales mix, iii) higher sales volume. Finished goods inventory days also declined significantly in November. Arwana expect this good performance to continue in 2017.
The meetings key takeaways:
¨ Lower cost per unit. Underpinned by higher capacity utilisation, the company can achieve better economic of scale through higher efficiency in gas usage, and has managed to reduce production costs per unit. Arwana said that its new plant-5 which located in Mojokerto, East Java has run at its maximum capacity. In addition, the company has been able to reduce product defect significantly. As a results, gross profit margin (GPM) is expected to improve.

¨ Higher UNO sales. By increasing its presence on middle-end ceramic tiles segment, Arwana is likely to register better sales mix in 4Q16. UNO sales contrbution increased to 38% in November (3Q16: 31%), while Best Buy sales contribution – which provides the lowest GPM – declined to 26% in November (3Q16: 51%).
¨ Better sales volume. Arwana indicated 4Q16 sales will likely to reach 12.7m sqm (+16% QoQ, 11% YoY). Hence, FY16F sales volume would reach 47m sqm (+19% YoY), in line with our expectation. In addition, Finished Good inventory days declined to 22-23 days in November (from 31 days in 3Q16).

¨ Promising 2017. Arwana management believes that 4Q16 good performance to continue in 2017 which driven by:
i) Higher sales volume which is estimated to reach 52-55m sqm (+11% YoY to +17% YoY),
ii) Better sales mix: UNO and Regular sales contribution to increase to 40% each, while Best Buy sales contribution to decline to 20%.
Main threats are weakening IDR which will increase production costs and higher diesel fuel price which should lift transportation costs.
In term of lower gas tariff, the Indonesia Ceramic Association is still waiting the government decision on lower gas tariff on ceramic industry which is stated on Presidential Decree No. 40/2016. Notably, in our forecast, we have factored USD1/mmbtu lower gas tariff starting 2017.
Maintain BUY on Arwana with DCF based IDR635 TP (27% upside), implying 25x/17x FY16/17F P/Es. (Andrey Wijaya)

Dec 16,2016 11:41:27

Regional Plantation - 2017 – a Bumper Crop Year?

We believe CPO prices would remain at high levels up to 1Q17, on the back of the still weak CPO output and strong USD. However, post-1Q17, we believe prices are likely to weaken, as the recovery in CPO output would coincide with the South American soybean harvest, which should put pressure on vegetable oil prices. We maintain our MYR2,500/tonne CPO price assumption for 2017, expecting prices to trade at a volatile range of MYR2,300-3,000/tonne during the year. No change to our NEUTRAL sector call and our regional Top Pick of Kuala Lumpur Kepong.

¨ CPO prices shadowing soybean price movement. CPO prices have risen to new highs, at close to MYR3,000/tonne at the time of writing (+12% MoM and 27% YTD). We believe this was in response to the surprise US election result, which led to USD/MYR strengthening by as much as 7% in the last month. This – together with the recent spike in crude oil prices on the back of the Organisation of the Petroleum Exporting Countries’(OPEC) decision to cut oil production, and several other factors in the US – led to a sharp rise in soybean prices (up 11% in one month) to USD0.375/bushel, bringing YTD price increase to 29% YoY. CPO prices followed suit, bolstered also by the lower-than-expected CPO output in Malaysia in October, and the unexpected early end to the peak season.

¨ CPO prices to stay moderate after 1Q17. Going forward, we believe CPO prices are likely to stay at current high levels until 1Q17, given the anticipated weakness in output in 1Q17, coming from the 24-month lagged impact of El Nino. However, post-1Q17, we expect a marked recovery in CPO output, as productivity bounces back post-El Nino. This, together with the higher soybean output that is expected to come out from South America during the same period, would start to weigh on CPO prices. We expect CPO prices to range between MYR2,300-3.000/tonne in 2017, with an average of MYR2,500/tonne.

¨ Demand to remain lackluster. On the demand front, we expect demand from India to pick up once the short-term impact from the INR fiasco dies down. However, China’s demand is likely to remain anaemic, on the back of the abundance of soybean crop as well as its soybean and rapeseed oil held in government reserves.

NEUTRAL sector call maintained, with unchanged CPO price assumptions of MYR2,500 per tonne for 2016 and 2017. Our regional Top Pick remains Kuala Lumpur Kepong (KLK MK, BUY, MYR26.80), given its geographical landbank diversity, exposure to Indonesian downstream operations which enjoys tax advantages and relatively inexpensive valuations versus its peers. We also like Sime Darby (SIME MK, BUY, MYR9.25) in Malaysia for its restructuring angle, given management’s plans to unlock value from the group. In Singapore, we like Golden Agri-Resources (Golden Agri)(GGR SP, BUY, SGD0.46) for its diversified geographical landbank, while its integrated operations well as soybean crushing enables it to capture margins all across the industry spectrum. In Indonesia, we like London Sumatra ($LSIP, BUY, IDR2,050) due to its undemanding valuations, its net cash and its good stock liquidity. (Hoe Lee Leng, Hariyanto Wijaya, CFA, CPA)

Dec 16,2016 10:59:11

Indonesia economy: Interest rate & trade balance
Economy: Indonesia
Keep an eye on global risks; Non-oil gas supports

BI keeps 4.75% rate; Eying global stability & administered prices: On 15 December, BI maintained its rate at 4.75%, FASBI at 4.00% and lending facility at 5.50%. BI is currently eyeing global policy risks from the US Fed rate hike, which can lift the global borrowing cost. For the domestic side, BI is keeping an eye on possible impacts from the administered price hikes in 2017, while still expecting 2017 inflation to be in line with the 4+/-1% y-y guidance. BI feels that the current policy accommodation stances at both the monetary and macro prudential levels are likely to support the domestic economy going forward. Furthermore, BI is acknowledging the prospect of improving oil prices after OPEC decided to cut the production quota while Indonesia exports are likely to improve in 4Q16 with the higher commodity prices. BI maintains its 2017 growth forecast at 5.0-5.4%, supported by resilient domestic consumption. On the balance of payment, BI is eyeing a CAD of below 2% on the positive non-oil and gas trade balance.

BI seeing peak NPL cycle; Well-maintained liquidity: On the financial side, BI recorded a 22.9% October CAR and 20.2% October liquidity ratio. Despite the monetary transmission with lower deposit and loan rates, October loan growth was still mild at 7.5% y-y (September: 6.5%). On the other hand, October third-party funds were higher at 6.5% y-y (September: 3.2%). In 2017, BI expects loan growth to reach 10-12% y-y and third-party funds to improve at 9-11% y-y.

Exports: 21.3% y-y (Cons: +11.6%) on non-oil and gas exports jump
§  O&G exports -26.3% y-y; Non O&G exports +28.8% y-y: November exports data indicated strong growth in the non O&G sector at +28.8% y-y (October: 8.8% y-y) and declining gas exports at -26.3% y-y. On a m-m basis, the increase in exports came from from animal/ vegetable oil at USD2.2bn, +20.4% m-m, and mineral fuels at USD1.6bn, +10.0% m-m. As for O&G, gas procurement jumped 17% y-y, to USD10.3mn.

§  Export volumes at +11.1% y-y; aggregate prices 9.2% y-y: November export volumes grew at 11.1% y-y (October: +8.9% y-y), supported by non O&G volume export growth of 14.8% y-y (October: 9.8% y-y). The export price index was already higher by 9.2% y-y (October: -3.5%) on higher oil and gas prices.

Imports: 9.9% y-y (Cons: +0.1%)
§  O&G imports 7.3% y-y; Non O&G imports 10.3% y-y: November O&G imports went up 7.3% y-y (October: -12.4% y-y), while non O&G imports saw more of an increase at 10.3% y-y (October: +6.6% y-y). On a m-m basis, the highest increases came from electrical machine and equipment at USD1.5bn, +15.23% m-m, and mechanical machine and equipment at +8.3% m-m.

§  Import volumes at +2.7% y-y; import prices index at 7.0% y-y: November import volumes grew 2.7% y-y (October: +5.7% y-y), while the import price index was at 7.0% y-y (October: -2.3%), supported by non O&G import prices at 10.8% y-y (October: -3.8%). Based on categories, the highest import increases were from raw materials at 12.2% y-y, followed by consumer goods at 6.5% y-y.

Dec 16,2016 10:13:05

Indonesian Coal Miners in Focus: Tambang Batubara Bukit Asam

The soaring benchmark thermal coal price of the Indonesian government (called harga batubara acuan, abbreviated HBA), which is set (on a monthly basis) by the Energy and Mineral Resources Ministry, should boost earnings of listed Indonesian coal miner Tambang Batubara Bukit Asam in 2017. The HBA price nearly doubled to USD $102 per metric ton in December from the year-start. Besides the rising coal price, the company should also see improving corporate earnings due to its expected rising sales volume.

The price at which Tambang Batubara Bukit Asam ($PTBA) sells its coal on the domestic market is determined by the HBA. More specifically, the domestic sales price in 2017 is determined by the average HBA in the last three months of 2016. This would be USD $85.2 per metric tons. However, CLSA Securities says the coal miner offers coal at a 20 percent discount, which would mean that Bukit Asam sells its coal (domestically) for a price of USD $62 per metric ton in 2017. This would imply a nearly 40 percent (y/y) growth in average sales price next year and a great boost for the coal miner's corporate earnings.

Bukit Asam, a coal miner that is for 65 percent owned by the Indonesian government, sells about 50-60 percent of its total coal sales on the domestic market of Indonesia and therefore the HBA price growth is a very positive matter for the coal miner. CLSA Securities, in fact, states that Bukit Asam will benefit the most - among Indonesian coal miners - from HBA growth as other local coal miners focus on exports (on average, other Indonesian coal miners only sell 25 percent of their coal output on the domestic market).

Meanwhile, Bukit Asam is also expected to raise coal output in 2017 from an estimated 19.6 million tons of coal in 2016 to 21.7 million tons in 2017. Also, the sales volume is expected to grow to 23.5 million tons in 2017 from an estimated 21.4 million tons in 2016. Rising production and sales will contribute to the company's expected improving corporate earnings in 2017.

Therefore, CLSA Securities advises investors to buy shares of Bukit Asam. Recently, the securities firm raised its target price for the miner's shares from IDR 15,500 to IDR 17,000 a piece. On Thursday (15/12) shares of Bukit Asam climbed 0.79 percent to IDR 12,700 a piece. So far this year, the company's shares have soared a whopping 180.66 percent.

Earlier, Arviyan Arifin, President Director of Bukit Asam, informed that the miner allocated USD $500 million for capital expenditure (capex) in 2017. These funds will partly be used for the expansion of its two coal-fired power plants. Arifin said development of the miner's power plants in 2016 has not met expectations, therefore more funds and time are needed to optimize production and efficiency at its power plants.

Up to the third quarter of 2016, Bukit Asam posted IDR 10.04 trillion in revenue, down 4.3 percent from revenue in the same period one year earlier. This decline is attributed to the lower coal price. For example, the miner exported coal at an average price of USD $51.75 per metric ton in January-September 2016, down from an average of USD $60.81 per metric ton in the same period one year earlier.

Besides coal production and the establishment of coal-fired power plants in Indonesia, Bukit Asam is also eager to establish two power plants in Myanmar and Vietnam.

Dec 15,2016 22:32:30

Masalah di Sektor Properti Bukan Hanya Soal Bunga Bank

Sektor properti masih berada dalam situasi perlambatan, mengikuti perekonomian secara nasional. Berbagai kebijakan sudah diluncurkan, baik dari pemerintah, Bank Indonesia (BI) dan otoritas terkait lainnya, namun belum membuahkan hasil.

Direktur Utama PT Bank Tabungan Negara (BTN) Maryono menilai, solusi dari permasalahan ini bukan hanya dari sisi bunga bank untuk mendorong peningkatan permintaan masyarakat. Akan tetapi juga soal lahan, perizinan dan lainnya.

"Permasalahan dari perumahan ini kita nggak bisa bergantung pada satu instansi atau kewenangan, karena perumahan bergantung ke banyak instansi. Kalau sering disebutkan perbankan untuk pembiayaan," terang Maryono dalam acara diskusi Property Outlook di Hotel Pullman, Jakarta, Rabu (14/12/2016).

"Kita juga ada persoalan izin di pemerintah daerah, kemudian penyediaan tanah yang masih menjadi masalah, kebutuhan akan landbank, ini sangat menjadi dominan dibandingkan masalah lain," paparnya.

Sektor properti berkaitan erat dengan kebutuhan rumah layak huni dari masyarakat masih sangat tinggi di Indonesia. Baik pemerintah, maupun instansi lainnya harus menjalankan program secara bersamaan agar mampu mencakup kebutuhan tersebut.

"Pak Jokowi betul-betul memberikan jalan keluar untuk memperbaiki kebutuhan rumah ini, lewat kebijakan nasional," ujar Maryono.

Total backlog sekarang adalah 13,5 juta. Setengah dari jumlah tersebut adalah untuk masyarakat kelas menengah ke bawah. Untuk itu program satu juta rumah dari pemerintah harus didukung agar menutupi kebutuhan masyarakat.

"Dari 5-7 juta yang perlu rumah untuk segmen menengah ke bawah. Ini lah kebutuhan. Minimal kita harus kurangi backlog," tandasnya. (mkl/dna)

Dec 15,2016 11:41:53

Retail: E-Commerce sales during Harbolnas increase five-fold

National online shopping day, or Harbolnas, between 12 and 14 December 2016 saw a five-fold increase in revenue compared to last year, in which a total of about 200 shopping sites took part. For instance, Bukalapak declared that they recorded 400,000 transactions and according to Bukalapak’s brand manager, Ambrosia Tyas, customers are intrigued by not only price discounts, but also the ability to negotiate prices directly with sellers particularly on Bukalapak. (Tempo)

Dec 15,2016 11:39:27

Agincourt Resources to IPO in 2017

Coal mining company, PT Agincourt Resources, plans IPO in 2017, following its recent acquisition of Emas Martabe Mine (TEM) in South Sumatra. Note that, the Djarum family owns 7% shares in TEM. Based on December 2015 data, total gold and silver resources of TEM is 7.4mt and 6.9mt, respectively. (Investor Daily)

Dec 15,2016 11:38:19

LIPI: Indonesia GDP growth would reach 5.45% in 2017

Center of Economic Research in Indonesian Institute of Sciences (LIPI) projects Indonesia GDP growth to reach 5.45% in 2017. LIPI officials stated that investment will be a main driver for the growth, supported by the 14 economic policies that raise the investor appetite to do their investment. Government will also increase regional competitiveness mainly in infrastructure development that would decrease logistics cost. In addition, LIPI also projected that inflation would reach 4%. Global oil and food prices would be the main driver of inflation. (Koran Tempo)

Dec 14,2016 15:22:38

Poultry: Imports from 7 countries stopped

Quarantine Agency of Ministry of Agriculture banned imports of poultry and fresh poultry products from countries affected by avian influenza. The countries are Romania, Japan, Netherlands, France, Finland, India and Sweden. (Kontan)


Dec 14,2016 15:21:28

MoF to prepare special documentation for state budget realization

Ministry of Finance will prepare a special documentation for state budget realization (DIPA Plus) for projects that resulted from trilateral meeting among MOF, Ministry of National Development Planning (Bappenas) and other Ministries and agencies. DIPA Plus plans to ensure that every project would have an outcome, and is aligned with Jokowi’s Nawacita program. (Investor Daily)

Dec 14,2016 15:16:55

Masalah di Sektor Properti Bukan Hanya Soal Bunga Bank

Jakarta - Sektor properti masih berada dalam situasi perlambatan, mengikuti perekonomian secara nasional. Berbagai kebijakan sudah diluncurkan, baik dari pemerintah, Bank Indonesia (BI) dan otoritas terkait lainnya, namun belum membuahkan hasil.

Direktur Utama PT Bank Tabungan Negara ($BBTN) Maryono menilai, solusi dari permasalahan ini bukan hanya dari sisi bunga bank untuk mendorong peningkatan permintaan masyarakat. Akan tetapi juga soal lahan, perizinan dan lainnya.

"Permasalahan dari perumahan ini kita nggak bisa bergantung pada satu instansi atau kewenangan, karena perumahan bergantung ke banyak instansi. Kalau sering disebutkan perbankan untuk pembiayaan," terang Maryono dalam acara diskusi Property Outlook di Hotel Pullman, Jakarta, Rabu (14/12/2016).

"Kita juga ada persoalan izin di pemerintah daerah, kemudian penyediaan tanah yang masih menjadi masalah, kebutuhan akan landbank, ini sangat menjadi dominan dibandingkan masalah lain," paparnya.

Sektor properti berkaitan erat dengan kebutuhan rumah layak huni dari masyarakat masih sangat tinggi di Indonesia. Baik pemerintah, maupun instansi lainnya harus menjalankan program secara bersamaan agar mampu mencakup kebutuhan tersebut.

"Pak Jokowi betul-betul memberikan jalan keluar untuk memperbaiki kebutuhan rumah ini, lewat kebijakan nasional," ujar Maryono.

Total backlog sekarang adalah 13,5 juta. Setengah dari jumlah tersebut adalah untuk masyarakat kelas menengah ke bawah. Untuk itu program satu juta rumah dari pemerintah harus didukung agar menutupi kebutuhan masyarakat.

"Dari 5-7 juta yang perlu rumah untuk segmen menengah ke bawah. Ini lah kebutuhan. Minimal kita harus kurangi backlog," tandasnya. (mkl/dna)

Dec 14,2016 15:12:01

Kebijakan Auto Reject Terbaru Diberlakukan Awal Tahun Depan

Bursa Efek Indonesia (BEI) telah mengeluarkan Surat Keputusan Direksi Nomor: Kep-00113/BEI/12-2016 perihal Peraturan nomor II-A tentang Perdagangan Efek Bersifat Ekuitas pada tanggal 13 Desember 2016.

Aturan tersebut memuat tentang ketentuan mengenai Auto Rejection, yaitu penolakan secara otomatis oleh sistem terhadap penawaran jual dan atau permintaan beli efek bersifat ekuitas akibat dilampauinya batasan harga atau jumlah efek bersifat ekuitas.

Keputusan ini efektif diberlakukan mulai 3 Januari 2017. Pengujian sistem (Mock Trading) akan dilaksanakan pada Sabtu, 17 Desember 2016.

Demikian disampaikan Bursa Efek Indonesia (BEI) seperti dikutip detikFinance, Rabu (14/12/2016).

Dalam lampiran keputusan ini diatur sebagai berikut:

Rentang harga

  • Rp 50-Rp 200: Aturan Saat Ini, batas atas 35%, batas bawah 10%. Aturan Baru, batas atas 35%, batas bawah 35%
  • Rp 200-Rp 5.000: Aturan Saat Ini, batas atas 25%, batas bawah 10%. Aturan Baru, batas atas 25%, batas bawah 25%
  • >Rp 5.000. Aturan Saat Ini, batas atas 20%, batas bawah 10%. Aturan Baru, batas atas 20%, batas bawah 20%


Dec 14,2016 09:27:04

Perusahaan Gas Negara ($PGAS) - Set For a Reversal Of Fortune

The pressure on PGN’s distribution margins, stemming from competing feedstock, is set to reverse. This is because the overhang on its stock from worries over the gas price cut overhang has been removed, while coal prices have doubled since early 2016 and crude oil prices are on the rise. With no more asset impairments in hand, PGN’s E&P segment’s operating margins could be lifted by the rise in crude oil prices. Overall, we expect gross margins to improve. Maintain BUY and DCF-based IDR4,000 TP ( also implying 15x FY17F reported earnings.

¨ No impact from the gas price cut. On 5 Dec, the Government announced that the natural gas tariff for three priority sectors in the upstream segment – fertiliser, steel and petrochemicals – would be cut by USD0.50-1.50/mmbtu. Only five companies stand to benefit from the lower tariff, of which two would also receive lower transmission fees from Pertamina Gas. These companies are big volume gas users and buy the commodity directly from oil & gas blocks, bypassing distributors such as Perusahaan Gas Negara (PGN).

¨ No definite date for further price intervention. The tariff cut was lower than what was announced earlier. Also, the ceramic, glass, oleochemical and rubber glove industries would also not benefit from the lower tariffs. Energy and Mineral Resources Deputy Minister Mr Archandra Tahar stated that, in the event of a similar reduction in gas tariffs, these sectors – which use natural gas for power generation only – would have a lower multiplier impact on the economy. This is in comparison with the fertiliser, steel and petrochemical industries, which also use natural gas as a raw material. Thus, the decision to not lower tariffs on these sectors at this juncture, in view of the impact to the Government’s budget.

¨ Sentiment should shift towards fundamental/recovery potential. While talk of a Pertamina merger still linger, (see our 30 Aug A Study Of PGN, Pertamina And Pertagas report), we believe the most detrimental factors, ie distribution margins or potential margins compression from the gas price cut, is largely over. We believe fundamental variables, such as gas distribution volumes and distribution margins recovery, as well as the recovery potential of its troubled E&P and LNG segments, are likely to drive its share price. And these factors are turning towards PGN’s favour, in our opinion.

¨ Rising crude oil prices and higher coal price bodes well for PGN. As coal prices have doubled and crude oil prices are on the rise, PGN’s appeal (as natural gas is a competing feedstock) ought to increase. This, in turn, would reverse the pressure on its distribution margin. In our opinion, PGN should maintain its ex-LNG pipe gas distribution margin of USD3.00/mmbtu, this might even improve in FY17 should volumes recover and surcharges reappear. With 2017 crude assumption of USD44.50/bbl, Its E&P segment’s impairment is done, while operating margins would benefit from higher ASP.

¨ Downside risks. PGN is now trading at 11x of our FY17F reported net profit, vis-à-vis its 5-year historical mean of 13x. Downside risks to our call are still an intervention from the Government, which may put pressure on margins, as well as an unfavourable outcome from the merger with Pertamina. (Norman Choong, CFA)

Dec 14,2016 08:22:29

$DILD akan mengakuisisi tanah seluas 200 ha di Jombang. Ini untuk menutupi penurunan lahan industrinya di Mojokerto yang kini tersisa 200 ha.

Dec 14,2016 08:22:09

$MYRX akan meng-IPO-kan satu anak usahanya pada 2017. MYRX memiliki 3 anak usaha. Diperkirakan nilainya berkisar Rp500-800 miliar.

Dec 14,2016 08:21:33

$PTBA kembali menjajaki ekspansi dua PLTU di Myanmar dan Vietnam tahun depan. Total kapasitas PLTU yang dibidik sekitar 800 MW. PTBA sudah mengantongi izin dari Menteri Listrik Myanmar dan rencananya PTBA akan membangun 2x100 MW. PTBA akan menggandeng badan usaha swasta Myanmar dan akan masuk dengan kepemilikan minoritas. Sementara itu, PTBA akan mengambil alih sebagian ekuitas dalam proyek PLTU di Vietnam. PTBA mencari proyek PLTU dengan kapasitas 600 MW. Jika proyek PLTU dapat dieksekusi, maka PTBA berpeluang menjadi pemasok batubara dalam PLTU. Pendanaan ekspansi di luar negeri akan disiapkan dari kas internal dan sumber eksternal.

Dec 14,2016 08:20:36

$BUMI mampu membukukan laba bersih sebesar US$73 juta pada kuartal III-2016 atau lebih baik dibandingkan dengan periode yang sama tahun lalu yaitu rugi senilai US$627,9 juta. Positifnya laba bersih berasal dari turunnya beban bunga keuangan dan adanya pendapatan lain-lain. Beban bunga dan keuangan turun dari US$405 juta menjadi US$283,3 juta.
Restrukturisasi BUMI yang berhasil dilakukan pada November tahun lalu turut dibukukan sebagai penghasilan lain-lain. Sesuai dengan kesepakatan PKPU, BUMI akan merestrukturisasi sebagian besar utangnya dengan beberapa cara yaitu menukar utang dengan saham, menerbitkan obligasi konversi, mengganti utang dengan new senior secured facility, termasuk adanya penghapusan biaya wanprestasi dan denda.

Dec 14,2016 08:19:21

Good morning,

U.S. equities closed higher on Tuesday as investors kept an eye on a key Federal Reserve meeting, while the Dow Jones industrial average closed in on another millestone .

Dow........19911   +114.8 +0.58%
Nasdaq...5463     +51.3   +0.95%
S&P 500..2272     +14.8   +0.65%

FTSE........6869    +78.2   +1.13%
DAX.......11285     +94.4   +0.84%
CAC.........4804     +43.1   +0.91%

Nikkei...19251     +95.5     +0.50% 
HSI........22447     +13.7    +0.06%
Shanghai.3155    +2.1       +0.07%
ST Times.2955    +3.1       +0.10%
Indo10Yr.7.8414   +0.0259 +0.33%
INDOBex209.9727-0.3152  -0.15%
US10Yr.....2.48       +0.00     +0%

VIX...........12.72     +0.08     +0.63%

USDIndx101.040      +0.07      +0.07%
Como Indx193.4571+0.112   +0.06%
(Core Commodity CRB
DJUSCL....48.25     -0.94     -1.91%
(Dow Jones US Coal Index)
IndoCDS.159.79     -0.21     -0.13%          (5-yr INOCD5)

IDR............13325     -6           -0.04%
Jisdor........13309    -28         -0.21%
IDR Fut......13250.5 -62.5     -0.47%

Euro.........1.0628   +0.0014 +0.13%

TLKM........29.71    +0.55      +1.89%
(Rp 3954)
EIDO.........24.70     +0.37      +1.52%
EEM.........36.33     +0.40      +1.11%

Oil.............52.50       +0.06     +0.11%    
Gold ........1160.10    -4.10      -0.35%
Timah......21295.00  +260.    +1.24%*
Nickel......11382.50  +32.50  +0.29%*

Coal price....86.90   +0.30     +0.35%         
Coal price....81.55   -0.20       -0.24%
Coal price....87.55   +1.35     +1.57%      
Coal price....78.40   -0.35      -0.44%
(Jan/ Rotterdam)

CPO............3099     +29        +0.94%
Corn...........361.00 +0.50    +0.14%
SoybeanOil 36.78   -0.19     -0.51%
Wheat........417.50 +0.25    +0.06%

*  source : Investing

(DE/ls 14-12-16)


Dec 14,2016 08:18:20

$PGAS - The Ministry of Energy and Mineral Resources issued regulation no 40 of 2016 on gas prices. The new regulation that cuts gas prices for petrochemical, fertilizers and steel to $6/mmbtu from average $7.5 will apply to 5 SOE so far. However, the other industries such as glass, ceramics, rubber gloves, and oleochemical industries demand the gov’t to clarify the new regulation to include those industries.

Dec 14,2016 08:17:33

$BDMNBank Danamon eyes 1m of credit card users in 2017. As of now, the bank’s credit card users reached 850k people. Regarding Central Bank’s (BI) plan to lower credit card interest rate to 2.25%/month (vs currently 2.95%/month), the bank stated that it will conduct cost cutting to implement the regulation. One of the company’s efforts is by launching an application which allows customers to conduct information self-check of their credit cards. Hence, the company can reduce the number of employees in its call centre. As of Sep2016, national credit card transaction volume grew 6.7% YoY to 24.74 transaction. However, nominal wise, value still declined (-)2.15% YoY to Rp22.38tn.

Dec 14,2016 08:17:06

$PPROPP Properti plans to conduct stock split in 2017. The company will announce the stock split ratio in Jan2017. PPRO also plans to conduct rights issue in 2017, raising Rp1.6tn. It also plans to raise Rp1tn from bond issuance in 2017. Meanwhile, PPRO plans to allocate Rp2tn of capex in 2017, (+)67% YoY.

Dec 14,2016 08:16:30

$SSIASurya Semesta Internusa acquired additional 38ha of land in Subang in 3Q16, making its total Subang land reserve to 486ha. As of 9M16, the company has managed to clear 87ha of land.  SSIA has also issued Rp900bn of bond to finance land acquisition. In Subang, the company has obtained permit to acquire 2,000 ha of land.  Aside from Subang, the company also plans to further add its land reserve in Karawang. The company plans to combine 110ha of its existing land in Karawang with its potential JV partner’s 150ha. Then the JV company will acquired additional landbank, making a combined land size of 400ha.

Dec 14,2016 08:13:48

President Jokowi has set a target to double the number of bank account holders by 2019. Jokowi said at least 76% of the country’s population should own bank accounts, from the current 36%, as increased public savings will help strengthen investment in Indonesia.

Dec 14,2016 08:12:14

Bank Rakyat Indonesia ($BBRI) distributes loans to Bukit Asam ($PTBA)

BBRI distributed loans totaling to USD135mn and Rp800bn to PTBA. The loans will be used to support the company’s funding and to support the government’s energy supply. The foreign exchange loan scheme consists of USD100mn of working capital loans and USD35mn of forex line, which is a non-cash facility to be used for hedging. Meanwhile, of the total rupiah loans, Rp500bn consists of bank guarantees and stand by letters of credit while the remaining Rp300bn will be used as collateral for imported coal and operational needs both inside and outside the country. (Bisnis Indonesia)

Dec 14,2016 08:11:21

Wijaya Karya Beton: Meeting Takeaways- Heading to an Even Better Year ($WTON)

Our discussion with Wijaya Karya Beton’s ($WTON) management revealed that 2016 new contracts would surpass initial expectation of Rp4.3tn. Meanwhile, entrance in ready-mix concrete business as well as infrastructure and energy projects should ensure 2017 sales to grow above 20%. Retain BUY call with TP of Rp1,000.

Positive news in the year end. WTON expects to book Rp6tn of new contracts in 2016, supported by the signing of Balikpapan-Samarinda (Balsam) toll road and Inner Jakarta LRT project with total contracts of around Rp1.6-1.7tn. This achievement is higher than the management’s already upgraded 2016FY new contracts target of Rp4.3tn (2015: Rp3.5tn). Gazing into 2017, WTON targets new contracts of Rp6tn (Mansek estimate: Rp5tn), which is backed by infrastructure (e.g. toll road and railroad) and energy (e.g. power plant) projects. In preparation for such projects, WTON is currently building a new plant in Subang (West Java) with total capacity of 300k tons per annum which specializes in girder products.

Another leap in 2017. Despite improving plant utilization rate to 82% in 9M16, WTON targets 2017F sales growth of more than 20% with expectation of better government projects realization. In addition, a forecast of Rp4tn of carry over contracts to 2017 should ensure more stable plant utilization rate and revenues recognition. In 2016, WTON experienced lower sales contribution from local private contractors (9M16: 38%; 2015: 57%) due to the ministerial budget cut.

Foray into new business. To increase synergy with its parent company, Wijaya Karya ($WIKA), WTON would start supplying ready-mix concrete (RMC). Going forward, the company expects RMC business to also provide a sales boost with target contribution of 10% of its total revenues. Meanwhile, on the back of strong demand for precast building, WTON plans to establish a new joint venture company with Wika Gedung. Through the new company, WTON could put more focus in growing precast building products as well as establish a new dedicated plant.

Reiterate BUY rating. With 34% EPS growth in 2017 and a well-established reputation in precast industry, we retain our BUY call with TP of Rp1,000, based on an unchanged 25x 2017F PER. Main risk is lower contracts from government and power plant projects.

Dec 14,2016 08:08:50

Semen Indonesia ($SMGR) Margins Likely To Narrow On Higher Coal Prices

Semen Indonesia expects its FY17 sales volume to grow 4-5% YoY, which is slower than our estimate. Meanwhile, higher coal prices are likely to lift production costs, while a sales price increase may not be easy amid the current overcapacity. We cut our earnings estimates, as well as our DCF-based TP to IDR9,800 (from IDR10,200, 6% upside, 12x FY17F P/E). Although the counter is trading at a low P/E, it is still not attractive, given strong headwinds. An upside risk in our call is faster-than-expected property sales on lower mortgaged rates. Maintain NEUTRAL.
¨ Moderate volume growth. Although the expected recovery in property sales and accelerated infrastructure projects should boost cement demand next year, Semen Indonesia expects national cement sales to grow by 5% YoY, faster than that of FY16F’s 2-3%. This, however, is slower than our 7% estimate. In our view, Semen Indonesia is likely to slowly reduce its selling price – albeit at the expense of sales volume growth, which may decelerate at a slower pace.

Notably, despite the slower selling price reduction, the company was able to maintain its market share. Other cement makers’ market shares have declined. We estimate that its 9M16 ASP declined by 3% YoY, slower than that of its closest peer, Indocement Tunggal ($INTP) whose ASP declined by 11% in the same period.

¨ Competition likely to remain intense. We expect the increase in supply to be faster than the growth in demand. We further anticipate the national utilisation rate (in terms of production) to decline to 69% FY17F (from 70% in FY16F). Total additional national capacity would be c.11m tonnes pa in 4Q16-2Q17, while additional national demand may be only 5m tonnes pain FY17. This situation should intensify competition in the industry.

¨ Margins may narrow on higher coal prices. Given the rising competition, it would not be easy to pass on the higher costs. Our ground checks suggest thatretail selling prices of cement continued declining in November. However, the average coal price increased to USD65/tonne in FY16F from USD60/tonne in FY15. We expect the price of coal to increase to USD75/tonne (+15% YoY) in 2017, which should increase production costs since coal accounted for around 20% of Semen Indonesia’s 9M16 COGS. In our sensitivity analysis, its earnings would decline by 6% for every 10% increase in coal prices.

¨ Paring down numbers. We cut our FY16F-17F earnings to IDR4.3trn-4.5trn (-3% and -14%) respectively on higher production costs and lower sales volume.

Our DCF-based TP drops to IDR9,800 from IDR10,200. It also implies as FY17F P/E of 12x. Although Semen Indonesia is trading at low P/Es, at close to-2SD from its average forward rolling P/E mean, we do not think it is an attractive option given strong headwinds in the industry. The summary of risks to our call is on page 3. Reiterate NEUTRAL. (Andrey Wijaya)

Dec 14,2016 08:07:34

Indonesia Economic Outloook - Prospect For A Modest Pick-Up In Economic Growth
Despite rising global uncertainties arising from Donald Trump’s victory in the US presidential elections, we expect the Indonesian economy to grow by 5.3% in 2017 (higher than our estimate of 5.1% in 2016), on account of:
1. A large domestic economy, with domestic demand a key driver of growth;

2. Higher State Budget for infrastructure projects;

3. Resilient household consumption;

4. A more stable to modest pick-up in primary commodity prices.

¨ Resilient domestic demand to underpin growth in 2017.We expect Indonesia’s domestic demand to pickup pace to 5.3% in 2017, from an estimated +4.9% in 2016, largely driven by:

i. A gradual pick-up in private investment on the back of a recovery in commodity prices and lower interest rates;

ii. Higher public infrastructure spending;

iii. Resilient household consumption due to moderate inflation and higher rural household income; but

iv. Offset by a slight downtick in total government expenditure.

¨ Recovery in the external sector. Real exports are likely to grow by +1.1% in 2017, from -1.8% in 2016, due to:

i. Relaxation of the export ban on iron ore;

ii. A more stable to a modest pick-up in primary commodity prices;

iii. Gradual improvement in world merchandise trade volume.

¨ Ongoing fiscal consolidation. We anticipate the Budget deficit to widen slightly to 2.8% of GDP in 2017, from -2.7% in 2016, on the back of:

i. Modest revenue collection after the implementation of tax amnesty;

ii. Various fiscal incentives that may erode revenue.

¨ Slight deterioration in current account deficit, widening to 2.3% of GDP for 2017, from -2.2% in 2016:

i. A pick-up in fixed investment and imports; but

ii. Mitigated by higher commodity prices

¨ Manageable inflation and room for policy easing, with the headline inflation rate to remain manageable at 3.8%,and the key policy rate likely to be cut by 25bps in 2017 amid:

i. A planned electricity tariff hike;

ii. Modest pick-up in volatile food prices; although

iii. Currency weakness could delayany key policy rate cut. (Rizki Fajar)

Dec 14,2016 08:06:54

Energy Ministry issued policy on gas tariff reduction for fertilizer, petrochemical, and steel

The Energy Ministry finally issued new policy which regulates gas tariff reduction for fertilizer, petrochemical, and steel industries, effective 1 January 2017. According to Ministrial Industry high-rank officer (Directorate General of Chemical, Textile, and Micellaneous) Achmad Sigit, they are still waiting the decision of gas tariff reduction for the remaining seven industries (which is stated on Presidential Decree No. 40/2016).
Based on our channel check, in regards of gas reduction on ceramic industry, the government (Industrial Ministry, Energy Ministry, and Finance Ministry) just requested the Indonesia Ceramic Industry Association to present their proposal on the gas tariff reduction at end November. Having said that, Energy Ministry is currently still reviewing the proposal.
Update on sales volume: Arwana’s sales volume reached 4.2m each in October and November. Based on the latest sales update, FY16F sales is likely to reach 47m sqm (+19% YoY), in line with our expectation. Maintain BUY on Arwana with DCF based IDR635 TP (14% upside), implying 25x/17x FY16/17F P/Es. (Andrey Wijaya)


Dec 14,2016 08:06:02

Property (Overweight), ‘Tis The Season To Be Jolly About Mortgages
Our ground checks reveal that commercial banks are stopping their promotional mortgage rates. However, as they are aiming for double-digit mortgage growth rates next year, we expect them to re-introduce packages at lower rates as well – since the rates do not yet reflect the latest cut made by BI in Oct. Note that the combination of the relaxation of LTV thresholds and lower mortgage rates following the BI rate cut during 3Q16 resulted in a shifting of consumer preferences back to obtaining financing for properties via a mortgage.
¨ Promo on hold, but... we learnt that some banks are stopping their promotional mortgage packages this month. The current normal mortgage rate has a fixed interest rate of 9.5-10.25% for one year. Bank Central Asia (BCA) ($BBCA) is still offering the lowest mortgage rate with its latest Fix & Cap promotion, ie 7.99% pa fixed interest for the first three years and capped for a further three years at 8.99% pa. This is almost 50bps lower than what was offered in its previous Fix & Cap promotion. However, we believe IND Banks would continue to introduce lower mortgage rates in the future as:

i. Banks are aiming for double-digit growth in their mortgage segments in 2017. BCA and Bank CIMB Niaga ($BNGA) are aiming for 12% and 9-10% mortgage loan growth respectively;

ii. Based on research by, the most important factor in buying properties is the Bank Indonesia (BI) rate. Most buyers still utilise mortgage facilities to purchase properties. This is also reflected in the trend shifting back towards taking a mortgage as a payment method during 3Q16. This is due to a combination of the relaxation of the loan-to-value (LTV) thresholds and lower mortgage rates following BI’s rate cut.

As such, we expect banks to start re-introducing their respective mortgages at lower rates earliest by Jan 2017. Their current mortgage rates do not yet reflect the latest BI rate cut, which was made in October. Note, also, that presales activities in December are more moderate.

¨ Maintain OVERWEIGHT. We keep our OVERWEIGHT rating on the sector, as we expect a better outlook in 2017 as the following factors have already been priced in:

i. All the catalysts that include the tax amnesty;

ii. A potentially lower benchmark interest rate;

iii. The relaxation of the LTV threshold;

iv. The allowance for properties under construction to come under a second mortgage.

The share prices of property counters under our coverage have softened following public protests on 4 Nov that demanded incumbent Jakarta governor Basuki Tjahaja Purnama, commonly known as Ahok, be arrested for blasphemy. Share prices dropped further after the US election was concluded on 9 Nov. On average, share prices have plunged 9% YTD since 4 Nov. These numbers have recovered by 5% on average from their lowest level during the same period. Nonetheless, the sector is currently valued at a 65% discount to RNAV, or around -1.5SD from its 3-year mean of 56%, which looks compelling. (Lydia Suwandi)


Dec 14,2016 08:03:36

PTBA: Plans to expand coal-fired power plants in Myanmar and Vietnam

Tambang Bukit Asam ($PTBA) aims to build two power plants in Myanmar and Vietnam in 2017. The company has an offer to build a 600MW coal-fired powerplant in Vietnam, but it is still reviewing whether the equity portion scheme is profitable for the company. For power plants in Myanmar, PTBA has obtained a mining permit in the country, and is currently waiting for a conducive situation in the power plant area. (Investor daily)

Dec 14,2016 08:02:48

ERAA to import iPhone 6S and iPhone 7

CEO of Erajaya Swasembada, ($ERAA) Hasan Aula, stated that the company has issued a certification request to import both iPhone 6S and iPhone 7. The company has opted for Postel B certification request to distribute the products, in which previously, the imports of 4G iPhones were not allowed as the phones were not meeting the TKDN requirements. (Kompas)


Dec 14,2016 08:01:52

WIKA prepares IDR2.5tn for electricity business expansion in 2017

Wijaya Karya ($WIKA) prepares IDR2.5tn budget for 2017 electricity business expansion. WIKA plans for a 15% ownership of 2x1,000MW Java V Steam Power Plant, 15%-20% ownership of 2x50MW Manado Steam Power Plant, and targets other power plants in several locations. (

Dec 14,2016 08:01:20

WTON obtained 2016 new contracts of IDR6tn

Wijaya Karya Beton ($WTON) has achieved higher than expected 2016 new contracts of IDR6tn (2016 target: IDR4.3tn), backed by a number of projects from readymix business, which started operations in the beginning of 4Q16. (

Dec 14,2016 08:00:29

MYOR 3Q16 results: Strong EBIT above our expectation, roughly in-line earnings

Mayora Indah ($MYOR) booked solid 3Q16 results with total revenue of IDR4.0tn, (+28% y-y, -12% q-q), roughly in-line with our quarterly estimate. However, due to higher cost of raw materials (coffee +26% y-y, sugar +69% y-y), gross profit margin was squeezed by more than 100bps, yet MYOR still booked 71% y-y growth in operating profit helped by lower selling expenses especially on A&P costs. Unfortunately, due to the shift from a forex gain in 3Q15 to a forex loss in 3Q16, the company’s net profit was only IDR307bn (+14% q-q, +11% y-y) resulting in 9M16 net profit of IDR898bn (+3.2% y-y) with net margin dropping by 140bps.

Bahana comment: Looking ahead, we expect sustained volume growth and margins on MYOR’s ability to promote its new and existing product and maintain A&P cost below 11-12% of sales. BUY.

Dec 14,2016 07:58:00

Credit card business still slow The Indonesian Credit Card Association (AKKI) predicts that the credit card business will still be slow next year as the government requires credit card transactions to be reported to the tax authorities. Steve Marta, General Manager of AKKI anticipates single digit growth in the number of credit cards next year, approximately +3%yoy. Furthermore, he expects transaction volume to grow by +5%yoy. (Kontan)

Dec 14,2016 07:57:08

Ramayana: Nov’16 - ($RALS; Rp1,195; Neutral; TP:1,180)

  • Nov’16 sales grew by 0.8% YoY to Rp501.7bn, a weak achievement given low based 2015. This should give color that demand recovery is still muted so far.
  • Nov’16 SSSG booked at 1.8%, Java area booked the strongest growth for the period at 2.9% followed by Jakarta and ExJava at 1.4%/1.5% respectively.
  • Cumulative 11M16 sales of Rp7,426.8bn grew by +5.7% YoY, slightly below company’s guidance of 6.7% YoY. SSSG was 6.2%, in-line with management guidance of 6.5%-7.5% for the full year.
  • By division, Direct Purchase still book a strong growth at +11.8%yoy, while Supermarket sales show a weak performance at 0.5%yoy from 1% YoY in 10M16.
Dec 14,2016 07:56:10

Bank Permata: More Provision Expenses Anticipated ($BNLI; Rp545; Buy; TP:Rp690)

  • Contradictory to prior expectations, NPL will likely peak in 4Q16 as the bank is still in the process of de-risking its loan portfolio to ensure a cleaner balance sheet in 2017. We lower our TP to Rp690 and maintain our BUY recommendation as we expect improvement in asset quality to take place in 1H17.
  • Closer to the peak. In contrast to earlier expectations, NPL will likely peak in 4Q16 as the bank is still in the process of de-risking its loan portfolio. Management wants to ensure that the bank has a cleaner balance sheet, stronger risk appetite, and tighter risk management standards prior to entering the new fiscal year. Hence, taking these factors into account along with the slow economic environment, we increase expected NPL to 5.0% in 2016F from previously 4.8%, mainly due to reduction in the bank’s asset size. Furthermore, we expect loan growth to decline by -17%yoy in 2016F (previously at -12%yoy). We downgrade 2016F earnings by 49%, which translates to an expected net loss of Rp1.7tn in 2016F from previously Rp1.1tn.
  • Weak results likely to persist until FY16. BNLI reported unconsolidated net loss of Rp1.4tn in 10M16, -266%yoy, mainly due to increase in provision expenses. However, the bank managed to book flat PPOP growth as decline in operating income was offset by operating expense efficiencies. Meanwhile, loans declined -18%yoy (-3% mom) and deposits by -8%yoy (+1%mom) in the month of Oct. We expect BNLI to report similar results in the month of Nov and Dec as the bank continues to de-risk its loan portfolio.
  • Expect some changes in management. We anticipate seeing a major change in BNLI’s BoD next week post the bank’s General Shareholder’s Meeting, however details have yet to be disclosed. As announced last month, BNLI will hold its Extraordinary General Shareholder’s Meeting on Dec 13, 2016, at 2.00pm.
  • 2017, a brighter year. Even though 2016 has been rather gloomy, we anticipate a more optimistic year ahead with expected loan growth of 10.5% in 2017 (previously 9%), stable NIMs at approximately 4.1-4.2%, and improvement in CASA ratio. Furthermore, we expect significant decline in provision expenses to be the main driver behind 2017’s net income growth. Despite earnings downgrade, we believe BNLI will start 2017 with a much cleaner balance sheet. We maintain our BUY call with revised TP of Rp690, the counter is trading at 0.5x 2017F P/BV.
Dec 14,2016 07:54:08

Mayora Indah: 3Q16 Beats Expectation ($MYOR; Rp 1,595; Neutral; TP: Rp 1,550)

  • MYOR posted impressive growths despite declining margins, helped by decent sales growth and a surprise drop in ads and promotion spending to a 5-year low. The former is encouraging, but the latter is actually not.
  • Core profit beats forecast. A swing from Rp260bn FX gain in 9M15 to Rp185bn loss in 9M16 slashed net profit growth to 3% YoY in 9M16. Stripping this out, core profit jumped 53% YoY to Rp1,037bn, beating our forecast with 73% realization (vs. 2-year average of 66%). Two key drivers are: 1) Impressive 28% YoY revenue growth in 3Q16, bringing 9M16 growth to 25% YoY (versus management’s 18% revenue growth guidance for 2016); and 2) significant 55%/59% YoY/QoQ drop in 3Q16 ads spend, which is as a big surprise.
  • Revenue growth offsets weaker gross margin. Domestic sales (+35% YoY in 9M16) continued to drive growth, albeit from a low base (-15% YoY in 9M15). Weaker export sales growth is expected, partly due to stronger IDR, but the rebound in exports growth to 18% YoY in 3Q16 from -1% in 2Q16 helped overall momentum. That said, this manages to offset the negative impact from falling coffee (-2.4ppt QoQ) and confectioneries (-0.6ppt QoQ) in light of higher coffee and sugar prices, which have been reflected in the increase in raw material inventories of late.
  • Alarming drop in A&P spending. We see the 59% QoQ drop in ads & promotion (A&P) spending as alarming for a fastgrowing consumer company. It implies a 5-year low A&P-to-sales ratio at 4.7%, much lower than the 10.5% ratio in 1H16. As a comparison, the A&P spending growth for UNVR/ICBP was 0%/34% YoY. We have yet to clarify with the management on this.
  • 4Q16 should be showering with gifts. Sales are seasonally strong in Q4, especially for exports: IDR today has weakened by 119bps QoQ, and exports are half of sales.
  • Neutral call unchanged, waiting for more clarity. We maintain our Neutral call and Rp1,550 price target. Our DCF based price target implies 24x 2017F PE. We may review our numbers as we seek further clarification from the management.


Dec 13,2016 16:56:24

Indonesia Poultry sector news flash
There is an announcement by Ministry of agriculture that going forward, Day old chicken (“DOC”) price will be capped at IDR4,800 per bird while farm chicken price will be capped at IDR18,000 per kg. If implemented from the beginning of FY17, full year DOC margin will be slightly lower than FY16 (which DOC ASP at hovered at IDR5,100) and we will need to lower our FY17 estimate on DOC segment, although impact to FY16 number will be minimal.
The proposed regulation is subject to change depending on market condition. Further, we were told that poultry companies have yet to receive either soft/hard copy of the regulation and its detail.
Current DOC price is about IDR6,000/bird, versus the price ceiling of IDR4,800, we’ve performed a quick sensitivity to our current FY17F forecast on $CPIN, $JPFA and $MAIN, changing FY17F DOC ASP assumption to IDR4,800, net profit of the poultry companies will be roughly 10% lower across the board than our existing estimate, still growth but relatively flat, driven by 5% volume growth in feed and DOC.

Existing FY17F net profit
FY17F net profit after revision
Existing EPS growth
EPS growth after revision
-5% (due to non- recurring gain of IDR200bn in FY16)
Sector valuation after the revision is still undemanding. But the resulting relatively flat earnings growth compared with FY16 and Rupiah depreciation bias might deter valuation from reverting to mean, upside risk are dependent on stronger than expected volume growth, whether feed ASP will be increased by the producers to compensate their lower DOC margin. Will stay tuned and review our sector call, pending more development. (Norman Choong, CFA)

Dec 13,2016 16:55:27

Wijaya Karya Persero - Moving On Up

We maintain our BUY recommendation and adjust our earnings post rights issuance, which translates to a new TP of IDR2,950 (from IDR3,370, 24% upside) based on 22x FY17F P/E. Imminent signing of the HSR project and LRT Greater Jakarta is likely to boost Wika’s orderbook. Having said that, we increase our orderbook FY16F-17F estimates to IDR85trn and IDR103trn respectively. We also increase our FY17F NPAT growth to 68.4%, as the company plans to ramp up its investment in infrastructure projects in order to rake in a higher orderbook.

¨ Post rights issue. Wijaya Karya Persero (Wika) has successfully completed IDR6.1trn rights issuance including IDR4trn from the Government with a high subscription rate. Previously, it set the rights issue price at IDR2,180 and issued 2.82bn new shares. 30% would be allocated for working capital, while 70% is likely to be used for infrastructure investments, capital injection to subsidiaries and land bank enlargement. The company aims to increase its infrastructure investments to several sectors such as power plants, water pipe networks and toll roads. Hence, we estimate that the company ought to allocate IDR6trn capex to support its business. As a result, we see that its NDER would be around 0.3x next year. We see that the company ought to therefore still have a plenty of room to stretch its balance in order to capture higher growth.

¨ Orderbook. Kereta Cepat Indonesia China (KCIC) has reached an agreement to sign financial facilities with China Development Bank (CDB) by the end of this year. Hence, the IDR15.8trn High Speed Railway (HSR) project would likely be signed this month along with the IDR5trnLight Rail Transit (LRT) Inner City Jakarta project. This would boost Wika’s orderbook. Given those additional new projects, we upgrade our FY16F’s new contracts estimate to IDR50trn (Figure 5). We also see that potential new projects would be higher than our initial expectation next year due to its healthier balance sheet to support Wika’s infrastructure investments. Having said that, we increase our FY16F-17F total orderbook estimates to IDR85.5trn and 103.5trn respectively.

¨ Robust growth. We also see stronger growth after the rights issuance as orderbook would be bulking up. Furthermore, the company is targeting to recognise 20% of HSR contract value to revenue, while most of LRT Inner City Jakarta’s civil work ought to be completed next year to support Asian Games in August 2018 in Jakarta. Consequently, we expect Wika’s NPAT growth is likely to hit 68.4% YoY (Figure 5) and a stable gross margin at 11.8% in FY17F. Note that our lower EPS in FY16F-17F is due to the dilution from the rights issuance’s proceeds.

¨ BUY with TP of IDR2,950. After rights issuance, we maintain our BUY recommendation with a new TP of IDR2,950 based on unchanged P/E of 22x FY17F, its 3-year average historical forward P/E. The key downside risks to our call are a delay in the HSR project and slower-than-expected land acquisition. (Dony Gunawan)


Dec 13,2016 15:27:05

Surya Citra Media ($SCMA): Key takeaways from meeting with group CEO
Media: Indonesia
2017 Outlook
We recenly sat down for a coffee with Alvin Sariaatmadja, CEO of Emtek (Parent company of SCMA) and Commissioner of SCMA, our top media sector pick and a Bahana country top pick, to get more color on SCMA’s strategy for 2017 and onwards. Below are 5 key takeaways.
IEG (SCMA’s Content Arm) could be the future trump card   
IEG’s 51%-owned PT Screenplay Cinema recently produced a new Indonesian movie called “Headshot”, scheduled to premiere locally on 8 December 2016. The movie received good feedback during the premiere at the Toronto International Film Festival (TIFF) 2016, is rated 7.4/10 by IMDB, and features Iko Uwais, the famous martial arts actor who was the main star in “The Raid (2011)” and “The Raid 2: Berandal (2014)”. Alvin mentioned that Netlfix has already bought the online distribution rights for the movie for a good price. We believe this is a major stepping stone for SCMA to start unlocking the value of IEG and its content assets (also to gradually increase IEG’s revenue contribution from outside SCTV and Indosiar), with a similar trend going forward (see pages 20-21 for the valuation analysis of IEG in our in-depth media sector report, TV Broadcasters: Value emergence, 1 December 2016). It is also interesting that Singapore’s sovereign fund GIC (which also owns 8% in Emtek) has recently added to its Indonesia media play with a USD260m investment in Cinema 21 (Indonesia’s largest cinema operator), with Amit Kunal (Emtek’s Commissioner) also in charge of the investment.
One goes out (to Online Ads), but Another comes in (E-com. TV ads)
Alvin acknowledged that some foreign FMCG corporates have started allocating some of their ad budgets (<10%) to online platforms (Facebook, Google), which is not good news for TV. Nonetheless, he actually sees the gap being more than filled by E-commerce/OTA players like Tokopedia, Traveloka, and Bukalapak which are utilizing TV as a primary marketing medium to generate better site/apps traffic.
Cost Cutting and Likely Margin Expansion
The broadcast of Torabika Soccer Championship (TSC) will be retired next year, potentially reducing SMCA’s COGS by c.20%. We believe this is good news for the company, as TSC was clearly pricey (more expensive than Euro Cup 2016) but not a successful program. Also note that the British Premier League (BPL) broadcast will be completely gone in 2017. Management plans to replace the current sports line-up with Spanish La Liga, which is much cheaper, and expects the 2017E COGS to come down by 5-10%, against a high-single-digit top-line growth expectation, thereby translating to margin expansion. We expect the 2017 revenue to grow 8% (SCTV +6% and Indosiar +10%), vs. a 3% decline in COGS, translating to a gross margin expansion to 66% (from 62% this year), EBITDA margin expansion to 51% (from 48% this year) and EPS growth of 17% (vs. 0% in 2016E).

Dec 13,2016 12:25:03

PP London Sumatra Indonesia - Monetising The CPO Price Upcycle And Weakening IDR

We think Lonsum is a good counter to monetise the CPO price upcycle and weakening IDR. Its share price movements tend to follow that of CPO prices. We expect such prices to remain robust up to 1Q17. In addition, we think the strengthening USD should weaken further the IDR to IDR13,700 in FY17, which should increase Lonsum’s earnings during this period. We fine-tune our forecasts to factor in weaker FY17-18 IDR assumptions and reiterate our BUY call on this counter with a higher IDR2,050 TP (from IDR1,900, 17% upside).

¨ A weakening IDR should improve PP London Sumatra Indonesia’s (Lonsum) earnings. We think the USD ought to continue to strengthen, especially after a US Federal Reserve (Fed) rate hike. This strengthening USD trend is projected to result in the USD/IDR rate averaging IDR13,700 in FY17 (2016 YTD: IDR13,290). We think Lonsum should benefit from this weakening IDR trend, as its CPO selling price is linked to the movement of the USD. Based on our sensitivity analysis on its earnings to the USD/IDR rate change, every 1% the IDR weakens, Lonsum’s earnings improve by 3.4%.

¨ Monetising the upcycle in CPO prices. The movement of Lonsum’s share price tend to follow those of CPO prices. We expect such prices to remain relatively robust up to 1Q17. This is on the back of lower-than-normal palm oil inventory levels as a result of the time-lagged impact of El Nino. However, after 1Q17, we expect CPO prices to moderate. This would be on the back of a strong recovery in CPO output post El Nino.

¨ Palm oil production levels to recover in 2017. After Lonsum’s palm oil production is set to decrease by 17.1% YoY in FY16 from the the impact of El Nino, we estimate its production in 2017 to grow by 21.9% YoY to 481,000 tonnes. This would be mainly due to a recovery from the impact of El Nino.

¨ Low increase in minimum wage should make costs more manageable. Palm oil is a labour-intensive business, where employee expenses make up ~40% of total operating cash costs. We consider the Manpower Ministry’s announcement of an 8.25% increase in the minimum wage for 2017 to be low. This is compared with the double-digit percentage increases over the last five years. Meanwhile, fertiliser prices are relatively stable. Therefore, we expect production costs for plantation companies to remain manageable in 2017.

¨ Reiterate BUY with a higher IDR2,050 TP (from IDR1,900). We fine-tune our assumptions in order to factor in a weaker IDR by increasing FY17-18 earnings by 7.5%. Our IDR2,050 TP is based on an unchanged P/E target of 16.4x. Our TP implies EV/ha of USD10,518, which is within the range of the EV/ha of the local listed planters.

¨ Lonsum is our Top Pick among the domestic plantation counters. This is due to its undemanding valuation (its EV/ha of USD8,978 is as cheap as the replacement cost of USD10,000), clean balance sheet (with a net cash position of IDR696bn) and good stock liquidity. The key risk to our call is weakening CPO prices from the current strengthening price trend. (Hariyanto Wijaya, CFA, CPA)


Dec 13,2016 12:00:07

Indonesia Tobacco: December ex-factory price update: +1-3% m-m
Tobacco: Indonesia
Reiterating our preference for HMSP on its strong brand equity 
According to our analysis, HMSP should face less ASP adjustment than GGRM next year due to cost pressure. ASPs for HMSP’s A Mild (c.60-70% of its total clove machine-rolled cigarette volumes [SKM]) are up by IDR124/stick YTD, vs. cost inflation of c.IDR97/stick. Given that A Mild has high brand equity, HMSP has managed to only lose 3% market share, while having a 13.5% ASP increase YTD despite aggressive pricing by competitors RMBA (Lucky Strike Mild and Dunhill Mild) and GGRM (Surya Pro Mild). Also, RMBA is doing a year-end promotion: IDR400/pack discount for Dunhill Filter and Lucky Strike Mild 16 and IDR300/pack discount for Dunhill Mild 20/16 and Lucky Strike Mild 12. Previously, we had expected GGRM to regain its earnings growth momentum once the company starts to catch up on price adjustments for its Surya Pro Mild in 2017. However, we see competition remaining intense, forcing GGRM to keep Surya Pro Mild ASPs low. Hence, the cross subsidy that GGRM is doing right now should continue, leading to a drag on its earnings.

Sensitivity analysis: GGRM earnings more sensitive to ASP changes
In order to quantify the price adjustment’s impact on the bottom line, we have conducted a sensitivity analysis for every 1% change in ASP. As almost 90% of GGRM volumes are from SKM, the company is more sensitive to ASP changes than HMSP (exhibit 8). We note that Surya 16 contributes c.40-50% to GGRM’s SKM sales volume, International 12 30-35%, and Surya Pro Mild c.10-15%. In other words, each IDR10/stick of additional profit to Surya 16 or International 12 could be used to cross-subsidize Surya Pro Mild by IDR30-40/stick. On the other hand, HMSP’s A Mild contributes c.70% to total SKM volumes, with a 12-stick pack representing about a fifth of total A Mild volume, slightly lower than U Mild’s sales volumes. Thus, every additional IDR10/stick profit at A Mild 16 could be used to cross-subsidize A Mild 12 or U Mild by IDR20-25/stick.

December ASP update: up 1-3% m-m at GGRM, RMBA and Djarum
Unlike last year, GGRM is taking a more cautious pricing approach. Effective 19 December 2016, GGRM plans to raise its Surya 16 ASP by 2.2% (YTD: +6.4%) to IDR1,153/stick, International 12 by 1.4% (YTD: +6.8%) to IDR1,175/stick, Surya Pro Mild by 2.6% (YTD: +10.1%) to IDR750/stick, and GG Merah by 2% (YTD: +7.3%) to IDR854/stick. We calculate that GGRM would need to pass on another IDR83/stick next year to maintain its margins (exhibit 5). Note that Surya Pro Mild was previously selling at par with Lucky Strike Mild 16 (IDR731/stick). Effective 1 December 2016, RMBA increased its Lucky Strike Mild 16 ASP by 3.4% to IDR763/stick, the first time since it was launched in April 2016. However, RMBA is having a year-end promotion until 19 December 2016 to sell at November old prices (IDR300-400/pack discounts). Thus, from 19 December 2016 RMBA will then follow the new price schedule (exhibit 10). HMSP, on the other hand, has not announced an ASP hike in December 2016. However, YTD the company has increased its ASPs for A Mild 16 by 12.4% and Dji Sam Soe 12 by 5.1%, more than enough to offset cost inflation in 2016. In addition, Djarum recently announced ASP increases for a majority of its products, effective 19 December 2016, with the key products being Djarum Super 12 +1.1% (+9.2% ytd), LA Bold +1.3% (+23.7% ytd), and Djarum Coklat +1.5% (+10.3% ytd).
Recommendation: HMSP is our top pick on better margin preservation
As RMBA still offers huge promotions, we prefer HMSP given that it has a higher brand equity in the Mild segment than GGRM.  Thus, we reaffirm our BUY call on HMSP, but slightly lower our 12-month TP to IDR4,600 (from IDR4,700), based on an unchanged 2017F PER of 40x following the 2% reductions to our 2017-18F earnings.  However, we believe GGRM’s valuation gap over HMSP remains compelling at these levels, with the shares trading at a 2017F PER of 17x, a 10% discount to their past-5-year trading PER. Therefore, we reaffirm our BUY call on GGRM and maintain our 12-month target price of IDR81,000 based on a 2017F PER of 21x, a 20% premium to its past-5-year PER, as we see margin improvement ahead from ASP hikes (exhibit 5). The risk to our call on HMSP would be adverse government policy on excise and health awareness. The risk to our call on GGRM would be more pricing competition in the Mild segment, especially from RMBA for its Lucky Strike Mild and Dunhill Mild, making it more difficult for GGRM to increase its Surya Pro Mild’s ASP.


Dec 12,2016 09:36:49

Indonesia to freeze new concessions

  • Draft of moratorium on new oil palm concessions has reportedly been finalised
  • In April 2016, Indonesian President had instructed moratorium on new oil palm concessions
  • Government is focused on forest fire prevention, peat land protection, equitable distribution of land
  • Issued concessions should lie outside the scope of this draft, but are subject to stricter peat land and high carbon stock (HCS) exclusions


Moratorium on new oil palm licenses to be issued
According to Investor Daily newspaper today, a spokesman for the Ministry of Environmental and Forestry had revealed that the government had finalised a soon-to-be-issued moratorium of new oil palm concessions. This new underlying regulation will serve as basis for moratorium policy. According to the article, key points addressed in the new regulation involve:

  1. Shift in focus away from expansionary mode to yield improvement through better seeds
  2. Protection and management of peat land ecosystem
  3. Forest fire prevention
  4. More equitable distribution of land between corporations and smallholders

Policy was first communicated in April 2016
To recap, Indonesian President Joko Widodo in April 2016, had instructed a freeze on new oil palm concessions to reduce its impact on the environment. In our flash note dated 15 April 2016, we also highlighted that Indonesian Agriculture Minister was quoted as saying that Indonesia needs to invest more in sugar, corn, and cattle while existing oil palm concessions could be more than twice as productive.

We do not expect the moratorium issuance to impact certification process of issued concessions (typically by provincial governments and regencies), as new regulations are not applied retroactively. However, out of the existing Izin Lokasi yet to apply for leasehold titles, we believe there would be a strict carve-out on peat land and high carbon stock (HCS) hectarage – thereby necessitating longer leadtime for environmental impact study (in addition to land compensation process) prior to new planting.

We have seen slower new plantings this year, as available and suitable land has dwindled anyway, in addition to compliance with Roundtable on Sustainable Palm Oil (RSPO) strict new planting procedure, licensing delays as well as compensation issues. Planters have guided for a speedier process next year, as they have completed most of the required procedures in the current year. While we have imputed higher FY17F expansion in terms of hectares, we will re-assess these targets in consideration for any hurdles under the soon-to-be-released moratorium on new oil palm concessions.

Planters with fully planted concessions would only be able to expand through acquisitions of estates with Izin Usaha Perkebunan (IUP) licences issued prior to the 100k ha cap (listed companies are exempt from this cap if majorityowned by the public). For this reason, we expect M&A deals to increase next year.

The moratorium would not have an immediate impact on palm oil supply (given aggressive new planting up to 2012), but would force established planters to expedite replanting with super seeds, the cost of which would temporarily affect their cash flow and earnings before the replanted areas start to mature. We maintain our forecast, TP, and ratings for stocks under our coverage until the final regulation is issued. Our top picks for the sector are Genting Plantations (GENP; RM12.40 TP) and Bumitama Agri (BAL; SGD0.95 TP).

Dec 09,2016 22:09:12

Pharmacy: Govt targets to reduce raw material import up to 40% in the next 5 years

Through the development of raw material plants. $KAEF currently is in the process of constructing its 2nd stage pharmacy salt with capacity of additional 4,000tons (from previous 2,000tons). The final product is sold at IDR13,500/kg (vs imported salt pharmacy at IDR20,000/kg). In the near term, Govt plans to develop pill and capsule raw material which is made of cassava. Up to now, Indonesia imports pill and capsule raw material from Australia with total demand of 10,000tons/year.

(Source: Bisnis Indonesia/Trimegah)

Dec 08,2016 22:21:49

AKRA: Eyeing lucrative retail market
Key points from Janeman’s report below:
1)   AKRA’s tie-up with British Petroleum (BP) to partner in retail fuel stations and jet-fuel distribution has similarities with AKRA’s tie-up with Vopak in 2007, when it successfully doubled its fuel-tank capacity. We see potential in this tie-up as the retail market is shifting toward higher-octane fuel.
The math is simple: the Indonesian petrol-station market is only about 5,704 outlets compared to the population of 4-wheelers of 21m units in 2014.
2)   We also see infrastructure development at JIIPE as a key differentiator among its peers.  The company is building its 23MW power plant and set to start on Aug 2017. It also managed to get approval from the government to extend the Legundi-Bunder toll road to Manyar, which will connect directly to JIIPE.

We keep our 12-month target price at Rp8,400 and reiterate our BUY as the stock looks relatively cheap.  Our earnings growth of ~20% is attributed to the following assumptions from AKRA’s businesses.


Dec 08,2016 12:23:19

CIMB Niaga ($BNGA) to increase infrastructure loans

BNGA plans to increase the contribution of infrastructure loans in its loan portfolio in 2017. The bank is optimistic that infrastructure loan growth will be higher than over all loan growth in the upcoming year. Chief Corporate Banking of BNGA Rusly Johannes states that they expect consolidated loan growth to be in the high single digit or low double digit range in 2017. (Bisnis Indonesia)

Dec 08,2016 12:22:47

BCA ($BBCA) to review lowering interest rates next year

BBCA states that it will be quite difficult to lower interest rates during the last few weeks of the year, the bank will review lowering interest rates again next year. As per Nov16, corporate lending rates have declined by 50bps to become 9.75% over the past year while retail lending rates have declined by 100bps to 10.5%. Meanwhile, in the consumer segment, mortgage rates have declined by 25bps to become 10% while non-mortgage lending rates have declined by 195bps to become 6.68%. (Bisnis Indonesia)

Dec 08,2016 12:22:09

Indonesia Toll Road Authority (BPJT) to postpone 2 toll road sections’ tenders

Head of BPJT Tender Committee, Eka Pria Anas, stated that BPJT would postpone Probolinggo – Banyuwangi (170.4km; Rp18.4tn) and Semarang – Demak (24km; Rp2.96tn) sections tender to early 2017 as the location has yet been decided by the governor. Note that 3 toll road business entity (BUJT) passed the prequalification for Probolinggo – Banyuwangi section, namely Enka Insast Ve Sanayi (Turkey), Jasa Marga ($JSMR)’s consortium (with Waskita Toll Road and Brantas Abipraya), and Pembangunan Perumahan ($PTPP). While 2 BUJTs passed the prequalification for Semarang – Demak section, namely JSMR’s consortium (with Waskita Toll Road) and $PTPP’s consortium (with $WIKA). (Bisnis Indonesia)

Dec 08,2016 11:47:12

Tax revenue realization 71% from target

As of Nov16, tax revenue realization, excluding customs and excises, have reached Rp965tn (71% of target, 10.9% MoM, 10.0% YoY). Although the realization is still minimum, the government believes that YE16 tax revenue shortfall is still in line with estimate of Rp215tn (Kontan)

Dec 08,2016 11:46:12

Acset Indonusa: Meeting Takeaways - Joining the Infrastructure Fray ($ACST)

ACST’s determination to partake in infrastructure projects seems adamant on the back of Astra Group’s full support. Toll road and power plant projects would load up the conventional building projects, bringing 2017-18F total new contracts target to Rp8tn. ACST is currently trading at 13.4x 2017F PER, based on consensus numbers.

Performance updates. ACST booked 9M16 revenue of Rp1.3tn (+51%yoy), supported by 3 major projects which accounted for 49% of total 9M16 sales, namely West Vista Residences (Rp236bn), Indonesia One (Rp205bn), and District 8 (Rp192bn). On the bottom line, ACST reported Rp40bn net profit in 9M16 (+210%yoy), driven by higher finance income of Rp10bn (+613%yoy) post the completion of the Rp600bn rights issue in Jun-16. Margin-wise, ACST booked 9M16 GPM of 15.7% (9M15: 16.4%) as sales portion from higher-margin foundation works dropped to 24% (9M15: 30%). Note that 3Q16 sales dropped to Rp347bn (-29%qoq; +16%yoy) as Lebaran holiday hindered construction progress.

Awaiting year-end surprise. In 11M16, ACST was able to book Rp2.5tn of new contracts with notable projects such as Indonesia 1 (Rp1.8tn) and Millennium Centennial Center (Rp371bn). Nevertheless, the management still believes to achieve its FY16 new contracts target of Rp3.5tn (+13%yoy) from several infrastructure projects. Based on media sources, Astra Group has several ongoing infrastructure projects under its belt, such as 2x1000 MW coal-fired Tanjung Jati Power plant and four toll road sections (Tangerang – Merak, Kertosono – Mojokerto, Kunciran – Serpong, and Serpong – Balaraja).

What’s next? Going forward, the management aims to achieve: 1) Rp4.5tn of new contracts in 2017, mainly supported by infrastructure projects; 2) Net profit growth above 15% through higher sales growth; however, ACST acknowledged GPM would slightly decrease as the company partakes in a higher number of infrastructure projects; 3) Lower cost of debt; the management stated that ACST is now able to obtain 7-8% rate for working capital loans from the previously 12- 14.5%; in addition, ACST has repaid its shareholders' loan, which has LPS + ~2% rate; 4) Better cash management system; ACST plans to continue utilizing the vendor financing scheme to increase its account payable days (9M16: 81 days; 3Q16: 106 days). Therefore, we could expect the company to maintain its negative cash conversion cycle days (9M16: -51 days; 3Q16: -64 days).

Dec 08,2016 11:10:43

LPPF: Discovering Value & Store #148

Investors are no strangers to LPPF - a department store catering to a fast growing middle class, Matahari Department Store is positioned for the sweet spot - reason why the company always catches the investors’ eye.
But the stock price has had a tough few months (~30% correction) after reaching all-time highs back in July (thanks to Lebaran seasonality where the company reaps peak sales).  
Robert explains the price correction for context before turning positive on the stock:

4 main reasons for the correction:

So why is it time to BUY now?
Pictures (or charts) > 1000 words…

Value?  At 17x.. for sure…
Liquidity?  Aplenty…  LPPF is a top 20 MSCI Indonesia constituent.
LPPF is current trading at 3 standard deviation below 3yr historical average valuation - we argue that share price has priced in all the negative news: 3Q16 weakness & additional investment in  
And while we also do not like LPPF’s additional investment in (though fair to point out that some investors DO LIKE IT), the company’s FCF is more than enough to cover it.
So what’s the catalyst?  Leveraging private labels could become big for LPPF..
Behold… store number 148... Nevada Store – Matahari’s first-ever private-label outlet.

Located in Plaza Semanggi in Central Jakarta, Nevada Store is LPPF’s 148th store offering ONLY LPPF’s private-label products.  We believe this is LPPF’s experiment or pilot project to test the market on its Nevada brands.
Robert points out in his BUY call that one way for LPPF to reduce rising e-commerce risk is by increasing direct purchase contribution to its overall mix.  Out of LPPF’s direct purchase brand, Nevada takes the lion share at 28% last year.
Chart of the day: Matahari Dept ($LPPF) sales from direct purchase steadily increasing 

Note that LPPF’s gross sales from direct purchases has increased steadily by about 2% every year.   In 2010, direct purchase sales was at 30%.  Today that number is closer to 40%.  Retail analyst Robert Pranata forecast that direct purchase vs. consignment will be evenly split at 50% in 2020.
Robert believes LPPF’s shift towards direct purchase will likely accelerate going forward though he recognize there is a trade-off as LPPF’s balance sheet will likely be heavier due to higher inventory, but margins to gross sales will increase as well as direct purchase has higher GP margins.  In addition, slightly heavier balance sheet is better than being cannibalized by e-commerce.
Yield play?
Even with the higher direct purchase contribution and inventory day assumption, LPPF still have ample cash even factoring in its additional Rp590bn (USD45mn) investment in  Robert points out that a 100% dividend payout ratio next year will not add any burden to LPPF’s balance sheet, although there’s NO official guidance from the company pointing to the 100% payout ratio.

Robert does adjust his numbers post 9M16 result - mainly reducing growth assumption, which resulted in lower sales growth.  He now expects 6% SSSg for 16CL (from 8% previously) and 7% SSSg for 17CL (from 10% previously).  Margins were, however, slightly above our assumptions for 9M16.
These changes resulted in 2% earnings upgrade in 16CL and 2% earnings decline in 18CL.
Given the recent sharp correction, we see attractive risk-reward on LPPF for the next 12 months - upgradding LPPF to BUY (from UPF) with TP of Rp17,500.  This is based on 19x 18CL PE, -2.5 std dev below LPPF’s 3-year mean.

Dec 06,2016 15:27:18

On The Road with RHB: Life In The Big Durian
Having lived and worked in Jakarta as an expatriate for almost three years, I am now sharing my understanding of the city and its people. This report aims to cover some distinctive features of Indonesia’s capital, as well as recent developments. Other than the notorious traffic jams (which I have learnt to get around), Jakarta has a relatively high level of customer service and hospitality. Consumers are keen on lifestyle spending and pretty open to new lifestyle trends. As such, I believe Jakarta is truly a land of opportunity for businesses.

¨ Why the nickname? The city is regarded as the New York City (ie the Big Apple) of Indonesia. Why the “durian” moniker? I find that this is a great comparison – for it is exactly how living in this city feels. It seems thorny and intimidating from the outside – possibly due to the traffic jams, seemingly disorganised planning of the city, and frequent demonstrations prior to the Jalan Thamrin boom incident. On the inside, however, the durian fruit is tasty – Jakarta has a high level of customer service in general, and its people are welcoming and polite. The city also has many spots offering good artisan coffee and food, with business owners and professionals even claiming that it is easier to make money here due to relatively lower competition and the scarcity of talented workers respectively.

¨ Modern lifestyle is more expensive. Based on my observations, prices of the same products and food items are at least 15-20% higher in Jakarta compared to Kuala Lumpur and Singapore, after currency conversion. Some attribute this to Indonesia’s previous years of high inflation and excessive pricing by sellers. Nevertheless, the Jakarta residents (Jakartans) whom I know, are not that price-sensitive – especially when it comes to lifestyle products.

¨ Vibrant F&B scene. Jakartans, especially those who stay in the suburbs, tend to dine in malls or dining streets while waiting for rush hour to pass. The food and beverage (F&B) scene here is vibrant and competitive, with a few privately-held groups dominating the industry. These are Ismaya Group, The Union Group, and Holycow! Group, which have created original and unique restaurant chains.

¨ Full of contrasts. More often than not, clusters of slums are found 1-2 streets behind fancy shopping malls or skyscrapers in the city. For instance, behind Grand Plaza Indonesia, one of Jakarta’s largest and most prestigious shopping complexes, there is Tanah Abang, a huge slum area that also houses the city’s largest wet market. According to my colleagues, this odd disparity is attributed to the rapid development of office towers and shopping malls during the commodities boom 10 years ago – which also happened in tandem with developers encountering difficulties in acquiring land from local residents.

¨ Rush hour traffic jams have improved. Traffic jams area part of day-to-day living in Jakarta, due to the fast-growing number of vehicles on the road. The construction of new roads and the development of the public transportation system have not yet caught up with vehicle growth. The Castrol Magnatec Stop-Start Index even named Jakarta as the city with the worst traffic jams in the world last year. The truth is, traffic here has improved, with the introduction of the “odd-even” number plate regulation.

¨ The city revolves around macet. Macet (the word for traffic jams), combined with the lack of a developed public transportation system, has led to Jakarta having one of the best private transportation systems in ASEAN. Taxis are cheap, easily available, and most run on meters. Most taxi drivers are polite and friendly, too. It is common for a white collar worker to hire a driver, so they can concentrate on something else other than the road while stuck in traffic. On top of that, “ojek” or motorcycle taxis, are also a popular means to get around traffic. To avoid macet, one can even order products, buy groceries, and arrange for house cleaners via online applications. (Norman Choong CFA)

Dec 06,2016 15:22:45

PPRO planning to issue IDR1t bond

PT PP Properti ($PPRO) is planning to issue IDR1t bond in 2017 to fulfill capex needs. The company is also planning to issue MTN for refinancing purposes. Finance Director of PPRO stated that bond issuance will most likely be executed in 2H17. (Bisnis)

Dec 06,2016 15:21:50

London Sumatra – Still enjoying the breeze ($LSIP) (by

·         Share price has passed our previous TP, but we think that there is still upside window as we expect CPO price to remain strong until 1H17, supported by strong USD and tight inventory supply. We expect tight inventory level to continue as we approach the seasonally weakest production period in 1Q17.
·         Besides CPO price, we also see that rubber price outlook is getting better, helped by China’s surging demand. China’s truck and automotive sales has surged for the past months, which lead to decrease in its rubber stockpiles. Coupled with the top rubber producers controlling their exports, we believe that the global rubber price recovery is sustainable. We also see improving automotive and heavy equipment sales domestically.
·         In light of these positive factors, we reiterate BUY and raise our TP to IDR2,100 based on USD9,500 EV/planted ha, -0.5SD from its LT mean compared to -1SD previously. Historically, LSIP can trade at +1SD during commodity boom. 4Q16 results should be the best quarter for 2016, which can boost optimism for share price for the short-term. Biggest risk to note is the CPO price outlook towards 2H17, where output seasonally peaks.

Dec 06,2016 15:20:19

LPKR books IDR800bn from its asset sales

Lippo Karawaci ($LPKR) has managed to secure IDR800bn from its Lippo Mall Kuta sales. This sales will be booked to LPKR’s marketing sales at the end of this year. The mall has been sold to LMIR Trust. (

Bahana comment: This should bring LPKR’s 11M16 marketing sales to IDR1.5tn since the company only booked IDR754bn of marketing sales in 9M16.

Dec 06,2016 15:19:30

PTBA: In negotiations with PLN regarding coal price

Tambang Bukit Asam ($PTBA) plans to revise its coal-sale contracts with Perusahaan Listrik Negara (PLN) next year in regards to the rising trend in coal prices. The company is currently in negotiations with PLN for a contract revision and expects there will be changes in the contracts starting from 2017. (

Dec 06,2016 15:18:51

BBCA books repatriated funds of IDR10tn

Until early December 2016, Bank Central Asia ($BBCA) has booked repatriated funds of IDR10tn, which increased from IDR8.2tn in third week of October. (Kontan)

Dec 06,2016 15:18:07

Coal: Coking coal prices to continue to rise

The prices of coking coal has risen 301% ytd and is expected to continue to rise if China decides to stop importing the high-grade coal from North Korea. The United Nations Security Council has just imposed sanctions on North Korea, limiting its annual coal exports to 7.5mt, after the country conducted a fifth nuclear weapons test. North Korea has been supplying 18.5mt (+12.8% y-y) of coking coal (used for steel production) to China from the start of 2016. However, due to recent sanctions imposed to the country, China may possibly limit its import from the country and, hence, drive coking coal prices further up. (

Dec 06,2016 15:15:54

Infrastructure: Jakarta-Cikampek II Elevated toll road has been signed

The Jakarta-Cikampek II Elevated toll-road project owned by Jasa Marga ($JSMR) has been signed and is targeted to be completed in 2019. Moreover, this IDR16tn toll road is expected to relieve traffic congestion in the current Jakarta-Cikampek toll road. (

Dec 06,2016 15:15:01

Media: GIC buys USD260.7m stake in Cinema21

Singapore sovereign wealth fund GIC is investing IDR3.5tn (USD260.7mn) in Cinema 21, a company that operates Indonesia's biggest cinema chain, marking the latest foreign investment in the country's burgeoning movie industry. GIC's partnership with PT Nusantara Sejahtera Raya (NSR), which runs Cinema 21, Cinema XXI and The Premiere brands in Indonesia, will expand "NSR's cinema footprint nationally", according to a joint statement on Monday. (Reuters).

Bahana Comment: Note that GIC also owns a c.8% stake in Emtek Group ($EMTK), parent company of TV Broadcaster and content company of Surya Citra Media ($SCMA). GIC has been increasing its investments in Indonesia in the past year, including collaboration with Mega Manunggal ($MMLP), Intiland Development ($DILD).

Dec 06,2016 15:12:56

Retail: Apple to invest IDR1.1tn in Indonesia

The TKDN regulation, which stipulates 30% of 4G phones be made in Indonesia, has not been particularly successful in attracting foreign investment. Nonetheless, Apple has stated that the company is interested in investing to the tune of IDR1.1tn to open a research and development center. 40% of the investment must be achieved in the first year and 100% in 3 years to fully comply with the TKDN regulation before the company could start selling 4G smartphones. Note that Blackberry has worked with Tiphone Mobile Indonesia ($TELE) to manufacture and distribute Blackberry handsets under PT Blackberry Merah Putih. (kontan)


Dec 06,2016 15:11:26

Lower cigarette production limiting customs and duties revenue

Lower cigarette production has limited the customs and duties revenue, which the government expects to reach IDR178tn by year end (10M16: IDR115.6tn). (Kontan)


Dec 06,2016 15:09:55

Indonesia Media: November 2016 TV Audience Shares
Consumer Discretionary: Indonesia
Winner of the month: VIVA, Trans, SCMA...  Loser: MNCN
Nielsen’s TV audience share data for the month of Nov-2016 was recently made public. We believe it is important to monitor the monthly TV audience share movement, as a laggard indicator of future adex revenue. In Nov-2016, MNCN lost a notable size of its market share to VIVA, Trans, and SCMA. Bahana is Overweight on Indonesia Media (TV Broadcasters: Value Emergence, 1 December 2016), with SCMA as our top media pick and among our top 10 country picks, now trading at 20.5x FY17E PE with 17% EPS growth and 48% ROE. We also have a Buy rating on MNCN, currently trading at undemanding 13x FY17E PE with 12% EPS growth and 16% ROE.

MNCN: Notable market share decline in RCTI and Global TV

MNCN booked in Nov-2016 a Prime Time (6-11pm) audience share of 39.9%, down 4.5ppt MoM from 44.4% in Oct-2016. This was fueled by RCTI (-3.1ppt to 27.7%), MNC TV (-0.1ppt to 7.9%), and Global TV (-1.3ppt to 4.3%). RCTI lost significant market share in November on the back of intensifying competition from Indosiar’s D’Academy Asia S02 and ANTV’s Indian dramas. RCTI managed to maintain the no.1 position, MNC TV remains at no.5, and Global TV remains at no.8.  

SCMA: Seeing promising recovery, thanks to Indosiar, as expected
SCMA booked in Nov-2016 a Prime Time audience share of 25.7%, up 1ppt MoM from 24.7% in Oct-2016. This was fueled by Indosiar (+1.2ppt to 14.2%) which managed to gain good market share, with D’Academy Asia s02 starting to kick off in the early stages, while SCTV was flat (-0.2ppt to 11.5%) with only 1 prime time drama doing well (“Pangeran s2”; translate to “Prince s2”) in the daily top 10. This is in line with our expectation that SCMA’s prime time audience shares have bottomed in 3Q16, with gradual market share improvement expected to reach 30%+ by 2Q17. Both SCTV and Indosiar managed to maintain their no.4 and no.3 positions respectively.

VIVA: Back-to-Back Indian dramas continued to perform well
VIVA booked in Nov-2016 a Prime Time audience share of 18.5%, up 1.3ppt MoM from 17.2% in Oct-2016. This was fueled by ANTV (+0.9ppt to 14.3%) and TV One (+0.4ppt to 4.2%). ANTV’s back-to-back Indian bollywood dramas from the afternoon (Anandhi, Gopi) to the evening (Lonceng Cinta, Mohabbatein) continued to do well, with TV One gaining some traction with good news coverage on the heated 4Nov2016 demonstration. Both ANTV and TV One managed to maintain their no.2 and no.9 positions respectively.


Dec 05,2016 15:06:22

KRAS: Groundbreaking integrated warehouse development

A subsidiary to Krakatau Steel ($KRAS), Krakatau Bandar, together with Sentral Grain Terminal (SGT) are currently undergoing groundbreaking for the development of an integratedwarehouse to increase efficiency and effectiveness of unloading cargo services located in Cigading Port, Cilegon-Banten. The total investment required is estimated to be around USD40mn with expected project IRR of above 20%. (

Dec 05,2016 15:05:38

TAXI: BOD and BOC members resign

CEO and president commissioner of Express Transindo Utama ($TAXI) as well as several commissioners and directors reportedly have submitted their resignation letters on 2 December, according to Handy Prawira, TAXI’s corporate secretary. The resignations will be effective starting 19 January. Moreover, TAXI’s investor relations manager, David Chen, stated that the changes in the BOD and BOC composition are required to revamp TAXI’s business strategy. (IQPlus, Company)

Dec 05,2016 15:04:32

Government increases stake in GIAA

Garuda Indonesia ($GIAA) has obtained IDR600bn (USD44mn) state-capital injection which will be implemented through a non-preemptive rights issuance (PMNTHEMETD) by adding 17.6mn shares at a price of IDR476/share. Through this transaction, the government’s ownership in GIAA would increase from 60.51% to 60.54%. Based on the schedule, the new shares will be listed on 9 December. We expect minimal dilution impact on the back of this transaction. (, Kontan, Bahana)

Dec 05,2016 15:03:37

Ciputra Group delays EGM plan to 27 December

Ciputra Group has delayed its EGM plan to 27 December from 2 December previously. At the EGM, the group will ask for shareholders approval to merge Ciputra Development ($CTRA), Ciputra Surya ($CTRS) and Ciputra Property ($CTRP) in order to simplify the group’s business structure and its liquidity in the stock market. Separately, CTRA has allocated IDR710.84bn to buy back CTRP/CTRS shares if shareholders decided not to approve the planned merger. (, Kontan)

Dec 05,2016 15:01:58

SMGR increases production by 10-11%; projects industry growth of 5%

Semen Indonesia ($SMGR) will increase production by 3-4mn tons to 31.5-32.5mn tons, or up by 10-11%, by the end of 2017. Being aware of the oversupplied domestic market, Semen Indonesia is targeting more export volume to neighboring countries, such as East Timor. Additionally, SMGR’s Secretary, Agung Wiharto, reported that domestic cement sales next year are expected to remain sluggish with only 5% y-y growth, pulled down by weak retail demand in 2017. This 5% growth is in line with Bahana’s expectation. (Kontan, Bahana)

Dec 05,2016 15:00:51

TBIG aims to add 2,500 tenants in 2017

Tower Bersama Infrastructure ($TBIG) targets to add 2,000-2,500 tenants in 2017 and 2,000 tenants in 2016. Furthermore, TBIG has allocated IDR1-1.25tn to build 1,000-1,250 towers in 2017. (Kontan)

Dec 05,2016 14:59:23

TLKM to expand cross-country cable network

Telekomunikasi Indonesia ($TLKM) is planning to expand its submarine-cable network across the country to support international connectivity. Bastian Sembiring, Vice President Wholesale and International Network Services of TLKM, stated that the submarine cable investment requires IDR600m per km and recently TLKM has owned 10 international submarine cable networks, of which all investment sources were own funding. (Kontan)

Dec 05,2016 14:56:45

Automotive: Honda saw higher 4W sales than full-year target

In November 2016, Honda Prospect Motor (HPM) managed to book 4W sales amounting to 16,501 units, +10.6% y-y but -3.4% m-m, resulting in 11M16 sales of 185,438 units, +25.8% y-y, (2016 sales target: 180,000 units). Furthermore, as of 11M16, the Honda 4W sales are mainly coming from Mobilio (37,466 units), Honda BR-V (35,810 units), Honda HR-V (33,211 units), Brio Satya (33,027 units) and other brands. (Bisnis Indonesia)

Dec 05,2016 14:53:10

SMEs income tax to be cut from 1% to 0.5%

The government plans to cut income tax for SMEs to 0.5% from 1%. Suahasil Nazara, MoF’s Fiscal Office Head stated that the plan is still being discussed internally with the MoF. (Kontan)

Dec 05,2016 14:52:43

Kadin to propose tax compensation for repatriated assets

Indonesian Chambers of Commerce and Industry (Kadin) plans to propose tax compensation for taxpayers who would like to repatriate their assets, but had already declared their foreign assets previously. In the first period, tax payers must paid 2% for repatriated assets and 4% for foreign assets declaration. Thus, Kadin proposes that tax payers should be eligible to obtain the 2% tariff difference. (Koran Tempo)

Dec 05,2016 14:50:19

Minggu kemarin Italia melakukan referendum untuk reformasi yang diusulkan Perdana Menteri, Matteo Renzi. Matteo Renzi mengusulkan mempersingkat birokrasi (tanpa harus meninta persetujuan Senat) supaya bisa memimpin Italia dengan lebih mudah dalam membereskan krisis finansial yang berkepanjangan. Karena trauma dengan perpolitikan di Perang Dunia 2, rakyat enggan memberi kekuasaan yang lebih besar ke PM. Hasilnya, 59% voters menolak rencana tersebut. Dan PM Italia Matteo Renzi menyatakan mengundurkan diri.
Akibat dari gagalnya reformasi ini, menurut pakar adalah timbul ketidakpastian ekonomi hingga membuka peluang krisis perbankan di Uni Eropa. Reformasi dibutuhkan untuk menyelesaikan permasalahan kredit bermasalah sebesar 356 miliar euro (Rp 5.340 triliun). Dan perbankan Italia setidaknya butuh 20 miliar euro (Rp 300 triliun) untuk suntikan modal dalam upaya bersih-bersih utang bermasalah. Gagalnya reformasi bisa memicu kepanikan investor untuk kabur dari negara tersebut yang membuat perbankan setempat makin kesulitan. Alhasil, Euro dibuka anjlok 1,50% ke level terendah pagi ini di 1.0507 terhadap US$.

Dec 05,2016 14:49:48

Industri makanan dan minuman nasional +9,82% setara dengan Rp192,69 triliun pada kuartal III 2016. Kenaikan disebabkan oleh masih tingginya permintaan masyarakat kelas menengah ke atas untuk produk-produk tersebut. Demikian dikatakan oleh Direktur Jenderal Industri Agro Kementerian Perindustrian, Panggah Susanto.


Dec 05,2016 14:43:26

MPMX menjajal pasar LCGC melalui merek Datsun dengan target penjualan meningkat sebesar 5% di tahun 2017 dan target akan disesuaikan terus dengan kondisi ekonomi Indonesia. Untuk menopan strategi yang agresif ini, maka PT. Nissan Motor Indonesia menambah 10-15 dealer baru untuk layanan ketersediaan suku cadang.


Dec 05,2016 14:42:37

GIAA memutuskan harga konversi setoran aset pemerintah ke saham pada harga Rp476. Pada APBN 1982/83, pemerintah melalui Departemen Perhubungan menyerahkan engine test cell ke GIAA yang dibeli pada harga Rp8,4 miliar. Kini aset tersebut dikonversi menjadi tambahan setoran modal pemerintah.


Dec 05,2016 14:42:02

Emiten Industri Properti Ingin menambah jumlah tanah di tahun 2017 karena optimis terhadap ekonomi Indonesia kedepannya. Emiten yang memiliki pandangan tersebut adalah $SSIA , $DMAS dan $KIJA .

Dec 05,2016 14:41:26

Bank diberi waktu 12 bulan untuk masa transisi Pemangkasan Bunga Kartu Kredit  dari 2.9% per bulan menjadi 2.5% per bulan untuk menyesuaikan perubahan peraturan ini. Hal ini disebabkan pemangkasan dapat berdampak menurunkan pendapatan dari kartu kredit sebesar 30%. Emiten yang akan terkena dampak adalah $BMRI, $BNGA, dan $BBCA

Dec 05,2016 14:34:50

A peaceful Friday’s event – signal for improved stability
The massive rally on the 2 Dec 2016 ended on high note, a peaceful and well in order event with no incidents reported in spite of thousand of participants that gathered around the Monas (Central Jakarta) area. The spotlight was on President Jokowi who made an impromptu visit to join the Friday’s prayer and gave brief speech in front of thousand of rally participants. His bold move has undoubtedly drawn positive response and improves the confidence to the government, in our view.
We see 3 main key points:
1. The President’s impeccable ability and understanding to calm down heighten political situation is clearly visible, and this would ensure stable and conducive environment going forward. Jokowi’s absence during the last rally on 4 Dec which has been used as a way to disparage the government’s authority would now be dissipating.

2. The police and army continue to showcase solid exemplary conduct in maintaining stability, without the image of overly repress the democratic environment. This ability is clearly important and it is now perceived that the overall security forces have been able to step up their capability under the current government.

3. The police investigated several people for suspected treason on early Friday. There have been widespread concerns that the rally against Jakarta government might also be used as an act to topple the current legitimate government, and the police’s on-going treason investigation would be seen as strong warning signal to those perpetrators. We continue to believe that the Government’s position remains strong. As long as these forces remain united under presidential control, any act that destabilises the country can be brought under control quickly.

On the alleged religious defamation by Jakarta governor Basuki Purnama case, the police worked fast, and have completed all the necessary process. The case is now already under the Attorney General Office’s jurisdiction for further proceeding to the court.
With the peaceful rally last Friday, the political situation is now entering the next chapter and we anticipate for more conducive and stable environment going forward. We opine that Indonesia’s fundamentals remain pointed towards long-term positives. This is underpinned by BI’s pro-growth policies to propel economic growth, the low inflation environment, continued government focus on infrastructure spending, and the security forces’ exemplary conduct in maintaining stability as political tensions rise. (Helmy Kristanto)

Dec 05,2016 09:59:19

Indonesia Poultry: Dollar concerns
Poultry: Indonesia
Currency sensitivity: 1% IDR depreciation = -5.6% earnings decline

Due to the strong dollar, we downgrade the poultry sector from Neutral to UNDERWEIGHT as we look for the continued strong dollar to undermine sentiment, despite expected strong 4Q16 results. This is particularly true as the Fed is expected to increase interest rates at its next few meetings. Our currency sensitivity analysis suggests that, for every 1% IDR depreciation, weighted-average sector earnings would decline by 5.6%, with the most sensitive to IDR currency movement being JPFA (-6.7%), followed by CPIN (-5.2%) and MAIN (-5.0%) (exhibit 12). Most sensitive within the poultry sector would be JPFA due to its high 9M16 USD debt amounting to USD212mn, around 54% of its total borrowings.

Pro-grass roots government rulings to hurt large poultry players

In addition to the new government regulation on monitoring DOC supply and demand signed by the Ministry of Agriculture in May 2016, the government is proposing a regulation that requires large poultry players to build a slaughterhouse for every 500k of weekly broiler production capacity and sell more than half of their DOC production to independent farmers at suggested fair prices. Note that companies under our coverage have only 10-12% of total broiler production that is sold internally. CPIN uses all of its internal farm production for its processed food segment, CP Food. JPFA also only utilizes 10% of its total 550mn annual DOC production capacity internally. This is equal to just 1mn weekly of on-farm broiler production, translating into just 2 slaughterhouses as per the regulation, while JPFA already has 9 slaughterhouses operating. Based on preliminary information about the new regulation, all the companies under our coverage have met the necessary requirement. We think the only overhang is the suggested DOC price cap, which should be negative for large poultry players as government plans to set the DOC price cap to protect small broiler farmers.

4Q16 earnings preview: Strong results for exit mechanism
In October and November 2016, we are seeing another anomalous quarter, with DOC and broiler prices continuing to strengthen. Based on our channel checks, there are some indications of DOC undersupply in various areas. DOC and broiler prices in October and November saw another anomaly of high DOC and broiler prices (4Q16 DOC: +19.2% q-q; broiler: +6.3%) (exhibit 4). That said, we should see another solid quarter for poultry stocks with high DOC and broiler margins, although there may be some margin contraction for feed, as domestic corn prices spiked to the IDR4,500/kg level (vs. imported corn price: IDR3,000/kg). Thus, investors concerned about negative sector sentiment following the recent dollar trend could use the expected strong earnings results to exit the sector.

Earnings reductions, with CPIN least preferred, JPFA most preferred
Given our weaker USD:IDR assumption for 2017, we lower our 2016-18 earnings forecasts for the three poultry stocks under our coverage by about 1-11% (exhibits 9-11). We maintain our HOLD rating and target 17x 2017F PER for CPIN with a lower 12M TP of IDR3,400, making it the least preferred in our coverage group. For JPFA and MAIN, we retain our BUY ratings and target 2017F PERs of 15x, with lower TPs of IDR2,400 (JPFA) and IDR2,000 (MAIN) (exhibit 2). Our latest sensitivity analysis suggests that JPFA is the most sensitive to broiler prices given that it has the highest broiler revenue contribution compared to the others (+27% net profit for every +5% in broiler price). Although JPFA is the highest USD-leveraged stock, it remains our top pick as we are still of the view that broiler prices should remain stable until 1H17 before experiencing some weakness post-Lebaran in 2H17. Additionally, as domestic corn prices have risen another 5-7% to IDR4,500/kg in 4Q16, we think JPFA will be most immune due to as it has the lowest revenue contribution from animal feed relative to its two listed poultry competitors. Risks to our calls: Sooner-than-expected DOC and broiler price corrections and IDR depreciation against the USD.


Dec 05,2016 07:55:24

Good morning,

U.S. stocks closed mostly flat on Friday, with financials falling around 1 percent, as investors braced themselves for a key constitutional referendum in Italy while digesting a stronger-than-expected jobs report .

Dow........19170 -21.5 -0.11%
Nasdaq...5256 +4.6 +0.09%
S&P 500..2192 +0.9 +0.04%

FTSE........6731 -22.2 -0.33%
DAX.......10514 -20.7 -0.20%
CAC.........4529 -31.8 -0.70%

Nikkei...18426 -87.0 -0.47%
HSI........22565 -313.4 -1.37%
Shanghai.3244 -29.5 -0.90%
ST Times.2919 -9.2 -0.31%

Indo10Yr...8.1691 -0.0119 -0.15%
INDOBex..205.7459+0.2945 +0.14%
US10Yr.......2.39 -0.05 -2.09%

VIX.............14.12 +0.05 +0.36%

USDIndx100.770 -0.17 -0.17%
Como Indx191.6940+0.2885+0.15%
(Core Commodity CRB
DJUSCL......51.61 +1.70 +3.41%
(Dow Jones US Coal Index)
IndoCDS...174.035 -0.71 -3.72% (5-yr INOCD5)

IDR............13512 -53 -0.39%
Jisdor........13524 -58 -0.43%
IDR Fut......13467 -63 -0.47%

Euro.........1.0657 -0.0007 -0.07%

TLKM........28.59 +0.68 +2.44%
(Rp 3867)
EIDO.........23.90 +0.50 +2.14%
EEM.........35.12 +0.04 +0.11%

Oil.............51.68 +0.77 +1.51%
Gold ........1178.80 +5.20 +0.44%
Timah......21090.00 -70.00 -0.33%*
Nickel......11482.50 +282.5 +2.52%*

Coal price....87.40 -0.30 -0.34%
Coal price....82.20 -0.10 -0.12%
Coal price....84.10 -0.15 -1.23%
Coal price....77.95 -0.75 -0.95%
(Jan/ Rotterdam)

CPO............3076 -6 -0.19%
Corn...........347.25 +4.75 +1.39%
SoybeanOil 37.72 -0.13 -0.34%
Wheat........404.25 +8.75 +2.21%

* source : Investing

(DE/ls 05-12-16)


Dec 03,2016 09:49:07

BUMI : Bos BEI Ramal Saham BUMI Bakal Masuk LQ45

Reporter: Dinda Audriene, CNN Indonesia

Jakarta, CNN Indonesia -- Bursa Efek Indonesia (BEI) tak menampik kemungkinan saham emiten PT Bumi Resources Tbk ($BUMI) dapat masuk dalam daftar indeks saham LQ45 setelah perdamaian restrukturisasinya disetujui pada Senin lalu (28/11).

Direktur Pengawasan Transaksi dan Kepatuhan BEI Hamdi Hassyarbaini menyatakan, masuknya saham dalam daftar LQ45 tergantung dari kondisi likuiditas dan fundamental suatu emiten.

Fundamental perusahaan Bumi Resources dinilai akan membaik setelah permohonan perdamaian penundaan kewajiban pembayaran utang (PKPU) Bumi Resources disetujui dalam sidang. Total tagihannya yang direstrukturisasi mencapai Rp135,78 triliun.

Dec 02,2016 13:22:07

SMGR: Shadow Soaring Over
Kami optimis adanya peningkatan volume pada tahun 2017, hal ini berlandaskan karena 1) infrastructure project yang cukup besar, di mana hal ini akan menjadi fokus pemerintah ke depan; 2) outlook dari sektor property yang cukup positif mengingat sejumlah peraturan yang direlaksasi diharapkan mampu memberikan dampak positif terhadap penjualan property. Namun peningkatan permintaan belum mampu mengimbangi kompetisi yang cukup ketat antar perusahaan untuk memperoleh market shares, sehingga kami memperkirakan margin SMGR masih akan flat di 2017 mencapai 38.9%. Intisari dari report kami adalah:
·         Peningkatan volume permintaan
·         Flat gross margin
·         Posisi balance sheet yang baik dari SMGR
·         Rekomendasi HOLD untuk SMGR dengan target price Rp. 11,000


Dec 02,2016 13:21:30

ICBP: Continue to Innovate
ICBP membukukan pertumbuhan pendapatan +9,9% YoY menjadi Rp 26,47 triliun atau menurun -10,3% QoQ. Laba bersih pun meningkat menjadi +15,9% YoY menjadi Rp2,83 triliun atau menurun -17,6% QoQ. Kami tetap memiliki pandangan positif untuk ICBP mengingat variasi produk yang terus dikembangkan. Sebagai kesimpulan kami merekomendasikan BELI untuk ICBP dengan target harga Rp11.500/saham, mengimplikasikan pertumbuhan EPS sebesar 18% pada FY17 dengan PE 28,8x FY7F.


Dec 02,2016 13:20:31

PTBA memperoleh fasilitas pinjaman sebesar Rp1,7 triliun dari BMRI untuk menggarap proyek-proyek pengembangan perusahaan. Pinjaman dibagi beberapa jenis, sebesar US$100 juta untuk pembiayaan belanja modal total sebesar US$130 juta dengan skema Fasilitas Pinjaman Transaksi Khusus. Kemudian skema Treasure Line untuk memenuhi kebutuhan likuiditas valuta asing dalam operasional perusahaan dan Rp700 miliar berupa fasilitas Trust Receive.
Sumber daya PTBA sebesar 8,27 miliar ton dan cadangan tertambang 3,33 miliar ton. Pada tahun 2020 PTBA mengincar produksi hingga 58 juta ton per tahun. Sementara pada 2024, menargetkan mampu mencapai produksi 98 juta ton per tahun.

Saat ini PTBA memiliki kontrak pasokan batu bara jangka panjang untuk konsumen domestik hingga 30 tahun ke depan sebesar 574 juta ton. Untuk sektor PLTU, pada 2020 diharapkan sudah memiliki sejumlah pembangkit dengan total kapasitas sebesar 1.500 megawatt, dan tahun 2025 sekitar 4.500 megawatt. Demikian dikatakan oleh Sekretaris Perusahaan Bukit Asam, Adib Ubaidillah.


Dec 02,2016 13:19:31

$BBCA membukukan kinerja yang membaik dimana laba bersih meningkat dari Rp14,7 Tn Okt-15 menjadi Rp16,7 Tn Okt-16 (+13%yoy). Namun pertumbuhan kredit masih dibawah rerata industri +4,72% vs Industri 7,4%. Penopang laba bersih ini disebabkan oleh peningkatan transaksi spot derivatif dari Rp0,5 tn Okt-15 menjadi Rp1,93 T Okt-16 (+286% yoy).

Dec 02,2016 13:18:52

Inflasi November 0,47% Akibat Tingginya Harga Makanan. Badan Pusat Statistik (BPS) mencatat, inflasi November 2016 sebesar 0,47 persen atau lebih tinggi jika dibandingkan dengan inflasi bulan sebelumnya 0,14 persen. Deputi Bidang Statistik Distribusi dan Jasa BPS Sasmito Hadi Wibowo mengungkapkan, laju inflasi November dipengaruhi oleh naiknya harga makanan jadi, minuman rokok, dan tembakau, juga naiknya harga tarif penyewaan mahan. Sedangkan inflasi komponen inti November 2016 sebesar 0,15 persen, tingkat inflasi komponen inti tahun kalender (Januari-November 2016) sebesar 2,84 persen, dan tingkat inflasi komponen inti tahun ke tahun sebesar 3,07 persen. Kemudian, tingkat inflasi tahun kalender (Januari-November) 2016 sebesar 2,59 persen dan tingkat inflasi secara tahunan sebesar 3,58 persen.

Dec 02,2016 13:12:48

BAJA: Targets higher local steel consumption in 2017

Saranacentral Bajatama ($BAJA) is optimistic that the demand for steel will be better in 2017 due to recent China’s production cuts. According to the company, local steel production has been hampered by Chinese steel imports to Indonesia, that makes up 40% of the market. (

Dec 02,2016 13:12:13

WINS’ subsidiaries establish new company

Two subsidiaries of Wintermar Offshore ($WINS), Arial Niaga Nusantara and Sentosasegara Mulia Shipping, reportedly have established a new company under the name Azuerus Simulator Asia, which will engage in administration, crew training and development. According to WINS’ corporate secretary, the establishment of the new company aims to develop abilities and skills of the company’s crew. (IQPlus)

Dec 02,2016 13:11:33

WIKA to cooperate with Pertamina on Balikpapan refinery project

Wijaya Karya ($WIKA) has signed a contract with Pertamina on Site Development and New Jetty Construction for Balikpapan RDMP RU V project. Bambang Pramujo, Operational Director II of WIKA, stated that the contract value of Jetty construction is totalling IDR552bn with 6,500 DWT (dead weight tonnes) of capacity. Moreover, WIKA is targeting mechanical completion to be finished on June 2019 with commissioning expected to start from September 2019. (

Dec 02,2016 13:10:58

PTPP to spend 2017 capex of IDR26tn

In 2017, Pembangunan Perumahan ($PTPP) is planning to spend full-year capex amounting to IDR26tn, +550% y-y. Tumiyana, Director of PTPP, stated that the allocation of capex would be mainly for energy sector with 40%, residential projects with 18%, while the remaining 42% for infrastructure projects like ports and airports. (

Dec 02,2016 13:10:20

JSMR: Optimistic on higher 2016 earnings than full-year target

Jasa Marga ($JSMR) is optimistic on booking 2016 earnings higher than the fullyear target. The Company is targeting 2016 bottom line of IDR1.7tn (Bahana: IDR1.7tn), up 21% y-y, while on revenue it targets IDR8.7tn (Bahana: IDR8.8tn), up 14.5% y-y. Furthermore, the 2016 revenue is estimated to come from toll revenues amounting to IDR7.9tn and other revenues of IDR824bn. (Investor Daily)

Dec 02,2016 13:09:48

AGRO sets rights issue price at IDR130

Bank BRI Agro ($AGRO) has set its right issue at IDR130, the lower range of IDR130- 175 price range the company had indicated earlier. Offered number of shares has also been lowered from 4.4bn to 3.3bn for a total fund raising target of IDR499.9bn. (IQplus)

Dec 02,2016 13:09:13

ACES aims 7% growth in 2017

Hartanto Djasman, the director of PT Aces Hardware Tbk ($ACES), is optimistic about its performance next year on the back of improved purchasing power especially from the middle income segment. That said, ACES expects top and bottom line to grow +7%, while net margin should remain at the 10-11% level. According to Helen Tanzil, the company’s corporate secretary, ACES has set aside capex of IDR250bn for 10 new stores in 2017 and looks forward to opening branches in Balikpapan, Pekanbaru and Bandung. (kontan)

Dec 02,2016 13:08:24

LPPF achieves full-year new store openings target

PT Matahari Department Store ($LPPF) launched its 8th new store, which has a selling space of 9,900m2 , at Lippo Plaza Keboen Raya Bogor, bringing in the total number of stores to 151. With this new store opening, LPPF has achieved its full-year target of new store openings, and similarly for 2017, LPPF aims to open up another 8 new stores, and capex for each store would fall between IDR20bn and IDR30bn as stated by the company. (kontan)

Dec 02,2016 13:07:27

SSIA 3Q16 results: In-line

Surya Semesta Internusa ($SSIA) booked a 3Q16 net proft of IDR27bn (-75.2% y-y), 96% of our quarterly estimate of IDR28bn net profit. The top line fell 21.8% y-y but up 3.0% y-y, having reached 72% of our and 58% of consensus’ full-year estimates. Based on our calculation, SSIA’s 2016F net interest expense would rise to IDR107bn stemming from its IDR900bn bonds issuance in September 2016. However, SSIA still has potential from its IDR2.2tn construction projects: Balaraja toll-road and AEON mall that could help the company achieve our 2016-17F revenue target of IDR4.2-4.6tn. (Company, Bahana)

Dec 02,2016 13:06:27

F&B: +9.82% y-y 3Q16 sales to IDR192.7tn

Directorate General of Agro Industrial Ministry stated that F&B growth was mainly driven by middle-up market consuming a more hygienic and natural processed products, which tend to be more expensive in value. He also added that F&B industry (33.6% of non-oil GDP) is supported Indonesia’s non-oil related GDP, which has grown +4.71%. (Koran Tempo).

Bahana comment: We expect middle-to-low segment to start contributing to the industry’s growth next year as purchasing power improves, in line with the Indonesian F&B Association’s (Gapmmi) expectation of +10% y-y.

Dec 02,2016 13:05:53

Govt: Not worried about higher oil prices post OPEC production cut

The government decided to freeze the country’s exporter status at OPEC. MoF Sri Mulyani stated that OPEC’s policy on lowering oil production would increase oil price and impact state’s revenue. Separately, Statistic’s Agency Deputy Sasmito Hadi stated that Indonesia is aware of potential higher oil prices post OPEC’s production cuts. According to Sasmito, higher fuel prices would result in 3% inflation. According to Mirza Adityaswara, BI Senior Deputy Governor stated that the government should not worry, as state budget would be still safe as the country sets fuel prices based on market prices. (Kontan)

Dec 02,2016 13:01:58

Inflation Continues to Accelerate in November

The headline inflation edged up to 3.6% YoY in November, from +3.3% in October (+3.1% in September). This was partly due to the faster increase in the prices of raw food products and clothing. Further out, we expect inflation to pick up slightly to 3.8% in 2017, from +3.6% estimated for 2016, on:

i. A planned electricity tariff hike

ii. A modest pick-up in volatile food prices.

¨ Despite higher inflationary pressure, it will likely be manageable and provide room for Bank Indonesia (BI) to maintain its loose monetary and macro prudential policy. Also, we are of the view that the BI will likely be more cautious and mindful of volatility in the external financial market and its impact on the rupiah in deciding its next monetary policy move, after Trump won US election. Indeed, the BI maintained its benchmark rate unchanged in November’s meeting. For the rest of the year, we envisage BI to retain its policy rate unchanged at 4.75%. Further out, however, we expect the BI to slash its key policy rate by another 25 basis points to 4.5% in 2017 to support economic growth under stable IDR circumstances.

¨ Separately, we revised up our inflation estimation for this year from our previous estimate of 3.4% due to higher than expected price hikes in volatile foods. As a whole, inflation has been on an upward trend after hitting a low of +2.8% in August. This was despite the Government cut fuel prices in August by an average of 1.8%. Starting1 October, the gasoline prices was cut further although the government decided to increase diesel prices.

¨ Meanwhile, the prices of raw food products and clothing picked up by 8.5% and 3.6% YoY in November, compared with +7.1% and+3.4% respectively in October. These were, however, mitigated by a slower increase in the prices of processed food, alcoholic beverage & tobacco and costs of education, recreation& sports while the costs of housing & utilities, healthcare and transport stabilised.

¨ The core inflation rate, on the other hand,stabilised at 3.1% YoY in November, the same paceas in October and compared with +3.2% in September (See Table 2). This was in part due to steadydomestic demand and stable inflationary expectation. The administered prices, however, eased to an increase of 0.1% YoY, from +0.2% in October. For volatile food (fresh food), the prices increased to 9.1% YoY in November, in line with a pick-up in raw food products due to bad weather conditions.

¨ On a monthly basis, the headline inflation increased to 0.5% MoM in November, after registering +0.1% in October and +0.2% in September. A rebound in the prices of raw food and a pick-up in the costs of transport outweighed a slower increase in the costs of housing & utilities. The former was due to higher chili prices, contributing almost half of monthly inflation. Likewise, core inflation edged up a tad higher due to weaker currency. (Rizki Fajar)

Dec 02,2016 13:00:38

Indonesia Media: TV broadcasters: Value emergence
Consumer Discretionary: Indonesia
Content is King, Distribution is Queen: OVERWEIGHT Indonesia Media
In line with higher GDP growth of 5.3% in 2017E, we are OVERWEIGHT the Indonesia Media sector, particularly as we see a rebound in adex next year (+10% yoy). Along with the sector’s attractive valuation (2017E: 16x PER, +16% EPS growth), we have a preference for the FTA-TV Platforms (advertising-based, cyclical), but adopt a bearish view on the Pay-TV space (subscription-based) on intensifying competition. We also like companies with good content assets, which should play a crucial role in the transition phase from traditional distribution platforms towards online in the medium-longer term. Thus, we have BUY calls on SCMA and MNCN, and initiate on LINK with a HOLD rating, and on highly-geared BMTR and VIVA at REDUCE. Downside risks: Macro downturn, weak IDR and online cannibalisation. This report marks the transfer of coverage of Indonesia Media to Henry Wibowo.
TV remains king of Ad Pie with positive adex growth
Indonesia’s ad industry is a USD2bn market, growing at an 8% CAGR over 2014-17E, and one of the most underpenetrated in the region (0.2% of GDP, vs. 0.5% for Asia), on our estimates. TV is the best medium for advertisers to seek audience eyeballs, making up 64% of the ad pie (stable from 2010), followed by Print 19% (down from 27% in 2010), Online 12% (up from 1% in 2010), Outdoor 3% and Radio 2%. TV’s muted growth in 2015 was fueled by a macro slowdown (GDP hit a 6-year low at 4.67% in 2Q15), not from online cannibalisation, with TV adex expected to rebound to 8%/10% in 2016/17E.
FTA TV: Oligopolistic market with high barriers to entry
With the National FTA TV license recently renewed in October 2016 for another 10 years (2016-26), the existing top-4 big groups will continue to dominate >95% of the TV market, in our view. Hary Tanoe’s MNCN is the market leader (37.1% audience share), followed by Eddy Sariaatmadja’s SCMA (25.6%), Bakrie’s VIVA (18.6%), Chairul Tanjung’s Trans (15.1%).   
Overlooked high-value content assets
By 2020, we believe SCMA’s (IEG & Screenplay) and MNCN’s (MNC Pictures & Sinemart) content assets can be worth USD700m/USD1bn, respectively, vs. currently underappreciated at almost 0; this would provide a boost to existing market caps of 30-50%. In our view, unlocking content value will be a key catalyst medium term. Distribution platforms continue to evolve over time (Radio to TV to Online), but content should remain king as a core value driver, especially in Indonesia where the local language is a high barrier.


Dec 02,2016 12:58:47

Indonesia economy: Inflation, PMI, IDR, Rates
Economy: Indonesia

Assumption changes
2016 inflation target intact; IDR & interest rates altered
On a ytd basis, 11M16 inflation is at 2.59% ytd (11M15: 2.37%) with core inflation pressure continuing to edge down at 2.835% ytd (11M15: 3.72%). Fundamentally, our outlook for lower-than-historical average inflation is still intact, helped by very low core inflation (exhibit 7) as well as government price controls supporting a manageable inflation outlook. However, we see some risks coming from possible higher oil prices as OPEC finally cut its production quota. At this point, however, as long as the IDR/USD exchange rate does not reach IDR14,000/1USD and the oil price does not break the USD70/bbl level, we do not see an urgency for the government to raise the country’s regular fuel prices (exhibit 9). In our sensitivity analysis, our calculation shows that for every 10% increase in fuel prices, inflation is likely to increase 0.7% m-m (exhibit 6). The recent 10-year US T-bill yield rising to 2.4% has led us to revise our exchange rate forecasts to 13,500 for end-2016 (from 13,200), and 13,500 for end-2017 (from 12,800) (exhibit 1). On rates, we expect the BI easing cycle to resume again in 2Q17.
November inflation edged higher to 3.58% y-y on higher spice prices
With higher spice prices, especially for chilies, and food inflation edging up 1.66% m-m (Oct: -0.21% m-m), November inflation edged higher to 3.58% y-y (BS: 3.55% y-y). On the transportation side, inflation rose to 0.07% m-m (Oct: -0.03% m-m) following a small increase in Pertamax prices introduced in November. However, core inflation continued to edge lower to 3.07% y-y (Oct: 3.08% y-y), due to stable processed-food inflation at 0.25% m-m (Oct: 0.24% m-m), low housing inflation at 0.16% m-m (Oct: 0.56% m-m) and clothing inflation at -0.01% m-m (Oct: -0.31% m-m).
Deflation still occurring in some Eastern cities in Indonesia
Even though inflation edged higher in general, some of Indonesia’s Eastern cities continued to record negative inflation, such as Kendari at -0.22% m-m, Bau-bau at -1.54% m-m, Tual at -0.27% m-m and Jayapura at -0.23% m-m-m. Continued infrastructure development and manageable logistics costs should support lower inflation in Eastern Indonesia going forward in our view.  
November domestic WPI drops to 12.03% y-y (Oct: 13.2% y-y)
Domestic WPI inflation in November was at 12.03% y-y (Oct: 13.20% y-y), with agriculture inflation falling to 37.41% y-y (Oct: 44.18% y-y), mining deflation continuing at -0.01% y-y (Oct: -0.55% y-y), and manufacturing inflation being stable at 4.69% y-y (Oct: 4.67% y-y).  
Markit indicates manufacturing contraction occurred in November Indonesia’s November Markit Purchasing Manager Index (PMI) was slightly higher at 49.7 (October: 48.7), although still in a contraction mode, dragged down by lower new-export orders, new orders, output and employment (exhibit 5) caused by flooding in some parts of the country such as Bandung, West Java. In the report, Markit also reported higher input costs due to IDR depreciation. From the producers’ side, Markit also stated that manufacturers may be prepared to loosen pricing policies in order to secure new business.

Dec 01,2016 23:27:54

GIAA: October passengers carried at 2.8mn, +5.7% y-y; New Surabaya-Madinah route

Garuda Indonesia ($GIAA) reported October 2016 passengers carried of 2.8mn (+5.7% yy), bringing 10M16 total passengers to 28.9mn (+6% y-y). Revenue Passenger Kilometers (RPK) was 3.4bn, or +9.5% y-y (10M16: 35.6bn or 7.8% y-y), and Available Seat Kilometers (ASK) was 4.6bn or +16.6% y-y (10M16: 48.5bn or +13.6% y-y), with total October seat load factor (SLF) of 73.5%, down from 76.7% in September and 78.3% a year earlier. October domestic passengers carried reached 1.6mn, -1.6% y-y, while international passengers carried were up 13.4% y-y to around 356k. In October 2016, GIAA's total fleet reached 194 aircraft, up by 8 planes on a y-y basis. Separately, GIAA has reportedly opened Surabaya Madinah flight route to strengthen and expand its travel network particularly in the Middle East region. (Company, IQPlus).

Bahana comment: The increase in international market mainly resulted from GIAA’s route expansions to China and London.

Dec 01,2016 23:24:43

Tax Office: To summon Facebook for alleged tax arrears

After summoning Google (US:GOOGL, US:GOOG), the government plans to call on Facebook (US:FB), which allegedly has tax arrears to the government. Related to the allegation, the government plans to summon Mark Zuckerberg, the CEO of Facebook, to come to Indonesia next week. According to Head of Special Tax Muhammad Hanif, Google and Facebook generated USD840mn in revenues from Indonesia, with 70% of the revenue going to Facebook. (Kontan)

Dec 01,2016 23:21:47

PTBA: Obtains funding facility from BMRI; Plans higher capex in 2017

Tambang Bukit Asam ($PTBA) has just obtained loan facility from Bank Mandiri ($BMRI) for IDR1.7tn or USD230mn, which will be used for expansion in both mining and power sectors. In separate news, PTBA plans to allocate higher capex in 2017 of IDR4.5tn and also acquire another coal mine located in Kalimantan in early 2017 as part of its expansion strategy. Moreover, PTBA has reached agreement with Perusahaan Listrik Negara (PLN) to not revise the original capacity design of the planned 2x620MW coalfired power plant in South Sumatra province. (,

Dec 01,2016 23:20:44

PPRO, KIJA invested around IDR875bn in low-cost apartments

PP Properti ($PPRO) and Kawasan Industri Jababeka’s ($KIJA) have committed to invest around IDR875bn in low-cost apartments called Riverview Residence in Cikarang, West Java. The price per unit will be in the range of IDR200-500mn. No further details have been disclosed. (

Dec 01,2016 23:19:59

PWON to be in MSCI in December 2016

Pakuwon Jati ($PWON) has been included in MSCI Global Index for the next 6 months to replace Global Mediacom ($BMTR). Previously, PWON was listed in the MSCI Small Caps Index. (

Dec 01,2016 23:19:07

TBIG 3Q16 results: In-line with our expectation

Tower Bersama Infrastructure ($TBIG) reported 3Q16 net profit amounting to IDR96bn, down 57.4% y-y but up 0.9% q-q, bringing 9M16 net profit to IDR938bn, up 17.8% y-y (9M15: net profit of IDR796bn). On the top line, TBIG booked 3Q16 revenue of IDR942bn, +2.8% q-q and +8.4% y-y, resulting in 9M16 revenue of IDR2.8tn, +8.6% y-y, in line with our forecast (97%), driven by tenants increase of 1,137 to 21,552 in 9M16. At the operating level, TBIG booked 3Q16 operating profit of around IDR756bn, +2.7% q-q and +15.5% y-y, resulting in 9M16 operating profit of around IDR2.2tn, +13% y-y, also in-line with our projection (101%). (Company, Bahana)

Dec 01,2016 23:17:55

Automotive: Government revises tire import regulation

The import regulation forces tire importers to obtain several certifications from Ministry of Industry and Ministry of Trade regarding import regulation. Tire importers are only allowed to import products to support production process. (IQplus).

Bahana comment: This regulation will benefit Gajah Tunggal ($GJTL), as the biggest local tire producer in Indonesia, in the form of less competition.

Dec 01,2016 23:16:30

Retail: Brighter days ahead

Roy Nicholas Mandey, head of Indonesia Retailers Association or APRINDO, stated that there was an uptick in spending in November, as opposed to slightly disappointing September and October numbers. He is confident that in December alone, the retail industry will generate IDR40tn in sales, contributing roughly about 20-25% of total full year sales, on the back of Christmas and New Year festivities. In comparison, Lebaran sales contribution is along the lines of 35-40% of total industry sales. He asserted that sales will mainly come from apparels, which we think is positive for the likes of Matahari Department Store ($LPPF), Ramayana ($RALS) and Mitra Adi Perkasa ($MAPI). Lastly, he believes that this year would be much better compared to 2015 supported by low inflation. (Investordaily)

Dec 01,2016 23:14:38

OPEC agrees to cap output; Indonesia suspends OPEC membership

Energy and Mineral Minister, Sudirman Said, stated that Indonesia has decided to temporarily suspend its OPEC membership as the committee decided to cut oil output by 1.2mn bbl/day, and asked Indonesia to drop the production by 37kl bbl/day. Minister sees this decision as best for Indonesia and OPEC as Indonesia is net oil importer. (

Bahana comment: We already assume USD60/bbl brent oil price for next year. Indonesia’s inflation will be significantly affected, if oil price edges above USD80/bbl, and IDR/1USD depreciates above 14,000.

Dec 01,2016 23:13:05

Armed Forces Chief held United Archipelago Movement

On 30 November, Armed Forces Chief, Gatot Nurmantyo, held a United Archipelago Movement (Gerakan Nusantara Bersatu) in all provinces. This movement was also attended by Tito Karnavian, Police Chief. Attended by students, artists, public officials, this movement was held to strengthen the nation’s unity and integrity. (Tempo, Detik).

Bahana comment: Amid political rallies by Islamic and labor groups on the ground, we take comfort in the security personnel (i.e. the military and the police) which are working hand-inhand to maintain political stability of the country. It is also positive that the students, which are normally instrumental in political movements, have remained firmly behind the Jokowi regime.

Dec 01,2016 23:12:01

Adhi Karya ($ADHI) : Downgrade rekomendasi menjadi HOLD dengan TP baru di IDR1,900 per saham.

• Berdasarkan riset report Adhi Karya ($ADHI), Pandu Anugrah mendowngrade rekomendasi menjadi HOLD (dari BUY), serta menurunkan TP menjadi IDR1,900 (dari IDR3,500) per saham.

• TP baru mewakili 14x 2017 P/E, atau rata-rata P/E dalam 3 tahunterakhirnya.

• Pandu menurunkan rekomendasi menjadi HOLD, karena dia melihat bahwa langkah pemulihan akan tertahan oleh beberapa factor seperti: tantangan dalam pendanaan LRT, kemungkinan pertumbuhan tipis dari proyek2 secara regular. Demikian proyek2 yang secara sessional proyek2 di kwartal IV lebih banyak, kemungkinan tidak banyak membantu.

• Karena itu, Pandu juga menurunkan pertumbuhan laba bersih per saham (EPS) sebesar 45-50% seiring dengan lebih konservatifnya proyek2 yang dapat dikerjakan (revenue/total order book).

• Pandu melihat bahwa kinerja laba bersih di 4Q16 kemungkinan masih akan lemah, seiring dengan kerugian proyek2 EPC yang telah mencapai IDR187miliar di 9M16. Adhi kemungkinan masih melanjutkan proyek yang rugi, dimana diperkirakan kerugian total mencapai IDR400milar tahun ini.

• Pandu juga fokus terhadap resiko pembiayaan LRT. Dimana jika ADHI dibayar ketika proyek2 tersebut jadi di tahun 2019. Hal tersebut tentunya akan meningkatkan pinjaman modal kerja yang akan mendorong meningkatnya beban bunga, meskipun hal tersebut terkompensasi dengan margin yang meningkat, dari Turnkey project (proyek2 yang ditalangi pembiayaannya terlebih dahulu).

• Pandu melihat kinerja ADHI juga terdiscount 30% dari sektornya dan masih akan berlanjut, kecuali mulai adanya beberapa perbaikan dari eksekusi, dan juga kejelasan dari pembiayaan LRT. Demikian juga resiko juga dapat terkompensasi dari potensi pengembangan sektor property yang dekat dengan proyek2 LRT.

Dec 01,2016 23:09:49

Key Takeaway from Adhi Karya’s ($ADHI) public expose

  • Adhi expects to sign the IDR23trn LRT Greater Jakarta 1st phase the latest in March 2017, later than our expectation, as Adhi is waiting the approval from Ministry of Transportation. Government plans to finance this project using the state budget and bank loan in FY17 – FY19F. Adhi expects that Government will allocate IDR10trn. Thus, during the construction Adhi will have to borrow up to IDR13trn from bank and would bear the interest const during the construction state. Post the project completion the loan will be passed to the government including interest expense.
  • The management estimates to have a gross loss of IDR400bn in EPC division this year, bigger than our initial estimates of IDR300bn.Moreover, there is a potential loss of IDR200bn in EPC projects next year.
  • Having said that, Adhi Karya ($ADHI) has revised its FY16F net profit target to IDR301bn (-35% YoY), much lower than our estimates of IDR388bn.
  • Conservatively, Adhi’s management guided FY17F’s NPAT of IDR500bn, lower than our initial estimates of IDR688trn. The company also aims to obtain IDR21trn new contracts and IDR14.31trn revenue next year.
  • Currently, we are reviewing our earnings estimates and our recommendation. (Dony Gunawan)


Dec 01,2016 23:06:24

Bank Tabungan Pensiunan Nasional ($BTPN): Profitable Bank With Appealing Valuation

BTPN would continue to focus on the small ticket size segment with high yields by tapping into the productive poor and iSME loans. To manage a further decline in loan yields, it also plans to enter the smaller ticket size segment called picco loan with maximum 3-months tenure. On funding, it would benefit from its branchless banking products to enlarge its CASA deposits by end-2017, in our view. Valuation is attractive at 0.9x 2017F P/BV with potential dividend distribution, as we rollover our valuation to 2017F compared to 1.06x P/BV of medium-sized banks. Upgrade to BUY (from Neutral) with a new IDR3,400 TP (from IDR2,900, 22% upside).

¨ Aims to maintain its high loan yield segment. Bank Tabungan Pensiunan Nasional (BTPN) would maintain its focus on the high yield loan segment to maintain its superior NIM level. Its micro lending is facing a difficult period due to close competition with the People's Business Credit (KUR) programme. The productive poor and iSME loan segments are its current growth engine. Aside from the high growth of the iSME loan, BTPN also plans to launch new lending product with short-term tenure (maximum three months) and small ticket size (IDR500,000-1m or c.USD37-74) called picco loan. We expect this loan segment would compensate it for the lower loan yield from iSME loan. All in, loan yield would dip to 20.5% in FY17 (FY16: 21.2%) based on our model.

¨ On progress to reprofile its funding mixture, since it has been BTPN’s challenge due to the domination of expensive instruments, ie time deposits (TD) and bonds. As such, amid aggressive policy rate cuts by total 150bps this year, blended cost of funds (CoF) has significantly fallen to 6.7% in 3Q16 (vs 3Q15: 8.1%). Given such sharp volatility in its funding cost, management has continued to invest in branchless banking products to provide stronger base for its current account, saving account (CASA) deposits. We thus project that CASA deposits would significantly improve to 16% of customer deposits by end-2017 (end-2016: 13.5% of customer deposits).

¨ Potential dividend distribution to boost return on average equity (ROAE), as BTPN’s management has had zero dividend payout policy since 2008 to maintain an ample capital position. However, due to concerns from most investors’ that its ROAE would continue to decline, management is considering to distribute dividend as the most reasonable solution. We moderately anticipate a 20% payout ratio only as a one-off corporate action. This translates to 12.7% ROAE and 24.3% capital adequacy ratio (CAR) in 2016F. Our sensitivity analysis suggests that for every 10% payout ratio, it would elevate BTPN’s ROAE by 10bps while CAR compressed by 28bps.

¨ Upgrade to BUY, new IDR3,400TP derived from a GGM-based valuation. Our TP implies 1.1x 2017F P/BV multiple (-1SD of its historical mean). BTPN’s current valuation is attractive compared to average medium-sized banks of 1.06x P/BV. The downside risks are:

i. Tight liquidity within the banking system would trigger a higher blended CoF;

ii. Lower KUR lending rate would further affect its micro lending;

iii. More banks to aggressively tap the pension loan segment due to its attractive yields and lower NPLs would reduce BTPN’s market share. (Eka Savitri)

Dec 01,2016 23:04:38

United Tractors ($UNTR): Weakening IDR and Coal Price Recovery Play

We think United Tractors should be a good play to monetise the weakening IDR and coal price recovery. We opine that IDR is to weaken further to IDR13,700 in FY17 vs IDR13,290 YTD. Therefore, Pamapersada’s profit margins as the biggest contributor to consolidated earnings should expand. This is on the combination of the weakening IDR and mining contracting fee recovery. We also believe heavy equipment sales would increase. This is due to the sizable rise in customers’2017 capex for such equipment. Reiterate BUY with a higher IDR26,300 TP (from IDR24,700, 20% upside).

¨       Beneficiary of a weakening IDR. We opine that the strengthening USD should cause the IDR to weaken further and average at IDR13,700 in FY17 vs IDR13,290 YTD. The USD’s contribution to PT Pamapersada Nusantara’s (Pamapersada) revenue and costs is at 100% and 60% respectively. Its gross margins, the biggest contributor to United Tractors’ consolidated earnings, tend to expand when the IDR weakens (Figure 1). We expect Pamapersada’s gross margins to expand to 22% in FY17 on a weakening IDR and recovery in mining contracting fees. This is due to the recovery in coal prices.

¨       Heavy equipment sales to improve sizably in FY17. We did channel checks on Delta Dunia Makmur. Its subsidiary PT Bukit Makmur Mandiri Utama (Bukit Makmur) is Indonesia’s second-largest coal mining contractor. Bukit Makmurhas allocated a sizable USD180m capex for FY17 (FY15: USD55m) (Figure 4), which is mainly slated for the purchaseof heavy equipment. This is because Bukit Makmur wants to replace some portions of its mining contracting heavy equipment fleet. This should boost United Tractors’ Komatsu and Scania unit sales for the mining sector during this period.

¨       Reiterate BUY, with a higher IDR26,300 TP. We fine-tune our assumptions on the IDR to accommodate the view that the currency would weaken further. This results in higher FY16-18 EPS by 4.6-7.2%. We reiterate our BUY call with a higher DCF-derived IDR26,300 TP (WACC:12.2%, LTG:2%), which implies 14.8x P/E on our FY17F EPS (its 6-year mean P/E). The call is retained as we think its FY17 earnings recovery has still not been fully factored in by consensus and share price. Our FY17F EPS is 22.5% higher than consensus. We think revising up FY17F consensus earnings should boost share price.

¨       Key risks to our BUY call include coal prices decreasing to <USD50/tonne and a strengthening IDR.

¨       October’s operational performance keeps improving. Pamapersada keeps booking improving mining contracting volumes (Figure 5). Its October coal production grew 15.1%YoY (+10%MoM) due to the recovery in coal prices. We think the decrease in stripping ratio to 5.9x in October is just temporary. This is because coal companies are likely to increase their stripping ratios in FY17, based on our channel checks. United Tractors booked 218 Komatsu sales units (+207%YoY, +7.4%MoM), with the construction and agro sectors as the drivers of growth. (Hariyanto Wijaya, CFA, CFP, CA, CPA)


Dec 01,2016 21:05:11

$JSMR – Jasa Marga projects its revenue (excluding construction revenue) to reach Rp8.7tn in 2016, 14% YoY. Out of the total revenue, Rp7.9tn of which is expected to be derived from toll road revenue. This is expected to be supported from traffic volume that is projected to reach 1.4bn vehicles by end of 2016. While net profit is expected to grow (+)21% YoY to Rp1.7tn in 2016. For 2017, the company targets its toll road revenue to grow (+)7% YoY in 2017 and other revenue to grow (+)105% YoY. Meanwhile, the company also targets net profit to grow (+)16% YoY in 2017.  Comment: the Rp8.7tn revenue target and Rp7.9tn toll road revenue target is inline with our assumption in 16CL.

Dec 01,2016 21:04:28

Indonesia suspends its OPEC membership while the organization agrees to implement six-month 1.2 mmbpd cut, with an agreement contingent on non-OPEC cutting 600 kbpd. Minister of Energy and Mineral Resources Ignasius Jonan said that Indonesia suspends its membership in OPEC, because Indonesia doesn’t agree to cut oil production in the state budget APBN.

Dec 01,2016 16:18:50

$TBIG - 3Q16 results – inline, by Jonathan Mardjuki

Market Cap, ADV: US$1.9bn, US$2.2m

Rec, TP: O/PF, Rp7,200/Sh

Event: 3Q16 results – in line


3Q16 Result highlights

  • Revenue Rp942bn, (+)3% QoQ, (+)8% YoY (75% of 16CL, 74% 16Cons)
  • Gross Profit Rp835bn, (+)3% QoQ, (+)13%YoY (75% of 16CL, 75% of Cons)
  • EBIT Rp756bn, (+) 4% QoQ, (+)15% YoY (75% 16CL, 75% Cons)
  • EBITDA Rp818bn, (+)3% QoQ, (+)11% YoY (75% 16CL, 75% Cons)
  • NPAT Rp96bn, (+)1%QoQ, (-)46%YoY (83% of 16CL, 74% of 16Cons)                                          


  • Revenue in 3Q16 grew 3% QoQ and 8% YoY as tenancy increased 3% QoQ and 9% YoY, and lease rates stayed flat QoQ. TBIG also added 397 telco sites in the quarter and tenancy ratio stood at 1.65 in 3Q, from 1.66 in 2Q.
  • Ebitda grew 3% QoQ and 11% YoY, as the Ebitda margin was 87%. Ebitda margin was flat QoQ but on yearly basis, it expanded from 85% in 3Q15.
  • While revenue Ebit and Ebitda grew stable, NPAT grew slower at 1% QoQ. It came at 83% of 16CL, partly because we expect tax expense of Rp130bn, while the company still booked tax benefit of Rp19bn in 9M16. NPAT dropped 46% YoY, due to higher tax expense in 3Q.
  • The stock is currently trading at 14.1x/12.9x EV/Ebitda for 16/17CL.
Dec 01,2016 15:49:10

Salim, Agung Sedayu, and Alam Sutera Groups to engage in toll roads business

Salim Group and Agung Sedayu Group would form a consortium to initiate Kamal – Teluknaga – Balaraja toll road section (48.3km; investment cost: Rp18tn), while Alam Sutera Group plans to initiate Semanan – Balaraja toll road section (31.7km; investment cost: Rp11.3tn). Note that Semanan – Balaraja toll road section would connect with Serpong – Balaraja and six other toll road sections, and Kamal – Teluknaga – Balaraja would connect with Sedyatmo toll road section. (Bisnis Indonesia)


Dec 01,2016 15:48:11

Puradelta Lestari ($DMAS) aims Rp150bn of recurring income

The company is targeting Rp150bn of recurring income from commercial projects including rental apartments, ready-for-rent factories, and shop houses. According to Tony Suwanto, DMAS Director, the company expects to record Rp30bn of recurring income from Le Premier (126 units) annually. Le Premier starts its operational activities in Nov’16 with 100% occupation rate due to 18-months contract with a Japanese firm. Meanwhile, the company has signed agreements with two clients for of its two ready-for-rent factories for a period of 3 years with rental rate of Rp75,000/sqm/month and potential annual income amounting to Rp961.2mn per factory. DMAS is also planning to launch several shop houses in Dec’16. (Bisnis Indonesia)

Dec 01,2016 15:47:28

Ciputra Development ($CTRA) eyes Rp1tn of DIRE issuance

For early stage, CTRA eyes to pledge assets through DIRE issuance with total value amounting to Rp1tn. According to Candra Ciputra, CTRA President Director, the company has Rp15-20tn of assets value which can be potentially pledged through DIRE. The company expects DIRE issuance to be realized in 4Q17. (Bisnis Indonesia)

Dec 01,2016 15:47:00

Bukit Asam ($PTBA) to eye for another mining asset

According to local press, PTBA is planning to acquire another mining asset in FY17, which the company has reserved budget of more than USD100mn. To finance their expansion projects, PTBA has obtained loan from Bank Mandiri ($BMRI) amounting to USD230mn and Rp1.7tn. The USD230mn bank loan consists of USD100mn special borrowing facility (for capex) and USD130mn treasury line (for foreign currency needs). On the other hand, the Rp1.7tn consists of Rp700bn supplier financing and Rp700bn Trust Receipt non LC (for payment to suppliers) as well as Rp300bn invoice financing facility. (Kontan)

Dec 01,2016 15:45:07

Sido Muncul ($SIDO): Herbal lift
Consumer Staples: Indonesia
Top-line growth targets, 2016-17: +14% y-y supported by herbal
Given the market leadership of the Tolak Angin product of around 70% (exhibit 6), we expect herbal revenue growth to accelerate in 4Q16 as management has applied price increases for its Tolak Angin product by around 7% y-y in late October. However, mangament expects volume to slighlty drop in the following month post October due to a price hike. Thus, we expect to see herbal revenue growth of 4% q-q to IDR378bn, translating into 2016 herbal revenue of IDR1,484bn, still up almost 30% compared to 2015’s level. In addition, we expect to see SIDO’s F&B segment growth pick up in 4Q16 to IDR243bn, up 15% y-y, supported by a higher ASP of 6% y-y on the Kuku Bima Energy product. However, we still expect to see some pressure in beverages this year on tight industry competition, although SIDO maintains market leadership (exhibit 7). We estimate F&B revenue of IDR967bn, -3% y-y. We expect flat growth of 2% y-y for pharmacies as the utilization rate has reached 100% and SIDO is taking a wait-and-see approach before adding more capacity.  
Solid GP and OP margins; weaker NP margin on lower interest income  
Backed by strong herbal growth this year and into 2017-18F, SIDO is set to see gross margin improvement alongside higher sales contribution from SIDO’s herbal (higher margin) division to more than 58% (exhibits 8-9). In addition, management stated that warehouse capacity increased 50% this year, enabling greater raw materials capacity during harvest periods. With stable A&P costs of below 10% of sales, operating profit margins should also improve, up 90bps in 2016, and conservatively expanding another 50bps in 2017 and 35bps in 2018. On the bottom line, 2016 margin is expected to be squeezed by 60bps on lower interest income on less cash on hand used for working capital. That said, we still expect solid double-digit EPS growth of 10% y-y this year, 13% y-y in 2017 and 15% y-y in 2018.
Looking to increase export contribution to 5% in 2019
With SIDO’s new international sales director, Carlo Lukman Windarto, the company is looking to increase the sales contribution from exports to 5% in the next 3 years from less than 2% in 9M16. Currently, SIDO exports Tolak Angin and Kuku Bima Energy to Nigeria, Malaysia and Hong Kong, which are the top 3 overseas destinations. On the domestic side, currently SIDO’s products are mostly consumed and distributed in Jakarta and West Java, accounting for 60% geographically. The company is expanding into the eastern part of Indonesia, which we think could be the driver for future growth.  
Slightly lower 12-month TP of IDR640; Maintain BUY

At this stage of the cycle, we have slightly cut our 2016-18F revenue by 2-5% and net profit by 1-3% (exhibit 5) on lower-than-expected herbal sales volume in 4Q16. Nevertheless, we retain our positive long-term view on SIDO as the beneficiary of growing demand for healthy herbal remedies. On valuation, our new 12M TP of IDR640 is based on an unchanged 17.6x 2017F PE (its 3-year historical average PE). Given our minimal earnings changes on SIDO, we expect the stock’s recent market outperformance to persist (exhibit 4). BUY. Risk: Higher raw materials prices and tighter beverage competition.


Dec 01,2016 11:50:55

BCA ($BBCA) and Bank Mandiri ($BMRI) sets target for next year

BBCA targets loan growth of 10-11% in 2017 and deposit growth of 5-8%. Meanwhile, BMRI targets loan growth of 12% next year, equivalent to this year’s target. In 2017, BMRI will focus on the following loan segments: corporate, consumer, and micro segment. Meanwhile, BMRI targets deposit growth of 8-10%. On a side note, BMRI targets its electronic money to grow by +30%yoy in 2017, based on the latest data published in Sept16, BMRI has issued 8.1mn electronic money cards, +32%yoy. (Kontan)

Dec 01,2016 11:46:05

BI projects IDR/USD to be stronger than prediction

Based on BI elaboration in a meeting with Commission XI of the parliament yesterday 29Nov16, the average projection for the exchange rate in YE2016 is Rp13,300/USD (vs. previous range: Rp13,300 – 13,600/USD). BI also projects the average exchange rate in 2017 to be Rp13,280/USD (vs. previous range: Rp13,200 – 13,500/USD). (Kontan)

Dec 01,2016 11:44:37

Jasa Marga: A More Robust Return (JSMR; Rp4,180; BUY; TP Rp5,175)

Favorable terms with lenders and contractors during construction phase should be able to support Jasa Marga’s working capital and profitability amid expansion period. We raise 2017F net earnings by 19% due to planned asset monetizing and better cash flow from CPF scheme. Upgrade to BUY with TP of Rp5,175.

Devising a more productive financing scheme. The planned development of 13 new toll roads would increase JSMR’s toll road concession to 1,235km by 2019. We calculate total capex in 2016-19F would reach Rp60tn, almost doubling JSMR’s 2015 total assets of Rp37tn. During this expansion period, JSMR plans to re-introduce the Contractor Pre Financing (CPF) scheme to improve its cash flow and reduce needs for borrowing additional debts. Note that JSMR has secured agreements with contractors of its new toll road projects (i.e. Balikpapan-Samarinda, Batang-Semarang and ManadoBitung) to defer payment until completion. By freeing up a much needed cash flow, we expect JSMR should be able to support the government’s effort in connecting cities through toll road network.

Monetizing existing assets. JSMR also plans to increase its cash assets through sales of existing toll road stakes. In 2017, we expect the company would offload its stakes in minority toll roads (e.g. Jakarta Lingkar Barat Satu – 19% stake) while reducing stake in majority-owned toll road (e.g. Trans Marga Jateng – 74% stake). Combined with the impact from CPF scheme, we have decided to raise our 2017 net earnings by 19%, continuing solid 18% y-y net profit growth in 2016F. It is worth noting that JSMR is on-track to achieve our 2016F target with 9M16 net profit of Rp1.3tn (+36% y-y, 74% of FY target) and Rp6.5tn sales (+18% y-y, 75% of FY target). Nevertheless, we have excluded JSMR’s plan to securitize its assets through creation of REIT or limited investment funds in our forecast as we now believe that JSMR would have sufficient cash flow in 2016-17F due to the CPF scheme.

Upgrade to BUY with 24% upside potential. We believe that improving profit outlook should be seen as positive news. After considering the share dilution from rights issue, we slightly lower our target price from Rp5,300 to Rp5,175. Note that we have considered a 25% discount to our DCF-based methodology (WACC: 9.7%) for margin of safety. Risks to our call are higher financing costs, unexpected delay in land acquisition, and unfavorable ruling in ongoing litigation case.


Dec 01,2016 11:42:02

Bank Jabar: 10M16 Results- Above Expectations ($BJBR)

Bjb reported 10M16 unconsolidated net income of Rp1.5tn, +49% yoy, accounting for 91% of FY16 consensus and 97% of Mansek’s expectations. Strong net income growth was driven by decline in provision expenses of -62%yoy and operating income growth of +25%yoy. Assuming its syariah unit’s net loss was similar to 9M16, we estimate consolidated net income to total to Rp1.2tn, accounting for 76% of consensus and 81% of Mansek’s expectations. Net income in the month of Oct totaled to Rp77bn, -41%mom/-14%yoy.

Loan growth +15%yoy (flat mom), deposit growth -6%yoy (-1%mom). We believe infrastructure loans, classifiedunder commercial loans, continues to be the main loan growth driver. Decline in deposit growth was driven by demand deposit of -7%yoy and time deposit of -9%yoy while savings deposit grew by +10%yoy bringing CASA to 45% in Oct16 vs. 43% in Oct15. LDR increased to 87% in Oct16 from 71% in Oct15.

NIM increased to 7.3% in 10M16 from 6.0% in 10M15 as cost of funds declined by 88bps while asset yield increased by 42bps, mainly due to strong loan growth and decline in deposit growth. On a monthly basis, NIM increased to 9.2% in Oct from 5.6% in Sept.

Cost to income ratio improved to 64% in 10M16 vs 67% in 10M15. However in the month of Oct, cost to income ratio deteriorated to 92% from 48% in Sept due to significant increase in other expenses totaling to Rp582bn.

Provisioning expenses declined by 62%yoy in 10M16 to Rp78bn as the bank continues to receive insurance claims and recoveries of bad debts. We estimate Bjb to have written off about Rp639bn in 10M16 and Rp70bn in the month of Oct alone. Provisioning level declined to 1.0% in Oct16 from 1.1% in Sept16 while cumulative cost of credit remains stable at 2.3% in Oct16.

Maintain Neutral with TP of Rp1,600. The counter is trading at 1.3x P/BV 2017F. We remain cautious on the bank’s syariah unit which has been dragging down consolidated net income. As of 9M16, BJBR’s syariah unit recorded a net loss of Rp231bn and a NPF ratio of 12.4%.

Dec 01,2016 11:39:11

Nov16 Inflation Preview: Spicy Flavor

Spicy-flavored inflation. We forecast Nov16 inflation of 0.33% MoM which is equal to 3.43% YoY (Oct16:3.31% YoY). The consensus, on the other hand, is expecting 0.32% MoM/3.40% YoY. Rainy season disrupted chili supply on cropping difficulties and caused price to crank up by more than 20% MoM. At an estimated 0.12ppt, the related commodities are likely to dominate foodstuffs contribution to the monthly inflation (exhibit 2). Global uncertainty post-US election, meanwhile, pressured the rupiah to depreciate by 2.1% and commodity prices to increase. These would push the core inflation to 3.34% YoY from 3.08% YoY in Oct16, in our projection, while the consensus is seeing 3.20% YoY. The data will be out on Thursday, 1 Dec16.

Tame inflation intact. Our estimate implies inflation rate of 2.45% YtD (11M15: 2.37%). We view that tame YE16 inflation is still on track and thus maintain our forecast of 3.3%. Foodstuff prices remain the upside risk especially that moderate-to-high intensity rainfall will continue in Dec16 and peak in Jan17, according to forecast by the weather agency BMKG. YE16 behind, inflation is set to pick up starting Feb17 when the impact of first 900VA electricity tariff adjustment kicks in.

Uncertainty holds benchmark rate. We are expecting the central bank to be in wait and see mode for further evidences of monetary transmission impact and for US policies unfolding. That said, the 7-DRRR would stay at 4.75% in the last governor board meeting this year (15/12) and likely to remain unchanged along next year.

Dec 01,2016 11:33:39

Regional Oil & Gas: OPEC Meeting: Christmas Comes Early

OPEC members have been able to resolve their differences and have all agreed to share the burden of production cuts. Starting Jan 17, production target would be 32.5mbpd, a 1.1mbpd cut from Oct 16 level of 33.6mbpd. We had initially anticipated 33mbpd production from OPEC members, as such, our view does not change dramatically as a result of this agreement. We maintain our crude oil price forecast average of USD60/bbl for 2017F and the longer-term. OVERWEIGHT maintained on the mid-stream and downstream players, with upstream players still a momentum play.

¨ We maintain our crude oil price forecast average of USD60/bbl for 2017F and longer-term, with the markets looking to be more bullish than prior to the Organisation of Petroleum Exporting Countries (OPEC) deal. However, there is downside risk from our expectations. The monitoring and implementation of the production cuts could result in non-compliance. Shale oil producers could return at a faster pace. We are also not certain how much this deal hinges on non-OPEC joining. If the deal depends on non-OPEC joining, there are higher chances of non-compliance and the deal can fall apart. Finally, Trump’s actions could provide further challenges for the upstream sector.

¨ Our view does not change much. We view that in that any action by OPEC would be self-defeating – as any intervention would result in higher oil prices, leading to higher cost producers entering the market and lowering oil prices again. We believe that the current oil market mechanism is already working, without its intervention – low crude oil prices are needed to clear the markets by cutting production at the highest cost producers. However, this agreement will in no doubt, should it be well implemented and stretched over a longer period of time, hasten the clearing of the inventory overhang.

¨ As financial markets focus on the shorter-term outlook for oil markets, upstream E&P players are looking at the longer-term picture. Mexico would be auctioning 10 deepwater blocks. This has drawn much interest from global oil majors such as Chevron (CVX US, NR), LUKOIL (LKOD LI, NR), CNOOC (883 KH, NR) and Petroliam Nasional (Petronas). This is one of the Government of Mexico’s first steps in opening up its upstream E&P business that has long been tightly held by its national oil company (NOC), Petroleos Mexicanos (Pemex).

¨ This resonates with our view that there is some glimmer of hope as we enter 2017. We believe that any conventional field development projects that have been put on hold since the oil price collapsed should start to look into locking-in contractors over the next 12 months, in order to take advantage of the current depressed market environment: Regional Oil & Gas: Glimmer Of Hope.

¨ OVERWEIGHT mid/downstream players. Global inventory would likely remain in oversupply in 2017 in our view, thus storage providers and tankers should still benefit – MISC and Dialog Group (DLG MK, BUY, TP: MYR1.77). As we expect markets to remain volatile, we recommend AKR Corporindo, Perusahaan Gas Negara (PGAS) and Yinson as defensive plays with strong balance sheets and negative correlation to crude oil price movements. For seasonal plays where quarterly fluctuations in demand and supply influence product prices, we like Petronas Chemicals and PTT Global Chemicals (PTTGC). Upstream companies remain momentum plays – prefer larger caps: PTT Exploration and Production (PTTEP), Keppel Corp and Sembcorp Industries. (Kannika Siamwalla CFA, Norman Choong CFA, Wan Mohd Zahidi)


Nov 30,2016 12:39:00

Summarecon Agung ($SMRA): Progressing
Property: Indonesia
§ 10M16 marketing sales of IDR2.4tn; 2 projects to be launched: According to management’s monthly performance announcement, SMRA booked solid October sales of IDR218bn, of which around 74% were from the Springlake Bekasi project as the company managed to sell 288 apartments worth IDR162bn in sales with ASPs of IDR10mn-IDR15mn/unit. This translated into 10M16 marketing sales of IDR2.4tn, reaching 60% of management’s IDR4tn full-year target and 69% of ours. To meet its 2016 target, SMRA plans to launch 2 projects: (1) Summarecon Bandung (26 November) and (2) Summarecon Karawang (December). As we are positive on SMRA’s upcoming launches, we retain our 2016 marketing sales assumption of IDR3.5tn, particularly given company’s guidance of IDR1tn in sales from those projects.
§ Cutting 2016 revenue on longer recognition, but raising 2017-18’s: On a huge 60% high-rise contribution to 2014-2015 marketing sales, we expect SMRA to book poor 2016F revenue of IDR5tn, down 10% y-y translating into IDR105bn of net profit (-88% y-y). Based on the company’s explanation, the disappointing revenue recognition was basically due to the longer construction period of their strata title projects which require 3 to 4 years to hand over the units. The construction period is also written in SMRA’s sale and purchase agreements (PPJB). Currently, SMRA has around a IDR3tn high-rise pre-sales backlog from 2014-15 that is expected to be booked in 2018-19 while the remaining landed housing backlog is IDR2tn. Thus, we raise our 2017-18 revenue assumptions by 0.3-7.1% as we expect most of the marketing sales backlog to be recognized in those years.
§ Ready-to-launch projects; Retain TP of IDR2,150 with BUY rating: On solid planned project launches and escalating ASP growth (9M16: +8% y-y) helped by the government’s infrastructure development, we maintain our 12M TP of IDR2,150, based on a 55% discount to our 2017F NAV. However, we believe recent market underperformance was due to SMRA’s weak 3Q16 sales recognition. We believe SMRA’s upcoming project launches could offset investor sentiment as the bad news looks mostly priced in and we believe the stock is currently trading at a more attractive valuation. With 58% upside potential to our TP, we maintain our BUY rating. Risks to our positive view on SMRA include worse-than-expected project launches, a failed tax-amnesty program as well as delays on government infrastructure projects.

Nov 30,2016 12:37:32

Wika Beton: NDR Key Takeaways

We brought Wika Beton ($WTON) management for one day NDR to Hong Kong. Most of the clients we met still positive on the overall Indonesia infrastructure story. The current currency volatility as well as the recent escalation in political tension appear  to become the main concerns.

The key highlights:

¨        WTON management is still positive on infra development on infrastructure development in Indonesia as the progress and execution capabilities have been considerably improved under the current government.

¨        WTON is confident to exceed this year new contract target of IDR4.3trn. As of 10M16, the company has secured IDR3.3trn worth of new contract and estimates to obtain around IDR5trn by year end, mainly due to Balikpapan - Samarinda toll road project

¨        WTON expects to have 13%-15% GM vs 9M16 GM of 13.6%, while the management remain positive on the new contract outlook next year and expect an increase of 25%YoY.

¨        High speed train project will benefit WTON next year. The company will likely to receive IDR1.5trn precast & ready-mix order from its parents Wijaya Karya (WIKA IJ, BUY, TP IDR3,370) and to pursue another IDR1.5trn order from China party.

¨        They are confident to compete with other precast players as they have more variety of products and well known reputation in term of precast quality. However, we do acknowledge the current stiffer competitive landscape especially from SOEs such as Waskita Beton Precast ($WSBP).

We maintain our BUY call on the company as we anticipate more new projects will be signed by year-end and will likely  be recognized as revenue  next year. We expect stronger year for WTON in FY17 underpin by the start of the HST project next year and government’s bigger infrastructure budget in FY17F.

As one of the biggest suppliers of railway sleepers in Indonesia, Wijaya Karya Beton (Wika Beton) will also benefit from the Government’s plan to build 3,258km of railway tracks across the country in five years.

Our TP of IDR1,070 is based on a DCF valuation assuming the following: RF of 7.5%, WACC of 12.7% and TG of 5%. It also implies 28.5x FY17F P/E. (Dony Gunawan)

Nov 30,2016 11:50:18

Jasa Marga ($JSMR): King of the road
Toll road: Indonesia
§  New toll-road projects support long-term earnings growth: As a domestic toll-road company with the greatest operating assets (61% market share), JSMR will likely benefit from President Jokowi’s push to accelerate toll-road projects. By 2020, we expect JSMR to operate 30 toll-road concessions (currently: 19) with a total length of 1,224km, up 106% from present levels of 593km. Apart from such large projects in its pipeline, JSMR plans to initiate two Jakarta-Cikampek expansion sections to complement the current Jakarta-Cikampek toll road, which carries the most traffic and generates the highest revenue for JSMR, providing earnings support ahead. This note marks a transfer of analyst coverage.
§  Margin support from e-money and low interest rates: In the next few years, JSMR plans to increase its revenue proportion from e-money toll stations to 80% in 2018 (23% as of 1H16). This would lower personnel costs (20% of JSMR revenue) by around 30%, improving the company’s cost structure in the long run. In 2017, JSMR expects its e-money revenue proportion to reach 50%. Furthermore, we expect lower interest rates ahead to support JSMR’s net profit given its substantial 2017 net gearing of 193%. That said, JSMR plans to lower its 2017 interest cost from around 10.4% to 9.0% through several refinancing initiatives. With lower interest rates, we expect JSMR’s interest coverage to hover around 2x in 2017-18.
§  Lower capex requirement on innovative payment structure: In 2017, we expect JSMR to spend capex amounting to IDR18tn (+73% y-y), to fund expansion of several toll-road projects. JSMR plans to structure capex for several toll roads such as Batang-Semarang, Samarinda-Balikpapan, Jakarta-Cikampek Elevated, Pandaan-Malang and Manado-Bitung using turnkey-CPF-and-LC schemes in order to minimize cash outlays for its investments in 2017. Thus, JSMR’s cash flow should be well-supported. On depreciation, JSMR will continue to use a traffic-based depreciation method, which lowers depreciation expenses for some new toll roads in the first few years while their traffic carried is still low. This will likely support JSMR’s bottom line as 7 new toll roads will become operational in 2017.
Ensuring longer term growth through IDR1.8tn rights issue
In order to ensure longer-term growth, JSMR is in the midst of conducting its rights issue in December 2016 with pricing set at IDR3,900, translating to a total fund raising of IDR1.8tn. JSMR will direct the proceeds towards three new toll-road projects: Balikpapan-Samarinda, Manado-Bitung and Jakarta-Cikampek elevated toll roads. On earnings, we expect JSMR’s 2017F revenue of IDR9.6tn (+10% y-y) and 2018F revenue of IDR11.2tn (+16% y-y) to result in 2017F net profit of IDR1.9tn (+8% y-y), before growing 8% y-y to IDR2.0tn in 2018F. In terms of dividends, JSMR plans to raise its dividend payout from 20% to 30%, allowing for 2017 dividend yield of 1.9% (market’s 2.6%). On valuation, our new IDR5,287 Theoretical Ex Rights Price (TERP) 12-month TP implies a 2017F PER of 22.5x, a 25% discount to its past-5-year average forward PER. BUY with 26% upside potential to our TP. Risks: Lower-than-expected traffic growth and execution delays of its toll-road projects.


Nov 30,2016 11:45:13

Indonesia Strategy: Managing Volatility
We opine that Indonesia’s fundamentals remain pointed towards long-term positives. This is underpinned by BI’s pro-growth policies to propel economic growth, the low inflation environment, continued government focus on infrastructure spending, and the security forces’ exemplary conduct in maintaining stability as political tensions rise. Thus, we expect stronger market direction post the Fed’s anticipated rate hike in December.

¨ Outflows dominate. Worries over a potential US Federal Reserve (Fed) rate increase and weakening IDR have triggered outflows in both the equities and fixed income markets. This is a reversal after months of inflows. Post Donald Trump’s win in the recent US elections, the JCI continues to trade at sub-5,200 level, with outflows recorded at IDR9.6tnin November. Similarly, outflows in the fixed income market have deepened, reaching IDR17trn over the past month, with the 10-year government bond continuing to escalate to 8.3% (August: +6.3%). Arguably, a lack of catalysts in the market have also led to the insipid performances, and we are only expecting stronger market direction post the Fed rate increase that is expected by mid-December.

¨ The three spectres are currency, interest rate trends and politics. As highlighted in our 14 Nov 2016 Currency Woes Dampen Sentiment report, the fundamentals still point towards a resilient IDR. This is underpinned by its high-yield differential vs developed market (DM) economies and peers, relatively high levels of growth among major emerging market (EM) economies, and ongoing reforms. Rising current account deficit (CAD) over the next few years is still manageable, while forex reserve levels also improved to USD115bn.

¨ Action by Bank Indonesia (BI) to intervene in the currency market is plausible to indicate direction. An influx of asset repatriation is also expected towards year-end, which would help the IDR to recuperate to a more favourable level. We opine that BI would maintain its current relaxation bias policy to propel economic growth, especially given the subdued inflationary outlook. As the series of rate cuts have yet to result in a meaningful economic trajectory, it is unlikely that the central bank would take the risk by reversing its current relaxation policy.

¨ Over the past five years, the spread between the BI rate and inflation has averaged 130bps vs the current 145bps spread. This provides room for further relaxation if needed. We expect BI to maintain its current benchmark rate until year-end, and potentially make another 25bps cut in early 2017 to further support economic growth under stable IDR circumstances.

¨ Jakarta Governor Basuki Tjahaja Purnama’s alleged religious defamation has raised the political landscape’s temperature, as seen by the magnitude of the anti-Basuki rally that occurred earlier this month. This upheaval is negatively perceived by investors, especially after >2 years of stable politics. The market is likely to take heed of the next rally and, more importantly, how the Government handles the situation. So far, the security forces have been exemplary in restoring stability. We continue to believe that the Government’s position remains strong. As long as these forces remain united under presidential control, any act that destabilises the country can be brought under control quickly.

¨ Commodity plays and blue chips. We like PP London Sumatra (Lonsum) and United Tractors as commodity plays. Bank Negara Indonesia (BBNI), Astra International, Ciputra Development, Bumi Serpong Damai (BSD), Telekomunikasi Indonesia (Telkom), Indofood Sukses Makmur and Waskita Karya are all stocks with strong fundamentals. (Helmy Kristanto)


Nov 29,2016 22:51:04

Tax changes under Trump could see trove of money repatriated, boosting U.S. currency

Bringing It Home

Donald Trump has said he'll propose a tax break to encourage U.S. companies to repatriate profits.

Nov 29,2016 10:19:25

JSMR announced rights issue price of IDR3,900

Jasa Marga ($JSMR) has announced rights issue price of IDR3,900. According to IDX, the JSMR rights issue ratio was 500,000:33,667 which means every owner of 500,000 old shares has the right to purchase 33,667 new shares. (

Nov 29,2016 10:18:12

Fisheries: Indonesia’s shrimp exports number 1 in the US

According to the Ministry of Maritime Affairs and Fisheries (KKP), Shrimp exports from Indonesia during 2016 have become the largest in the US, beating India which had been the number-1 shrimp exporter to the US for the last 3 years. Moreover, based on data from KKP, shrimp commodity exports exhibited an upward trend in 2015-16 as export volumes increased by 6.8% y-y and export values rose 3.8% y-y. (


Nov 29,2016 10:17:36

Poultry: New rule to stop monopoly

On top of the new government regulation signed in May 2016, the government is proposing another rule to dismantle the domination of large poultry corporations. These companies will be required to sell at least half of their DOC (day-old chicks) to independent farmers at a fair price and they will have to run a slaughter house for every 500k broilers of their weekly production capacity. In this way, they can slaughter at least 30% of the live birds and store them in cold storage. The new arrangement is pending for approval from the agriculture minister. (Jakarta post).

Bahana comment: This is a huge step-back for the poultry stocks under our coverage, however, there are still a lot of gray areas in terms of implementing the new rule.


Nov 29,2016 10:15:58

IDX plans to introduce a new penny stocks trading board in 1H17

Director of Indonesia Stock Exchange (IDX), Hamdi Hassyarbaini, stated that the IDX plans to introduce a new penny stocks trading board in 1H17. (Kontan)

Nov 29,2016 10:14:31

FSA released a new stock list for Syariah index

The Financial Services Authority (OJK) has released a new stock list for the Syariah index. The FSA has added Waskita Beton Precast ($WSBP), Energi Mega Persada ($ENRG), Aneka Gas Industri ($AGII), Malindo Feedmill ($MAIN), Gajah Tunggal ($GJTL), Bumi Resources Mineral ($BRMS), Cikarang Listrindo ($POWR), and Hexindo Adiperkasa ($HEXA). Furthermore, The FSA has deleted Surya Citra Media ($SCMA), Jasa Marga ($JSMR), Modernland Realty ($MDLN), and Nirvana Development ($NIRO). (OJK).

Bahana comment: SCMA's removal from the syariah index has been well flagged by management in the past couple of months, given the company's strong revenue growth coming from the tobacco sector (non-halal), which accounts for more than 10% of total revenue. Note that competitor $MNCN is also not inside the Syariah index list.

Nov 29,2016 10:11:42

Labor market: 2017 average minimum wage to rise 8.25%

Ministry of Manpower stated that the 2017 average minimum wage growth will increase 8.25% y-y, in line with the formula of GDP growth plus inflation rate. (Investor Daily).

Bahana comment: We welcome this decision as positive improvement for the country’s inflationary prospect, as in the last 5 years, average minimum annual wage increase was at 14.4%.

Nov 29,2016 10:10:20

2 December demonstration: Agreement struck with the Police

On 25 November, Maruf Amin (Chairman of Ulema Council), Tito Karnavian (Police Chief), Moh. Rizieq Shihab (Founder of Islamic Defender Front) have struck an agreement on how and where to organize the planned demonstration on 2 December. The venue has been decided at Monas Square, near the presidential palace. Additionally, the Police also explained their efforts to prevent the possibility of infiltration from terrorist groups. Moreover, Rizieq Shihab emphasized that despite the compromise with the police regarding the chosen site for the protests, they continue to demand the authorities to detain Jakarta Governor Basuki "Ahok" Tjahaja Purnama for his alleged blasphemy charge. The Police Chief previously told the public that to demonstrate is a right for every citizen which is guaranteed by the constitution, but under the 1998 Law, the implementation must not disturb and interfere public order. (

Nov 29,2016 10:08:20

Kino Indonesia ($KINO) targets 8% YoY revenue growth in 2017

The growth comes from a range of new launches and new export market. KINO allocates Rp80 bn capex for variant launches
in 2017: Ellips, Sleek Baby, Resik V, and to expand its pharmaceuticals segment. KINO also plans to export candy products to
the US, adding to the current 4% export contribution to revenue, concentrating in South East Asia. This year’s 0% YoY revenue
growth target is maintained. (Kontan)

Nov 29,2016 10:07:40

Adhi Karya ($ADHI) to invest Rp4tn in water purification business
The company plans to allocate Rp2tn capital expenditure for the business segment in 2017. In addition, ADHI also aims to
invest in toll road projects, such as Cileunyi – Sumedang – Dawuan (Cisumdawu) toll road section in West Java. In separate
news, the company’s subsidiary, Adhi Persada Properti would develop Grand Taman Melatin Margonda 2 in March 2017 with
Rp372bn investment cost, the company hopes to finish the project by December 2019. (Bisnis Indonesia)

Nov 29,2016 10:06:57

Bank Danamon ($BDMN) partners with a telecommunication company
BDMN will partner up with a telecommunication company to develop its digital banking services. Djamin Nainggolan Senior
Executive Vice President of BDMN states that the telecommunication company is one of the biggest players in Indonesia,
however they are not able to disclose the name of the company yet. BDMN has signed a MoU with the telecommunication
company. (Bisnis Indonesia)

Nov 29,2016 10:06:12

Bank Tabungan Pensiun Nasional (BTPN) WoW agents markets e-commerce

BTPN WoW agents will not only provide branchless banking services but will also be allowed to do online sales through KUDO
Technology Indonesia. Senior Vice President Sales Management Head of Bank BTPN states that the collaboration will help
improve the welfare of BTPN WoW agents. The first pilot project will be conducted in Semarang and the surrounding area.
(Bisnis Indonesia)


Nov 29,2016 10:05:26

Bank Mandiri’s (BMRI) subsidiary to operate in Malaysia in 2017

BMRI predicts that its subsidiary located in Malaysia will start operations in 3Q17. The new subsidiary will focus on the retail and corporate segment. BMRI has transformed its remittance office in Malaysia, Mandiri International Remittance Sdn Bhd, to become a subsidiary and plans to increase its subsidiary’s capital to RM300mn over a period of five years. BMRI will prepare RM100mn as its initial capital. (Bisnis Indonesia)

Nov 29,2016 10:04:40

Bank Indonesia projects 0.35% MoM inflation in Nov16

Foodstuff volatility continues to be the main factor, especially from chili and shallot (Kontan)

Nov 29,2016 09:50:17

Plantation: Overpowered by the Bull Factor

We expect favorable CPO fundamental and better soybean prospect to outweigh the impact of weaker Indian palm oil import as a result of India’s demonetization policy. We believe Indian palm oil import should normalize by Jan-17 once the issues have been settled. Maintain overweight with LSIP as our top pick.

Favorable CPO fundamental still prevails. In our previous report, The Time is Ripe!, we highlighted that CPO fundamental will remain strong because of 1) pressure on emerging market currencies, such as IDR and MYR, since 8 Nov post the US presidential election, 2) expectation of subdued output till 1Q17 and 3) slower minimum wage hike set by the government at 8.25% for FY17. Note in previous years, this ranges between 13-19% since FY12. According to the latest estimates by MPOB, Malaysia's palm oil production guided a 3.5% MoM decline in the first 20 days of Nov. This follows a 2.2% MoM decline in Oct-16. Given this, and higher Dec demand in anticipation of Chinese New Year, we expect CPO price to trade within the range of MYR2,800-3,000/ton until year-end.

US proposal for higher biofuel quotas in FY17 an added boost for CPO price. On 23 Nov-16, the US Environmental Protection Agency (EPA) has set higher biofuel quotas at 19.28bn gallons or 72.98bn liters (+6.5% YoY) to be blended into gasoline and diesel for FY17, which is higher than the initial 18.8 billion gallons (71.1bn liters) proposed in May. The revised quota also includes 280mn gallons (1.1bn liters) of increase in advanced biofuel quota, which may boost demand for soya oil-based biodiesel by 700-800mn lbs (0.3-0.4mn tons), according to a Bloomberg article. Increased demand for soy-related products will boost soy products' prices, hence positive for CPO price.

India’s high-denomination banknotes ban poses short-term hiccup for palm oil demand. On 8 Nov-16, India announced immediate ban on the use of 500 Rupee (USD7.50) and 1,000 Rupee (USD15.00) banknotes, which account for 86% of total cash in circulation, in an effort to combat corruption and counterfeit money in the country. Citizens will have until 30 Dec-16 to exchange their old notes for the new ones. We think the ban of high-denomination notes will affect India palm oil import negatively in the short-term, given that India is the largest importer of palm oil, accounting for 19% of total Malaysian palm oil export (10M16) and 22% of total Indonesia palm oil export (8M16). Due to slow distribution of the new notes, cash crunch in India will temporarily disrupt retail demand, including purchases of necessities, as well as delayed shipment of vegetable oils to India. As a result, we could see weaker Indian palm oil import translating into Malaysia’s Nov and Dec CPO export figures, before normalizing in Jan-17. According to Intertek Testing Services, Indian palm oil import fell 75% MoM to 58,360 tons in the first 20 days of Nov.

Maintain overweight. Overall, we expect favorable CPO fundamental and better soybean price prospect to negate the negative impact of weaker Indian palm oil import. Moreover, we believe Indian palm oil import should normalize by Jan- 17 once the issues have been settled. Maintain overweight on the plantation sector with LSIP as our preferred pick.


Nov 29,2016 09:48:19

The Time is Ripe!

We may see pressure of weakening IDR due to rising uncertainty and Fed Fund Rate hike to positively affect CPO players’ earnings. This is further backed by slower wage hike in FY17 and supportive sector fundamental. We prefer LSIP for its cheap valuation and strong financial position.

CPO players as beneficiary of IDR depreciation… On higher chance of Fed Fund Rate hike in Dec and uncertainty of Trump policies, we may see market and pressure on IDR to persist. Given that the Indonesian CPO price is quoted in USD (CIF Rotterdam), we believe listed local CPO players’ earnings should benefit from IDR depreciation against USD. Based on our sensitivity analysis, for every 1% depreciation in IDR, both AALI's and LSIP's net profit would increase by 2.1% and 3.1% respectively. Benefit of IDR depreciation to AALI’s earnings is less profound as it was partially offset by higher forex arising from its outstanding USD-denominated loan.

… And slower wage hike. In addition, the Indonesian government has set minimum wage hike of 8.25% for FY17, which is a slower rate as compared to previous years’ increment of more than 10%. We think CPO players will benefit from slower wage hike as labor cost accounts for 20-30% of CPO players’ production cost.

Fundamental remains supportive of CPO price. We also think high CPO price within MYR2,800-3,000/ton should sustain in view of continued low inventory level for the next several months. The recently reported lower MoM Malaysia CPO output in Oct, we believe, may signal subdued production for the rest of FY16 and into 1Q17, the start of low crop season, hence capping further rise in CPO inventory level. Upcoming Chinese New Year demand and ongoing concerns on delayed soybean planting due heavy rainfall in Argentina and parts of Brazil continue to be a positive factor supporting CPO price.

AALI's and LSIP's performances lag behind the CPO price. Compared to the year-to-date 32% rise in CPO price, share prices of both AALI and LSIP underperformed by 22% and 4% respectively. We think share prices have been penalized as a result of deep production decline which negatively impacted earnings. On the other hand, AALI and LSIP are still reasonably valued at 14.9x and 14.2x FY17 P/E respectively (vs. peers' average of 14.3x). In summary, undemanding valuation coupled with better production and CPO price outlook ahead should present plenty of upsides for the stocks.

Who’s our preferred pick? Despite liking both AALI and LSIP for their stock price sensitivity to CPO price and good liquidity, we prefer to play LSIP to take advantage of
the CPO price momentum and potential weakening of the IDR. Aside from its cheaper valuation as compared to AALI, we like LSIP for its strong and debt-free balance sheet, which provides buffer to foreign exchange risk and rising interest rates. We currently have a buy recommendation on LSIP with TP of Rp1,950 based on 17.0x 3-year average rolling forward mean P/E. Our TP offers 19% upside from current share price.


Nov 29,2016 09:42:57

State owned electricity company, PLN decided to terminate 11 stalled coal fired power plant projects with total capacity of 147 MW and replace them with gas-fueled power plants. Previously the State Palace announced that the Development Finance Controller (BPKP) found 34 power plant projects worth Rp11.2tn (US$828.8m) have been stalled for up to 7 years. The delayed projects make up 627.8 MW and are comprised mainly of coal-fired power plants, with several mini power plants that were planned to be built outside Java and Bali.

Comment: Total coal consumption for 147 MW power plants around 1mt per year. Fairly small relative of the overall demand in the future. While we expect domestic demand for coal to grow, the ramp is likely delayed as per recent news on the later completion of the 35GW power plant projects.

Nov 29,2016 00:05:39

Chandra Asri Petrochemical ($TPIA) will increase the production capacity if its Polyethylene plant in Cilegon, Banten to 400,000 tons per year from 336,000 tons at the moment. The expansion requires a total investment of USD350m. The company will use internal cash (30%) and some loans to fund the expansion.  The company also issued Rp500bn bonds with 10%-11.5% coupon rate and will mature in 3 and 5 years.


Nov 29,2016 00:03:12

Indo Tambangraya Megah ($ITMG) targets revenue to grow by 30% in 2017. The company’s finance director Yulius Gozali said that the company is optimistic as China coal demand will increase next year.

Nov 28,2016 12:26:48

Ministry of SOEs hopes the revision of network sharing regulation will be fair for all operators. Ministry of SOEs Rini Soemarno said that the revision of network sharing regulation in Gov’t regulation No 52/2000 should consider the investments that have been spent by Telkom ($TLKM). Rini said that the gov’t should calculate all the risks and benefits on the revision so that it will not hurt operators that have invested in the network development for years.

Comment:  Considering that the network sharing regulation proposal makes it optional to share, not mandatory, Telkomsel would have the option to share its equipment if it wants to monetize the investments it made. But at the same time, it also does not force Telkomsel to share, if Telkomsel feel the risk from competition is greater than the potential increase in lease rates.


Nov 28,2016 12:25:46

Bank Permata’s  ($BNLI) public expose (23Nov2016) by Marisa Wijayanto
·       BNLI plans to lower its wholesale loans proportion in the future due to high NPL risk.

o   Wholesale loans to total loans declined to 49% in 9M16 vs. 53% in 9M15

o   BNLI expects its wholesale loans to grow by 5-7% YoY, while its retail loans to grow by 9-12% YoY in 2017

o   BNLI will also rebalance the wholesale loan portfolio to smaller loan size and more SOE loans in order to reduce its NPL risk.

o   9M16 retail loans breakdown:

§  Credit card: 2% of total loans

§  Personal loan: 1% of total loans

§  Joint financing (auto loans with Astra): 10% of total loans vs. 7% of total loans in 9M15

§  Mortgage: 13% of total loans vs. 12% of total loans in 9M15

§  SME: 25% of total loans

o   To support its mortgage growth, BNLI accelerates its mortgage approval process to 5 days.

·       Mining loans (including mining supported sectors) contributed 7-8% of total loans in 9M16

o   Related to recently increasing coal price, BNLI stated that it is still too early to indicate the potential recovery in the mining sector’s NPL. If the coal price keep rising for the next 3-6 months, then it may give good indication for the NPL recovery.

·       Most of the loan restructuring is through giving grace period

·       BNLI plans to spin-off its sharia business by 2023 (Sharia loans contributed 9% of BNLI’s total loans).

o   BNLI’s sharia business will implement branchless banking in 2017

·       Fee based income grew significantly by 21% YoY in 9M16, supported by bancassurance business (Astra Aviva Life) and wealth management business


Nov 28,2016 12:20:25

Freeport Indonesia hopes to sell 10.64% stake through IPO. The gov’t already has a 9.36% stake in Freeport’s Indonesian operation, and has hoped to take another 10.64% stake this year, but negotiations stalled after the gov’t valued the stake at two-thirds below Freeport’s offer price of US$1.7bn.

Nov 28,2016 12:19:05

Jakarta transportation committee board (DTKJ) projects Electronic Road Pricing (ERP) to generate Rp4tn of revenue per year. Jakarta transportation committee board Budi Susandi said that there are 235 participators have participated in the ERP tender. In stage 1, the ERP will be applied in Sudirman-Thamrin, and Rasuna Said roads. In stage 2, the ERP will be applied in other road such as Gatot Subroto road.

Nov 28,2016 12:18:24

Heavy rain has ruined tobacco harvest in Central Java. Chairman of the National Commission to Save Clove Cigarettes (KNPK) Klaten branch, Aryanta Sigit estimated that the total losses experienced by tobacco farmers in Klaten amounted to over Rp10bn.

Comment: We have highlight this in our previous tobacco sector Indonesia Tobacco (Keep your tobacco dry!)


Nov 28,2016 12:17:19

Adhi Karya ($ADHI): The Train is Not Here Yet

Downgrade to NEUTRAL with a lower TP of IDR2,085 (from IDR3,150) as the LRT Greater Jakarta Phase 1 contract may likely be signed latest in Mar 2017, and to reflect the bigger-than-expected loss in the EPC project. Thus, we adjust our orderbook assumption and trim FY16F-17F earnings to IDR266bn and IDR492bn respectively, as we expect lower projections from the company. Management announced a conservative earnings guidance of IDR500bn for FY17, as there may be a potential further loss in EPC projects next year.

¨ Update on LRT Greater Jakarta. Adhi Karya expects to sign the IDR23trn LRT Greater Jakarta Phase 1 contract at the latest in Mar 2017, which is later than our expectation of Dec 2016. It submitted the proposal to the Ministry of Transportation in October and is currently in discussions over the payment scheme of the projects. The company also expects to incur a minimum gross margin of 10% from the projects.

¨ The Government plans to finance this project using the state budget and a bank loan in FY17-19. Adhi Karya expects the Government to allocate IDR10trn for the project. Thus, during construction, it would have to borrow up to IDR13trn from the bank – which would be reflected in its balance sheet. Furthermore, the company would bear the interest cost during the construction stage. After the project is completed, the loan will be passed to the Government (including interest expense).

¨ Loss in EPC projects. Management expects its EPC unit to incur a gross loss of IDR400bn this year, vs our initial estimate of IDR300bn. Hence, we adjust our loss estimate to IDR414bn for this year. In FY17, we also expect this unit to book a potential loss of c.IDR214bn as there may be a loss stemming from the potential cancellation of a power plant project.

¨ Orderbook. We expect new contracts won to hit IDR16trn by the end of this year – which is below the company’s guidance of IDR18trn – as we see that its current level of orders is still relatively slower than the seasonal norm. We pare down our new contracts assumption for FY17 to a conservative IDR18trn (ex-LRT Greater Jakarta Phase 1, which is worth IDR23trn). Up to the third week of November, Adhi Karya’s new contracts reached 71.3% of our full-year estimate.

¨ Cutting our earnings estimates. We cut our FY16F earnings to IDR266bn this year as the delay on the LRT Greater Jakarta contract signing and loss in the EPC division may hurt the company. Conservatively, management guided FY17F’s NPAT to be IDR500bn, lower than our initial estimate of IDR688trn. As such, we cut our FY17F earnings to IDR492trn.

¨ Downgrade to NEUTRAL. Our new TP of IDR2,085 (from IDR3,150, 7% upside) is derived from 15.1x FY16F P/E, its 5-year historical forward P/E mean. (Dony Gunawan)


Nov 28,2016 12:16:32

The Indonesian Palm Oil Producers Association (Gapki) expects CPO output to reach 30m tons, (-)15% YoY, from 34m tons in 2015. The exports of CPO and palm oil products are expected to drop around 15% to 22.5m tons due to global slowdown. Gapki Chariman Joko Supriyono said that the price of Indonesian palm oil products are discounted at US$15 to US$20 compared to Malaysian products due to bad infrastructure that affect the quality of the products.

Nov 28,2016 12:15:05

A month since taking office as Minister of Energy and Natural Resources (ESDM), Ignasius Jonan has been focusing on two key regulations: uniform standard price for fuel nationwide and lowering industry gas price.
ESDM Minister issued one price for fuel regulation
Agreeing with Arcandra (Deputy ESDM Minister), soon Jonan will issue industry gas price regulation.
The latter has been in discussion for quite some time which has negatively impacted investors’ sentiment on Perusahaan Gas Negara ($PGAS) as overhang remains.  PGAS share price has dropped 27% since Aug16 - at this level one could be tempted to argue that downside from uncertainties have mostly been priced in.

Furthermore, what the government has provided so far in terms of regulatory clarity on gas pricing, in theory has neutral impact on PGAS.  The new regulation will set the price for downstream at below US$6/mmbtu for three main sectors: petrochemical, steel, and fertilizer.  But this is only be applied to upstream suppliers which directly supplying to these downstream customers. Therefore, PGAS may be spared on pricing but of course it would lose out on volume here.
To be fair, business has been tough for PGAS regardless of regulatory risk.  For one, distribution ASP has been weak.  Recent re-pricing for PLN for gas supply to Muara Tawar also contributed to the drop.  At the same time, upstream gas prices have increased.
Additionally, the ability to pass through the higher gas prices may be limited. Industries would have found it difficult to pass through price increases as the economy slowed - spreads fell as a result.
As such, Abdul lowers his volume growth forecasts, considering near zero growth in volume this year.  He also assumes the spread to remain stable at the 3Q level.
Whilst much of the above dynamics/developments may have been priced into the stock, one big uncertain outcome is the potential M&A with Pertagas.
Abdul’s forecast assumes that Saka remains with PGAS but does price in Pertagas. Recall that the government plans to merge Pertamina, Pertagas and PGAS in a SOE holding structure.
Initially, the gov’t was aiming to complete the process of creating all SOE holdings by end of year but with just a few days left in Nov16, there have been no new updates on proposed merger.
Gov’t proposed structure on Pertamina-PGAS-Pertagas merger
Abdul has been insightful in analyzing possible scenarios of how the deal could go through. Please see below for his detailed analysis.
So what would it take for us to be bullish on PGAS?
Abdul highlights a possible trigger is pickup in volume. This can come from the distribution network that PGAS is building.  With an additional network, PGAS will be able to connect with more clients that could switch to gas.
However, the target for completion is 2019.  So in the near term, an increase in volume can only come from clients within the existing or newly built network.  We expect the network size to grow 7-9% each year.
From earnings sensitivity perspective PGAS is much more levered to price than volume.  For example if volume grows 15% next year, the impact to NPAT is only 14%.  Another reason why bottom line impact from the network build-up is unlikely near term.
As such, Abdul reiterates his SELL recommendation on PGAS with TP of Rp2,400.

Nov 28,2016 12:08:07

Indonesia Plantations Update: Indonesian Palm Oil Conference notes
Plantations: Indonesia

More attendees; Price rebound on volume drop post El Nino: With CPO prices on the rebound, the 12th Indonesian Palm Oil Conference (IPOC) 2016 on 23-25th November 2016 at the Westin Resort Nusa Dua (exhibit 10) with the theme of “Palm Oil Development: Harmonizing Market, Society and the State”, saw around 1,300 delegates, up from the 2015 level of 1,100. Organized by the Indonesian Palm Oil Association (GAPKI), the conference was opened by the chairman of GAPKI, Joko Supriyono, who spoke about the CPO price level which has climbed from its 6-year low at USD630/ton in 2015 to USD660/ton as of October 2016. He pointed out that the price recovery was due to a production drop post El Nino leading to palm oil stocks being at their lowest level of 1.8mn tons in 1H16, down 59% from 4.5mn tons in December 2015. In addition, he stated that Indonesia’s palm oil production in 2016 may only reach 30.9mn tons, -10% y-y. This should drag 2016 exports down by 15% y-y to 22.5mn tons.

5mn cultivating rights certificates to deal with spatial planning: Separately, at the conference, the Minister of Agrarian and Spatial Planning, Sofyan A. Djalil, cited that one of the major problems faced by the palm industry is on agrarian and spatial planning. To address the problem, the minister has issued a policy to accelerate the issue time for cultivating rights certificates (HGUs) to only 90 days. The government will also undertake a pilot project to certify 1,000 plots of smallholders' land, plasma and public land with a total area of 25,000 ha. The government targets to issue 5mn cultivating rights certificates in 2017.     

6 government programs to support industry development: At the conference, the Minister of Agriculture, Amran Sulaiman, stated that there are 6 programs defined by the Government in order to further develop the Indonesian palm oil industry and increase its sustainability:
1.     Improving the productivity of smallholders’ plantations and increasing funding support for Indonesia Estate Crop Fund for Palm Oil (BPDP) to support smallholders’ replanting, as currently smallholders account for more than 40% of total oil palm plantation areas in Indonesia.
2.     Accelerating and encouraging all Indonesian palm oil producers to obtain the Indonesia Sustainable Palm Oil (ISPO) certification for their products in order to be accepted internationally.
3.     Increasing utilization of peatlands for oil palm plantations to further intensify palm oil productivity and also to prevent forest fires.
4.     Converting the legal status of smallholder plantations from plantation business permits (IUPs) to cultivation rights (HGU) to provide legal certainty and help smallholders obtain bank loans, which should support productivity. The cultivation rights will also enable smallholders to obtain replanting programs from BPDP.
5.     Focusing exports on major CPO markets, such as India, China, Pakistan and Bangladesh, but reducing exports to Europe due to the adverse publicity on CPO products from Indonesia.


Nov 23,2016 23:50:21

Patience Is A Trader's Virtue


Dow Jones Industrial Average (US:^DJI)

Nov 23,2016 23:02:02

$TLKMTelkom officially launched its 3rd data center service “Telin-3” in Singapore. Telin Singapore CEO Septika Widyasrini said that Telin-3 is a carrier-neutral data center supplier that is connected to domestic fiber optic network owned by Telin Singapore. Telkom also owned 2 data centers (Telin 1 and 2) which are located in Changi and Tai Seng, Singapore.

Comment: Building a data center in SG helps Telkom reduce traffic that goes to the U.S. by caching regularly downloaded data to the data center in SG. A data center in SG may also attract companies to setup mirror site in the region but are not as comfortable to setup such sites in Indonesia.

Nov 23,2016 22:58:46

$MAPIMitra Adiperkasa will open more than 50 new F&B outlets next year, higher than the average 30 to 40 outlets. The government estimates that F&B industry will grow by 7.4%-7.8% this year.

Nov 23,2016 22:58:10

$ASIIUD Trucks Indonesia projects heavy duty truck sales to grow 300-400% YoY to 4.6-5k units in 2017, mainly supported by the construction sector.

Comment: As of 10M16, UD Trucks has sold 1.4k units of heavy trucks, (+)25% YoY. Ave. monthly sales has also improved to 139 units/month in 10M16, vs 47 units/month in FY15.

Nov 23,2016 22:57:16

Government sets up its own Halal certification body by early 2017; the agency is called Halal Products Certification Agency (BPJPH). BPJPH will operate under the Religious Affairs Ministry and it will regulate application, collection of fees for issuance, which will be accounted as non-tax revenue.  Applicants who want to obtain halal certification for their products must submit for registration at the agency, with fees ranging from  Rp430k to Rp4.3m for SMEs. The BPJPH will then submit the audit reports to the MUI (Indonesia Ulema Council) for the latter to issue edicts on whether the products are worthy of being certified halal or not. The gov’t stated that the new mechanism, will make the fees for the certificates open for audit by the Supreme Audit Agency (BPK), with MUI’s position as a civil society organization, the gov’t claimed that it is more difficult to control.

Nov 23,2016 22:49:34

Chart of the day: Tapping into Indonesia ice cream market

Indonesia ice cream market size (USD100m as of 2015) will likely to accelerate faster which is driven by more competition and low ice cream consumption. According to Euromonitor data, ice cream market size is estimated to grow c9% Cagr during 2015-2020, second highest after India. $ICBP has a total of 59 SKU for ice cream with additional 7 new SKU under “Nusantara” flavor which are competing directly with its competitors – $UNVR and Wings.

Nov 23,2016 22:44:26

Harum Energy ($HRUM) targets coal production to grow by 35% to 4m tons in 2017. In 2016, Harum targets its coal production to reach 3m tons.

Nov 23,2016 22:43:46

Mitra Adiperkasa ($MAPI) will add 60,000 sqm of selling area in 2017, which is at the same as this year’s 50,000-60,000sqm increase. F&B segment will be the priority of next year’s expansion and 75% of the addition will be in Java. Comment: MAPI’s next year target is slightly higher than our forecast of 45,000sqm of selling space addition.

Nov 23,2016 18:54:26

Property: Stay The Course

Share prices of property counters under our coverage have fallen 25% YTD (on average) from their highest levels. With catalysts for the sector in place and with limited downside risk, the sector is currently valued at a 63% discount to RNAV, around -1.4SD from its past 3-year mean of 56% – which looks compelling. Maintain OVERWEIGHT on the sector, while we remain bullish on companies with low gearing ratios, healthy operating cash flow and sufficient landbanks.

¨ Policy rate reversal? We believe a reversal of Bank Indonesia’s (BI) policy rate (Figure 1) is unlikely, as:

i. Indonesia’s real interest rate is positive, at+1.4%;

ii. The BI’s benchmark rate has a wide discrepancy vs that of other countries.

Also, as there is greater uncertainty in the global financial markets in the wake of the US election results, we still think BI will slash its key policy rate by another 25bps to support economic growth – and this may happen as early as 1H17. This is on the expectation of moderate inflation, a manageable current account deficit amid external headwinds for the IDR due to the US Fed Funds rate hike.

¨ Currency impact on earnings. We believe currency fluctuations should have no significant impact on property developers’ earnings, as their costs and revenues are denominated in IDR. For companies with large USD debt exposure – such as Lippo Karawaci and Alam Sutera, where 84% and 80% of their debt is USD – forex gain or loss would be realised only when the debt matures. Our sensitivity calculations indicate that every 2% increase/decline in our forex assumption could result in a 9%/6% decline/increase for Alam Sutera (ASRI)’s earnings and a c.3% decline/increase to Lippo Karawaci ($LPKR)’s net profit in FY17 respectively. We think this is not significant, and would be just a paper profit (or loss) in their books – in terms of recording an unrealised forex gain(or loss) – since both companies’ bonds will mature in 2022.

¨ Accelerated recovery in 2017. We still expect the sector’s recovery to accelerate in 2017 vs this year, based on catalysts like the tax amnesty, a potentially lower benchmark interest rate, relaxation of the loan-to-value (LTV) threshold and the allowance for properties under construction to come under a second mortgage. We note the increased presales activities in October and November. YTD, marketing sales on average have hit 63% of ourFY16F presales target, coupled with potential big commercial land lot sales in pipeline which also reached our targets. As for FY17, we expect presales to grow 12% YoY to IDR31.7trn,as developers continue targeting the middle class segments, selling property with prices ranging between IDR1bn and IDR2bn per unit.

¨ OVERWEIGHT. We continue to favour companies with healthy balance sheets and sufficient landbank, as landed houses are still the most popular type of property to buy (Figure 4). Our Top Pick for the sector is Bumi Serpong Damai ($BSDE). The counter is currently trading at a 66% discount to RNAV, supported by huge landbank totalling 4,092ha, a low net gearing level of 0.1x and FY17F earnings growth of 20% YoY.

¨ Risks include economic slowdown leading to declining purchasing power, slower revenue recognition, as well as external factors such as global financial uncertainties that may indirectly or directly influence investor sentiment. (Lydia Suwandi)

Nov 23,2016 15:44:10

Tin Prices Seen Extending Climb as Global Shortages to Last
by Bloomberg News

  • Metal is best performer after zinc on London Metal Exchange
  • CRU says tin is among its top picks for commodities next year

Tin, which has surged more than 40 percent this year, is set to keep advancing amid continued shortages because supply is not coming on fast enough, according to Peter Kettle, chief analyst at research group ITRI Ltd.

Prices may rise to about $30,000 a metric ton in 2018-2019, Kettle said at an industry conference in Shanghai, an increase of 42 percent from the level now. The market will have a deficit of 10,000 tons to 15,000 tons this year and a similar shortfall in 2017, he said on Tuesday. Tin is among the top picks for researcher CRU Group next year, said Susan Gao, head of consulting in China.

Tin, used for soldering in electronics, has gained to the highest level in more than two years, and is the best performer after zinc on the London Metal Exchange in 2016. Top shipper Indonesia has curbed exports and inventories in sheds tracked by the LME have slumped to the lowest since 2004. Tin and zinc are “the standout stories in terms of structural supply constraints capable of tightening the market,” Standard Chartered Plc said last month.

“We’re in a very long-term trend of declining stockpiles,” Kettle said. “If stocks fall much further, we will get to a critical point that prices could go much higher than the medium-term equilibrium” of about $22,500 a ton, he said. ITRI is a U.K.-based company which supports the industry and helps to expand the metal’s use. The group is backed by producers and smelters.

Shipments by Indonesia, the world’s largest exporter, plunged to 52,617 tons in the first 10 months of this year, the lowest for the period in at least a decade, from 61,713 tons a year earlier, Trade Ministry data show. Global supply trailed demand by 20,500 tons in the first eight months of 2016, according to data from the World Bureau of Metal Statistics. LME-tracked stockpiles have fallen by more than half since May.

Refined output in the country may drop to about 60,000 tons this year, Jabin Sufianto, head of the Association of Indonesia Tin Exporters, said in September. That compares with 67,350 tons in 2015 and would be the lowest since 2002, according to WBMS data. Kettle said on Tuesday that Indonesian supply will be about 60,000 tons in the medium term.

While Indonesia’s production has been hurt by rains and mining regulations, it could be 60,000 tons to 70,000 tons this year and may rise slightly in 2017 if the weather improves, Riza Pahlevi Tabrani, president director of top producer PT Timah ($TINS), said in an interview. Timah’s shares have more than doubled in 2016 and reached the highest in two years this month.

Prices above $22,500 are needed in the medium term to spur the supply required to balance moderate growth in demand, said Tom Mulqueen, an ITRI analyst. While Bolivian production is set to rise, output in China, Indonesia and Peru is faltering, he said. Tin for delivery in three months time added 1.2 percent to $21,100 on the LME by 10:48 a.m. in London on Tuesday.

Along with tin, Gao from CRU said at the conference that crude oil, nickel and zinc were also among her top choices for next year and that commodity prices overall were poised to rise further.

— With assistance by Winnie Zhu

Nov 23,2016 10:05:07

$MYOR - The biscuit industry is predicted to have a total revenue of Rp18tn in 2016, (+)8.4% YoY, according to the Indonesia Association of Biscuits, Bread, and Instant Noodles (Asrim).

Mayora Indah will still have the largest market share (30%-35%) in biscuit industry, followed by Khong Guan and Nissin with market share of 30% and 15% respectively. Asrim Chairman Sribugo Suratmo said that the new player Asia Sakti Wahid Foods (ASW Foods) has gained 8% market share with its Hatari brand. ASW Foods targets revenue to grow by 25% in 2016. Comment: Mayora has been growing faster than industry with double-digit growth rate.

Nov 23,2016 10:04:17

$HMSP – HM Sampoerna has appointed Mindaugas Trumpaitis as its new President Director to replace Paul Norman Janelle.

Mindaugas comes from Lithuania, and has been working with Phillip Morris for 19 years in Latvia, Finland, Mexico, Switzerland and Canada. The company also plans to spend Rp1tn (US$74.58m) capex in 2017, which will be used to upgrade its machinery next year. 

Nov 23,2016 10:02:42

$SMRA – Summarecon Serpong apartment launch -96 units – 80% take up rate
Summarecon Agung launched “Midtown” apartment on 19 November 2016. The apartment is situated in Summarecon Serpong, located strategically across the main commercial center, Summarecon Mall Serpong. SMRA launched 96 out of the total of 830 units, from 2 towers named Jefferson and Carmel.
Details on the launch:
Jefferson & Carmel tower:
Total unit offered: ~96 units
Price per unit: Rp426m-Rp2.1bn
Unit size: 23-92sqm
Price per sqm: Rp16-18m/sqm and Rp22-24m/sqm
Estimated pre-sales: ~Rp90bn or 2.5% of its FY pre-sales target
SMRA booked Rp2.2tn of pre-sales as of 9M16, 62% of its FY pre-sales target of Rp3.5tn.

Nov 23,2016 08:48:45

Did you know?  That ICBP’s Indomie instant noodle has more than 40 different flavors? Since inception in Sept 1970, Indomie has been the leading instant noodle in Indonesia and around the world.
Offering different flavor such as Fried Noodle, Soto Mie, Tom Yum, Bulgogi, and Real Meat, Indomie is now available in more than 100 countries. Also worth noting that in present day, Indonesia is the second largest instant noodle consumer in the world at 14.5bn packs/year, after China which consumes 44bn packs/year.

Indofood ($INDF) through its subsidiary Indofood CBP ($ICBP) has been innovative with its products to appeal to “demanding” customers both domestically and overseas.  As such, we can see a wide range of products from the company now available for our choosing.

New product launch is a key strategy for all consumer companies to grab market share.  Reason why we see consumer staple companies such as Unilever ($UNVR) and Wings also aggressively launching new line of products.

Today consumer analyst Merlissa Trisno points out that INDF will keep its pace in product launch to grab market share.  INDF will see stronger revenue growth potential for its CBP division at 12.3% in 17CL driven by its new products launching particularly in the dairy and beverage divisions.

However, due to potentially weaker Rupiah assumption and higher soft commodity prices (ie. CPO, sugar, skimmed milk), we estimate 50bps lower Ebit margin for 17CL.
Thus, Merlissa expects lower earnings growth potential for 17CL at high single-digit level of 8.1% as compared to 25.6% in 16CL.

While higher CPO price results in higher cost for CBP, INDF the parent company is a net beneficiary given its upstream plantation exposure (15-20% of Ebit).  4Q16 CPO price has exceeded RM2,800/t (+5% qoq) and close to RM3,000/t in the week of November 11.
This spells upside for our current regional CPO price forecast of RM2,450/t and RM2,600/t in 16-17CL respectively.  Our sensitivity analysis suggests that for every 10% CPO price increase it translates to 6-8% EPS upside at INDF level, all else equal.

Merlissa’s thesis on CPO is supported by CLSA’s plantation analyst, Chuanyao Lu (CY), who in his latest report emphasized the persistent low inventory level in Malaysia and China due to El-Nino aftermath.  CPO inventories in Malaysia stood at 1.57mt which is virtually unchanged from Sep and is 45% lower compared to 2015.

As such, CY expects CPO prices to continue its uptrend.  And with production recovery on the horizon, we expect this to translate into better earnings for the industry.

Circling back to INDF, Merlissa highlights that INDF claims that the SGD416m proceed from 52.9% China Minzhong (SG:K2N) divestment will likely be received around December 2016, subject to the delisting and privatization process in SGX.  Merlissa has incorporated ~Rp370bn divestment loss in her 2016 financial forecast.
Post the transaction, net gearing will drop to 17% in 2016-17CL, from 33% in 2015.  We estimate interest cost saving of around Rp100bn but with lower earnings contribution from Minzhong which might lead to a net net Rp60-70bn cut in 2017 earnings.

In summary, Merlissa adjusts INDF’s EPS down by 6% for 17CL and 4.1% for 18CL to factor in a lower EPS assumption for the CBP division and lower Minzhong ownership (from 82.9% to 29.9%).
Despite lower earnings assumptions, Merlissa maintains her BUY recommendation and target price at Rp10,500/sh for INDF as she rolls forward her SOTP-based valuation to end-2017.  The target price implies a 20x 17CL PE.

Nov 23,2016 08:37:44

Good morning,

U.S. equities closed higher on Tuesday, hitting new all-time highs, as investors digested housing data anda kept an eye on President-elect Donald Trump's policy agenda .

Dow........19024  +67.2       +0.35%
Nasdaq...5386   +17.5       +0.33%
S&P 500..2203   +4.8         +0.22%

FTSE........6820  +41.8       +0.62%
DAX.......10714   +28.7      +0.27%
CAC.........4548   +18.8      +0.41%

Nikkei...18163     +56.9     +0.31% 
HSI........22678    +320.3   +1.43%
Shanghai.3248   +30.2      +0.94%
ST Times.2822   +5.5        +0.20%
Indo10Yr...8.0365   +0.052    +0.65%!
INDOBex..206.0360-0.6594   -0.32%
US10Yr.......2.32       -0.77        -0.77%
VIX.............12.41     -0.01        -0.08%

USDIndex101.020       +0.14     +0.14%
Como Index187.5628+0.2552 +0.14%
(Core Commodity CRB
DJUSCL......48.57        +1.38     +2.92%
(Dow Jones US Coal Index)
IndoCDS......17r            -3            -1.69%          (5-yr INOCD5)

IDR............13443      +37        +0.28%
Jisdor........13424      -14         -0.10%
IDR Fut......13432      +2          +0.01%

Euro.........1.0628   -0.0003     -0.03%

TLKM........29.25      +0.05      +0.17%
(Rp 3927)
EIDO.........23.83       +0.29      +1.23%
EEM......... 35.46       +0.53     +1.52%

Oil.............47.90       +0.41     +0.86%    
Gold ........1211.90    -1.50      -0.12%
Timah......21985.00 +245      +1.18%
Nickel......11347.50  -22.5      -0.20%*

Coal price...106.30  +1.20    +1.14%        
Coal price....86.85   +2.65     +3.05%
Coal price....87.15  +0.35      +0.40%       
Coal price....81.00  +1.45      +1.82%
(Des/ Rotterdam)

CPO............2922     +2          +0.07%
Corn...........359.00  +1.25      +0.35%
SoybeanOil 34.77    -0.16       -0.46%
Wheat........427.25  +0.25       +0.06%

*  source : Investing

(DE/ls 23-11-16)


Nov 22,2016 21:48:01

Stocks Extending Record Run

U.S. stocks are adding to yesterday's record highs for the three major averages in early action, with the post-election rally persisting, despite a modest pullback in crude oil prices from a recent rebound. The U.S. dollar is ticking higher and Treasury yields are mixed, ahead of a read on domestic existing home sales. Palo Alto Networks is seeing pressure after its earnings results, and Dollar Tree is jumping on its quarterly report. Gold is little changed. Asia finished mostly higher and European equities are gaining ground on the heels of crude oil's recent rebound and the record highs posted in the U.S. yesterday.


Nov 22,2016 15:33:44

Matahari Department Store ($LPPF): Looks oversold

Consumer Discretionary: Indonesia 

Some clarity on strategies previously thought unclear
Investors did not seem receptive to the idea of LPPF’s decision to invest an additional IDR590bn or USD44.4mn in, particularly given the company’s already wholly owned This apparently created confusion as to the need for two e-commerce domains, resulting in the share price declining by 22% since 19 October, coinciding with the announcement date of Mitsui and Co’s and LPPF’s decision to buy in into However, we note that LPPF had stated in the past that owning a 10.5% stake (IDR180bn investment) in would allow a learning process of the IT infrastructure system, paving the way for the eventual development of its own e-commerce website. Additionally, it is worth noting that is a marketplace where other retailers can sell their products. That said,, which is already up and running, can show items and redirect customers to LPPF’s own website e-commerce, With MPPA’s and Mitsui Co’s investments in, LPPF’s current stake is unclear, although we believe this has been a solid investment given’s estimated market value of IDR5.9tn. Nevertheless, further investments in its e-commerce business could adversely affect interest income despite LPPF’s strong FCF generation (2016F: IDR2,024bn; 2017F: IDR2,538bn). This note marks a transfer of analyst coverage.

LPPF should become leader in e-commerce
As of late, LPPF has been actively investing in e-commerce, hoping to garner a 20% market share of Indonesia’s rapidly growing e-commerce market, despite its still nascent stage at 1.2% of 2015 national sales based on Euromonitor. In spite of operating challenges due to the low credit and debit card penetration rate in the mid-income segment as well as slow infrastructure progress in under-penetrated areas causing higher logistics costs, e-commerce is expected to rise to 5% by 2020. At this stage, we believe that both online and conventional shopping along with in-store experiential events/promotions as well as visual & tactile dimensions, can amply grow for LPPF.

Persistently weak SSSG expected to improve
Earlier this year, LPPF guided for 2016 SSSG of 6.5-7.5%. However, following 9M16 SSSG of 6% y-y, LPPF cut its 2016F SSSG to 5-6.5% (2015: 6.8%), mainly attributable to weakness in Greater Jakarta, the worst regionally as outlying areas are helped by higher commodity prices. Greater Jakarta’s Q3 SSSG of -25% q-q lowered aggregate 9M16 SSSG to 3.5%. On a more positive note, LPPF signaled promising 10M16 SSSG, hoping to achieve the top end of revised full-year guidance. LPPF’s CEO mentioned that the lower end of the SSSG target range is plausible when year-end sales would prove to be mediocre, caused by persistently weak purchasing power as opposed to competition. Nonetheless, he said he believed that domestic weakness had bottomed out this year and is on track to a solid recovery in 2017.


Nov 22,2016 14:55:47

Tin Prices Seen Extending Climb as Global Shortages to Persist 2016-11-22 05:59:31.502 GMT
By Bloomberg News

(Bloomberg) -- Tin, which has surged more than 40 percent this year, is set to keep advancing amid continued shortages because supply is not coming on fast enough, according to Peter Kettle, chief analyst at research group ITRI Ltd.  Prices may rise to about $30,000 a metric ton in 2018-2019, Kettle said at an industry conference in Shanghai, an increase of 43 percent from the level now. The market will have a deficit of 10,000 tons to 15,000 tons this year and a similar shortfall in 2017, he said on Tuesday. Tin is among the top picks for researcher CRU Group next year, said Susan Gao, head of consulting in China.

Tin, used for soldering in electronics, has gained to the highest level in more than two years, and is the best performer after zinc on the London Metal Exchange in 2016. Top shipper Indonesia has curbed exports and inventories in sheds tracked by the LME have slumped to the lowest since 2004. Tin and zinc are “the standout stories in terms of structural supply constraints capable of tightening the market,” Standard Chartered Plc said last month.

“We’re in a very long-term trend of declining stockpiles,” Kettle said. “If stocks fall much further, we will get to a critical point that prices could go much higher than the medium-term equilibrium” of about $22,500 a ton, he said. ITRI is a U.K.-based company which supports the industry and helps to expand the metal’s use. The group is backed by producers and smelters.

Shipments by Indonesia, the world’s largest exporter, slumped to 52,617 tons in the first 10 months of this year, the lowest for the period in at least a decade, from 61,713 tons a year earlier, Trade Ministry data show. Global supply trailed demand by 20,500 tons in the first eight months of 2016, according to data from the World Bureau of Metal Statistics.

To contact Bloomberg News staff for this story: Winnie Zhu in Shanghai at To contact the editors responsible for this story: Jason Rogers at James Poole, Jake Lloyd-Smith