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Feb 22,2017 11:24:38

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.   

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)

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.


Nov 14,2016 17:09:33

Indonesia: Currency update: IDR depreciation: Don’t panic
Effects of a shallow FX market; Buying opportunities exist
Based on Bank Indonesia’s data, ytd the average daily turnover for the IDR spot market is only USD1.7bn, which is shallow by regional standards, reflecting just 0.5x of GDP (exhibit 1), one of the lowest among its regional peers. Even worse is the 1M NDF market, which only trades at USD0.7bn a day ytd. Unfortunately, the NDF sometimes can influence the spot market, particularly on pressure stemming from the recent Trump election. However, given such illiquidity, we advise investors to remain calm, particularly as we believe the fundamentals in Indonesia remain largely unchanged. We note that, through years of balance sheet repair since the 1998 Financial Crisis, the Indonesian stock market’s net gearing has improved from more than 150% back then to 27.3% in 9M16. Furthermore, we believe Indonesia is currently in a good position given that its 3Q16 CAD of 1.86% is the lowest since 1Q12. In fact, we think the current situation presents buying opportunities for investors as we expect the IDR to become stronger by year-end. It is worth pointing out that there should still be around USD10bn to come in from tax amnesty repatriation between now and the end of 2016.

Sensitivity analysis: 1% weaker IDR = 0.9% market EPS
Given recent IDR gyrations, we present our latest currency sensitivity analysis on the IDR/1USD, in an effort to aid investors in better gauging their investments in Indonesia. Our study, based on 87 non-financial stocks under our coverage (62% of total JCI market capitalization), shows that each 1% IDR depreciation could lower the EPS of our covered stocks by 0.9% overall (exhibit 5). That said, it is not a surprise that a recent 3% negative swing in the NDF market spooked investors, as it could translate into a 3.6% wipeout in 2017 market EPS growth.  

Winners: Coal, Metals, Oil & Gas and Plantations

A stronger dollar should in general spell good news for sectors with dollar revenue such as Coal, Metals and Oil & Gas and Plantations (exhibit 5). By stock, our sensitivity analysis indicates that $SIMP, $WINS, $TBLA, $PTBA and $SGRO should be the major beneficiaries of IDR deprecation within our basket of stocks (exhibit 2).

Losers: Poultry, Property and Consumer Discretionary
Against a backdrop of a weaker IDR, sectors with large USD costs and borrowings should suffer: Poultry, Property and Consumer Discretionary (exhibit 5). Stock-wise, losers of a stronger dollar include heavily leveraged companies under our coverage: $SMCB, $LPKR and $MAPI (exhibit 3).

Safe havens: Mainly Construction and Telcos  

For investors seeking shelter from currency volatility, we point to the Construction and Telco sectors (exhibit 10 & 24). In terms of stocks, $JSMR, $SCMA, $SIDO and $WSKT (exhibit 4) should have their earnings relatively least altered by FX swings.

May 02,2016 13:09:37
Sido Muncul (SIDO), Continued Rebound In Herbal Medicine Products

As the economy rebounds, we also expect to see a continued rebound in sales volumes of SIDO’s Tolak Angin and continued solid traction of Tolak Linu. Based on our recent ground checks visiting several Sumber Alfaria Trijaya’s (Alfamart) (AMRT) minimarkets, we have found that Tolak Linu is gaining more acceptance. The stores we had visited confirmed that Tolak Linu’s sales are increasing. Maintain BUY with a DCF-based IDR650 TP (30% upside), which implies 21x and 19x 2016F and 2017F P/Es respectively.


Apr 05,2016 11:15:18
Industri Jamu dan Farmasi Sido Muncul targets revenue to grow by 12%-15% in 2016. The company will continue to concentrate on the energy drink segment and will explore more export market.

Feb 16,2016 16:31:56
Sido Muncul: Tolak Linu Gaining Broader Acceptance

While its low-margin energy drink sales could still decline this year, sales volume of SIDO’s high-margin flagship herbal medicine product, Tolak Angin, has rebounded strongly and its new herbal medicine product, Tolak Linu, has been gaining solid traction since its launch in Jun 2015. Sido would continue its share buyback as it had used only c.41% of its IDR198bn fund for share buyback as at Nov 2015. Keep BUY with a higher IDR640 TP (25% upside) as we see strong acceptance of its high-margin Tolak Linu and rebounding sales of Tolak Angin.

¨ Strong start for Tolak Linu. Since its launch in Jun 2015, the new herbal medicine for joint stiffness/fatigue, Tolak Linu, has been gaining solid traction as evidenced by Sido Muncul’s ($SIDO) increasing monthly sales volume (Oct 2015: 2m sachets, Nov 2015: 4m sachets, Dec 2015: 10m sachets).

¨ Continued rebound in Tolak Angin sales. Sido increased the selling price of its flagship high-margin herbal medicine, Tolak Angin, by 6% in Sep 2015, which affected its monthly sales in Oct and Nov 2015. Yet, Tolak Angin monthly sales volume rebounded to c.30m sachets in Dec 2015 and it recorded the same sales volume in Jan 2016. Thus, management expects Tolak Angin sales to grow 15% YoY in 2016 (ie 9% from a volume increase in FY16F and 6% from the price increase in Sep 2015).

¨ More sales via modern store outlets. As there is still ample room for modern store growth in Indonesia, Sido aims to increase sales of Tolak Angin and Tolak Linu via modern outlet channels, such as Alfamart (AMRT) and Indomaret. Currently, only c.8% of Tolak Angin sales are transacted via modern outlets. As such, Sido aims to increase Tolak Angin sales contribution via modern store channels to 10%.

¨ Higher margins due to product mix change. We expect Sido’s gross margin to increase 30bps YoY in FY16 as strong sales of its high-margin herbal medicines, Tolak Angin and Tolak Linu, would more than offset declining sales of its low-margin energy drink, Kuku Bima, as the energy drink market is already saturated.

¨ Export sales to the Philippines. Export sales currently constitute c.2% of Sido’s total sales. The company is in the process of selecting distributors for its products in the Philippines. It is aiming to achieve c.5% of export sales within the next few years.

¨ Maintain BUY with a higher TP. We upgrade our TP to IDR640 (from IDR625) to account for the strong acceptance of its new herbal medicine Tolak Linu and rebounding sales of Tolak Angin. Our new TP of IDR640 offers a 25% potential upside and implies 21.8x/20.5x 2016F/2017F P/E. Our TP is based on DCF with a WACC of 12.0% and TG of 3%. Downside risks include: i) a slower take-up rate of its new herbal medicine, Tolak Liku, in the coming years, and ii) a faster-than-expected sales decline of its Kuku Bima energy drink.
May 11,2015 12:38:44
SIDO belum ada tanda reversal... Weekly Chart
May 11,2015 12:28:09
SIDO belum ada tanda reversal... Weekly Chart
Quotes delayed, except where indicated otherwise.
550.00 5.00 (0.95%)
Industri Jamu dan Farmasi Sido
Last Update 17:14:11