Friday, May 31, 2013

Indonesia Market Summaries 31 May 2013

Bumi Serpong Damai to pay out Rp262bn dividend

BSDE announced that they will be paying out Rp262bn or Rp15/sh as dividend implying 20% payout ratio. (Bisnis Indonesia) Comments: The dividend payment implies a yield of 0.8%.

Erajaya Swasembada to disburse 40% dividend payout


Erajaya Swasembada (ERAA) at its AGM announced that a 40% dividend payout, higher than our 20% assumption. This translates into Rp174bn of payment or Rp60/share, giving a 1.8% yield at current price. (Company)

Cigarette TV advertisement to be banned

Based on the revision of the draft of regulation no.32/2002 regarding the airing of advertisement, all cigarette advertisements or programs & shows sponsored by cigarette companies that air on TV in Indonesia are to be banned. The regulation will impose a fine to TV stations who air any kind of cigarette advertisements that could reach Rp10bn. In 2012, cigarette producers spent Rp2.5tn on advertisement. (Kontan)

Cigarrette sector : KPI propose to ban cigarette TV advertisement (Under review)

Kontan Daily today reported that Indonesian broadcasting commission (KPI) will propose additional chapter in the revision of the draft of regulation no.32/2002 regarding the airing of advertisement, which all cigarette advertisements or programs & shows sponsored by cigarette companies that air on TV in Indonesia are to be banned. The regulation will impose a fine to TV stations who air any kind of cigarette advertisements that could reach Rp10bn. In 2012, cigarette producers spent Rp2.5tn on advertisement.

Our take: This kind of black campaign has been a prolonged issue in Indonesia cigarette industry which involve some political issue especially near to the election time next year. This is still premature stage and yet we believe the big names will have strong lobby to the government official not to pass the proposal. But if the worse thing happen, it may drive negative sentiment to the sector. And we believe big players like GGRM, RMBA, HMSP and WIIM are likely to survive given their strong equity brand and customer base. Indeed, they may gain more market share in volume as other small players will likely to collapse.

for Indonesia Market Summaries 31 May 2013

PT Bukit Asam announced 10 new locos from GE USA have arrived in May 2013

PT Bukit Asam:  10 new locos have arrived in May 2013 (PTBA; Rp12,500; Neutral; TP:Rp16,500)

10 new locos arrived. PTBA has announced 10 new locos from GE USA have arrived in May 22nd, 2013. Ytd, total additional new locos that have been delivered are 30 units, and the remaining 14 unit locos is scheduled to deliver on June 24th, 2013. All those additional new locos would increase the coal rail transportation capacity up to 15.6mn tons for Tj enim – Tarahan port this year. However due to some delayed and lag time in commissioning, we only expect effective coal rail transportation capacity of 13.5mn tons this year considering company’s historical execution risk track record (10-15% below guidance).

Tarahan port expansion on progress. Those additional rail transportation capacity to align supporting the Tarahan port loading capacity expansion double up to 25mn tons per year (for Capesize size 150k DWT and Panamax size 80k DWT). Tarahan port expansion progress is on track, and company expect will complete in November 2013.

Currently we have Neutral rating on the counter. PTBA share price has been hammered badly due to continuous negative sentiment in the sector and some regulation overhang issue domestically and externally. PTBA now is trading at 12.4x – 9.2x P/E 13F -14F. Continued selling pressure may suggest attractive entry point to the stock as PTBA has solid balance sheet and one of the highest cash margin among peers.

for Indonesia Market Summaries 31 May 2013

Modernland Realty recorded a very strong first quarter of 2013 results

Modernland Realty: Strong 1Q13 results booking Rp323bn net profit above both ours (32.2%) and consensus’ (35.7%) estimates (MDLN; Rp1,070 Buy; TP:Rp1,250)

MDLN has recorded a very strong 1Q13 results where they booked Rp323bn net profit (+258.5%yoy; +241.0%qoq) beating ours (32.2%) and consensus’ (35.7%) estimates. The company enjoyed margin growth across the board from the gross to net levels.

Operation wise, the strongest margin growth is seen from land sales where the margin is 87%, grew from 45% in 1Q12 or 58% in 4Q12. The significant margin growth is as a result of MDLN’s land sales to ASRI where the company booked Rp400bn of sales in 1Q13.

MDLN expects to book Rp1.18tn of sales from the land sales with ASRI for FY13. We believe that land sales with ASRI as well as the performance of the Modern Cikande Industrial Estate will be key catalysts for MDLN. Construction of the new toll road access to Modern Cikande is expected to have started and to be completed by May 2014 which should boost land value in the estate. We expected the land ASP at Modern Cikande to be Rp700,000/sqm  for FY13F, but as of this month the company claimed that their ASP is already at Rp950,000/sqm.

MDLN is currently one of our top picks in the property sector. The company is still one of the cheapest in the property sector trading at 6.7x FY13F PE vs sector average of 18.0x and industrial players of 9.9x; 23% discount to our RNAV. Re-iterate Buy.

for Indonesia Market Summaries 31 May 2013

Bank Tabungan Pensiunan Nasional at an attractive valuation

Bank Tabungan Pensiunan Nasional: At an attractive valuation  (BTPN; Rp4,775, Buy, TP:Rp5,500)

We reiterate our Buy call on BTPN, which is trading at 2.8x P/BV 2013F, after its share price declined 20% from the peak. The new shareholder, SMBC, is not likely to change the business model or the management, hence concentration will remain on the high-margin micro lending and pensioners.

Sumitomo Mitsui Banking Corporation (SMBC) to become major shareholder. SMBC has bought 24.3% of BTPN shares earlier this month and plans to increase its ownership to 40% if it gets approval from the central bank. The investment, which was done at Rp6,500 or 4.9x P/BV 2012, is long-term with no intention to increase the stake beyond the 40% limit stipulated by the existing regulation. TPG Nusantara still owns 41% (previously 57.9%) but will reduce it to 25.3% when SMBC realizes its additional purchase from the company.

No change in BTPN management.  Despite there is no agreement between the management and SMBC we understand that the current management will remain intact for the foreseeable future.  BTPN’s business model on micro lending (loan to pensioners 70% and micro loans 23%), the main factor for SMBC’s decision to buy, will be unchanged, hence we expect the bank to deliver high ROE of more than 25%. In the longer term SMBC may replicate such platform in other countries in the region.

Potential lower cost of funds. BTPN’s reliance on high-rate-bearing time deposits (84% of total deposits) and borrowings may change in the long term. SMCB's higher rating may help BTPN tap the bond market with lower cost of funds. This will help maintain the high margin.

Reiterate Buy. BTPN share price has underperformed the JCI by 30% this year after outperforming the market by 39% in 2012. We believe investors had taken profit learning that there would not be any tender offer post the acquisition. While we lowered our earnings forecasts by 7% for 2013 and 5% for 2014 due to the expected slower loan growth post the fuel price increase and higher corporate income tax rate of 25% we reiterate our BUY call on the bank  with the expected 26% average ROE in 2013-15. Consequently we also lowered TP to Rp5,500 from Rp5,600 based on 3.2x P/BV 2013F.

for Indonesia Market Summaries 31 May 2013

Thursday, May 30, 2013

Indonesia Market Summaries 30 May 2013

The Commission VIII has approved social compensation program required for the government to hike subsidized fuel price

The parliament’s Commission VIII has approved the government’s social compensation programs proposed under the 2013 Revised Budget Plan. The program will cover Rp66.6tn fund and is allocated to, among other programs, rice for the poor (Rp21.9tn), temporary direct aid (BLSM, Rp11.6tn), education aid (BSM, Rp12tn), and basic infrastructure (Rp17.5tn).

To refresh, the government requires approval of such compensation program to execute subsidized fuel price hike. Mind that the approval is still in commission level; to be official the notion must pass the parliament’s plenary. That said, the Vice Minister of Finance Mahendra Siregar gave hint that the price may rise in 17 Jun13 post approval of the 2013 Revised Budget. In a side note, the parliament has also allowed 2013.

Banking industry - new ruling for bank under intensive and special supervision

Bank Indonesia issued a bank regulation #15/2/PBI/2013 concerning bank status and the follow up actions required, especially for those under the intensive and special supervision of the central bank. Banks under the intensive supervision (criteria: CAR>8% but does not meet the CAR based on the bank risk profile, Tier 1 CAR does not meet BI’s regulation, reserve requirement >5% but does not meet RR based on risk profile, net NP>5%, health status of 4 or 5 or health status is 3 but corporate governance is 4) are given one year to improve their condition including writing off bad debts, limitation on management salary, freezing payment on subordinated bonds, improve capital and do not distribute dividend.

Indofood Sukses Makmur and CBP announced Rp185 and Rp186 dividend respectively

INDF announced that they will be paying out Rp185/sh of dividend, while ICBP will be paying Rp186/sh. INDF has prepared Rp1.63tn for the dividend payment, implying 50% payout ratio, to be paid out on August 2. Meanwhile, ICBP has prepared Rp1.08tn, also 50% payout ratio, to be paid on July 31. (Investor Daily)

for Indonesia Market Summaries 30 May 2013

Government proposed to increase coal mining royalty rate to 10%

Coal Sector:  Government seek to increase royalty up to 10%  (Under weight)

Royalty up to 10% for IUP holder.  Kontan daily today reported that the head of fiscal policy (BKF), Mr Bambang Brodjonegoro, has proposed to parliament to increase coal mining royalty rate to 10% vs current rate which varies from 3% - 7% subject to caloric value of the coal for IUP holder (based on PP No 9/2012). But it also need to be coordinated with Ministry of energy and resources (ESDM). From the Indonesia coal association (APBI) perspective, Mr Bob Kamandanu as the Chairman, suggest that if the proposal approved by the parlement, it should be implemented only for coal quality above 6,100kcal/kg as most of the low rank coal producers currently are suffering  from depression.

This is not a new surprise as the noise has been sounded last year. It is still a premature stage to speculate the impact to our coal universe due to political issue until we see the final regulation signed. However, if this proposal approved to implement across the board of coal qualities (low to high end rank), the bigger losers will be ABMM (Not Rated). While ADRO (Sell, TP: Rp1,000) partially affected for its recent M&A include MIP and BEP coal assets (as their main future volume growth drivers). While for PTBA (Neutral, TP: Rp16,500)  as an IUP holder is more on a grey area.

for Indonesia Market Summaries 30 May 2013

Tuesday, May 28, 2013

Matahari Department Store in a growing market

Matahari Department Store: Unrivalled Dominance (LPPF, Buy, Rp13,200, TP: Rp15,600)

With US$4bn market cap, LPPF is one of a few companies that still offers a remarkable 38% EPS CAGR and combined 14% free-cash flow yield in FY13F-15F. We use DCF in valuing LPPF with 10.1% WACC and 4.5% terminal growth. Our TP implies 28.5x FY14F PE or 0.7-0.8x PEG versus current 24.1x FY14F PE. Premium is justified by its sizeable market cap (US$4bn) and superior financial and operational performance (see Exhibit below: 38% EPS growth, >14% EBIT margin, >25% ROA) Stripping out the non-tax deductible interest expenses, LPPF trades at 22.6x FY14F PE.

LPPF is currently Indonesia’s largest department store with >32% market share and 118 nationwide stores. In a growing market, LPPF as the biggest player still outpaced the industry by growing 3.1x faster, with market share rose from 24% in 2006 to 32% in 2011. We expect LPPF to continue growing fast as it aggressively opens 13-15 stores p.a. over the next three years, while the industry is also still underpenetrated particularly outside Jakarta. LPPF benefits from its strong positioning in the fast-growing Indonesian middle class (53% of total population).

LPPF has the highest ROA among peers, given its most profitable and least-capital intensive business model. LPPF also has unrivaled working capital management with 25 days negative cash conversion cycle, which means that its operational needs are more than self-funded. Strong cash generation enables LPPF to meet its expansion plans and accelerated debt repayment, while servicing a 40% dividend payout starting FY14F.

Accelerated debt repayment would make LPPF debt-free by FY15F. This gives substantial 38.4% EPS CAGR in FY12-15F, as the non-tax deductible interest expenses gradually diminish.  By 4Q13, we also expect LPPF to earn the 5ppt tax reduction assuming that it maintains the current >40% free-float.

for Indonesia Market Summaries 28 May 2013

Monday, May 27, 2013

Indonesia Market Summaries 27 May 2013

Panin Financial - Panin Life Insurance worth USD737m? (PNLF IJ; Rp295; Not rated)

It is reported that  Dai-Ichi Financial will soon close the deal to buy 40% stake in Panin Life Insurance, which is 62.9% owned by Panin Financial Tbk (the other 37.1% is owned by Panin International). Dai-Ichi is likely to pay around Yen30bn (US$295m) for the stake, indicating US$737m value for the whole company, which was has a total assets of Rp4.4tr in March 2013 and equity of Rp458b.

Comment: Using the Yen30b transaction value, the life insurance company is valued at 15x P/BV, well above the acquisition of Sinar Mas Life Insurance by Mitsui Sumitomo Insurance at the estimated 9-10x P/BV in 2011. (Kontan).

Inflation to reach above the 7% threshold this year

The National Development Planning Agency (Bappenas) projected that inflation post-subsidized fuel price increase could hover around 7.2% - 7.8% this year. Officially, the government proposed the lower bound figure of 7.2% in its plan revised budget (RABPN-2013) to the parliament.

for Indonesia Market Summaries 27 May 2013

Bank Jatim indicated the pretax profit of IDR 414 Billion

Bank Jatim - pretax profit of Rp113bn in April vs. Rp100bn/mth in 1Q13 (BJTM; Rp445; Buy; TP Rp575)

Bank Jatim indicated the pretax profit of Rp414bn in the first four months to April, +11% YoY, accounting to 33% of consensus and our full year pretax profit. This translates into Rp113bn pretax profit in the month of April as compared to Rp82bn in April 2012 (+37% YoY). The bank recorded an average pretax profit of Rp100bn/month in 1Q13.

Loan growth was recorded at 14% YoY to Rp19.4tr with consumer loans increased 17% YoY (65% of total loans), commercial loans +10% yoY (17% of total loans) and SME +7% YoY (17% of total). Total deposits increased 10% YoY resulting in higher LDR of 70% vs. 67% in April 2012.

NIM however continued to decline given more growth in lower yield loans such as mortgage which grew 75% YoY. The additional Rp2.3tr of deposits in April alone (+9.5% MoM) which was placed in low yield assets also resulted in lower margin for the bank.

Asset quality still deteriorated with NPL increased to 3.22% in April from 3.15% in March and the main culprit is the commercial loans which NPL increased to 3.43% from 2.95% over the same period. This is due to the late payment from the regional government on the finished projects, resulting in the decline in asset category for the loan facility; this may likely be reversed once the regional government pays the projects. On KUR, while the bank saw outstanding loans decline, NPL in this segment continued to increase, as expected, to 15.1%.

Cost to income declined to 41% in 4M13 from 42% in 1Q13 due to the absence of one-off expenses on staff uniforms in 1Q amounting to Rp20b.

CAR was 23.4% in April, down from 24.7% in March 2013 due to loan expansion.

The stock is trading at 1.1x P/BV and 6.7x P/E 2013F. Maintain Buy.

for Indonesia Market Summaries 27 May 2013

Friday, May 24, 2013

Indonesia Agro News 24 May 2013

Plantation (Underweight): Short-lived Bounce

We think the euphoria sparked by Malaysian palm oil inventory decrease to below 2 million tons and higher palm oil demand before Ramadan would last only about 2 months. Maintain Underweight as we have bearish view on CPO price in 2H13 due to strong supply growth in 2H13 and softening demand from China. Reiterate Sell call on AALI, BWPT and LSIP, and downgrade SGRO to Sell.

Astra Agro Lestari: Volume growth mainly from external FFB (AALI, Rp26,200, Sell, TP: Rp15,000)
  • Among Indonesian listed plantation companies under our coverage, AALI booked the highest CPO production growth in1Q13. However, the main source of volume growth come from external FFB, which generates low profit margin. We  maintain our Sell call with lower TP of Rp15,000 (Previously Rp15,300) as we think downtrend  in CPO price in 2H13 would drag down its PE multiple.

BW Plantation: Deteriorating Altman’s Z-score (BWPT, Rp980, Sell, TP: Rp775)
  • BWPT’s Altman’s Z-score kept deteriorating (from 3.3 [safe] in 1Q11 to 1.5 [ignorance] in 1Q13).  There is no room for error in managing its cash flow considering: 1) 62% of its 1Q13 EBITDA is used only for interest payment. 2) 1Q13 current ratio of 0.4X.  2) 1Q13 net gearing ratio of 169.6%.  3) further decrease in CPO price in 2H13. Reiterate Sell with lower TP :Rp775 (previously Rp850).

London Sumatra: Too much sacrifice for improving quality of FFB Plasma (LSIP, Rp1,730, Sell, TP: Rp1,200)
  • Although supported by liquidation of inventory of 21ths tons (around 19% of 1Q13 CPO sales volume), 1Q13 profit dropped by 66.4%yoy mainly due to lower CPO price and higher costs. We think flat FY13F CPO production and lower 2H13F CPO price would hit FY13F profit (our FY13F EPS is 24% lower than consensus). Reiterate Sell call with lower TP of  Rp1,200 (Previously Rp1,570).
  • Too much sacrifice in improving quality => decrease in FFB from Plasma. LSIP want to improve the quality of purchased FFB from plasma by imposing more criteria. The result is 1Q13 CPO production decreased by 7.7%yoy and purchased FFB from plasma dropped by 29.8% yoy in 1Q13. The benefit of higher quality of purchased FFB is not significant as OER only improved slightly and the selling price of CPO is not significantly difference.
Sampoerna Agro: Not in the right time (SGRO, Rp1,920, Sell, TP: Rp1,625)

  • Although SGRO is suitable for value investor because it is traded EV/ha at US$7,086, which is as cheap as cost of new planting, we think its weak FY13F earnings would further drag down its share price in the next 6 months. Therefore, we downgrade it to Sell with TP: Rp1,625.
  • Higher production pattern in 2H13 is unfavorable due to lower CPO price. Although SGRO’s yearly FFB production grows steadily, its quarterly FFB production pattern usually fluctuates significantly with different pattern from year to year (in some years, 1H FFB production contributed more than 60% of FY, while in other years, 2H FFB production contributed more than 60% of FY). We expect production spread in 2013 will be similar to 2012 (2H FFB production contribute more than 60% of FY).
for Indonesia Market Summaries 24 May 2013

Thursday, May 23, 2013

Ministop acquisition is long-term positive for Supra Boga Lestari

Supra Boga Lestari: Ministop acquisition is long-term positive (RANC, Rp1,040, Buy, TP: Rp980)

On an announcement submitted to the IDX last Friday, we learned that RANC has concluded the injection of Ministop convenience store by signing a share subscription agreement on May 16 to acquire 70% stakes at PT Bahagia Niaga Lestari (BNL) for Rp28bn. The 70% acquisition would be facilitated through the issuance of 28,000 new shares at BNL, thus the injected money would remain inside the company, which would be used to finance its initial stores expansion capex.

Ministop had earlier stated that it aims to open a minimum 300 stores in Indonesia within 2013-2018. As per capita income rises and middle class population doubles, we believe that the strong growth of convenience stores in Indonesia will continue to prevail. Competition is rising in Jakarta, but consumers’ lifestyles are changing and convenience store’s penetration rate remains attractive, we believe. The side-by-side operations of Alfamart and Indomaret minimarket stores are a strong proof of this solid demand.

For this year, RANC reportedly aims to open 10 Ministop stores, with the first store being opened in mid-June in Bintaro, South Jakarta. To differentiate itself, Ministop would target slightly higher target market than 7-Eleven and focus on its core expertise at fresh food business. As we know, RANC’s management has extensive know-how in the fresh food and groceries retailing business. The shareholders of RANC are also the owner of Hoka Hoka Bento, the biggest local Japanese fast-food chain in Indonesia.

Earning from the experience of 7-Eleven Indonesia, the company achieved its first operating profit in two years after operation, while net profit will turn positive in three years after operation (end-2012). Looking at the infrastructures synergy, better suppliers’ bargaining power (combined with Ranch Market and Farmers Market), and the speed of stores opening (60 stores per year); it is possible that Ministop may do better under RANC. Based on the management’s projection, RANC would be better off with the Ministop consolidation as its future gross.

for Indonesia Market Summaries 23 May 2013

BRI has shown improvement in micro lending

Operating improvement to continue (BBRI, Buy, Rp9,300, TP: Rp10,600)

BRI has shown further improvement in micro lending and we expect this to continue this year. Asset quality in this micro loan segment, and the rest, is not expected to deteriorate much even if inflationary pressures increase.

Strong loan growth supported by corporate, medium and micro loans. BRI’s 28% YoY (+4% QoQ) consolidated loan growth in 1Q13 was supported by corporate loans which grew 59% YoY while medium and micro loans grew 24% and 22% YoY, respectively. Such growth rates are the highest in the past three years but we expect the rates to slow down towards 24% by yearend and to continue growing at 21% in 2014.

Micro loans on the rise again. This loan segment accounts for 31% of total loans in March 2013 and recorded 22% YoY loan growth. The loan growth has been rising since June 2012 when it only recorded 12% YoY growth rate. The bank estimates its market share in the micro lending is around 40%.

Asset quality is under control. Despite the increase in NPL to 2.0% in March 2013 from 1.8% in December 2012, we believe BRI is able to keep asset quality under control, expecting NPL level of 2.0-2.1% in 2013 and 2014. We also expect the bank to maintain its high loan loss coverage ratio of 175%, lower than the 200% level recorded in 2010-2012. This should provide some cushion in case of any further deterioration of asset quality if subsidized fuel prices are increased.

Minimal impact on rising rates. We believe BRI will see minimal impact if interest rates increase by 100 bps. Certainly loan growth will slow and problem loans will rise but not to the alarming level. In addition the bank’s high loan-loss-coverage ratio provides a buffer for higher NPL.

Maintain Buy. Trading at 2.9x P/BV 2013F with share price outperforming the JCI by 16% YTD we believe there is still some upside for BRI with the expected further loan improvement in micro lending. We tweaked our earnings forecasts but keep our TP of Rp10,600 based on 3.3x P/BV 2013F. The risk is rising inflation which may increase NPL level and generate a negative sentiment towards the banking sector.

Cardig Aero Services (CASS) Penetrating into industrial area catering

Catering for growth (CASS, Not Rated, Rp830)

A play on Indonesia’s increasing flight frequency, import volume and airport capacity expansion, Cardig Aero Services (CASS) posted 25% yoy revenue growth and 33% yoy net earnings growth in 2012 with healthy ROE of 36%. Yet, shares are illiquid (6M average daily trading value of US$36k). 

Benefitted by higher flight frequency. The ground and cargo handling business (where Singapore-based SATS owns 49% stake) still contributes to 73% of FY2012 revenue. The subsidiary currently serves 34 international carriers, 9 domestic carriers and 150 consigners. It controls 70% and 40% market share for ground handling and cargo handling, respectively. Revenuefrom this segment grew by 13% yoy mainly supported by increasing import volume and higher flight frequency.

Smaller but growing maintenance business. On line maintenance service (where SIA Engineering owns 49% stake), it controls 56% market share for international flight. Last year, it added Jet Star, Air New Zealand and Air Asia as new clients. Revenue from this segment contributes to 7% of FY2012 revenue and posted 30% yoy growth last year.

The next source of growth. Food solutions business contributed to 20% of FY2012 revenue with more than double yoy revenue growth, supported by full year consolidation of food solution subsidiary in 2012. Coal contracting companies, like Pama and Buma, are the example of its remote catering clients. CASS also does in-flight catering business with 9,000 meals capacity.
Penetrating into industrial area catering. CASS is also setting up food production center in Karawang to tap into food solution service for industrial clients (it secured 300 daily meals order from Federal Oil early this month). Revenue contribution from aviation service and food solution are expected to be 70%: 30% in the next two year.

High ROE business, yet liquidity is a main concern. The business was generating around 30% EBITDA margin for the past three years. ROE was very high at 36% last year. Yet, stock is very illiquid with 6 month average daily trading value at only US$36k. No rating on this stock.

for Indonesia Market Summaries 23 May 2013

Wednesday, May 22, 2013

Cardig Aero Service not rated

Cardig Aero Service (CASS; Rp820; not rated)
 
Cardig Aero Service is a service company providing aviation support and food solution. Aviation support service range from ground and cargo handling and line maintenance, while food solution business serves remote area catering, in-flight catering and industrial area food service. It operates in 11 largest airports in Indonesia. The company also started integrated facility management solution early this year.
 
Key takeaways from the analyst meeting that we attended yesterday: 
  • The ground and cargo handling business (where Singapore-based SATS owns 49% stake) still contributes to 73% of FY2012 revenue. The subsidiary currently serves 34 international carriers, 9 domestic carriers and 150 consigners. It controls 70% and 40% market share for ground handling and cargo handling, respectively. Revenue from this segment grew by 13% yoy mainly supported by increasing import volume and higher flight frequency.
  • On line maintenance service (where SIA Engineering owns 49% stake), it controls 56% market share for international flight. Last year, it added Jet Star, Air New Zealand and Air Asia as new clients. Revenue from this segment contributes to 7% of FY2012 revenue and posted 30% yoy growth last year.
  • Lastly on food solutions business (20% of FY2012 revenue), CASS posted more than double yoy revenue growth, supported by full year consolidation of food solution subsidiary in 2012. Coal contracting companies, like Pama and Buma, are the example of its remote catering clients. CASS also does in-flight catering business with 9,000 meals capacity. In addition, it is also setting up food production center in Karawang to tap into food solution service for industrial clients (it secured 3,000 daily meals order from Federal Oil early this month).
  • Revenue and net earnings in 1q2013 were Rp301bn (29% yoy growth) and Rp28bn (41% yoy growth), respectively. 2013 capex is budgeted for Rp100bn. EBITDA margin for this company was 29% last year and ROE was at 36% level. Current market cap of the company is Rp1.7tn (US$175mn) with 6M ADTV of Rp350mn (US$36k). The company may be benefitted from increasing flight frequency, import volume and airport capacity expansion in Indonesia.
for Indonesia Market Summaries 22 May 2013

Foxconn to team up with Erajaya

Erajaya Swasembada: Foxconn to team up with Erajaya (ERAA, Buy, Rp3,300, TP: Rp3,875)

It is all over the news today, that the Ministry of Industry, Mr. MS Hidayat, revealed the plan of Taiwanese-based Foxconn’s, the world’s largest electronics contract manufacturer, in constructing factory in Indonesia in 2H13. The long-delayed plan finally is nearing its realization, as Foxconn reportedly has signed a partnership agreement with a local partner recently.

Under the agreement, Mr. Hidayat revealed that Foxconn would team up with ERAA to manufacture and sell cell phones and tablets worldwide. Official disclosures on the agreement is yet to be announced (possibly within months’ time), but the news mentioned that Foxconn might invest up to US$10bn for several development stages over a few years.

We are still unclear over the partnership arrangement, but it is clear that ERAA offers strong domestic distribution access for Foxconn to sell its products domestically. At this stage, we are still unsure if ERAA could take up some stakes at the manufacturing business, but if it does, we think that it could be just some minority stakes in stages (as development phases are in stages).

The potential revenues of this partnership could be huge, in our view, as Indonesia imports US$2.5bn of cell phones annually. Earlier last month, Foxconn also said that it would not produce Apple products in Indonesia, but only manufactured phones to serve the huge domestic market – giving us some hints that they may do low-end mass-market phones. The government’s stance towards localizing cell phones manufacturing is also very supportive, given the fast-rising cell phone imports growth that is contributing to the country’s trade deficit.

for Indonesia Market Summaries 22 May 2013

Tuesday, May 21, 2013

Indonesia Market Summaries 21 May 2013

The government proposes once-every-two-years wage adjustment

The Ministry of Manpower and Transmigration proposes wage adjustment to be done once every two years as opposed to the current one year cycle to avoid conflict between the labor and the enterprise. Some other points included in the Government Regulation Draft on Wage Mechanism are wage adjustment differentiation based on the company’s scale of business with labor’s productivity level also considered (Kontan)

Agung Podomoro posted Rp2.2tn marketing sales as of April 2013

As of April 2013, APLN has recorded marketing sales of Rp2.2tn or approximately 37% of the company's full year target. The marketing sales implies a 44.2% yoy growth. Contribution is as follows: Podomoro City Extension (57%), Vimala Hills (15%), Soho Pancoran (7%), Metro Park Residence (7%), Grand Taruma (6%), and Parahyangan Residence (3%). (Company Release)

Comments: The marketing sales is 30% to our expected full year marketing sales of Rp7.3tn.

Honda aggressively expands network as it enters the low MPV segment

PT Honda Prospect Motor, the dealership for Honda 4W, is aggressively rolling out dealerships network in Indonesia to support the upcoming launching of low MPV before April 2014. The car, which many called as Brio MPV, would be assembled at Honda’s new assembling plant in Karawang, which has an annual production capacity of 120,000 units. The arrival of Honda into the low MPV segment would further give competition to the incumbents like Toyota Avanza, Daihatsu Xenia, Suzuki Ertiga, Nissan Evalia, Mazda VX-1, Proton Exora, and Chevrolet Spin. (Bisnis Indonesia)

for Indonesia Market Summaries 21 May 2013

Kalbe Farma To Cancel All Treasury Stocks

Kalbe Farma: To cancel all treasury stocks and distribute Rp19 DPS (KLBF, Rp1,540, Neutral, TP: Rp1,275)

At yesterday’s AGM, shareholders gave the green light for KLBF to cancel its entire 3.9mn of treasury stocks, equivalent to 7.7% of its paid-up capital. Therefore, total outstanding shares post-cancellation would be reduced to 46,875mn from 50,780mn. The cancellation would have no financial impact to the company, but would be EPS accretive to shareholders given the lower paid-up capital. Our current EPS forecasts have nevertheless factored this cancellation into account.

KLBF also received approval to distribute Rp19/share of dividend (1.2% yield), equivalent to a 51% payout – in-line with its minimum 50% payout policy, but lower than FY12’s payout at 65% and our payout assumption of 60%.

KLBF also reiterated its Rp1-1.5tn capex plans for this year, which would be used to finance production capacity expansion across the board, as well as for its distribution arms. On a newspaper today, Mr. Vidjongtius (Corporate Secretary) was quoted saying that the company plans to acquire 4-5 companies operating in the consumer health and nutrition segment this year.

for Indonesia Market Summaries 21 May 2013

Muhammad Chatib Basri The new Finance Minister of Indonesia

The new Finance Minister : The right man for the job

The president has officially appointed M. Chatib Basri as the new finance minister replacing ad-interim official Hatta Rajasa. Though his term will be short, until 2014, tough challenges awaits him.

Well suited for the job. We think M. Chatib Basri has experience in the Ministry of Finance. He was the special staff for the late Minister of Finance Sri Mulyani while was also the Representative of the Ministry of Finance for the G-20 in 2006 – 2010. Moreover, Mr. Basri has extensive private sector working experience, as he was the commissioner for several companies such as Astra International, Semen Gresik, Astra Otoparts, and Indika Energy.

First priority: the nearby 2013 revised budget. Following his official inauguration, Mr. Basri will have to immediately prepare the 2013 revised state budget (RAPBN 2013) accommodating fuel price hike scenario. In our view his success in passing the hike will not rely only on his ability to clarify the importance to reduce subsidized fuel cost, which we believe he is capable of, but also depending on his ability to persuade the parliament about the need of a compensation scheme.

Fostering fiscal policy. His public sector experience in combination with credentials in academic world and the private sector should give him enhanced view about the type of fiscal policies required going forward. Thus, based on the president’s direction of a fiscal framework that supports investment, we believe the likelihood of any tax rates increase or other fiscal constraints will be small.

for Indonesia Market Summaries 21 May 2013

Monday, May 20, 2013

Indonesia Market Summaries 20 May 2013

Infrastructure update: Indonesia Investment Coordinating Board will introduce and market 24 infrastructure projects worth US$12.7bn.

Indonesia Investment Coordinating Board (or BKPM) has decided that 24 infrastructure projects will be prioritized this year, and will be marketed to private and foreign investors this year. Among the largest projects are Cileunyi-Sumedang-Dawuan (Cisumdawu) toll road (US$1,016mn), Soekarno Hatta – Manggarai train project (US$2,000mn), Maloy International Port (US$2,130mn) and Karawa Hydro Power (US$1,336mn). Total value of the project that will be offered in 2012 may reach US$12.7bn.

These projects are considered feasible by the governments and the construction planning has been completed by the government. Financing of these projects will be funded by private-public partnership scheme.

No hedging regulation for now

The government has yet to impose hedging regulation for its external debt as the downgrade rating risk remains relatively high. Specifically, if it does use such hedging mechanism, any downgrade rating from specific agencies will result a penalty paid by the government to the counter party (Bisnis Indonesia)

MSCI Indonesia Index changes - 20 new stocks are in

MSCI announced its semi-annual index review for the MSCI Equity Indices in which there will be 20 new Indonesian stocks to be included in the two indices: 3 in Global Standard Index and 17 in Global Small cap Index. Of the Global Standard Index, Lippo Karawaci (moved from small cap index), Bumi Serpong Damai and Indofood CBP Sukses Makmur are to be included and for the Small Cap Index, in addition to the 17 new counters, there will be four deletions including Lippo Karawaci which will be moved to the Standard Index. The changes will be implemented on 31 May 2013.

for Indonesia Market Summaries 20 May 2013

Friday, May 17, 2013

Erajaya Swasembada an Insignificant EPS dilution from MESOP issuance

Erajaya Swasembada: Insignificant EPS dilution from MESOP issuance (ERAA, Rp3,225, Buy, TP: Rp3,875)

ERAA yesterday announced a plan to issue Management and Employee Stock Options Plan (MESOP), pending shareholders approval at the upcoming EGM on May 30, 2013. Under the MESOP scheme, ERAA would conduct a non-preemptive issuance of a maximum of 20mn new shares with an exercise price of at least 90% of the average price of the last 25 trading days prior to the announcement day. The eligible employees would be given a timeline of up to 2-year (deadline on May 30, 2015) to exercise their options.

Who are eligible? The eligible employees for the MESOP include permanent employees nominated by the BoD (with BoC approval), BoC members (except for the independent commissioner), BoD members, and key employees that have been working for at least 1-year with with a minimum Assistant Manager position.

Insignificant EPS dilution at 0.7%, but sizeable cash inflow at 31% of total cash balance. Assuming that the MESOP is fully exercised today, the EPS dilution effect would be insignificant at a maximum of 0.7%, as the 20mn new shares issuance is very little as compared to the outstanding 2,900mn shares. Considering the small dilution, we think that the plan could yield some positive impact to further realign the interests of BoD and key employees with the shareholders.

We retain our Buy call. Strong new products launching would be the key catalyst to ERAA. Recent BlackBerry's announcement to introduce R5, the mid-end version of BB10, has partially answered uncertainties over the potential slowdown in ERAA's mid-to-low-end BlackBerry products, which have more than 50% volume contribution.

for Indonesia Market Summaries 17 May 2013

Indonesia Market Summaries 17 May 2013

Bank BNI is reviewing investment in Bahana

The management is studying two options to acquire Bahana Pembinaan Usaha Indonesia (BPUI), which is owned by the Ministry of SOE. First is 100% direct investment which will take a long process as it needs the parliament approval. The second is through additional share issuance in which BNI will own 40% of BPUI while the government will still own 60%. This does not need the parliament approval and earlier the bank mentioned to pay the shares using part of their Rp17tr recapitalization bonds. (Kontan)

Investment to ease in 2Q13

The chairman of the Coordinating Investment Board Chatib Basri anticipated easing investment in 2Q13 affected by declining capital goods imports since 1Q13. Though so, the FDI to GDP ratio is expected to increase to above  5% from 3% in 1Q13 and 1.7% in 1Q12 (Investor Daily)

Subsidized fuel price hike compensation program set at IDR 20 trillion

The number is registered in the 2013 Revised State Budget Proposal (RAPBN-P 2013). A big chunk of the amount is allocated to the temporary direct aid (BLSM), reaching IDR 13 to 14 trillion according to the Coordinating Minister of Citizen’s Welfare,  while the rest to enhance existing social programs already budgeted this year. The government reportedly has submitted the budget proposal to the parliament in Tuesday (5 May13) and the related discussion is expected to be done in a month (Kontan)

for Indonesia Market Summaries 17 May 2013

Thursday, May 16, 2013

Bank Tabungan Negara Earning adjustment on higher problem loans

Bank Tabungan Negara: Earning adjustment on higher problem loans (BBTN, Rp1,340, Buy, TP: Rp1,700)

We lowered our TP by 19% to Rp1,700 based on 1.5x P/BV 2013 after factoring higher NPL level post the 1Q13 results that resulted in a13.8% cut in our 2013 earnings forecast. For every 0.5% increase in NPL from the base case of 3.0% in 2013, net earnings will be cut by a further 10.2%.

NPL level remains stubbornly high. BTN saw its NPL level increasing to 4.8% in March 2013 from 4.1% in December 2012 and 3.2% in March 2012. This is the highest NPL since mid-2007 when it was 4.84%. Loan-loss coverage ratio has been on the decline as well, currently at 25% compared with 41% a year ago. However, given the rising value of collaterals there is little concern over such low coverage ratio here.

Most of the rising NPL in subsidized housing loans. Part of the reason for the rising NPL is the subsidized housing loans, which make up 30.5% of total loans in March 2013, in particular the interest only balloon payment loans (IOBP), amounting to Rp6t (7% of total loans) with the NPL level of 8%, according to the management.  The loans were made in 2008-2010 through a government program to help people to own a house by paying interest only for three years, after which they have to start pay.

Management’s NPL target is below 3%. During the last analyst meeting the management indicated its target to bring NPL level to below 3% by the year-end and hence we use this guideline instead of our earlier expectation of 2.5%.  The 3% level is higher than the 2.1% expected during the FY12 result analyst meeting which makes us doubtful if they can achieve the target.

Earnings cut with lower TP of Rp1,700. Based on our new forecast, which is 13.8% lower than the previous expectation for 2013, we calculate that for every 50-bp additional NPL, assuming the same coverage ratio of 38%, we have to cut net earnings by 10.2%. The new TP is based on 1.5x P/BV 2013F using the GGM model with ROE of 15.2%, COE of 12.5% and growth rate of 7.25%.

for Indonesia Market Summaries 16 May 2013

Indonesia Market Summaries 16 May 2013

Bakrie Toll Road transaction is nearing completion

ELTY and the MNC Group’s transaction on the Bakrie Toll Road (BTR) sell is nearing completion as the deal was signed a couple of days ago. ELTY admitted that the transfer of syndicated loans and collateral was part of the issue that delayed the transaction; however, the issue has been cleared and the loans and collateral has been transferred to the MNC Group. (Kontan)

The government cut budget

The cut is intended for all government institutions by an average of 9.1% of their 2013 budget. The action is estimated to save Rp24.6tn and will be used to to finance budget deficit that is expected to reach 2.5% of GDP compared with initial projection of 1.65% of GDP (Kontan)

Bank Indonesia to respond subsidized fuel price hike with interest rate measure

Bank Indonesia governor Darmin Nasution expect inflation to bump up to 7.5-7.8% should subsidized fuel prices, premium and diesel, are increased to Rp6,000/liter and, alternatively, to 7.5% if each rise to Rp6,500/liter and Rp5,500/liter. Such condition warrants monetary policy review which may result in change of interest rate, though it is not yet clear which one will be utilized, the FasBI rate or BI rate (Kontan)

for Indonesia Market Summaries 16 May 2013

Wednesday, May 15, 2013

Indonesia Market Summaries 15 May 2013

BCA and BNI connected through ATM

The customers of the two banks are now connected through ATM under ATM Prima. Together the two banks have more than 20,000 ATMs, BCA 12,173 units and BNI 8,279 units in March 2013. (Bisnis Indonesia)

LPS said that there are five interested buyers for Bank Mutiara

Lembaga Penjamin Simpanan (LP) or the Deposit Insurance Company said that there are five interested buyers for Bank Mutiara, which is to be sold this year. LPS will sell the bank at minimum price of Rp6.7tr, the amount it spent to save the bank from failure back in 2008. If they fail to sell the bank this year, they will have to sell it to the highest bidder next year, which is a more likely scenario given the high asking price of more than 6x P/BV 2012.  (Bisnis Indonesia)

Nobu Bank  IPO

Nobu Bank  IPO – owned by Lippo Group, Bank Nobu is offering 2.155bn new shares, equivalent to 52% of the enlarged capital, at Rp375/share, raising Rp808bn. Listing is on 20 May 2013. The funds will be used to strengthen the capital and for expansion. (Kontan)

Sentul City recorded 83.4% yoy marketing sales growth in April 2013

In April 2013, BKSL’s Sentul City estate booked marketing sales of Rp145.5bn implying 83.4% yoy growth. Cumulative marketing sales up to April is recorded at Rp504.1bn (50.4% to full year target) which grew by 150% yoy. Sentul Tower Apartment Tower A and B contributed 57% to sales, while 31% came from landed houses and 12% came from shophouses. Meanwhile, Sentul Nirwana booked marketing sales of Rp36.8bn in April 2013 or Rp186.3bn cumulatively from January (34.8% to full year target), implying a 9.6% yoy growth. Landed houses contributed 47%, apartment 37%, while 16% came from sales of the Jungleland Avenue. (Company release)

Indocement to pay out Rp450/sh dividend

INTP is planning to pay out dividend of Rp1.65tn (34.8% of FY12 net profit) or equivalent to Rp450/sh. The dividend payment this year is higher compared to last year of Rp1.07tn. (Investor Daily)
Comment: The dividend payment implies a yield of 1.8%.

Bumi Serpong Damai targets Rp2.9tn from rights issue

Quoted from the news, that BSDE is targeting proceeds of at least Rp2.95tn from their planned non-preemptive rights issue. The company is ready to issue 1.74bn new shares with a minimum price of Rp1,691/sh. The proceeds will be used for land acquisition and infrastructure development. (Investor Daily)

Budget deficit reached Rp39.2tn in 4M13


At a time when government tax and non-tax revenues realization are falling in line with slowing economic growth, expenditure post is about as high as last year with subsidy spending dominating (Rp66.6tn or 24.2% of 2013 budget compared with Rp14.9tn or 8.8% 2012 budget). This resulted in Rp39.2tn budget deficit as of 30 Apr13. The government estimates budget deficit to increase to 2.5% from 1.65% initially expected; this change is proposed under the 2013 Revised State Budget (Kontan)

Semen Indonesia expanding to Myanmar

After expanding to Vietnam by acquiring Thang Long Cement, SMGR is now planning to build a new 1mt capacity cement plant in Myanmar which will cost US$200mn. The company is selecting from 3 local companies as their JV partner which should be completed by 2H13. (Investor Daily)

for Indonesia Market Summaries 15 May 2013

China will ban thermal coal import below 4500kcal/kg NAR

Coal Sector:  China plans to ban coal import below 4,500kcal/kg NAR (Under weight)

China will ban thermal coal import below 4,500kcal/kg NAR. Based on a channel check (sourced from IHS McCloskey) has reported yesterday that China’s National Energy Administration (NEA) has released a draft regulation proposing to ban coal import with a CV below 4,500kcal/kg NAR, which may translate into around 4,800 – 5,000kcal/kg GAR depend on the moisture content. In our view, this policy is to align with China’s government commitment to reduce carbon emission and protect the national interest for its domestic coal products.

Potential pressure on Indonesia’s CAD. We expect at least 20% of Indonesia’s coal export below 4,800kcal/kg GAR may need to relocate either into domestic or India market if this China’s policy is becoming effective. It would definitely have negative pressure to Indonesia’s current account balance as coal export accounted for 14% of total Indonesia trade export (as of FY2012).

Big losers: ADRO, KKGI and ABMM. The biggest losers in our view are low rank coal exporters like ADRO (Sell , TP:Rp1,000), INDY (Not rated), KKGI (Not Rated) and ABMM (Not Rated) due to their bigger exposure to China and India market. Integrated coal-to-power project become imminent goals in near-mid term, otherwise ADRO’s balance sheet will be at risk due to its recent aggressive low rank coal M&A below 4,200kcal GAR.

Big winners: ITMG, HRUM. We believe if this regulation become effective, the pricing gap will be widening due to different grades and interestingly from supply and demand dynamics it would favor higher rank coal producers (above 5,000kcal GAR) such as ITMG (Sell, TP: Rp30,600), HRUM (Neutral, TP: Rp4,200), due to some demand disparity from the biggest emerging country, China.

Neutral and mixed on PTBA, BRAU and BUMI. Despite PTBA’s coal export mostly above 4,800kcal/kg and would likely to gain more premium in pricing, however potential abundant supplies flooding into domestic market may likely to increase the price gap and hit PTBA’s domestic sales. So overall the net effect to PTBA is neutral as currently domestic and export sales is balance at about 50:50. While for BUMI and BRAU, both are mixed due to some exposure to Ecocoal (Arutmin) and pretty big exposure to domestic market.

for Indonesia Market Summaries 15 May 2013

BI Rate remains unchanged

BI Rate remains unchanged, higher concern on inflation expectation.

No change on the policy rates. As we have expected, BI rate and FASBI rates were unchanged at 5.75% and 4.00%, respectively, in today’s board of governor meeting.

Inflation remains the key issue. Bank Indonesia maintained its focus on inflation especially considering potential risk of inflation expectation owing to the uncertainty over the government’s fuel subsidy policy. That said, the central bank will continue to absorb liquidity through its longer term instruments to restrain short term inflationary risk. At the same time, such strategy is also meant to maintain the rupiah’s volatility and to fine tune money market internationally.

External imbalance improvement is seen in 1Q13. The central bank highlighted that 1Q13 current account deficit has fallen to 2.4% of GDP from 3.6% in 4Q12 and 2.8% of GDP in FY12, respectively. The reason is sharp decrease in imports at a time when non-oil and gas export remained positive. A more detailed balance of payment data will be released tomorrow.

International reserve increased to US$107.3bn in Apr13 from US$104.8bn in Mar13. The current reserve is equivalent to 5.8 months payment of imports and government’s foreign debt service. Basically, we have expected this in our report last week (see Weekly Economic Research titled S&P downgraded Indonesian sovereign credit rating outlook on 2 May13).

Monetary policy will be more dynamic in 2H13. Until this moment, assuming no major change in subsidized fuel policy, we maintain our BI rate forecast of 5.75% until YE13 and an increase on FASBI rate by no less than 25bps to 4.25% the soonest in Jun13.  However, should the government increase subsidized fuel price, Bank Indonesia will definitely be more aggressive in attacking higher inflationary risk.

for Indonesia Market Summaries 15 May 2013

Indo Tambangraya Megah First quarter 2013 results is within expectation

Indo Tambangraya Megah:  1Q13 results, within expectation 23.8% ours, 19% consensus (ITMG, Rp34,300, Sell, TP: Rp30,600)

1Q13 results within expectation. ITMG recorded 1Q13 net profit of US$72mn (-42%YoY), within our expectation made up 23.8% our FY13 forecast but slightly below consensus at 19.0%. Quarterly basis, bottom line increased 22%QoQ mainly due to higher other income including derivative gain. 1Q13 operating profit of US$85mn (-50%YoY, -19%QoQ) was 20.2% ours and 18% cons mainly due to higher COGS and opex which up 17.6% YoY and 10.0%YoY respectively.  Operating margin continued decreasing to 15% vs 16% in previous quarter due to lower ASP (-20.9%YoY, -1.2%QoQ).

Strong production growth. ITMG produced 7.1Mt coal in 1Q13 (+24.6%YoY, -11.3%QoQ), accounted for 24.5% our FY!3 forecast and company’s target, relatively strong compare to the last 2 years where 1Q volume made up about 21 – 22% full year target, thanks to pre-stripping activities and good weather. Strip ratio was down 11.4%YoY to 11.7x result in lower total cash cost of US$62.9/t (-11.4%YoY), but quarterly it was slightly higher up by 2.1%QoQ due to higher SR (+6.5%QoQ).

Higher deferred stripping cost at the expense of future earnings. ITMG’s deferred stripping cost in 1Q13 continued to increase by US$13mn (+8.5%) up to US$169.5mn (combined current and non-current) vs end of FY12 of US$156.5mn.  Deferring higher than expected stripping activities may help ITMG’s current earnings performancebut at the expense of future earnings (as most of its counterparts have conservatively expensing or manage their balance sheet). Jorong and Indominco west block which have the shortest mine life-reserves (less than 5 years) have the most challenging stripping activities and unlikely being deferred anymore in near-mid term.

Maintain Sell. Currently we have sell rating on the counter with TP at Rp30,600, offering 10.7% downside. ITMG now is trading at 13.3x P/E FY13F. Lack of M&A option will continue to drag down and cap its valuation, where historically ITMG traded at range 11 – 12x, about 15-20% discount to industry vs currently about par to industry.

for Indonesia Market Summaries, 14 May 2013

Dyandra Media International An eventful year

Dyandra Media International: An eventful year (DYAN, Rp370, Buy, TP: 425)

Part of Kompas Gramedia group, Dyandra Media International (DYAN) is one of the largest event company in the country. We are expecting 30% EPS growth this year driven by higher IIMS revenue and APEC and WTO events to be held in its Bali hall.

Established exhibition portfolios. Since 1995, DYAN has been very active in exhibition organizer space with main portfolios in consumer electronics and automotive. The top 4 exhibitions have been organized annually by DYAN since 2000s. As the growth strategy, DYAN is actively rolling out well accepted exhibitions to new cities in Indonesia.

Busy 2013. The optimism of PT Dyandra Media International in 2013, the 4Q13 will be a hectic quarter for DYAN. 2013 Indonesia International Motor Show has been launched last week (95% of the space has been booked). The 2013 APEC CEO Summit and the 9th WTO Ministerial Conference will be held in its Bali Nusa Dua Convention Center. We forecast revenue will grow by 78% yoy. In 2012, 4th quarter revenue contributed to 34% of FY revenue (15% in 1st quarter).

Strategically part of Kompas Gramedia group. Being part of the largest printed media group posses several advantages for DYAN, mainly in the area of media coverage and business relation. The group is also well known for its conservativeness and good corporate governance.

Initiating coverage with BUY rating and Target Price of Rp425/share. Our TP was derived from sum-of-the-part valuation of event and property business. At our TP, the event business will be valued at 12x PE2013 (10% discount to global peers) and 1.15x current PBV for the property business. The global event companies are trading at average of 13.2x PE2013. PBV method is utilized for the property business as the segment is still on the developing stage.

Risk factors. Cyclical business, high reliability to key personnel and political stability are among the key risks. Full year revenue and net earnings will also be skewed toward the last quarter of the year.

for Indonesia Market Summaries, 14 May 2013

Monday, May 13, 2013

Indonesia Market Summaries 13 May 2013

Credit growth is slowing, as anticipated

Bank Indonesia deputy governor Perry Warjiyo mentioned that 1Q13 credit growth of 22.2% yoy is slower compared with 24.9% yoy in the same period last year, in line with the easing in economic growth. Such slowing occurred in all segments, namely working capital (23.7% yoy in 1Q13 vs. 25.2% yoy in 1Q12), investment (23.2% yoy in 1Q13 vs. 30.6% yoy in 1Q12), and consumption (18.9% yoy in 1Q13 vs. 20.5% yoy in 1Q12). However, the slowdown is anticipated; Bank Indonesia has previously revised its 2013 credit growth target to 21-22% (Bisnis Indonesia)

Surya Semesta’s NRC to conduct share swap with Saratoga Capital

PT Nusa Raya Cipta (NRC), SSIA’s construction arm, is planning to go through a share swap with Saratoga Capital before their IPO. Saratoga will acquire 7% of shares in NRC, while NRC will acquire 7% of Saratoga’s shares in the Cikampek-Palimanan toll road for Rp130bn.The reason for the share swap is still undisclosed, but the swap should be good for NRC since it raises the company’s stakes in the toll road. NRC targets total new contract of Rp4tn this year implying 48% growth yoy. (Kontan)

Comments: SSIA through NRC currently indirectly owns 20.5% stakes in the Cikampek-Palimanan toll road.
  • NRC owns 100% of PT Karsa Sedaya Sejahtera (KSS)
  • KSS owns 45.62% of PT Baskhara Utama Sedaya (BUS)
  • BUS owns 45% of PT Lintas Marga Sedaya (LMS), who is a concession holder of the toll road

Bank Danamon - 30% dividend payout for 2012

Bank Danamon’s shareholders agreed to distribute 30% of 2012 net profit as cash dividend, translating into Rp125.58/share. Cum- and ex-date will be on 30 May and 31 May with payment date on 19 June 2013. Based on this payout ratio, the current yield is 1.9%.

MEDC discover gas reserve in Matang-1, Aceh

Medco E&P Malaka discover gas reserve in Matang-1, Aceh. President Director of MEDC estimates Matang-1 may produce gas of 25 MMscfd. (Bisnis Indonesia)

Indonesia Market Summaries 13 May 2013

Friday, May 10, 2013

Ramayana Lestari Sentosa April sales still sluggish

Ramayana Lestari Sentosa:  April sales still sluggish (RALS, Rp1,530, Buy, TP: Rp1,600)

April gross sales came at Rp489bn, 12% below internal budget. Positive impact from the minimum wage hike has not kicked in yet. SSSG for April remained sluggish at -5.1%yoy, dragged by ex-Java (-8.7%) and Java (-3.5%), while Greater Jakarta was flat (-0.4%).

We are yet to obtain the growth figure at bottom-line level, but believe that it remains encouraging given the 25.5% gross margin achieved in 4M13 (against the 23% level in 4M12, despite moderating from 26.1% in 3M13). As such, we believe that operating profit should remain on track with our and consensus' forecasts, despite weak top-line realization at 22% to the full-year.

We reiterate our Buy call with Rp1,600/share target price. We still believe that strong wage hikes in the past two years would strongly benefit RALS. When the volume is back, likely in July-August (during the back-to-school and Eid-ul-Fitr periods), RALS growth should be much higher at the bottom-line level as the company now earns more profit for each sales generated. In 1Q13, RALS already reported higher-than-expected 36%yoy growth at operating profit level.

Indonesia Market Summaries, 10 May 2013

Indonesia Market Summaries 10 May 2013

Bank BTPN - SMFG to buy more BTPN at Rp6,500

Sumitomo Mitsui Financial Group (SMFG) is buying 24.26% stake in BTPN for Rp9.2tr translating into Rp6,500/share, to be sourced from  TPG Nusantara (16.87%) and the market (7.39%). The group also plans to increase its stake up to 40% for Yen150b (US$1.5bn) without giving any time table for this. (Kontan, Bisnis Indonesia).

Comment: at Rp6,500 SMFG values the bank at 4.9x and 3.7x P/BV for 2012 and 2013E compared to the industry average of 3.5x and 2.9x. Based on P/E this translates into 19.2x and 15.0x versus the industry average of 15.4x and 12.5x for the same period.

PT Timah delays Myanmar expansion

TINS’ plan to expand to Myanmar has been delayed due to new local regulation requiring local companies to be involved in the mining investment. Thus, TINS is required to start a JV company with a local partner. (Bisnis Indonesia)

Deltamas aims for US$200-300mn IPO

PT Pembangunan Deltamas, the developer of Sinarmas Land’s Kota Deltamas, is aiming for an IPO proceeds of US$200-300mn or equivalent to Rp1.9-2.9tn. The IPO will be conducted in the near term this year. Currently, Deltamas is 50% owned by Sinarmas Land, 25% by Sojitz Corporation, and 25% by Fame Bridge Investment. Kota Deltamas is a 3,000ha township with an industrial estate as well as commercial and residential estates. (Investor Daily)

Surya Semesta recorded industrial land sales decline of 22.6%

In 1Q13, SSIA booked industrial land sales of Rp260bn which declined by 22.6% where the company only sold 28.8ha compared to 43.5ha last year. SSIA claimed that they had difficulties in handing over the land and will only manage to book the sales in the next quarter. The company still believes that they will be able to sell at least 100ha with an ASP of US$125 psqm this year. (Bisnis Indonesia)

General Motors reopens Bekasi Factory

General Motors reopened its factory in Bekasi, West Java, on Wednesday to domestically produce its car for the first time in the Indonesian market in seven years. GM injected US$150mn into the shuttered plant as part of a greater push into lucrative Asian markets. The 58,000sqm facility will assemble up to 40,000 vehicles a year when fully operational. Most of the vehicles will be sold in Indonesia. GM’s international operations president stated that Indonesia is one of GM’s fastest growing markets. GM recently rolled out Chevrolet Spin, a 7-seater MPV (pricing point of Avanza/Xenia at Rp170mn) that is also the first vehicle it made for the domestic market since the Chevrolet Blazer ceased production in 2006. (Jakarta Globe)


Agung Podomoro to pay Rp123bn dividend

Quoted on the news that APLN is paying a Rp123bn dividend in June 2013 or equivalent to Rp6/sh. (Bisnis Indonesia) Comments: The dividend payment implied a yield of 1.3% in 2013.

for Indonesia Market Summaries, 10 May 2013

Wednesday, May 8, 2013

Indonesia Market Summaries for Automotive 8 May 2013

April 4W retail sales were weaker than the wholesale

Despite a strong wholesale number (+6.4%mom), 4W retail sales in April remains muted at 95,487 units (-0.7%mom). The retail number is 6.5% lower than the wholesale, suggesting piled-up inventories at dealers’ level. Cumulatively until 4M13, retail sales figure came at 377,100 units (+12.6%yoy), 5.2% lower than the wholesale at 397,991 units (+17.8%yoy). As a comparison, 4M12 retail sales figure was only 0.9% lower than the wholesale. Aggressive expansions of assembling capacity by all principals contributed to this over-supply. Auto2000, the official dealer for Toyota, revealed that its stock level has exceeded the normal one month level. (Kontan)

April 2W sales only down 0.7%mom despite the closure of sharia loophole

Preliminary domestic 2W sales (wholesale) in April came at 660,509 units (-0.7%mom; +7.0%yoy). Compared to the previous month, April sales can be considered as strong, as industry players (i.e. Astra Honda Motor) previously hinted for a 5-10%mom drop in sales, amidst the full closure of sharia loophole starting April 1. Cumulatively up to 4M13, wholesale figures reached 2.6mn units (+2.8%yoy), on track with 35% realization to our 7.4mn units forecast (+5.1%yoy). (Bisnis Indonesia)

Toyota aims 800 units of monthly sales for All New Vios

Toyota Astra Motor officially launched the All New Vios yesterday, with a price range of Rp242.5-272.5mn/unit (four variants) – which are about Rp20mn more expensive than the previous variant. The company’s CEO, Johnny Darmawan, revealed that it aims to secure 300 units of monthly sales for the new variant, excluding the 500 units of monthly orders for the taxi version, Limo. Mr. Darmawan mentioned further that the total demand potential for taxi is around 20k units per year, but the company is only able to secure around 8-10k units amidst limited supply from Thailand. Since 2007, Vios has always been dominating the low-end sedan segment with a minimum of 41% market share. (Bisnis Indonesia)

Isuzu Astra Motor to increase tonnage capacity to boost sales

Isuzu Astra Motor, the exclusive dealer for Isuzu, plans to increase the tonnage capacity standard for some of its vehicles to adjust with the Indonesian geography and hence, boost sales. The standard tonnage capacity would be increased according to the standards in Japan, as well as the intake and ground clearance. As of April, Isuzu recorded 2,700 units of sales. To further support the sales, Isuzu Astra Motor would also continue to extend the dealers network by expanding to about 100 outlets from the current 93 outlets. (Bisnis Indonesia)

Indospring announced its rights issue offering

Indospring: Rights issue offering at Rp 1,700/share, much lower than current price (INDS, Rp4,575, Buy, TP: Rp5,925)

Through at an abridged prospectus released this morning, Indonesia Market Summaries 8 May 2013, Indospring (INDS) announced its rights issue offering. In total, INDS would issue 210mn of new shares (3 old shares are entitled for 2 new shares) with an offering price of Rp1,700/share, potentially giving a total proceeds of Rp357bn. Cum and ex date are set on June 21 and 24. Indoprima Gemilang as the majority owner (88.1% stakes) would be the standby buyer of the rights issue.

After deducting for underwriting feeds, the net proceeds of Rp354bn would be used for the following purposes: a) about 51.41% (Rp182bn) for purchasing leaf spring machine as it adds additional one production line, b) about 31.07% (Rp110bn) for purchasing machines and developing factory building for the coil spring (particularly hot coil spring), and c) about 17.52% (Rp62bn) for working capital needs. As of FY12, INDS’ capacity utilization was 78% for leaf spring, 67% for hot coil spring, and 69% for cold coil spring.

Using the latest closing price of Rp4,575/share, the proposed rights issue would be very dilutive given the low offering price. The current TERP would be Rp2,749/share, which is 40% lower than the current price. Despite the purpose for capacity expansion, a steep share price downside is imminent at this juncture.

Tuesday, May 7, 2013

ADHI will lead consortium to build 3 monorail projects

ADHI to lead monorail project. ADHI will lead 8 BUMN (State-Owned Enterprises / SOE) consortium to build 3 monorail projects worth of IDR 12 trillion, where IDR 8.4 trillion will be financed by bank loan. On ADHI side, it plans to raise IDR 2 trillion via rights issue.

The 8 SOEs are:
  1. PT Jasa Marga (Persero) Tbk (JSMR), where the project will utilize some of the land it owns;
  2. PT Telekomunikasi Indonesia Tbk (TLKM), which will provide the communication and ticketing system;
  3. PT LEN Industries to source the IT part of the projects;
  4. PT Industri Kereta Api or Inka, which is a local train manufacturer;
  5. PT Angkasa Pura II to provide land in airport area;
  6. PT Pelindo III to provide land in seaport area;
  7. PT Bank Mandiri to provide loan for 3 monorail projects;
  8. PT Adhi Karya as consortium leader
3 monorail projects are planned by the consortium are:
  • Jakarta Link Transportation (JLT) – Bekasi Timur – Cawang (18.1km), Cibubur – Cawang (13.7km) and Cawang – Kuningan (7.2km). Total investment of Rp7 trillion.
  • Automatic People Mover (APM) Soekarno Hatta monorail (Airport) – Jakarta to Soekarno Hatta airport with total investment of Rp 2.5 trillion. Operation is expected to start by 2015.
  • Automatic Container Transporter (ACT) Tanjung Perak, Surabaya, monorail (Seaport) – bulk only monorail in Tanjung Perak seaport.
All domestic consortiums. As a consortium leader, ADHI will have a control over the construction works of the project, which will bring positive catalyst to ADHI’s order book in the next 3-4 years as the project is multi-year project. Interesting aspect of this project is that all of the works will be handled by SOEs and financed by a consortium of state-owned banks.

Comparable to MRT project. In terms of project size, both MRT and Monorail project are about the same at Rp 12 trillion, yet in the monorail project, there is only one construction company involved which means more order book can be secured by ADHI in the project.

Indonesia Market Summaries, 7 May 2013

PT Bank Mandiri Tbk will form a consortium of state-owned banks to obtain a target loans for 3 monorail projects

PT Bank Mandiri Tbk will form a consortium of state-owned banks to obtain a target loans amounting to IDR 8,4 trillion to support the construction of three monorail project.

"Bank Mandiri will hold PT Mandiri Securitas to form a consortium of state-owned banks in the financing of this project," said Director of Corporate Banking of Bank Mandiri, Fransisca Nelwan Mok, following the signing of a preliminary agreement launching Mock Up Monorail, in Madiun, East Java, on Monday. According to her, the proposed banking consortium will be approved by the project implementing consortium consisting of PT Bank Mandiri as leader of a consortium of lending banks, PT Adhi Karya, PT INKA, PT LEN, PT Angkasa Pura II, PT Pelindo, PT Telkom, PT Jasa Marga.

"First, We have to form the agreement from the internal and this is still under discussion and it could be multi-year, not in a year's time," she said.

In line with Fransisca, President Director of PT Adhi Karya, Kiswo Darmawan said that 30 percent of the source of funding comes from internal SOEs consortium and 70 percent comes from SOEs bank loans. "The funds will come from cash investments and loans companies, with each serving 30 percent and 70 percent," he said.

The Three monorail project to be built are Jakarta Link Transportation (JLT) in the Greater Jakarta area, Automatic Container Transporter (ACT) in Tanjung Perak, Surabaya and Automatic People Mover (APM) at Soekarno-Hatta Airport. For monorail that will be operated in the Greater Jakarta area requires a fund of IDR 7 trillion. As for the APM and the ACT require funds amounting to IDR 2,5 trillion each.

Indonesia Market Summaries, 6 May 2013

Monday, May 6, 2013

Express Transindo Utama 1Q13 a bit off due to pools expansion

Express Transindo Utama: 1Q13 a bit off due to pools expansion (TAXI, Not Rated, Rp1,320)

1Q13 revenues and gross profit grew 35.4%yoy and 28.8%yoy to Rp158bn and Rp50bn, respectively accounting for 25% and 20% of our full-year forecasts or 24% and 19% of consensus’. However, NPAT only increased by 6.7%yoy to Rp24bn, accounting for just 18% of ours and 19% of consensus’.

Top-line achievement remains intact, with operational fleets expanded to 8,550 units as of end-1Q13 as compared to 8,035 units as of end-4Q12. However, bottom-line came weaker-than-expected due to doubling G&A expenses on account of significant jump in salaries and allowances expenses (+200%yoy). The company addresses the rising salaries costs due to pools expansion (the plan is to add 5 in FY12 and 3 in FY13), as well as additional positions at HQ to comply with public company requirements.

Based on Indonesia Market Summaries last post, Express Taxi targeting net earnings up 50% in 2013, TAXI guides to book Rp677bn revenues and Rp130bn NPAT this year. That said, revenue guidance is 5% above ours and 1% above consensus, while NPAT guidance is 2% below ours but 6% above consensus. We have no rating on TAXI. The counter trades at 23.1x FY13F PE based on consensus numbers, or 21.8x PE based on its guidance

Friday, May 3, 2013

Bumi Resources Gearing rose to an alarming rate

Bumi Resources:  Gearing rose to an alarming rate (BUMI, Rp630, TP: Rp500)
BUMI posted net loss in 1Q13 of US$62mn vs US$100mn net loss in 1Q12 due to less forex loss and gains in derivatives, which within our FY forecast of a net loss at US$228mn. Operating profit stood at 19% of our FY forecast and 15% consensus’s. Equity value eroded by 40% as net gearing spiked to an alarming rate of 14x vs 9.5x end of 2012, ultimately suggesting a potential risk of capital raising. Maintain Sell and TP maintained at Rp500 implies 22% downside.

Production volume in-line.  BUMI produced 19.6Mt (+25%YoY), which was one of the best operational performing quarter on the basis of good weather, still within our FY forecast of 78Mt. However, weak ASP at US$72/t (-22%YoY) dragged down its earnings and margins as the Company recorded 8.3% operating margin in 1Q13 vs 11.5% in previous quarter or 14.5% in 1Q12. Strip ratio was lowered to 9.5x (-12%YoY) but was partially offset by higher fuel consumption, which lowered total cash cost.

Greater balance sheet risk. As of March 2013, BRMS, BUMI’s affiliated subsidiary, recorded worsening working capital to negative US$390mn vs US$270mn at the end of 2012. Operations worsened as Newmont’s 1Q13 gold and copper production continues to fall 36%YoY and 7%YoY respectively. Consolidated at the Group level, BUMI may face financial commitments to support BRMS, which will put BUMI’s balance sheet at risk.

Overhang on deleverage plan continues and debt services worsen. BUMI’s non core asset BRMS monetization plan continues to extend beyond schedule due to a bleak industry outlook and weak earnings performance from Newmont. With interest expense remaining high at US$146mn in 1Q13 and performance deteriorating at the EBITDA level, creditors may pose a reason to worry when debt services fall below 1x.

Arwana Citra Mulia expecting net earnings to leap by 60%

Arwana Citra Mulia: Simple and Clean (ARNA, Rp 3,100, Not rated)

ARNA sees no better year to expand further than this year, expecting net earnings to leap by 60% this year. Running its existing plant at almost full capacity, the 4th plant will come on stream by 2H13. We expect the momentum on ASP to continue on the back of robust property market.

New capacity coming on stream. ARNA is expecting 4th plant (Palembang) to start production by June this year. Production capacity may increase by 19% to reach 49.4mn sqm/year. Not stopping there, ARNA is preparing a 5th plant in East Java with a capacity of 6-8mn sqm/year to start operation end of 2014.

Industry is looking at 15-20% growth. The ceramic producer association is looking at 15-20% industry growth in the medium term, where 90% of demand will come from domestic market. ARNA posted 20% revenue growth in 2012 (contributed by 5.3% sales volume & 14.6% ASP growth). In 2013, it expects 29.7% revenue growth (12% ASP & 17.7% volume increase).

Yet, pricing power and efficiency gave a boost to bottom line. Management has successfully passed through cost increase to consumers, reflected by its improving margins in the past 2 years (31% in 2011 & 34% in 2012). ARNA is aiming for ~38% gross margin this year.

Benefitting from mid-to-low segment & outside Java growth story. ARNA highly focuses on mid-to-low segment, where market is the largest among other segments. With 69.4% sales in Java, sales outside Java has grown by CAGR08-12 by 16.5% (vs Java sales growth of only 7.8%). Tiles are distributed through over 15,000 outlets across Indonesia.

Low debt, consistent dividend payout and healthy 1Q growth. ARNA’s net gearing is at 8.9%. Historically, company has been consistent in dividend payout (47% in 2012), thus, the ratio should be kept at least at current level, in our view. In 1Q13, revenue and net earnings grew by 37% yoy and 123% yoy respectively. Definitely not cheap at 23.5x PE2013, yet strong growth outlook, consistent effort to efficiency, and beneficiary of property boom may justify the value.

For Indonesia Market Summaries, 3 May 2013

Dyandra Media International seasonality kicks in 1Q13

Dyandra Media International: FY2012 in-line, but seasonality kicks in 1Q13 (DYAN, Rp385, Not rated)

In-line FY2012. Dyandra Media International (DYAN) reported FY2012 revenue of Rp624.2bn (69% yoy growth) and net earnings of Rp64.9 bn (421% yoy), which both are in line with our FY2012 estimate (Rp618bn revenue and Rp64bn net earnings).

1Q net loss due to seasonality. In 1Q2013, DYAN posted Rp4.6bn net loss, a lower loss compare to Rp5.4bn net loss in 1Q2012. The loss was mainly attributed to the cyclicality of the business. On event business, the Indonesia International Motor Show (IIMS), the largest contributor to the revenue and earnings, will only be held in 2H this year. On convention and exhibition center business, we expect that the segment will book significant revenue increase with the growth rate.

Strong revenue growth. Revenue, on the other hand, grew strongly in each segments, where total revenue almost double yoy. The event organizer, supporting and hotel business grew by 107%, 161% and 99%, respectively. Only the convention and exhibition business revenue was lower yoy.

Positive developments in 2013. During the first 4 months of the year, DYAN has topping of the extension of Bali Nusa Dua Convention Center (BNDCC) and opened up an Amaris hotel in Benoa, Bali, which located close to BNDCC. From the IIMS press conference, IIMS will be held from 19-29 September 2013 in JI-Expo Kemayoran, where 35 car manufacturers and growing number of automotive supporting players are expected to join the show.

Positive return since its listing. The stock was up by 10% since its listing and we are currently reviewing our recommendation on the counter.

For Indonesia Market Summaries, 3 May 2013

S&P revised down Indonesia’s outlook to stable from positive

Surprisingly, S&P – the only prominent rating agency that has not yet upgraded Indonesia to investment grade – downgraded Indonesia’s outlook from positive to stable with current BB+ rating retained yesterday. At the same time, ironically, S&P upgraded the Philippines to investment grade (BBB-)

S&P’s decision to downgrade Indonesia’s outlook was a combination of several factors such as slow progress on infrastructure, policy and bureaucratic uncertainties. It also stated external credit fundamentals had weakened owing to rising private sector external borrowing and structural external imbalance.

However, we believe S&P’s decision to downgrade Indonesia’s outlook was mostly owing to government’s reluctance to deal with fuel subsidy problem that was likely its constraint in the first place to upgrade Indonesia last year. Just as we have mentioned on our previous report, despite the president’s decision to increase subsidized fuel price, his statement on the conditionality of the hike still leaves big uncertainty about the plan.

What should be watched after this? We do not think it will have significant impact to domestic growth. Instead, it will affect financial market and the rupiah fluctuations. Following S&P’s statement on 2 May13, the JCI reacted negatively as it fall 1.3% on the day. Meanwhile, the 10-year government bond yield increased 2bps to 5.54% (3 week high) and the rupiah reached Rp9,745/US$ (nearly four week low) on the corresponding period.

Is there any potential risk other rating agencies would follow? For information, S&P’s decision is based on an assessment done by a visiting team to many Indonesian officials last month. Moody’s and Fitch have done their assessment 3-4 months ago and thus for the moment we believe that the probability for them to change their outlook or rating is low. Nevertheless, if in fact the government take no significant action regarding fuel subsidy in the second semester just as promised.

Nevertheless, S&P may raise its rating if reforms are implemented, especially on the subsidized fuel issue.

For Indonesia Market Summaries, 3 May 2013.

Thursday, May 2, 2013

Inflation and trade improvements: Are they here to stay?

The central bureau of statistics (BPS) announced Apr13 inflation and Mar13 trade results yesterday.  As in April 2013 Consumer Price Index Indonesia inflation and March 2013 Trade Preview in The Indonesia Market Summaries, that the consumer price index deflated 0.10% mom in Apr13, pulling down the year-on-year inflation to 5.57% yoy from 5.89% yoy in Mar13 (vs. consensus’ 5.67% yoy and our 5.53% yoy). Two major components namely raw food and clothing were the main deflators.  The year- to- date inflation is 2.24%.

Core inflation eased (again). It continued to slow down to 4.12% yoy in Apr13 from 4.21% yoy in the previous month. Moreover, this trend has been prevailing since the last five months. We believe the deceleration of gold price is the reason for slower core reading. We think, however, it is not the only reason. Even if we exclude gold price impact from the core calculation, the on-year core inflation remains relatively benign this year.

Is the pass-through impact of administered price hike to core inflation has not yet been seen or easing core inflation (excluding gold effect) is a sign of demand slowdown? We believe the answer relies on a combination of factors. First factor, we think, part of the pass- through impact of administered price hike to core inflation has actually materialized yet not entirely. Indirect impact of minimum wage increase has affected higher informal workers (maid and household workers) whose wages average is below the minimum.

However, no big concern on demand slowdown as we think part of it is due to the macro policies implementation. We think macro policies to fix external imbalance have caused slower consumer demand. For instance, BI’s loan to value policy has reduced demand for motor vehicles, reflected by easing sale of cars so far this year. Furthermore, BI’s liquidity tightening has resulted in lower money supply growth, which in the end leads to moderation in credit growth.

Beware of potential inflation “overhang.” Moreover, we see inflation expectation pressure will pick up ahead. The fact that the president decided to hike subsidized fuel price only if the cash transfer program is approved by the parliament in the next budget meeting (likely in Jun13) creates a new uncertainty. Thus, regardless of what will happen on subsidized fuel price policy, the period between now until the decision of fuel price hike will likely generate an inflation “overhang” condition.

Meanwhile the central statistic agency also announced Mar13 trade data which came out stronger than expected, yet unfortunately for the wrong reasons. Trade balance has swing to a surplus of US$0.31bn from deficit US$0.33bn in Feb13, owing to larger contraction on imports than in exports. Exports slightly decreased 0.08% mom in Mar13 mainly due to shrinking CPO export followed by electrical devices, tins and nickel. Meanwhile, imports contracted by 4% mom. Specifically, non-oil and gas import.

Policy implications:  BI rate is expected to remain unchanged in the next board meeting (14/5), reflecting BI’s accommodative stance while the central bank will likely absorb more liquidity with monetary instruments to tame inflation expectation pressure. Tame inflationary pressure will provide ground for BI not to aggressively hike interest rate amid possible increase in fuel price in the beginning of 2H13. Specifically, we expect the BI and FASBI rates to be unchanged at 5.75% and 4%, respectively.

Erajaya Swasembada 1Q13 came weak

Erajaya Swasembada: As expected, 1Q13 came weak (ERAA, Buy, Rp3,175, TP: Rp3,875)

1Q13 NPAT came at Rp75bn, forming 12% of our and consensus’ full-year estimates. This is not really a surprise, as management has earlier been guiding for weak 1Q13, as:
  • flood affected its central distribution in Jakarta,
  • absent of key products launching affected its volume
  • changes in import regulation affected some importation activities in the beginning of this year (which also led to doubling interest expenses as ERAA stocked up more inventories).
In 1Q12, NPAT was 18% of the full-year.

Sales still in-line if not for the 2-weeks flood disruption. On a YoY basis, 1Q13 NPAT fell 5.3%yoy as sales declined 7.5%yoy to Rp2,935bn. Weak sales (17% of us and consensus) came on the back of the Jakarta flood that disrupted ERAA’s central distribution in Jakarta for about two weeks long, affecting sub-distribution across cities. Had there been no flood, we estimate that ERAA”s sales would have been Rp3,522bn, an increase of 11%yoy and 9%qoq, still in-line with 20-21% realization to our and consensus’ full-year forecast.

Stores opening seasonality affected weak 1Q13. Seasonality in the retail stores opening also contributed to the weak 1Q13 sales. Out of the targeted 105 net stores opening (including stores closures), ERAA only realized a total net opening of 2 stores in 1Q13. The company keeps its opening target unchanged, expecting the roll-out to ramp up in 2Q13 onwards.

Expect a strong rebound 2Q13. We still expect a strong rebound in 2Q13, on account of a) sharp reduction in BB grey market handset (from 30% to 5% post new import ruling) that should benefit ERAA, b) strong new products pipeline (BB Z10, Samsung Galaxy S4, and BBQ10), b) normalized distribution and inventory after flood issues and new import ruling, and c) better stores opening seasonality. Beyond 2Q13, we think that the key catalyst would be the potential launching of BB R10, the mid-end segment for BB10.

Indonesia Market Summaries, 2 May 2013.

Holcim Indonesia reported a weak 1Q13 results

Holcim Indonesia: Weak 1Q13 results 14.4% to our’ and 13.7% to consensus’ estimates (SMCB, Rp3,725, Sell, TP: Rp3,000)

SMCB reported a weak 1Q13 results booking a net profit of Rp184bn (-26.1%yoy, -58.0%qoq) which is 14.4% to our’ and 13.7% to consensus’ estimates. The company was hit hard on the pretax earnings level which we suspect is due to royalty cost.

Revenue is saw a 7.3% yoy growth, but a 13.5% qoq contraction which we believe is due to decline in sales volume. ASP grew by 5% yoy or 3% qoq. Cost wise, COGS/ton grew by 9% yoy or 10% qoq where salary costs showed the highest jump of 38% yoyo t 21% qoq.

In terms of domestic sales volume, SMCB saw a negative growth of -1.6%yoy or -15.5%qoq. On a yoy basis, Eastern Indonesia and Kalimantan saw the most decline in sales volume growth and Sumatra is the only region which posted a positive growth of 13.7%. If we look on a qoq basis, SMCB saw negative growths in sales volume across the board in all area except for Maluku & Papua.

The most significant decline was seen in Sulawesi where volume decreased by -42.9% qoq.
SMCB is still the most expensive among the three cement players; trading at FY13F PE of 22.4x vs. industry of about 19.6x and EV/ton of US$339. Maintain SELL.

Indonesia Market Summaries, 2 May 2013

Federal International Finance diversifies into 4W financing

Federal International Finance (FIF), a subsidiary of Astra International (ASII), diversifies into 4W financing this month, seeking Rp10-15bn monthly new booking target or about 100 cars. The CEO expects to gradually ramp up the target to Rp100bn/month or about 1,000 cars.

At the moment, FIF’s portfolio is 80% channeled to new 2W financing, and the remaining 20% to used 2W and electronics. On 4W financing, FIF will tap the areas that have not been by Astra Credit Companies (ACC), another subsidiary of ASII that is involved in the 4W financing business. Thus, FIF will focus on areas like Papua, Ambon, and Pontianak. This year, FIF targets 1.2mn units of new 2W (around Rp12tn), 400,000 units of used 2W (around Rp3.45tn), and Rp2.5tn of electronic products. (Bisnis Indonesia)

Indonesia Market Summaries, 2 May 2013

Wednesday, May 1, 2013

International Workers' Day in Indonesia 2013

Today, May 1 2013, which also known as May Day, 150 thousand workers look thronged the Jakarta protocol streets to enliven the International Labor Day commemoration 2013 in Indonesia.


Labor rallies in Jakarta and Greater Jakarta area centered at Bundaran HI, the Presidential Palace, Parliament House and the Office of the Ministry of Labour.



Jalan Sudirman and Jalan Thamrin on the side toward the direction of the National Monument looks crowded with large vehicles such as buses carrying workers to the city center of Jakarta.


While on the other side of the road used by the workers who walk to Bundaran HI and the State Palace.


Indonesia Market Summaries noted that International Workers' Day in Indonesia 2013 itself does not affect the economic condition of Indonesia, particularly Jakarta.

Express Taxi targeting net earnings up 50% in 2013

PT Express Trasindo Utama Tbk (TAXI) believe that it's business prospect still wide open. It can be seen from the high performance targets this year.

For 2013, the target TAXI revenue rose 34% to Rp 700 billion, compared to last year's Rp 521 billion. The realization of revenue in 2011 amounted to Rp 338 billion.

"With the revenue growth, we are optimistic that our net income also rose 50%," said David Santoso, Finance Director of TAXI, Monday (29/4). In 2012, management successfully earned a net profit of Rp 79.4 billion, up approximately 32% compared to 2011, amounting to Rp 60.2 billion.

"TAXI will add a new fleet of 2,000 units." he adds. (Kontan)