Indonesia Market Summaries 12 September 2013

• PT Modernland Realty Tbk (MDLN, 700, BUY, TP Rp 1.250) seek approval of its shareholders at the EGM 27 September to seek bank loans. The fund is intended to be a source of funding for the acquisition of Jakarta Garden City of Keppel Land that has been previously announced.
  
  As a result of the world financial market conditions that are not conducive, MDLN failed to issue bonds denominated in U.S. dollars that were previously planned and are looking for alternative financing from banks. In the EGM, MDLN also requested approval of a stock split 1:2 . (Company Released)
• PT Cemindo Gemilang , the owner of Semen Merah Putih, began to build a new cement plant worth U.S. $ 600 million. The factory of Ganda Group company in Banten will have a capacity of 4 million metric tons per year and will start operating in 2015. The plant capacity can be increased to 12 million metric tons per year with a total investment of Rp 1,8 trillion. (Investor Daily)
• PT Astra Otoparts Tbk (AUTO, Rp3.550) of Group Astra will pay an interim dividend of Rp 22 per share (0.6 % yield). Cum date and ex date of dividend is 2 and 3 October, while the distribution will be made on October 23.
  
  Another ASII subsidiary, PT Astra Agro Lestari Tbk (AALI, Rp 21.400, BUY, TP Rp 21.900) and PT Astra Graphia Tbk ( ASGR , Rp1.230 ) will also pay dividends Rp 160 and Rp 18 per share. (IDX)
• Property company PT Surya Semesta Internusa Tbk intends to hold a buyback worth IDR200 billion. The funds will be used to purchase a maximum of 20 % of its shares in the stock market. (Investor Daily)
• Group Emtek PT Elang Mahkota Teknologi Tbk (EMTK, Rp 5.450) develope their business into the health care sector by acquiring ​​1.5 hectares area of RS Usada Insani in Tangerang. Acquisition is done by forming a joint subsidiary namely PT Surya Cipta Medika. The business group of Sariaatmadja was known as SCTV and has other business lines such as solutions and connectivity. (Bisnis Indonesia)
• PT Nippon Indosari Corpindo Tbk (ROTI, Rp 5.950) will hold the sale price this year despite there are any invasion of foreign companies and increased costs when fuel prices rise. The selling price was hold especially useful for maintaining their market share. (Bisnis Indonesia)

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Honda Prospect Motor Launch Brio Satya environmentally friendly car

Honda launched the Honda Brio Satya, a cheap environmentally friendly car yesterday. The launch was also accompanied by the launching of All New Brio.

So there are three line-up types of New Brio:

• Brio Satya - range price from Rp 106 million to Rp 117 million
• Brio 1.2L - range price from Rp 131 million to Rp 136 million
• Brio Sports 1.3L - range price from Rp 169 million to Rp 179 million

The CBU version of the Honda Brio (1.3L engine) was launched in August last year, with cumulative sales of 15,000 through August 2013.

Compared with LCGC model, the Satya (Rp 106 million to Rp 117 million) , there are still buyers who will be having Brio 1.2L (Rp131 million to Rp136 million) because it has an automatic transmission and the difference in monthly payments is not as significant (Rp 900.000 for 3 years tenor).

To the 1.3L Sports model (Rp 169 million to Rp 179 million ), buyers will not so enthusiast but it can boost the image of "premium " on the Brio brand.

Regardless of the type of Sports 1.3L model, Brio pricing at levels Rp 106 million to Rp 136 million is still more expensive 6 to 15 million rupiah compared to Toyota Agya (Rp 100 million to Rp 121 million) and 30 to 60 million rupiah on top of Daihatsu Ayla (Rp 77 million - Rp 107 million). It is believe that buyers will also compare the Brio with Agya not Ayla.

On a monthly basis, the difference between Brio and Agya installments based on 3 years tenor are  Rp 173.000 to Rp 486.000 for manual transmission and Rp 591.000 to Rp 733.000 for automatic transmission.

What are the main differences for this New Brio?

With higher prices, Brio is equipped with a 88 HP 1.2L engine, compared with Agya with 65 HP 1.0L engine. Other features are relatively similar.

Honda has a strong branding in the segment of passenger cars in Indonesia with 8.1% market share during the first 7 months of 2013. With the design and specifications, Brio can take Agya market, but it will not much because the dealerships capacity is only about 120, compared with Toyota (240) and Daihatsu (200).

Honda targeting to sell 4,000 units of Brio per month, with about 1,200 of Satya. The first deliveries expected in November 2013. For comparison, Agya / Ayla predicted will be posted sales of 8,300 units in 2014.

To support assembly, Honda intends to increase its plant capacity to 180,000 per year from 60,000 per year to increase the capacity of 120,000 per year, equivalent to the capacity of LCGC of PT Astra International Tbk (ASII, Rp 5.950, NEUTRAL, TP Rp 7.300).

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Astra International Final DPS approved

Astra International: Final DPS approved, yielding 2.0% at current price (ASII, Neutral, Rp7,350, TP: Rp7,900)

Yesterday’s AGM approved ASII’s proposed final DPS of Rp150, bringing a total 45% payout ratio including the interim DPS of Rp66 paid last November. The final dividend, which yields 2.0% at current price, would be paid on June 7. Cum and ex-date are on May 20 and 21. The approved final payout is similar to the management’s proposal revealed last month.

Management retained 2013 capex budget at Rp15.5tn (Rp5tn to be financed through bank loans), but altered its allocation. Portion to infrastructures division is raised to Rp2.8tn (versus Rp500bn in FY12) mainly for its toll road business and some Rp0.6-1.0tn for the development of its newly acquired port (Eastkal Supply Base in Penajam, East Kalimantan). Infrastructures and logistics contributed 2.9% to ASII’s 1Q13 NPAT. To compensate the higher infrastructures capex, ASII reduced the portion of UNTR’s budget from Rp5tn to Rp3tn. Automotive capex allocation is Rp8tn.

Key BoD and BoC members are unchanged. Mr. Angky Tisnadisastra stepped back from the BoD, as well as Mr. Kyoichi Tanada from the BoC member (replaced by Mr. Hisayuki Inoue).
We have a Neutral rating on ASII.

Indonesia Automotives sales is on the right track at first-quarter 2013

Official March auto sales were released on Friday; both aligned with preliminary data. Performances are relatively on-track with bias upward revision on the 4W segment, but we remain vigilant on the government’s plan in announcing a new policy limiting fuel subsidy, which may give a negative sentiment in the short-term. Maintain Neutral on ASII (TP: Rp7,900) and Buy on IMAS (TP: Rp6,150)

4W sales came at 95,936 units (+9.1%yoy; -7.1%mom). Considering the very strong February sales at 103,284 units, the reduction in March volume should not be considered a weakening trend as it is also still higher than the monthly average volume during the strong 2H12 at 96,828 units. As we all know, 2H volumes are seasonally higher than 1H. Toyota volumes weaken by 1.7%yoy or 7.2%mom, though it reportedly managed to sell 1,289 units of Etios Valco (launched on March 11). However, Astra’s performance was strongly offset by the strong sales of Daihatsu (+19.6%yoy; +15.5%mom). Nissan, on the other hand, booked a very weak sales of 4,648 units (-24.5%mom; -22.5%yoy).
On cumulative basis, 1Q13 4W sales came at 295,909 units (+18.0%yoy; -1.3%qoq), accounting for 24.2% of our 1.2mn units full-year estimate (+9.6%yoy), versus historical realization of 24.3% on average (range: 19.4-27.0%). The strong growth was driven by Honda (+228.8%yoy; +16.7%qoq) and Suzuki (+70.4%yoy; -6.4%qoq), mostly due to strong products launching (i.e. Honda CRV, Honda Brio, Suzuki Ertiga).
On the 2W segment, March sales came at 665,334 units (+7.4%yoy, +2.4%mom), marking the highest sales since February 2012, likely due to the effect of fast-forwarded sales ahead of the effective implementation of LTV ruling for sharia banks on April 1. Industry growth was mostly driven by Honda (+26.0%yoy; +2.4%mom), thanks to its aggressive new products launching and strong dominance in the less-sensitive upper-class 2W models.
Cumulatively, 1Q13 2W sales came at 1.9mn units (+1.5%yoy; +3.0%qoq), accounting for 26.4% of our full-year forecast of 7.4mn units (+5.1%yoy). Honda continued to be the outperformer with sales growth of 13.7%yoy and 17.9%qoq, boosting its market share to 61.7%. That said, Honda’s performance is already ahead as it has achieved 27.6% of our full-year estimates of 4.3mn units (+7.2%yoy). We expect Honda to experience a milder impact from the sharia law.
As we had highlighted in our earlier Sector Report on March 14, regulation noise from the government’s plan to curb fuel subsidy spending remains the concern going forward. If the government decides to raise the subsidized fuel price, historical patterns suggests a short-term negative impact of 3-6 months long for auto sales. In our view, the announcement of fuel subsidy policy would also be the key to pave the way for the release of LCGC regulation, which had been delayed.

Astra International Key takeaways from results briefing

Astra International: Key takeaways from results briefing (ASII, Neutral, Rp8,050, TP: Rp7,900)

ASII held an Analyst Briefing yesterday, discussing the recently released FY12 results and the outlook for 2013. In overall, management’s broad outlook is similar to our view, with neither significant upside nor downside apparent to our and consensus earnings forecast for 2013. We are reiterating our Neutral call and Rp7,900 TP (refer to our latest Company Focus report “No surprises in 4Q12” on 1 March 2013). Key highlights from the analyst briefing are summarized below.

Where are we heading in 2013? Management in overall remains cautious on 2013, underpinned by challenges faced in the 2W division on the full implementation of LTV ruling towards sharia financing, and the heavy equipment division. 4W is likely to remain the key engine together with the financial services division. On a positive note, management indicated its optimism that this year’s high investment (Rp15tn capex budget versus Rp13bn actual spending in FY12) would be fruitful for 2014 performance.

4W outlook – Management admitted the rising competition in the 4W space, with massive investments coming from new and existing auto principals. ASII would focus on strengthening its value added services and continuous products innovation to maintain its market share. It was further indicated that a new improvement in best-selling Toyota Avanza/Daihatsu Xenia is underway. On a positive note, management mentioned that the rising competition would benefit its auto components subsidiary as almost all auto principals have decided to make Indonesia as another production base.

LCGC update – Management confirmed that the LCGC regulation has been finalized, pending final approval from the President. Mr. Sudirman M. Rusdi, the CEO of Astra Daihatsu Motor and the Chairman of Gaikindo, commented that the final signing of the Presidential Decree is expected to come through in mid-March, after the President’s return from his overseas trip. He stated further that the Ministerial Decree would follow suit a month after, which means that ASII would start delivering Daihatsu Ayla and Toyota Agya to consumers starting early May, about two months from now. Since the cars were launched in September 2012, backlog orders have reached about 30,000 units as of mid-January 2013, which is considered strong. ASII nevertheless decided to stop selling the cars since then, following delays on the government regulation. With first delivery in May, management conservatively expects to book around 40,000-50,000 units of sales for LCGC this year (versus 30k backlog as of mid-January), compared to our 60,000 units assumption. Despite the lower ASP, management clarified that LCGC should generate similar operating margins given the lower operating expenses.

2W outlook – Since the new LTV ruling was implemented last year, management admitted that it has used sharia loophole as the solution. As a precaution, however, ASII decided to increase the sharia down-payment from 8% on average to 13%. Thus, the company is quite confident that this precautionary step would help mitigating the impact from the closing of sharia loopholes starting 1 April, which require a 20% DP on 2W financing (another 7% more from the current average DP). Maintaining a solid market share amidst industry decline would be the key focus for Astra Honda Motor. As such, it plans to strengthen its market share on the less-sensitive upper-segment motorcycles model (i.e. scooter and sports segment), as well as continuously launch new products. In overall, Honda’s market share is targeted to increase to 60% this year (from 58% in FY12 and 53% in FY11), slightly higher than our 59% target.

Commodities arm – Management’s target for Komatsu sales volume remains unchanged at 5,000 units, in-line with our heavy equipment’s analyst forecast of 4.9k units assumption. Admitting the uncertain coal mining outlook, UNTR would continue to focus on increasing the revenue contribution from spare parts sales and services, as well as heavy equipment demand from the infrastructures development that normally picks up one-year ahead of the election. On AALI side, management mentioned that it is completing a 700,000 tons p.a. CPO refinery in West Sulawesi next year.

Infrastructures division – Management expects earnings contribution from this division to go up, driven by the contribution from the toll road division. In FY12, its Tangerang-Merak concession (72.5km) reported a 15% rise in traffic volumes to 37mn vehicles, while ASII also expects the commencement of the Mojokerto-Kertosono section (41km) in 2014. Asides from the power plant business, management further mentioned over possibilities of extending its business towards industrial estate.

Article related: Astra International: 4Q12 in-line, final DPS proposed at Rp150

Astra International 4Q12 in-line

Astra International: 4Q12 in-line, final DPS proposed at Rp150 (ASII, Neutral, Rp7,950, TP: Rp7,900)

ASII reported FY12 NPAT at Rp19,421bn (+9.2%yoy), in-line with our (100%) and consensus (101%) expectation. Stripping-out the Rp215bn FX losses, core profit came at Rp19,636bn (+11.1%yoy), also in-line with our core profit estimates of Rp19,478bn (101%).

Sales (+15.7%yoy), gross profit (+13.0%yoy), operating profit (+11.4%yoy), and pretax profit (+8.2%yoy) also met our and consensus estimates. Margins slightly declined compared to FY11, which happened almost across the board with the exception of 4W division, thanks to its strong volume growth.

Contribution of automotive NPAT edged up to 48.8% from 46.5% in FY11, posting a 14.6%yoy growth led by the 4W (+34.2%yoy) and components (+5.2%yoy), offsetting the weak 2W (-11.2%yoy). Contribution from infrastructures and IT, albeit small, also edged up to 3.5% and 0.7% from 3.4% and 0.6%, respectively in 2011.

4Q12 NPAT came at Rp4,750bn (-4.9%qoq; +9.3%yoy), translated down from the top as margins were relatively unchanged.  Weak QoQ performance is expected, as auto sales volumes are seasonally weaker leading to year-end. Notable pick-up, nevertheless, was seen in the net margin of the auto components subsidiary that led to a 20.0%qoq growth in its NPAT.

ASII will hold an analyst meeting on Monday. We currently have a Neutral call on ASII. The stock now trades at 14.5x FY13F PE. Management would propose a final DPS of Rp150 (1.8% yield) at the upcoming AGM in April, bringing total DPS of Rp216 including the interim paid in November 2012.