Indonesia Market Summaries 5 September 2014

PT Modernland Realty Tbk (MDLN, Rp510, NEUTRAL, TP Rp510) to revise marketing sales target to IDR 3.8 trillion. MDLN decided to revise the target company's marketing sales in 2014 to IDR 3.8 trillion from IDR 4 trillion since the launch of the bari project in the first semester of 2014 is lower than the target.

Pre-sales for 7M14 reached IDR 1.88 trillion (49.5% of the target). The company is optimistic to achieve the new targets by launching two new housing clusters in Jakarta Garden City in the second semester of 2014 and the contribution of Cikande Modern Industrial Estate. (Bisnis Indonesia)

PT Kresna Graha Sekurindo Tbk (KREN, Rp 405) intends to rights issue worth IDR 2 trillion. The step is a part of restructuring of the company into a group holding company, and will acquire Affiliate company in the insurance sector and the property. (Kontan)

Astra Group targeting Mulut Tambang power plant project worth USD 900 million in South Sumatra through tenders. Tender was followed by the Astra Group through PT United Tractors Tbk (UNTR, Rp 21.475, NEUTRAL, TP Rp 23.000) subsidiary', PT Pamapersada Nusantara (PAMA). (Investor Daily)

Division of Flour, PT Indofood Sukses Makmur Tbk (INDF, Rp 7.050, BUY, TP Rp 8.200) is targeted to achieve Bogasari revenue IDR 19.6 trillion this year, up 5% from last year. The target was supported by an increase in demand for capacity on the market, but there is no expansion this year. (Bisnis Indonesia)

for Indonesia Market Summaries 5 September 2014

Minz SP has denied the allegations from Glaukus Research

China Minzhong (Minz SP) - a subsidiary company of PT Indofood Sukses Makmur Tbk (INDF, 6,500, BUY, TP Rp 7,500) - has denied the allegations from Glaucus Research and assess that those view was reckless opinion and misleading.

The vegetable processing companies of the People's Republic of China (PRC) was previously accused by Glaucus Research Group. Glaucus accused Minz has inflated the amount of assets and income which are presented to the Singapore Stock Exchange (SGX).

Minz also accused and reported their total capital expenditures of 2011-2012 were different from that recorded in State Administration for Industry & Commerce (SAIC).

Minz said that Glaucus did not understand the business and operational environment in China, and stated that any firm statements have been adjusted to the financial reporting standards (FRS) and have been audited by Crowe Horwarth First Trust LLP.

In detail, the following rebuttal by Minz against Glaucus report:

1. No sales were inflated. Legal adviser of the Hong Kong Trading Co. Yifenli willing to provide evidence of the sales contract and to confirm their trade relations.
2. Proof of purchase from the company to Chengdu Shufeng for question period are also available.
3. Minz said that there was no major consumer transactions are covered, including the Putian that has a normal commercial contract. Related to Glaucus allegations that there is a covered affiliate transactions in Putian, the company said that Lin Guo Rong (Chairman of Minz SP) and legal counsel of one of its subsidiary, Ping Guo Lin, was never involved in the daily activities of management and operations. Both of them also do not have the Putian stock either directly or indirectly.
4. Capital expenditure stated by Minz can be provable. Glaucus also accused only show Minz 2010-2012 financial statements partially and did not consider differences in the calculation of generally accepted accounting principles (GAAP) in China and the FRS.
5. Financial performance can also be proved as Glaucus is considered to have improper of EBITDA count and did not understand the tax calculation. Income derived from the sale of fresh vegetables are tax-free while the income of vegetable processed and branded products are taxable.

Minz also stated that the company has received letters of interest from INDF which will be announced today. Although we have not been sure what kind of bid that will be submitted by Indofood, but there is a possibility that INDF intends to increase its ownership in Minz as the majority and took over the operations and management thus increasing control by Indofood.

Earlier, INDF acquired a 29.3 % stake of Minz with average purchase price of SGD 1.02 per share or totaling SGD 195 million.

Although, Minz official explanation were relief but we assess the condition of Minz is overhang and has a negative sentiment from this scandal. Sentiment was mainly exist when it's linked to a similar scandal and delisting from some Chinese companies were listed on the Singapore (S-chips).

The majority acquisition of Minz stake will make the overhang condition fade away. However, INDF is still consider to be  potential for investors.

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PT Indofood Sukses Makmur Tbk gained net sales up 9,3%

In the first semester of 2013 financial statements, PT Indofood Sukses Makmur Tbk (INDF, Rp5.900 BUY TP: Rp8.700) recorded consolidated net sales amounted to Rp 26,86 trillion. Sales gained by INDF was up 9.3% on an annual basis compared to the first half of 2012 of Rp 24,58 trillion.



INDF states, the company's strategic business groups, namely Group Consumer Branded Products (CBP) accounted for 45% of total revenue. While revenues from Bogasari business line, Agribusiness and Distribution respectively contributed 27%, 21% and 7% of total revenue.

However, operating profit of INDF fell 18.1% to Rp 2,93 trillion in the first semester of 2013 from Rp 3,57 trillion in the first half of 2012. Operating margin also fell to 10.9% from 14.5%.

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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