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.

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.