Indonesia Market Summaries 2 July 2014

PT XL Axiata Tbk (EXCL, Rp 5.075) to sell towers in 2H.
EXCL plans to sell part of its telecommunication towers in the second half of 2014 and will use the fund to proceeds the pay off of a portion of its debt which amounting to IDR 22 trillion (USD 1.9 billion).


The company has formed a bid committee to make recommendations to the board of commissioners and directors of the company. Although not mentioned the details of the number of towers that are intended to be sold, the company had mentioned will sell approximately 7,000 towers in the price of 9 to 10 times from EBITDA  tower business. (Bisnis Indonesia)


PT Bank Rakyat Indonesia Tbk (BBRI, Rp10.375, BUY, TP Rp12.100) allocates Rp 3 trillion on acquisition. BBRI allocated 3 trillion for investment in order to create inorganic growth. Currently, the company is following due diligence on the acquisition of PT Bank Mutiara Tbk (BCIC, Rp50) and two insurance companies. (Investor Daily)


PT Newmont Nusa Tenggaran complained Indonesia to the International Arbitration. Complaints that aims to overturn a ban on the export of raw mineral policy, whereas NNT have got delays on exports ban until 2017. (Kontan)


for Indonesia Market Summaries 2 July 2014

Indonesia Market Summaries 4 July 2013

• PT Sumber Alfaria Trijaya (AMRT, Rp6.450) projecting Lebaran Ied moment will boost the company's revenue by 20% more than the usual month. AMRT also anticipate this moment by increasing the stock of necessary public goods, among others, biscuits, syrup and various other snacks. Sales of these products are expected to increase up to 200% compared than usual days.
• PT Electronic City Indonesia Tbk (ECII, Rp3.800) targeting sales growth of 20% -22% during the month of Ramadan. This value would contribute 10% -12% to total revenue as a whole.
  
  Demand for consumer spending in the month of Ramadan usually seen at the end of the first week or toward the second week, and continued to increase until the end of the month. The most high demand items during Ramadan is an audio video, home apliance, and mobile gadgets.
• PT Bank Rakyat Indonesia Tbk (BBRI, Rp 7,500, BUY, TP Rp10.600) increased its investment to its subsidiary, PT Bank BRI Syariah worth Rp500 billion. With this additional capital, then BBRI has paid-in capital amounting to Rp1,48 trillion in its subsidiary, equivalent to 99.99% of the total shares of BRI Syariah.
• Gross profit margin PT Hexindo Adiperkasa Tbk (HEXA, Rp4.575, SELL, TP Rp 4,000) fell to 17.5% in the fourth quarter of 2012-2013 compared with 22.9% in the third quarter of 2012-2013, this is because the increasing competition that is expected to continue in line with CPO and coal prices that are still falling.
• There will be a surprising decline in the financial statements reports on first quarter of 2013 and 2014 related to the cessation of two workshops (workshops) in Satui & Senakin since April. SELL recommendation with a target price of Rp 4,000 for the next 12 months.
• World Bank lowered its economic growth forecast of Indonesia to 5.9% in 2013, compared with a previous prediction of 6.2%. Several factors affect this projections are that the global economy has not improved and the increasing prices of subsidized fuel that makes household consumption fell. Minister for Economic Affairs, Mr. Hatta Rajasa still optimistic target of 6.3% is to be achieved (Bisnis Indonesia)
• The government of Indonesia is designing a fuel subsidy scheme more regularly to the State Budget (APBN) 2014. Deputy Finance Minister, Mr. Mahendra Siregar said the government is willing to set the exact amount of subsidy per liter of fuel It is no longer refers to the price of crude oil. (Bisnis Indonesia)
• PT Summarecon Agung Tbk (SMRA, Rp1.140) recorded sales marketing Rp 2 trillion during the first 6 months of this year. This achievement represented 44.4% of this year's target that is set at Rp 4, 5 trillion.
  
  SMRA' new mall in Bekasi which opened last week had a 91% occupancy rate. The company is also targeting 100 hectares of land in Bekasi, Bandung, and other locations in Greater Jakarta Area began at third quarter of 2013. (Investor Daily)
• Sales of four-wheeled vehicles throughout the first semester of 2013 rose 12% year-on-year (yoy) that is to be as many as 601,200 units. (Investor Daily)

for Indonesia Market Summaries 4 July 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.

Another good year for banks in Indonesia

Entering 2013 banks are more optimistic compared to in 4Q12, translating into 23.5% loan growth. However, with a more conservative stance on provisioning charges, we expect slower earnings growth of 13% on average in 2013. We assign a NEUTRAL stance on the industry with BBRI and BBNI on the larger banks and BJTM and BBTN on the smaller banks as our top picks.

Stronger loan growth in 2013. We expect average loan growth on our bank universe of 23.5% in 2013 compared with 22.7% in 2012. This is expected to come from investment or corporate loans and consumer loans, which have been supported by the rising middle income.

NIM to remain high at more than 6%. Average net interest margin on our bank universe is forecasted at 6.56% in 2013 and 6.50% in 2014. We do not see NIM to decline significantly in the medium term given the high cost of business operation in the country.

Asset quality at its best. Industry NPL level stood at 2.0% in January 2013, the lowest since the Asian crisis. This is supported by high coverage ratio of more than 150%. We do not expect any significant asset quality deterioration in the next two years.  Nevertheless we expect a more conservative stance on provisioning charges which will limit earnings growth to 13% in 2013.

No Tier-1 capital raising. With average total CAR of 19.3% in January 2013 (17.% in our bank universe) we do not expect any Tier-1 capital raising in 2013-14. The average ROE is expected at 21.4% and 21.8% in 2013-14, a comfortable level for sustainable growth.

Valuation and stock picks. The banks are trading at 2.8x P/BV 2013F, 1STD above the mean valuation since 2004. We prefer BBRI and BBNI for the large banks and BJTM and BBTN for the smaller ones.

Three major bank stocks dropped the JCI

In the second session today (14/3), Indeks Harga Saham Gabungan ( IHSG /  JCI ) is still unable to strength. At the close of trading, stock index trimmed 0.34% to a level of 4802.83.

Investors sold mainly for three blue chip stocks following:

Three major bank stocks dropped the JCI

• PT Bank Rakyat Indonesia Tbk (BBRI)
  
  BBCA prices plunged 2.84% to Rp 8.550,-. A number of securities to sell most of the bank's stock are CLSA Indonesia worth USD 132.6 billion, JP Morgan Securities Indonesia Rp 93.88 billion, and Krishna Graha Sekurindo Rp 38.72 billion.
• PT Bank Central Asia Tbk (BBCA)
  
  BBCA fell 0.93% to Rp 10,650. Biggest selling are Kim Eng Securities Rp 55.51 billion, Indo Premier Securities Rp 41.32 billion, and JP Morgan Securities Indonesia worth Rp 12.19 billion.
• PT Bank Mandiri Tbk (BMRI)
  
  BMRI lose 1% back to Rp. 9.900,-. Securities which posted the highest sell are Citigroup Securities Indonesia Rp 20.41 billion, Kim Eng Securities worth Rp 12.06 billion, and Credit Suisse Indonesia worth Rp 10.85 million. (Kontan)