Professional Documents
Culture Documents
Analysts
Stefanus Darmagiri
(62-21) 29 555 831
stefanus.darmagiri@danareksa.com
Natalia Sutanto
(62-21) 29 555 888 ext.3508
natalia.sutanto@danareksa.com
Maria Renata
(62-21) 29 555 888 ext.3513
maria.renata@danareksa.com
Eka Savitri
(62-21) 2955 5888 ext 3506
eka.savitri@danareksa.co.id
Adeline Solaiman
(62-21) 29 555 888 ext.3503 A Sanguine Proposition
adeline.solaiman@danareksa.com
Propelled by improving consumption, the economy will grow at a
Yudha Gautama
brisker pace in 2018. While the government’s infrastructure
(62-21) 29 555 888 ext 3509
development drive will continue, we expect a more defined two-
yudha.gautama@danareksa.com
pronged approach with a focus on populist policies which will
promote higher consumption and appease the nation’s grassroots.
Ignatius Teguh Prayoga
In addition, the benign inflation outlook will provide room for further
(62-21) 29 555 888 ext 3511
policy easing by the central bank, if needed. We are positive on the
ignatius.prayoga@danareksa.com
equity market with a year-end index target of 6,854.
www.danareksa.com
January 2018 Market Outlook
Market Outlook 1
Automotive Sector 38
Banking Sector 40
Cement Sector 42
Cigarette Sector 44
Coal Sector 46
Construction Sector 48
Consumer Sector 50
Industrial Estate Sector 52
Media Sector 54
Metal Mining Sector 56
Pharmaceutical Sector 58
Plantation Sector 60
Poultry Sector 62
Property Sector 64
Retail Sector 66
Company Outlook 68
Appendix 240
January 2018 Market Outlook
OVERWEIGHT Strategy
A Sanguine Proposition
Propelled by improving consumption, the economy will grow at a brisker pace
in 2018. While the government’s infrastructure development drive will
continue, we expect a more defined two-pronged approach with a focus on
populist policies which will promote higher consumption and appease the
nation’s grassroots. In addition, the benign inflation outlook will provide
room for further policy easing by the central bank, if needed. We are positive
on the equity market with a year-end index target of 6,854.
Key Underpinning Factors
We are positive on the equity market in 2018 for several reasons:
1) Following the disappointing progress in 2016-1H17, economic growth is now
reviving, with domestic consumption expected to improve on the back of higher
energy subsidies and the government’s social assistance program. We expect
GDP growth to improve to 5.3% in 2018; 2) 2018 is a pre-election year with 171
direct regional elections scheduled to take place across Indonesia. With the 3
most populous provinces all having gubernatorial elections in 2018, political
campaign spending will provide support to consumption, we believe.
Furthermore, we also expect political tensions to be less than in 2017, and 3)
potential interest rate cuts given the outlook for muted inflation. As the central
bank continues to adopt an inflation targeting framework, lower inflation will
create room for further policy easing. At this juncture, rising oil prices look to
be the main specter.
Proliferation of Growth Factors
We expect a better macro environment that will be favourable for investment.
More coherent government and central bank policies should continue to
facilitate growth in 2018. The first stage of the transformation process – the
removal of subsidies to facilitate more productive infrastructure spending - is
complete and Indonesia will now move to the second stage of the
transformation through demand creation as private participation increases.
This will support underlying growth factors for the micro environment over the
longer run as well as put Indonesia on a trajectory of higher economic growth.
Index target of 6,854
Given the positive macro trends, we expect the outflows recorded in 2017 to
be reversed in 2018 as: 1) Indonesia will remain an attractive emerging market
for investors and 2) the inflows/outflows trend has occurred intermittently
since 2013. We set our year-end index target at 6,854. Expectations of a higher
index will be mainly underpinned by earnings growth, with the companies in
the Danareksa universe registering 12% estimated earnings growth in 2018
x Helmy Kristanto following the strong growth of 16% in 2017. We like the consumption-related
sectors (consumer, retail and media), as well as banking and construction. Our
(62-21) 2955 5888
10 top picks are: ADHI, ADRO, BBTN, BBRI, ICBP, MAPI, MNCN, PTPP, PWON,
helmy.kristanto@danareksa.co.id and RALS.
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (Rp) (RpBn) 2017F 2018F 2017F 2018F 2018F
Adhi Karya WIKA IJ BUY 2,800 6,766 15.5 11.3 1.1 1.0 9.2
Adaro Energy ADRO IJ BUY 2,200 57,575 8.5 8.9 1.2 1.2 13.3
Bank Rakyat Indonesia BBRI IJ BUY 3,900 419,376 15.5 13.5 2.6 2.3 18.3
Bank Tabungan Negara BBTN IJ BUY 4,000 36,747 9.8 8.4 1.4 1.2 15.8
Indofood CBP ICBP IJ BUY 9,700 104,083 26.7 24.2 5.3 4.7 20.6
Mitra Adiperkasa MAPI IJ BUY 8,100 10,253 26.9 20.6 2.9 2.6 13.2
Media Nusantara Citra MNCN IJ BUY 1,750 17,916 12.2 10.2 2.0 1.8 18.2
Pembangunan Perumahan PTPP IJ BUY 4,000 16,058 11.3 7.7 1.7 1.5 20.5
Pakuwon Jati PWON IJ BUY 720 30,581 16.0 12.9 3.0 2.5 20.9
Ramayana Lestari Sentosa RALS IJ BUY 1,250 6,908 16.9 16.0 2.0 1.8 11.8
External factors appeared to have little impact on the JCI in 2017, with domestic
factors taking center stage. The structural reforms initiated by President Jokowi’s
government finally prompted S&P to upgrade Indonesia to investment grade,
putting Indonesia in a more favourable position. Political tensions eased as the
gubernatorial election in Jakarta was conducted in peaceful fashion.
In 1H17, the direction of the market and inflows moved in the same direction. In
this period, total net inflows reached IDR17.4tn, driven mainly by: 1) the peaceful
Jakarta gubernatorial election, 2) the government’s successful tax amnesty
program and 3) further economic stimulus provided by the government. In 2H17,
however, these two factors decoupled, with foreign investors aggressively
unwinding their positions, with total outflows reaching a staggering IDR60tn. In
our view, investors were discouraged by the still-lethargic economic growth, with
GDP growth falling short of market expectations.
Despite the massive outflows in 2H, the market continued to head north. In
December, the market even reached an all-time high, driven mainly by the greater
participation of domestic investors. The central bank’s decision to make further
cuts to its benchmark interest rate to 4.25% helped to support sentiment,
especially in the hope that such policy would help to speed up economic growth
recovery. The finance sector led the outperformance, with a 33% increase mainly
driven by the strong performance of both BBTN and BBNI. The basic industry and
consumer sectors also outperformed, the former mainly underpinned by a rally in
cement counters following a multi-year downtrend, while the expectation of
domestic consumption recovery boosted sentiment in consumer stocks.
In our view, Indonesia continues to offer an attractive proposition over the longer
term, with GDP growth expected to improve to 5.3% in 2018 and the muted
outlook for inflation paving the way for further policy easing by the central bank.
15,554
Rp, bn
20,000 Agriculture -13.2
10,516
Property -6.3
15,000
Miscelaneous -0.3
10,000
Trade & Service 5.2
5,000
559
Infrastructure 8.3
0 Mining 12.7
-869
-1,189
-4,796 JCI
-6,201
15.8
-6,370
(10,000)
-7,271
Jul-17 -10,640 Consumer 18.0
Sep-17 -11,499
Nov-17 -18,616
(15,000)
Nov-16 -12,361
Dec-17
Feb-17
Oct-17
Apr-17
May-17
Aug-17
Jan-17
Mar-17
-20 -10 0 10 20 30 40
In 2018, we are positive on the equity market with year-end index target of 6,854,
mainly supported by:
1. Supportive developments on the macro front, with GDP growth
improving to 5.3% and stronger household consumption given higher
energy subsidies and the government’s social assistance program.
2. 2018 is a pre-election year with 171 direct regional elections scheduled
to take place across Indonesia. With the 3 most populous provinces all
having gubernatorial elections in 2018, political campaign spending will
give a boost to consumption, we believe. Furthermore, we also expect
political tensions to be less than during the election in Jakarta in 2017.
3. Potential interest rate cuts given the outlook for muted inflation. Higher
energy subsidies mean no more electricity tariff increases, which were a
main factor behind the rising inflation and softer purchasing power in
2017. As the central bank continues to adopt an inflation targeting
framework, lower inflation will create room for further policy easing. Our
economist expects inflation to ease to as low as 2.5%. Hence, with BI’s
real interest rate comfort level of 1%, there may be potentially two more
rate cuts in 2018 (or 50 bps) , from the current level of 4.25%.
4. Given the positive macro trends, we expect the outflows recorded in 2017
to be reversed in 2018 as Indonesia will remain an attractive emerging
market for investors. The inflows/outflows trend has occurred
intermittently since 2013.
National Capital Integrated Coastal Jakarta Government of Jakarta 2,400 2016 2018
Development (NCICD) Phase A and Ministry of Public
Facility
Revitalization of Existing Oil Refinery Cilacap, Balongan, Dumai, PT Pertamina 246,220 2017 2025
Balikpapan, Plaju
High Voltage Direct Current (HVDC) South Sumatera, Lampung, PT PLN 33,400 awaiting for PLN 2024
Banten, West Java confirmation
Sumatera 500kV Transmision Sumatera PT PLN 24,400 2016 2019
Central - West Java Transmission Line Central Java and West Java PT PLN 7,640 2017 2019
500kV
Central Java Power Plant (Steam Central Java PT PLN 40,000 2016 2019
Power Plant of Batang)
Steam Power Plant of Indramayu Jawa Barat PT PLN 20,000 2017 2019
Steam Power Plant of South Sumatera Selatan PT PLN 18,000 awaiting for PLN 2023
Sumatera Mine Mouth 8 confirmation
Steam Power Plant of South Sumatera Selatan PT PLN 54,000 Cancelled by PLN Cancelled by PLN
Sumatera Mine Mouth 9 and 10
Hydro Power Plant of Karangkatas IV East Java Ministry of Public 1,600 2017 2020
Electricity Facility
Tol Road of Terbanggi Besar - Lampung and South Sumatera PT Hutama Karya 21,950 2017 2019
Pematang Panggang - Kayu Agung
Tol Road of Palembang - Tanjung Api- South Sumatera PT Hutama Karya 14,200 2018 2020
Api
Tol Road of Kisaran -Tebing Tinggi North Sumatera PT Hutama Karya 13,454 2018 2019
MRT of North - South Jakarta Lane Jakarta Regional Government 17,012 2013 (Phase I), 2019 (Phase I)
of Jakarta 2016 (Phase II)
Express Train of Soekarno Hatta Banten and Jakarta Ministry of Transport 24,500 2018 2022
Airport
Makasar - Parepare Train Railway South Sulawesi Ministry of Transport 8,250 2015 2018
East Kalimantan Train Railway East Kalimantan PT Kereta Api Borneo 53,300 2017 2021
Light Rail Transit of South Sumatera South Sulawesi Ministry of Transport 12,500 2015 2018
Telecommunication Transportation Facility
LRT Jakarta, Bogor, Depok, Bekasi Jakarta and West Java Ministry of Transport 23,000 2015 2019
International Hub Seaport of Kuala North Sumatera Ministry of Transport 30,000 2019 2021
Tanjung
International Hub Seaport of Bitung North Sulawesi Ministry of Transport 34,000 2020 2022
Seaport of Patimban West Java Ministry of Transport 43,220 2018 2019
Inland Waterways/ Cikarang-Bekasi- Jakarta and West Java PT Pelindo II 3,416 2018 2021
Laut
Palapa Ring Broadband Indonesia Coverage Ministry of 5,130 1h2016 (West and 1Q2018 (West
Communication and Central part), and Central part),
Information 1Q2017 (East 4Q2018 (East
part) part)
Facility
Exhibit 5. GPD growth Q1-Q3 2017 (YoY) Exhibit 6. GDP Growth Q1-Q3 (YoY)
Net Ex/Im,
20%
1.63%
15%
Fixed
10%
Investment,
33.69% 5%
0%
Private
Consumption, -5%
56.72%
-10%
Private Government Fixed Export Import
ConsumptionConsumption Investment
Government
Consumption, GDP growth Q1-Q3 2016 (YoY) GDP growth Q1-Q3 2017 (YoY)
7.95%
Nonetheless, the path toward achieving high spending on infrastructure has not
been easy, especially since strong political will has been needed to reduce
spending on long-term subsidies, especially energy subsidies. Since infrastructure
is so costly, it takes time for infrastructure spending to translate into stronger
economic growth. Another limiting factor is the cap of a maximum 3% budget
deficit to GDP which pushed the government to focus on improving its revenues
rather than just depend on bonds issuance to support infrastructure spending.
Ultimately, these two factors (the shift from subsidy spending and the need to
boost revenues especially from tax) weighed on Household consumption, the
main part of the Indonesian economy.
1. Subsidy spending helped to boost consumption
With subsidy spending reduced by more than IDR300tn, consumption is
adversely affected as consumers are burdened with higher living costs
arising from higher fuel prices. The adjustment has been difficult with
Household consumption growth remaining under pressure. During the
era of high energy subsidies, Household consumption grew by 5.28% on
average in 2011-2014, whereas growth only reached 4.95% in 9M17.
Exhibit 10. Energy Subsidies Exhibit 11. Household Consumption Growth (%YoY)
5.6%
IDR tn 5.5%
240 5.4%
250
210 5.3%
200 5.2% 5.2%
5.1%
150 5.1% 5.0%
100 101.8 5.0% 4.9% 5.0%
100 5.0% 4.9%
58.3 60.8 63.1
43.7 45.4
44.5
47.746.9 4.9%
50
4.8%
0 4.7%
2013 2014 2015 2016 Outlook APBN
4.6%
2017 2018
Electricity Subsidy Fuel and LPG Subsidy 2011 2012 2013 2014 2015 2016 1Q17 2Q17 3Q17
Source: Ministry of Finance Source: Central Bureau of Statistics
Exhibit 12. Household Consumption Growth: Food (%YoY) Exhibit 13. Household Consumption Growth: Non Food (%YoY)
6.0 7.0 6.83
5.5 5.62
5.24 6.5
6.49
5.0 4.88 6.0 5.78
4.58 5.5 5.36
4.5
5.0 5.26
4.0 4.21
4.52
4.5
3.5 4.33 4.37
3.51 4.0
3.0 3.5
I II III IV I II III IV I II III IV I II III IV I II III IV I II I II III IV I II III IV I II III IV I II III IV I II III IV I II
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017
2. Increase in tax
Government revenues mainly come from taxation: its contribution is
expected to surpass the 85% mark in 2018. Since the current government
came to power with a reform oriented focus, tax contribution has shown
a major improvement. Back in 2013, tax contribution to overall
government revenues only reached 75%, and with funding needed for
infrastructure development in an environment marked by low commodity
prices, an improvement in tax collection is considered as the only way to
keep the budget deficit below the 3% level.
IDR Tn
2,000 1,736 1,895 14.0% APBN 2018 85% 15%
1,800 12.0% Outlook
1,550 1,508 1,556 11.6%
1,600 1,439 85% 15%
10.0% 2017
1,400 9.1%
1,200 7.5% 7.8% 8.0% 2016 83% 17%
1,000 6.0%
800 2015 82% 17%
4.0%
600 3.2%
2.0% 2014 74% 26%
400
200 0.0%
2013 75% 25%
- -2.0%
2013 2014 2015 2016 Outlook APBN
2017 2018 0% 20% 40% 60% 80% 100%
State Revenue State Revenue Growth (RHS) Tax Revenue Non Tax Revenue Grant Revenue
The tax amnesty program which was aimed at boosting tax compliance appears
to have come at the right time. Dubbed as one of the world’s most successful tax
amnesty programs, better compliance has, however, had an adverse impact on
asset investment (as seen in the low take-up rate for high-end residential
property). The government continues to further improve tax collection, through
both intensification and extensification. This has led to weaker consumption due
to higher tax payments. Nonetheless, we believe the impact will only be short-
lived since better compliance should give a boost to GDP and consumption over
the longer term.
Exhibit 16. Tax Ratio Exhibit 17. Tax Revenues
15.0% 14.3% IDR Tn
1,800 1,618 30.0%
13.7%
14.0% 1,600 1,473
25.0%
1,400 1,240 1,285
13.0% 1,147
1,200 1,077 20.0%
12.0% 11.6% 11.5% 11.6% 1,000
15.0%
11.9% 10.8% 800 12.7%
11.0%
11.4% 600 9.9% 9.2% 10.0%
9.0%
10.7% 10.8% 10.9% 400 6.5%
10.0% 5.0%
10.4%
200 3.6%
9.0% - 0.0%
2013 2014 2015 2016 Outlook APBN 2013 2014 2015 2016 Outlook APBN
2017 2018 2017 2018
Exclude oil, gas, mineral Include oil, gas, mineral
Tax Revenue Growth (RHS)
Source: Ministry of Finance Source: Ministry of Finance
2017 2018
Subsidy (2014-2018) 2014 (LKPP) 2015 (LKPP) 2016 (LKPP) Outlook RAPBN
Energy 341,810 119,091 94,355.1 89,864.0 103,368.4
Subsidy of Fuel and 3Kg LPG 239,994 60,759 43,686.9 44,488.8 51,130.4
Electricity Subsidy 101,816 58,332 50,668.2 45,375.2 52,238.0
The budget for education subsidies has been raised to IDR444.1tn in 2018, up
5.8% y-y, targeting 19.7m people through Indonesia’s Smart Program, with the
building of 61,000 schools. The government has also increased healthcare
subsidies to IDR111tn, more than double the level in 2013 of only IDR46.1tn. The
government is targeting 92.4 million people through National Healthcare
Coverage or Indonesia’s Health Card program.
The government will disburse money from its IDR18tn cash-basis labour intensive
program starting in January 2018 to support the economy and reduce
unemployment. The program focuses on 100 undeveloped villages and will be
funded from village funds (IDR60tn for 74,954 villages). The Minister of Finance
stated that in 2018, the village funds would be disbursed on three occasions
starting in January.
Exhibit 26. Poverty Line Exhibit 27. Poverty Line and Social Assistance Budget
mn people IDR Tn
32 15% 100 20%
31 80 15%
10%
30 10%
5% 60
29 5%
0% 40
28 0%
27 -5% 20 -5%
26 -10% - -10%
2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017
People in Poverty Social Assistance Budget
Portion of People in Poverty (RHS) Portion of People in Poverty (RHS)
Poverty Reduction (RHS) Poverty Reduction (RHS)
Source: Central Bureau of Statistics Source: Central Bureau of Statistics , Ministry of Finance
Exhibit 28. Real Wage Index Exhibit 29. Composition of Income Household Usage
25% 72%
102
71%
101 20%
70%
100
15% 69%
99 68%
98 10% 67%
97 66%
5%
96 65%
0% 64%
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17
Construction Worker Farmworker
Loan Repayments Saving Consumption (RHS)
Household Worker (monthly)
Learning from the past two presidential elections (2009 and 2014), data from
consumer companies depicts significant revenues growth on a yearly basis in the
4 quarters before the elections. In 2009, the sector’s revenues increased by 11.2%
yoy while in 2014 growth was higher at 14.2% yoy (in the 4 quarters prior to the
elections). Should this pattern be repeated in 2018-19, consumer companies will
be positively impacted.
Exhibit 30. Approved Regional Election Budget 2018 Exhibit 31. Top 10 Regional Election Budget
For 2018, in the absence of energy policy price hikes, inflation is expected to trend
down to around 2.7% - 3.5%. The 2018 budget bill also confirms that the
government has no plans to raise administered prices in 2018 and the effect of
the government's administered price increases in January, March and May 2017
will be removed in February, April and June 2018, respectively, so inflation will
drop significantly.
%
12.0
10.0
8.0
6.0
4.0
2.0
0.0
May-13
Nov-12
Nov-13
May-14
Nov-14
May-15
Nov-15
May-16
Nov-16
May-17
Feb-17
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
Aug-16
Aug-17
In our view, this change in consumer preferences has partly alleviated concerns
on the impact of rising oil prices on administered prices and ultimately the
government’s fuel subsidies overall. We also believe that with the low budget
deficit target in the 2018 budget, the government still has room – if needed - to
raise the energy subsidies allocation if oil prices head stubbornly higher.
In the past, when oil prices were low, the government did not reduce fuel prices
as much, providing some profit buffer at Pertamina, which would then be used to
maintain the stability of fuel prices if oil prices were to rebound. However, this
system only works if the spike in oil prices is temporary with any prolonged
increase in oil prices being addressed through hiking fuel prices (and risking
heightened inflationary pressures) or making revisions to the government budget
by raising subsidies. We believe the latter option will be the first choice of the
government as 2018 will be the pre-election year, and the implementation of
policies which are not populist, such as raising fuel prices, would hit the
government’s popularity.
Given this backdrop, the reverse repo rate - which stood at 4.25% at the end of
December 2017 - may potentially decline to 3.75% - 4.00 % in 2018. This
prediction may depend upon Fed monetary policy normalization not having as
large an impact as originally expected.
9.5 8.5
8.5 7.5
7.5
6.5
6.5
5.5
5.5
4.5
4.5
3.5 3.5
2.5 2.5
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
For banks, lower interest rates should help to stimulate loans growth despite
some time lag. In 2018, we foresee 13.5% loans growth for the banks in our
banking universe mainly supported by lending to fund the development of
government-infrastructure projects. From this we anticipate a trickle-down effect
to propel consumer spending in the pre-election year. In addition, mortgages as
the main contributor of consumer loans grew by 10.6% YoY by September 2017.
Exhibit 35. GDP, policy rate, loans and deposits growth Exhibit 36. Consumer Loans
10.0 IDR Tn
% % 35.0 1,400.0
%
25.0
30.0
8.0 1,200.0
25.0 20.0
1,000.0
6.0 20.0 15.0
800.0
4.0 15.0 600.0 10.0
10.0 400.0
200.0 5.0
2.0
5.0
- -
- - Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep
Dec 08
Jun 09
Dec 09
Jun 10
Dec 10
Jun 11
Dec 11
Jun 12
Dec 12
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
12 13 13 14 14 15 15 16 16 17 17
GDP (LHS) BI rate (LHS) Consumer loans (LHS) YoY growth (RHS)
Loan growth (RHS) Deposit growth (RHS)
Source: Company, Danareksa Sekuritas estimates Source: Financial Services Authority (OJK)
With a 35% risk weight and low credit cost due to the fact that the loans are
collateralized by the property, some banks have aggressively expanded their
mortgage lending since early 2017 through promotional rates as the sweetener
to attract customers. As such, some banks with minimal exposure to mortgages
have sought to gain market share in this segment. These banks include Bank
Mandiri (BMRI IJ, HOLD, TP IDR7,700) and Bank Rakyat Indonesia (BBRI IJ, BUY, TP
IDR3,900). These two banks have gained market share of 8.2% and 5.4%,
respectively, as of September 2017.
Source: Financial Services Authority (OJK) Source: Company, Danareksa Sekuritas estimates
At the same time, the market leader in mortgages, Bank Tabungan Negara (BBTN
IJ, BUY, TP IDR4,000) will retain its dominance in our view, particularly in the
subsidized mortgages segment given there is a housing backlog of c.11.4mn units.
Bank Central Asia (BBCA IJ, HOLD, TP IDR21,000) is another big player yet with a
different niche market. BBCA focuses more on the middle-high income population
segment. All in all, mortgage lending for the banks in our banking universe is
expected to grow by 17% in 2018, supported by mortgages for subsidized houses
and in the secondary property market.
Improving Business Sentiment
Business sentiment strengthened during the reporting period of August and
September 2017 as the central bank unexpectedly cut benchmark interest rates.
As such, the main measure of business sentiment, as measured by the Business
Sentiment Index (BSI), rebounded 2.1 percent to 137.1, recovering some of its 4.2
percent loss posted in the previous survey.
The easing of monetary policy in August and September – the benchmark rate
was cut 25 bps in each month – has created greater optimism toward the
economic outlook, even though the rate cuts may take some time to be
transmitted to the economy. Given this positive development, one of the two
main components of the BSI – the Expectations Index (EI) – climbed 2.3 percent
to 146.9 – a very high level reflecting widespread optimism toward the nation’s
future prospects.
Commensurate with BI’s policy to cut rates, a greater proportion of the CEOs
surveyed (17.6 percent) now believe that interest rates will decline over the next
six months than in the previous survey (11.8 percent). Another 43.4 percent of
CEOs believe interest rates will remain unchanged. Lower interest rates are
expected to support the economy as they should encourage more companies to
take on new borrowings to finance expansion.
At the corporate level, CEOs claimed better corporate performance during the
reporting months. At the top line, CEOs noted slightly brisker sales growth – this
index added 0.4 percent to 105.4. In addition, they also reported higher capex
spending – the index rose 3.2 percent to 109.7. Although CEOs did claim higher
cost pressures as well (all four cost indices in our survey rose), they also said that
their companies were better able to raise product prices - an indication of a less
challenging business environment.
This also helped to support profits: at the bottom line, CEOs claimed that profits
grew at a brisker pace (this index climbed 7.1 percent to 110.4).
As the government targets higher GDP growth as one of its main long-term goals,
there is a greater need for a major overhaul of the current infrastructure and
logistics system across the country. The government has embarked on making real
efforts to improve connectivity in Indonesia, as seen in massive infrastructure
spending over the past couple of years.
IDR Tn
2,000 1,895 APBN 2018 85% 15%
1,736
1,800 22.0% Outlook
1,550 1,508 1,556
1,600 1,439 85% 15%
17.0% 2017
1,400
1,200 12.0% 2016 83% 17%
11.6%
1,000 9.1%
7.5% 7.8% 7.0% 2015 82% 17%
800
600 3.2% 2.0%
2014 74% 26%
400
-2.7% -3.0%
200
2013 75% 25%
- -8.0%
2013 2014 2015 2016 Outlook APBN
0% 20% 40% 60% 80% 100%
2017 2018
State Revenue State Revenue Growth (RHS) Tax Revenue Non Tax Revenue Grant Revenue
The main source of government income is tax revenues. In 2018, tax revenues will
contribute around 86% of total state revenues of IDR1,895tn, up from 75% in
2013. This reflects: 1) better tax compliance, with the Tax Office taking greater
efforts to raise more tax income. The recent tax amnesty program is also expected
to provide a boost for a further increase in tax collection. In 2018, the government
expects the tax ratio to reach 11.6%, up from 10.8% in 2016. And 2) lower
commodity prices in general. Despite the recent upward trend in the oil price, it
is lower than its level in 2013-14. In 2018, income from oil and gas is expected to
reach IDR80.3tn, or much less than the figure of around IDR200tn in 2013-14.
Exhibit 49. Natural Resources Income Exhibit 50. Income from Oil & Gas
IDR Tn IDR Tn
30 55% 250 106 120
97
25 0.8 0.7 0.7 45% 100
0.9 0.9 200
0.2 3.7 0.2 0.1 0.9 1 0.6 35%
20 3.1 4.2 0.4 4 4.2 80
18.6 3.8 150
19.3 25% 49
15 48 48 60
216.9 40
13.8% 17.9 15% 100 203.6
17.7
12.6% 40
10
5.2% 15.8 5%
17.9 -0.5% 50 20
5 78.2 72.2 80.3
-4.9% -5% 44.1
-8.7%
0 0
0 -15%
2013 2014 2015 2016 Outlook APBN
2013 2014 2015 2016 Outlook APBN
2017 2018
2017 2018
Natural Resources Income (O&G)
General Mining Forestry
Fishery Geothermal Indonesia Crude Price (USD/Barrel)
Growth (RHS)
Source: Ministry of Finance Source: Ministry of Finance
Infrastructure will still be one of the main spending priorities, with a total budget
of IDR410tn, up 5.1% from 2017’s level and almost triple the allocation in 2014 of
only IDR155tn. The government seeks to further expand toll roads, railways and
ports in order to boost connectivity across Indonesia: 1) The development of
832km of new roads, 33km of toll roads and 15,733m of bridges; 2) Airports in 8
new locations; 3) 639km of railway lines; and 4) Various technology and
broadband connectivity developments in the regions.
While infrastructure will remain the government’s main focus (as we have
highlighted in the previous section), the government is also trying to boost
consumption as seen in the escalation of energy subsidies and various social
support programs. Overall, the government’s 2018 budget deficit target of 2.2%,
in our view, is rather conservative, and there may be room for further subsidies
or social cash assistance if needed during the submission of the Revised Budget,
sometime in May 2018.
To cover the 2.2% budget deficit, the government seeks to secure IDR399.2tn of
loan funding, excluding the maturing bonds of IDR384tn, which leads to an overall
funding requirement of IDR783.2tn. The relatively high amount of maturing bonds
in 2018 is also one of the main reasons for the conservative low budget deficit
target in 2018, we believe.
Minimum wages
In the fourth stimulus package, the government created a fixed formula to
determine increases in labour wages. With a fixed formula, the arduous process
of negotiations between labour unions and companies can be navigated more
easily. In addition, this policy should also discourage labour rallies which call for
higher wages. This is a positive development as news of such rallies may spook
investors, thus putting further improvements in FDI inflows at risk.
The central government has worked closely with the Ministry of Manpower to
establish regulations to support the increase in minimum wages through
government regulations (RPP). The new formula now uses only two main inputs
i.e. inflation and provincial GDP growth, which can be clearly measured. Since
their inception, the overall growth in minimum wages has become more rational,
up 8.9% in 2017 and 8.7% in 2018, below the 12-19% range in 2013-2016.
IDR Th
2,500 50%
2,256
2,076 45%
2,000 1,906 40%
1,703
35%
1,506
1,500 1,297 30%
1,089 25%
989
842 909
1,000 19.1% 20%
673 746
16.1% 15%
13.1% 11.9%
500 11.5% 10.9% 12.8% 10.1% 10%
8.0% 8.8% 8.9% 8.7%
5%
- 0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Average National Minimum Wage Growth
Exhibit 55. 2018 General Election Total Exhibit 56. Regional Election Stage
Governor, 17
Stage Schedule
Mayor, 115
While heightened political tensions are inevitable in any election, the 2017 Jakarta
gubernatorial election was, in our view, particularly hard fought, with the rivalry
between the candidates creating social discord that dented confidence in the
capital market.
Post the election which spilt the community in two, the ultimate goal of the
government is to achieve reconciliation to restore stability which is crucial to
facilitate economic progress. However, this is not necessarily an easy task. In our
view, political harmony is a prerequisite for the creation of a healthy democratic
environment, especially regarding the relationship between the government and
the opposition. The current reform-minded government is perceived to have
effectively delivered structural change on the macro front, and the continuity of
its programs is crucial to support Indonesia’s LT growth. The regional elections in
2018, especially in the country’s three most populous provinces, East Java, West
Java and Central Java, will definitely be seen as the precursor to the 2019
presidential elections.
Against this backdrop, political tensions are likely to remain high in 2018.
Nonetheless, we don’t expect the regional elections in 2018 to be as intense as in
2017 when all the attention was focused on the bitterly-contested election in
Jakarta even though as many as 101 regional elections took place during the
period.
PDI-P is the main political party in Central Java with 31 seats in its regional
parliament, while PKB and PDIP are the two largest parties in East Java, where
they have 20 and 19 seats, respectively. Both PDI-P and PKB are part of the
coalition of government supporting parties. In addition, PDI-P has also performed
well in West Java where it secured the most number of seats (20), followed by
Golkar (17).
Although PDI-P has strong political support in West, Central and East Java, this
does not automatically translate into strong support for Jokowi in these areas. In
West Java, for example, Jokowi claimed only 40.2% of the votes in the presidential
election or far less than the 60% achieved by Prabowo. While this seems to show
that the preference for certain candidates is not necessarily the same as the
preference for political parties, the recent defeat of the incumbent governor in
Jakarta may suggest otherwise. Despite his very high approval rating, Basuki
Purnama still lost in the final round of voting by a considerable margin. That said,
the political strategy among candidates to attract voters can be the determining
factor to win a direct election.
Recent surveys by CSIS show that the satisfaction rate in the current government
has continued to improve. According to CSIS, it has now reached 68.3%, up from
only 50.6% in 2015. The Kompas survey in Oct 2017 depicts a similar trend, with
the satisfaction rate climbing to 70.8% from 63.1% in April. According to the
Kompas survey, the highest satisfaction is in the field of politics and stability.
In the recent business sentiment survey conducted by Danareksa Research
Institute, on the political front, CEOs were more satisfied with the performance
of the government. In the survey, the overall measure of Business Confidence in
the Government (BCGI) rose a healthy 5.1 percent to 146.9 following a 2.3 percent
increase in the previous survey. Most notably, CEOs are more confident in the
government’s ability to rein in inflationary pressures – this index added another
7.8 percent to 132.6 after increasing 7.4 percent in the previous survey.
With the trend showing increasing satisfaction in the government’s performance,
the government should continue to make progress. Arguably, infrastructure
development has been the main focus of the government during the first 3 years
of Jokowi’s presidency, and in 2018, we believe the government will gradually
move to the later stage to boost more consumption-driven spending, while
maintaining a low inflation environment.
In the September 2017 FOMC, the Fed revealed its plans to unwind its balance
sheet. To this end, the Fed seeks to reduce its balance sheet by USD1.5tn by the
end of 2020 or early 2021. In our view, the pace and transparency of this policy is
key, as a sudden move would be likely to create considerable pressure in the
capital markets, especially in Indonesia. However, if the unwinding process is well
defined and transparent, we view that the impact on the global financial markets
would be relatively limited. In this case, the concerns of some market participants
over the possibility of significant yield increases in the US and considerable
strengthening of the US dollar could be allayed.
Exhibit 58. Fed balance sheet changes
25-Oct-17 Change from 26-Jul- Change from 26-
2017 Oct-2017
Total assets 4,461 (4) 7
Selected assets
Securities held outright 4,243 1 25
US Treasury securities 2,466 1 2
federal agency debt securities 7 (1) (12)
Mortgage-backed securities 1,771 2 35
Memo: Overnight securities lending 25 3 5
Memo: Net commitments to purchase mortgage-backed securities 18 (1) (21)
Total capital 41 * 1
Source: US Treasury
12000 9.0
11000 8.0
10000 7.0
9000 6.0
8000 5.0
2007 2008 2009 2010 2011 2012 2013 2014
We have argued that there is a negative correlation between the IDR and BI’s
policy rate. As an emerging country, growth is a key factor is luring funds into
Indonesia. Yet with higher interest rates, Indonesia’s economic growth pace
tends to slow - as seen in 2013-14. With a slowdown in growth, Indonesia’s
market loses its shine, inevitably leading to outflows which, in turn, negatively
impact the IDR.
Over the last couple of years, the CAD has been a major economic concern and is
considered to be the culprit behind the weak IDR back in 2013. The CAD has
essentially been driven by an increase in capital inflows (FDI and portfolio
investment) since 2010 - which has ultimately supported economic growth.
Higher capital inflows consequently led to higher imports of raw materials, which,
in turn, resulted in an expansion in the CAD. As a result, during these periods,
Bank Indonesia tends to tighten monetary policy by raising the benchmark rate
and reducing the growth in the money supply. Arguably, the policy was effective
in bringing down the CAD. However, it came at a considerable cost, i.e. lowering
the pace of economic growth and even putting pressure on the IDR.
4,000
9,500
2,000
10,500
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
-2,000 11,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-4,000 12,500
-6,000
13,500
-8,000
14,500
-10,000
Transaksi Berjalan IDR ep
-12,000 15,500
In our view, the CAD is unlikely to pose a serious risk in 2018, despite potential
recovery in consumption. Commodity prices are still holding up relatively well,
and with global economic recovery, commodity demand will continue to be
robust. Bank Indonesia (BI) expects the CAD to increase until 2019 before trending
down to below 2% by 2022. The CAD in 2018 is projected to be between 2-2.5%,
or up from 1.65% in 2017. The increase in the CAD is mainly expected to come
from an increase in imports and services transactions - inline with the higher
economic growth. In our view, the expected increase in the CAD is not alarming
and it will still be well below its level in 2014 of 4.2%. BI also stated that there is
the possibility of a current account surplus should commodity and aggregate
export prices increase. In 2018, we expect the IDR/USD exchange rate to be in the
range of IDR13,250 – 13,500/USD.
Poultry 29.8%
Construction 21.0%
Banks 16.1%
Media 13.5%
Heavy Equipment 13.1%
Retail 12.4%
Consumer 12.0%
Healthcare 11.5%
Auto 11.0%
Cigarettes 10.7%
Cement 4.0%
Plantation -0.8%
Mining -3.8%
Property -4.7%
Industrial Estate -46.5%
-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40%
DDM model: Our DDM model gives rise to a year-end index target of 6,800, based
on a market dividend yield of 2.3%, with growth of 12.1%, Cost of capital of 12%
and nominal terminal growth of 9.4%.
Bottom-up approach: Our bottom-up approach reveals 13.8% upside from the
current level, translating into a JCI index of 6,952.
We have assigned a 40% weighting for the PE based model, and an equal 30%
weighting for both the DDM and bottom-up approaches; thus giving rise to a year-
end index target of 6,854 for year-end 2018.
5,500 16x
15x
5,000
14x
4,500 13x
12x
4,000
11x
3,500
3,000
2,500
2011 2012 2013 2014 2015 2016
We believe the big cap stocks will still take center stage in earlier part of 2018,
especially on the expected reversal of outflows, before the focus will be shifted
to medium cap stocks. We like sectors related to the consumption theme and
banking, while retaining our neutral stance on commodities and property.
Bank Tabungan Negara (BBTN IJ, IDR 3,470, BUY, TP IDR 4,000) - As one of the
JCI’s big cap best performers, BBNI’s current share price already entirely prices in
the positive outlook for in 2018, in our view. The narrower valuation gap between
BBNI and BMRI is reasonable given the same business model with similar ROAE
expectations. Assets quality should be the bank’s main focus post aggressive loans
growth in the past three years. As such, we conservatively assume a flat gross
NPLs ratio of 2.7% by the end of 2018F. Maintain HOLD with a TP of IDR8,500.
Bank Rakyat Indonesia (BBRI IJ, IDR 3,400, BUY, TP IDR 3,900) - We reiterate our
BUY call on BBRI with an unchanged TP of IDR3,900 as we believe that the
government’s KUR program will continue to support micro lending growth
following the recent decision by the government to provide a higher interest rate
subsidy at 10.55%. This is despite a lower KUR lending rate of 7% (previously 9%).
We assume BBRI’s KUR loans will grow by 32% leading to a higher contribution of
11% in the bank’s loans book by the end of 2018. The bank’s NIM, meanwhile, is
expected to edge down by c.6bps to 7.8% driven by 8bps lower asset yields with
a stable blended CoF of 3.6%. BBRI is one of our top picks in our banking universe.
BUY maintained.
Pembangunan Perumahan (PTPP IJ, IDR 2,590, BUY, TP IDR 4,000) - PTPP’s order
book in 2018 is targeted to grow 21%yoy on the back of strong carry over
contracts. This should translate into 34%yoy growth in revenues. PTPP has equity
investments in 18 associates as the minority investor with ownership ranging from
5%-49% with most of them still in the early stage of development. PTPP has
injected IDR1.1tn of equity into those subsidiaries. We have a BUY on PTPP with
a TP of IDR4,000.
Adhi Karya (ADHI IJ, IDR 1,900, BUY, TP IDR 2,800) - KAI as the main investor in
the LRT project is looking to raise IDR18.1tn of debts after the capital injection of
IDR7.6tn is provided by the government. Meanwhile, ADHI is expected to invest
IDR4.0tn in TOD and depots for the project following the government’s IDR1.4tn
capital injection in 2015. ADHI expects to receive the first payment from KAI on
Jan 18. We maintain our BUY call on ADHI with a target price of IDR2,800.
Adaro Energy (ADRO IJ, IDR 1,800. BUY. TP IDR 2,200) - While we expect lower
coal prices in 2018 to impact the company’s earnings, we continue to like Adaro
Energy (ADRO) on: a) recovery in coal production to cushion further declines in
coal prices, and b) business diversification into the power business to support
long-term earnings. Maintain BUY with a target price of IDR2,200 (based on DCF
valuation with WACC of 9.9%).
Indofood CBP (ICBP IJ, IDR 8,825, BUY, TP IDR 9,700) - Looking forward, we are
confident that the positive momentum can be maintained, especially since sales
should receive a boost from more populist government policies in the pre-election
year of 2018. Maintain BUY with a TP of IDR9,700.
Mitra Adiperkasa (MAPI IJ, IDR 6,200, BUY, TP IDR 8,100) - We have a BUY call
on MAPI with a TP of IDR8,100. We like the stock as we believe: 1) resiliency in
the mid-up segment should boost sales performance in 2018 with better expected
performance of specialty stores and F&B, 2) the management’s operational
turnaround in terms of brand rationalization will continue in 2018, and 3) better
cash position and lower inventory days should be on the cards.
Pakuwon Jati (PWON IJ, IDR 635, BUY, TP IDR 720) - We reiterate our BUY call on
PWON with a target price of IDR720. With solid marketing sales in 11M17, we
believe PWON will achieve marketing sales of IDR2.4tn in 2017 (+4.2%yoy). Going
into 2018, we expect PWON to record higher marketing sales growth supported
by new project launches (+11.1%yoy). We also remain optimistic with PWON’s
strong retail portfolio considering its good visitors traffic.
Media Nusantara Citra (MNCN IJ, IDR 1,255, BUY, TP IDR 1,750) - We recommend
a BUY on MNCN with a TP of IDR 1,750. We think improving local FMCG company
ad spending and content revenues should translate into higher 2018F top line
growth. We also expect the company to maintain its no. 1 audience share position
in the TV industry. Meanwhile, content business efficiencies remain on track along
with the recent re-branding of Global TV and iNews. The cheap valuation,
attractive dividend yield and significant potential upside make MNCN our top pick
in the sector.
NEUTRAL Automotive
Heightening competition
ASII relative to JCI Index We expect modest growth in domestic car and motorcycles sales of 5% yoy
xxxx
in 2018 supported by moderate economic growth of around 5.2 – 5.4%.
However, competition is expected to heighten on the back of the launch of
new models in the popular segments: LMPV and LSUV. In turn, this will
increase marketing expenses, putting some pressure on the profitability of
car makers. Maintain Neutral.
Slight increase in domestic car sales in 2017. Domestic car sales are expected
to increase by 1.7% yoy to 1.08mn units in 2017, with motorcycle sales posting
flattish growth. The anemic growth in 2017 reflects the impact of weak
consumer purchasing power. In 11M17, car sales grew by 2.0% yoy, while
motorcycle sales volume posted flat growth.
Source : Bloomberg
Domestic car and motorcycle sales to grow by 5% yoy in 2018. With the
expectation of economic growth of 5.2 – 5.4% yoy in 2018, we expect modest
growth in domestic car sales of 5% yoy to 1.13mn units in 2018, up from an
estimated 1.08mn units this year. With ASII’s market share expected to dip to
52% in 2018 on the delivery of Mitsubishi Expander in 3Q17, we expect flat
growth in ASII’s car sales in 2018. For motorcycles, we expect sales to also
grow by 5% yoy in 2018.
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Astra International ASII IJ BUY 9,200 323,868.0 17.1 15.4 2.6 2.4 16.3
700 75
100 70
600 70
65
80
500 65
60
60 400 60
55
300 55
40
50
200 50
20 45 100 45
- 40 0 40
Jul-14
Oct-14
Jul-15
Oct-15
Jul-16
Oct-16
Jul-17
Oct-17
Apr-14
Apr-15
Apr-16
Apr-17
Jan-14
Jan-15
Jan-16
Jan-17
Jan-14
Jan-15
Jan-16
Jan-17
Jul-14
Jul-15
Jul-16
Jul-17
Oct-14
Oct-15
Oct-16
Oct-17
Apr-14
Apr-15
Apr-16
Apr-17
Source: Gaikindo Source: AISI
Exhibit 3. Car Sales Volume by Brands Exhibit 4. Motorcycle Sales Volume by Brands
300
4W sales, '000 units
3,000
250
173 185 2,500
200 173 172
2,000
150 109 1,2761,223
102 90 1,500
84
100 1,000
50 500 53 69 91 73
0 0
Toyota Daihatsu Suzuki Honda Mitsubishi Honda Yamaha Suzuki Kawasaki
Exhibit 5. Market Share in Low-MPV market Exhibit 6. Competition lower automotive margin for ASII
4%
15%
Ertiga
14.1% 3%
10%
2%
5%
Mobilio 1%
Avanza
15.2%
and Xenia 0% 0%
63.7%
-1% -5%
1Q12 4Q12 3Q13 2Q14 1Q15 4Q15 3Q16 2Q17
Automotive EBIT Margin (LHS) Automotive EBIT Contribution (RHS)
OVERWEIGHT Banking
Rise and Shine
BBRI relative to JCI Index The expectation of higher consumer spending in the pre-election year and
xxxx
major government-infrastructure projects are two key drivers for a pick-up
in loans growth. In addition, we expect limited downside on assets quality as
most banks have already undertaken aggressive loans restructuring and
conservatively employed a higher LLC ratio in the past two years. This will
provide more room for lower credit costs in FY18F in our view. All in all,
13.5% loans growth and 174bps credit cost expectations for our banking
universe should translate into 16% net profits growth and a decent ROAE of
16.1%. BBRI and BBTN are our top picks in the sector. OVERWEIGHT.
Expect a pick-up in loans growth. Given its proxy to economic health, the
banking sector still faced some challenges in 2017 to push loans growth amid
the rather modest GDP growth pace. This is reflected in the 11.5% YoY loans
growth as of September 2017. However, we expect loans growth in 2018 to be
higher at 13.5% in our banking universe, still mainly coming from government
BBTN relative to JCI Index infrastructure projects. Consumer loans, meanwhile, should gain momentum
xxxx – driven by mortgages in our view, particularly subsidized mortgages as well
as lending for purchases of property in the secondary market.
Minimal downside risk on assets quality. After the lifting of the relaxation
policy in August 2017 and stable commodity prices, we foresee no major
downside risk on assets quality going forward. Credit costs already declined to
197bps in 9M17 with a higher LLC ratio of 151.4%. As such, we project 174bps
credit costs for FY18F. Assuming a 2.4% gross NPLs ratio, the LLC ratio should
stand at a modest level of 150.3% as of December 2018F based on our model.
Lower NIMs outlook. The latest 50bps policy rate cuts should provide more
room for banks to lower their TD rates. Lending rates should follow with a six
Source : Bloomberg months lag-time. In addition, the government’s request for lower lending rate
for several infrastructure projects also creates more pressure. As such, NIM is
expected to touch 6.5% with c. 12bps dip in the assets yield to 9.5% and 6bps
reduction in the blended CoF in FY18F for our banking universe.
OVERWEIGHT: BBRI and BBTN as our top picks. We maintain our positive
view on the sector due to the expected acceleration in loans growth and
milder pressure on assets quality. Our top picks are: 1) BBRI due to its resilient
micro lending business - which should translate into superior NIM - along with
its potential higher fee-income contribution, and 2) BBTN given its strong
focus on mortgages - which should translate into predictable credit costs.
x Eka Savitri
(62-21) 2955 5888 ext 3506
eka.savitri@danareksa.co.id
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
BRI BBRI IJ BUY 3,900 419,376 15.5 13.5 2.6 2.3 18.3
BTN BBTN IJ BUY 4,000 36,747 9.8 8.4 1.4 1.2 15.8
BTPN BTPN IJ BUY 2,800 13,788 11.2 8.8 0.9 0.8 9.4
BPD Jatim BJTM IJ BUY 830 10,332 8.3 8.0 1.4 1.3 16.3
BNI BBNI IJ HOLD 8,500 177,628 13.2 11.6 1.8 1.6 14.8
Mandiri BMRI IJ HOLD 7,700 347,667 17.8 14.8 2.2 2.0 14.0
BCA BBCA IJ HOLD 21,000 526,335 22.0 19.2 3.9 3.3 18.8
- - - -
2013 2014 2015 2016 2017F 2018F 2013 2014 2015 2016 2017F 2018F
Gross loans (LHS) YoY growth (RHS) Cust deposits (LHS) YoY growth (RHS)
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 3. Asset Yields, NIMS and COFS Exhibit 4. NPLS and LLC Ratio
12.0 %
3.0 % % 200.0
2.7
2.6
10.0 167.2 2.4
2.5 151.6 2.2
150.0
8.0 2.0 1.8 150.3
6.7 6.6 6.7 6.9 6.6 6.5 1.7 147.5
142.0 139.3
6.0 1.5 100.0
4.0 1.0
50.0
2.0 0.5
- -
-
2013 2014 2015 2016 2017F 2018F 2013 2014 2015 2016 2017F 2018F
NIM Asset yields Blended CoFs NPL ratio (LHS) LLC (RHS)
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Source: Company, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
UNDERWEIGHT Cement
At a turning point but challenged by lofty valuations
INTP relative to JCI Index We maintain our UNDERWEIGHT call on the cement sector as we believe the
xxxx
current lofty valuations are not justified. For the sales volume, we expect
the industry to record lower domestic sales volume in 2018 (+5%yoy) vs.
+6.0%yoy in 2017. Nonetheless, we expect the prices to bottom out in 2018
(based on our channel checks with 60 building material stores, new players
have tended to keep prices flat from July to November 2017, even raising
them in several regions). The cement sector currently trades at 38.9x P/E, or
near to its historical +2SD forward trailing P/E of 44.1x.
Expect 5% yoy sales volume growth in 2018. Going into 2018, we expect
modest domestic sales volume growth of 5%yoy, or slightly lower than this
year’s expected sales volume growth of 6%yoy. This slower growth reflects
the expectation of lower growth of bulk cement sales in 2018 given the lower
growth in the infrastructure budget allocation in the government’s 2018 state
budget (+5.3% in 2018 vs. +44.3% in 2017). For bagged cement sales, we
SMGR relative to JCI Index expect lower sales growth in 2018 than in 2017 considering: (i) limited
xxxx improvement in property demand, (ii) lagging impact of improvement in real
GDP to cement sales.
Price check: new players have raised their prices. Based on our channel
checks with 60 building material stores in the main markets of the cement
companies under our coverage, we note that: (i) most of the new players
tended to keep their prices relatively flat from July to November 2017, (ii)
nonetheless, the market leaders, such as INTP (with its Tigaroda brand) and
SMGR (with its Gresik, Padang, and Tonasa brands) have still tried to lower
their prices slightly in a bid to boost market share. This has narrowed the price
gap between the market leaders and other players. On a positive note, in
several areas including West Sumatera and North Sumatera, cement prices
Source : Bloomberg have started to edge higher (by 1-2%).
Price outlook: the bottom is near. With most new players tending to hold
their prices at current levels, we believe the bottom for the prices of these
new players is near. For the market leaders (SMGR and INTP), we expect them
to keep their prices stable in 1H18, as we expect consolidation to occur in this
period. After consolidation, we expect better price discipline with fewer
players dominating the market and we believe that there will be no reduction
in the domestic installed capacity. Thus, we expect average prices in 2H18 to
increase slightly by 2-3% compared to average price in 1H17. And although we
expect a reversal in pricing in 2H18, with the trending down in prices in 2017,
we estimate that on a yoy basis, prices will still be down by 1%yoy.
Underweight on the cement sector with SELL calls on INTP and SMBR. We
are UNDERWEIGHT on the cement sector with SELL calls on INTP (SELL
IDR14,700) and SMBR (SELL IDR460). The cement sector currently trades at
x Antonia Febe Hartono, CFA 38.9x P/E, or near to its historical +2SD forward trailing P/E of 44.1x. While we
(62-21) 2955 5888 ext.3504 believe a turnaround may be on the cards in 2018, we only expect the sector
antonia.hartono@danareksa.com to rerate to +1SD (33.7x P/E).
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Indocement INTP IJ SELL 14,700 71,416 37.9 36.9 2.7 2.6 7.1
Semen Indonesia SMGR IJ HOLD 8,600 58,722 30.0 27.7 1.9 1.9 6.9
Baturaja SMBR IJ SELL 460 32,772 194.2 218.3 10.1 9.8 4.5
Source: ASI, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. Cement sector’s historical forward trailing PE Exhibit 6. Cement’s sector historical forward trailing PB
(x ) (x )
60.0 4.5
2sd
50.0 4.0
2sd
1sd
40.0 3.5
1sd
30.0 3.0 Average:2.89
Average:23.22
20.0 2.5 -1sd
-1sd
10.0 2.0
-2sd -2sd
0.0 1.5
Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
NEUTRAL Cigarette
Benefiting from a more level playing field
HMSP relative to JCI Index We see room for both HMSP and GGRM to grow since the 2018 excise tax
xxxx
regulation creates a more level playing field in the cigarette industry and
because populist policies ahead of the elections in 2019 should bolster
purchasing power at the grassroots level. Improved buying power and less
intense competition should allow cigarette producers to increase their
selling prices, in our view. However, with limited upside to our TPs, we
maintain our neutral stance on the sector.
2018: a more level playing field. There are two key points in the 2018 excise
tax regulation that will create a more level playing field in the cigarette
industry. This will reduce the competition from cheaper cigarettes and benefit
the major cigarette players including HMSP and GGRM. The first point relates
to tier simplification which will push more producers into the higher tax
bracket. The second point concerns pricing. The government lowered
minimum selling prices for the end-retailers to 85% (from 90% previously),
GGRM relative to JCI Index accelerating the hike of banderol prices and pushing for higher tax revenues.
xxxx As a result, it is more difficult to offer cheap cigarettes to consumers. It is also
worth noting that the government will allow a 2-month payment delay for the
purchase of excise in the period from 15-31 Dec 2018.
Positive outlook for 2018. Following the better 3Q17 sales volume with ASP
hikes and a supportive outlook from 2018 excise, we are optimistic on the
prospects for both HMSP and GGRM next year. For HMSP, the company
should also benefit from additional regulations that will combine the total
production of SKM and SPM for the volume threshold of excise tax, starting in
2019. Therefore, we expect both companies to book positive volume growth
ranging from 1-2% in 2018. Combined with higher selling prices, we estimate
the sector to maintain an operating margin of 15.8%. Earnings growth should
Source : Bloomberg reach 10.1%.
x Natalia Sutanto
(62-21) 2955 5888 ext.3508
natalia.sutanto@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
HM Sampoerna HMSP IJ HOLD 4,400 517,616 39.5 36.2 14.9 14.3 40.3
Gudang Garam GGRM IJ HOLD 83,800 152,147 20.3 17.9 3.6 3.1 18.8
IDR/stick IDR/stick
590 400
600 365
530 345
500 290
300 275
415
400 375 235
325 200
290 200
300
200
100
100
0 0
2009 2011 2013 2015 2017 2018
2009 2011 2013 2015 2017 2018
Exhibit 3. HMSP volume (bn sticks) and market share Exhibit 4. GGRM volume (bn sticks) and market share
120 40.0%
34.9% 100 21.9% 22.0%
100 34.3% 33.4% 32.9% 35.0% 21.5%
80 80 21.5%
60 21%
60 30.0% 20.8% 21.0%
40
40
25.0% 20 20.5%
20 81 79 77 38.6
110 110 106 74 - 20.0%
- 20.0%
2014 2015 2016 1H17
2014 2015 2016 9M17
Voume (Bn sticks) - LHS Market share - RHS
Volume - LHS Market share - RHS
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. HMSP’ retail selling prices growth – Ytd Sept 2017 Exhibit 6. GGRM ex-factory selling prices growth - Ytd
Profitability to remain intact despite lower coal prices and higher costs. The
Source : Bloomberg gross margin of the coal mining companies under our coverage is expected to
decline to 31.9% in 2018 from 34.0% in 2017 reflecting: a) coal prices
consolidation, and b) higher cash costs of production arising from rising
energy costs with a higher crude oil price assumption of USD60/tonne for
2018 (2017F: USD55/tonne). Despite the expected decline in the gross margin,
it is still expected to be better than the gross margin in 2016 of 27.4%.
Top picks in the sector: ADRO, PTBA and UNTR. We continue to like coal
mining companies which have good earnings prospects over the long-term.
Our top picks in the sector are: a) Adaro Energy (ADRO) supported by business
diversification in power plants and coking coal along with adequate reserves
to provide long-term earnings growth and b) Bukit Asam (PTBA) with the
largest coal reserves and diversification into power plants. We also like United
Tractors (UNTR) as sturdy coal prices to sustain heavy equipment demand.
x Stefanus Darmagiri
(62-21) 29 555 831
stefanus.darmagiri@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Adaro Energy ADRO IJ BUY 2,200 57,575 8.5 8.9 1.2 1.2 13.3
Bukit Asam PTBA IJ BUY 2,900 26,742 8.0 8.1 2.0 1.8 23.5
Indo Tambangraya ITMG IJ HOLD 21,100 22,599 6.9 8.0 1.7 1.6 20.3
Harum Energy HRUM IJ HOLD 2,200 5,730 9.6 9.0 1.3 1.3 14.3
United Tractors UNTR IJ BUY 38,000 122,442 16.4 14.5 2.7 2.4 17.3
110 20.0
100
15.0
90
10.0
80
5.0
70
0.0
60
(5.0)
50
40 (10.0)
Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 2012 2013 2014 2015 2016 2017F 2018F
Source: Bloomberg Source: Resources and Energy Quarterly, ABS, IEA, Danareksa Sekuritas
Exhibit 3. Coal to dominate power generations in ASEAN Exhibit 4. Indonesia’s coal requirement for power plant
TWh Coal Oil mn tonnes
RUPTL PLN 2015-2024 RUPTL PLN 2016-2025
Natural Gas Nuclear 180
2,500 Hydro Geothermal RUPTL PLN 2017-2026
Other Renewables 160
2,000
140
1,500
120
1,000 168163 171165
157 151
148 150 148
100 138 138
133 127
500 119 122
106101 111 111
80 9892 99
85 89
0
2005 2015 2020F 2025F 2030F 2035F 2040F 60
2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F
Exhibit 5. Recovery in coal production in 2018 Exhibit 6. Coal Sector is currently trading at -1SD
% yoy growth (x )
40.0 30
30.0
20.0 25 2sd
10.0
0.0 20 1sd
(10.0)
15 mean
(20.0)
(30.0) 10 -1sd
(40.0)
(50.0) 5 -2sd
(60.0)
2011 2013 2015 2017F 2019F -
Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
Our Coverage ADRO HRUM ITMG PTBA
Source: Respective companies, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas
OVERWEIGHT Construction
Waiting for the tide to turn
PTPP relative to JCI Index Looking ahead to 2018, a year before the presidential elections, we believe
xxxx
that a lot of infrastructure projects will be tendered by the incumbent
government. Despite a challenging 2017, we are OVERWEIGHT on the sector
given: 1) the government’s plans to secure funding availability, 2) new
funding sources, and 3) the strong order books of the contractors thanks to
massive carry-over contracts.
New sources of funding. In 2017, efforts were made to find new sources of
funding which included assets securitization, project bonds, and Komodo
WIKA relative to JCI Index bonds. This is the first time that such funding sources have been used by a
xxxx domestic company in Indonesia. The pioneer was JSMR which managed to
raise funds totaling IDR7.5tn in 2017. We believe other companies might
follow suit in the near future.
Strong order books on the back of massive carry-over contracts. In 2015 total
new contracts booked by 4 SOE contractors reached IDR98tn, up 41%yoy. In
2016, the increase was even more marked: up 75%yoy to IDR172tn. Since the
construction period for most of the projects is two to three years, the SOE
contractors have seen massive contracts carry-over in their order books. The
contribution from carry-over contracts is expected to reach 58% of the
sector’s order book in 2018.
Source : Bloomberg Most SOE contractors are highly leveraged, yet still below the covenant. The
leverage of most SOE contractors has trended higher as they raised funds for
working capital and investments. Despite this, leverage remains below the
level stipulated in sectoral covenants of 3.0x. In fact, the highest leverage of
the contractors is still below 2.0x. Nonetheless, banks and financial
institutions are still willing to provide loans to the contractors as government
guarantees have been given to the projects.
Our top picks are PTPP and ADHI. Despite the rosy outlook, there are
concerns related to: 1) the lower new contracts growth ahead due to the high
base (owing to strong growth in previous years), 2) regulatory changes with
government intervention risks, and 3) the negative operating cash flow of
several contractors. We remain optimistic, however, since payments are
expected to be made for many projects in 2018. Our top picks in the sector
x Maria Renata are PTPP and ADHI. We like PTPP as its leverage is one of the lowest in the
(62-21) 2955 5888 ext.3513
sector giving the company plenty of room for debt raising if necessary for its
expansion. As for ADHI, sentiment should improve as the signing of the
maria.renata@danareksa.com
Jakarta LRT agreement in mid Dec 17 provides clarity on the project’s future.
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Pembangunan Perumahan PTPP IJ BUY 4,000 16,057.7 11.3 7.7 1.7 1.5 20.5
Adhi Karya WIKA IJ BUY 2,800 6,765.6 15.5 11.3 1.1 1.0 9.2
Wijaya Karya ADHI IJ BUY 2,100 14,172.5 13.0 10.7 1.2 1.1 10.5
Waskita Karya WSBP IJ BUY 3,000 29,998.3 9.8 8.1 2.2 1.8 24.6
Waskita Beton Precast WSKT IJ BUY 520 9,811.5 8.7 7.3 1.2 1.1 15.4
Wika Beton WTON IJ BUY 800 4,152.5 11.9 9.9 1.5 1.4 14.8
IDR Tn IDR Tn
500 400
410 342
390 350 310
400
317 300
300 256 250
200
200 156 155 150 119 107
90 95
100 100
50
0 -
2013 2014 2015 2016 Outlook APBN 2013 2014 2015 2016 Outlook APBN 2018
2017 2018 2017
Exhibit 3. Infrastructure and subsidy budget to state budget Exhibit 4. Contribution construction to GDP
Infrastructure budget Energy subsidy budget Construction (LHS) % to GDP (RHS)
IDR Tn %
Source: Respective companies, Danareksa Sekuritas estimates Source: Respective companies, Danareksa Sekuritas
NEUTRAL Consumer
Bright outlook but a bit pricey
ICBP relative to JCI Index Looking ahead to 2018, a year before the next election, we believe that
xxxx
more populist government policies will be implemented to please the
nation’s grassroots. Purchasing power should improve on the back of easing
cost pressures given the government’s 2018 state budget will increase
energy and health subsidies. This should help to support demand for
consumer products and sustain higher sector earnings growth of 10.8% yoy.
Pre-election = higher growth. In 2018, there will be 171 regional elections (on
27 June 2018) in 17 provinces, 115 municipalities and 39 cities. This is nearly
double the number of regional elections in 2017 (101 only). From the past two
presidential elections (2009 and 2014), data from consumer companies
depicts significant revenues growth on a yearly basis in the 4 quarters before
the elections. In 2009, the sector’s revenues increased by 11.2% yoy while in
2014 growth was higher at 14.2% yoy (in the 4 quarters prior to the elections).
Should this pattern be repeated in 2018-19, consumer companies will be
INDF relative to JCI Index positively impacted.
xxxx
Purchasing power boost from government programs. For 2018, the
government proposes ID94.6tn of energy subsidies, up 5.2% from the amount
in 2017’s revised budget. The government also plans for 10mn low-income
households (2017 target: 6mn) to receive non-cash social assistance. To
further support purchasing power, the government is also planning to launch
a cash-basis labor intensive program in 2018 to absorb job seekers as well as
provide direct income, with funding coming from village funds (2018:
IDR60tn). Combined with continued health subsidies, these government
programs should support purchasing power in the coming years, we believe.
Top pick in the sector: ICBP. Looking ahead to 2018, a year before the next
election, we believe that more populist government policies will be
implemented to please the nation’s grassroots. This should lead to a recovery
in purchasing power and bode well for the consumer sector. As such, we
continue to like the sector given its defensive nature with proven track record
x Natalia Sutanto and solid balance sheet (FY18F gearing 0.3x). However, with limited upside to
(62-21) 2955 5888 ext.3508
our TP, we maintain our neutral stance on the sector. Our top pick in the
sector is ICBP.
natalia.sutanto@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Indofood CBP ICBP IJ BUY 9,700 104,083 26.7 24.2 5.3 4.7 20.6
Indofood INDF IJ BUY 9,100 66,292 15.1 13.7 2.1 2.0 14.8
Kino Indonesia KINO IJ HOLD 2,100 2,886 25.2 20.0 1.4 1.4 7.0
Mayora Indah MYOR IJ HOLD 1,960 49,860 39.1 35.4 7.1 6.2 18.8
Unilever Indonesia UNVR IJ HOLD 52,000 404,390 57.1 51.4 74.9 65.5 135.8
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
- 0.0% -5.0% 4.4%
2009 2014
Revenue - yoy growth - rolling 2Q (RHS)
H-8Q to H-5Q H - 4Q Yoy growth (LHS) Household consumption - real yoy growth (LHS)
106.8 111
94.6 104.9
100 89.9
100 92.3
63.1 47.7
45.4
50 65.9
59.7
46.9 60
43.7 44.5 46.1
0
2016 2017- revise 2018
20
Fuel and LPG Electricity 2013 2014 2015 2016 2017F 2018F
Source: Ministry of Finance, Danareksa Sekuritas Source: Ministry of Finance, Danareksa Sekuritas
Exhibit 5. Sector’s quarterly revenues growth Exhibit 6. Growth and margins of the consumer sector
50,000 14% 20.0%
17.0%
12%
40,000 16.0%
10%
8% 13.0% 12.0%
30,000
6%
4% 8.0%
20,000 9.0%
2% 4.0%
10,000 0%
-2% 5.0% 0.0%
- -4% 2013 2014 2015 2016 2017F 2018F
1Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q17 Operating margin Earnings growth - yoy (RHS)
Cons sector revenue (RHS) yoy growth (LHS) Revenue growth - yoy (RHS)
The strong demand in 2017 may not be sustainable in 2018. In 9M17, the
companies under our coverage recorded industrial land sales of 62ha, up by
2.6%yoy. Going into 4Q17, we are convinced that the companies under our
coverage will achieve our targeted marketing sales of 109ha (+15.3%yoy),
slightly below the managements’ target of 110ha. This may not be sustainable
in 2018, however, given a lack of catalysts which could boost industrial land
DMAS relative to JCI Index sales next year either in relation to company expansion or factory relocation.
xxxx We argue that industrial land sales can be proxied by the Business Sentiment
Index (BSI). Since the BSI has tended to be volatile one year before the
elections, we expect lower industrial land sales to be recognized next year
(107ha in 2018 vs 109ha in 2017).
Source : Bloomberg Competitors do not pose a threat yet. From five industrial estate submarkets
in the greater Jakarta area, the main threat to the industrial players under our
coverage emanates from the Karawang submarket. In Karawang, Colliers
expects an additional 2,400ha of industrial estates. Although DMAS has the
closest proximity to the area, we do not expect the Karawang industrial
estates to pose a major threat in the near term, given: (i) the tendency of
customers to prefer ready-to-use land plots (from potential new supplies of
2,400ha, only 400ha have been developed), (ii) the narrowing price gap
between industrial estates in Karawang and industrial estates in Bekasi.
DMAS to gain the most. Our top pick in the sector is DMAS (BUY TP IDR240).
Although we expect lower industrial land sales to be recognized in 2018
overall, we still believe that DMAS will record more land sales (60ha) than
either BEST (40ha) or SSIA (7ha), supported by: (i) the highest level of
inquiries, (ii) less scattered land and the largest ready-for-sale land bank, (iii)
the competitive prices offered. We believe that the expected land sales in
x Antonia Febe Hartono, CFA 2018 will create positive sentiment on the stock as, historically, movements
(62-21) 2955 5888 ext.3504 on the discount to NAV are more driven by land sales volume.
antonia.hartono@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Bekasi Fajar BEST IJ BUY 320 2,412 4.9 4.4 0.6 0.6 13.2
Puradelta Lestari DMAS IJ BUY 240 8,049 10.1 9.5 1.1 1.0 11.1
Surya Semesta SSIA IJ HOLD 540 2,183 1.9 n/m 0.6 0.7 n/m
Exhibit 3. Aggregate revenue of companies under our coverage Exhibit 4. Gross land bank of companies under our coverage
in IDRbn in Ha
9,000 7,742 7,841 40% 1,200
6,842
7,000 6,215 6,301 30% 1,000
5,880 5,632 5,948 20% 800
5,000 10%
600
3,000 0%
400
-10%
1,000 200
-20%
(1,000) -30% -
2012 2013 2014 2015 2016 2017F 2018F 2019F
DMAS BEST SSIA
DMAS BEST SSIA Growth (RHS) Industrial Commercial Residential
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. Industrial estate’s historical discount to NAV Exhibit 6. Industrial estate’s sector historical forward trailing PE
60% (x )
-2SD 16
14 2sd
-1SD 12 1sd
65%
10
Mean mean 8.03
8
6 -1sd
70% +1SD
4 -2sd
2
+2SD 0
75% Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17
Jun 15 Dec 15 Jun 16 Dec 16 Jun 17
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
OVERWEIGHT Media
FTA TV ad spending will improve in 2018
SCMA relative to JCI Index We are positive on the outlook for the media sector in 2018 given: 1) FTA TV
xxxx
ad spending will improve in 2018 driven by local FMCG and internet
companies, 2) higher expected revenues growth for both SCMA and MNCN
as they maintain their leading positions in terms of audience share, 3)
content cost efficiencies which can drive better profitability and earnings,
and 4) attractive dividend yields for both SCMA and MNCN.
SCMA and MNCN to maintain their leading audience share positions; higher
revenues growth in 2018. SCMA and MNCN can be expected to maintain their
large scale advantage during the demand upturn next year despite stiffer
competition from ANTV. We expect MNCN to maintain its no. 1 position in
terms of audience share at 34-35% in 2017-18F with SCMA no. 2 with
audience share at 27-28% in 2017-18F. We forecast aggregate revenues
growth in 2018 of +5.5% yoy for SCMA and MNCN, taking into account: 1)
better expected SCTV and IVM revenues growth next year and 2) RCTI’s
recently booked billing commitments and more upside on MNCN’s content
Source : Bloomberg revenues from Malaysia’s DTH satellite pay-TV license.
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Surya Citra Media SCMA IJ BUY 2,800 35,823 24.1 22.4 9.6 8.6 40.5
Media Nusantara Citra MNCN IJ BUY 1,750 17,916 12.2 10.2 2.0 1.8 18.2
Source: Company, Danareksa Sekuritas Estimates Source: Company, Danareksa Sekuritas Estimates
Exhibit 3. Media vs. Cigarettes revenues growth yoy, % Exhibit 4. Media vs. Cigarettes ad spending growth yoy, %
Source: Company, Danareksa Sekuritas Estimates Source: Company, Danareksa Sekuritas Estimates
Exhibit 5. Indonesians spend more hours watching TV per week Exhibit 6. All Time Audience Shares, %
NICKEL: Nickel prices have revived. This owes to: a) nickel supply concerns
following the closure of over half of the nickel mining area in the Philippines
due to environmental concerns, b) greater demand from stainless steel
producers and c) new demand from the greater usage of nickel in the
rechargeable batteries for electric vehicles. The government of Indonesia
relaxed the nickel ore export ban in the beginning of the year which put some
pressure on the nickel price in the beginning of 2017.
Slow but sure for the nickel price in 2018. With greater nickel ore production
INCO relative to JCI Index from Indonesia on relaxation of the export ban and from the Philippines on
xxxx the possibility of the resumption of mining operations to ease supply
concerns, we expect the nickel price to increase going forward but at a slow
pace on the continuation of modest demand growth going forward. With the
average nickel price at USD10,500/tonne for 2017, it is expected to increase
gradually to USD11,000/tonne in 2018 and USD11,500/tonne in 2019.
TIN: Rising exports of tin from Indonesia in 2017. With stronger refined tin
prices averaging around US20,121/tonne in 11M17 (+14.0% yoy), tin miners in
Indonesia boosted their refined tin production in 2017. As such, refined tin
exports from Indonesia increased by 23.7% yoy to 71,134 tonnes in 11M17.
Given limited tin reserves from Indonesia, we expect lower refined tin exports
from Indonesia in 2018.
Source : Bloomberg
Tin market outlook 2018: supply risks to outweigh muted tin demand. We
expect muted refined tin demand due to the continued miniaturization of
electronic equipment (meaning lower solder usage). For 2018, ITRI expects
global refined tin consumption growth of only 0.8% yoy. However, we expect
supply risks to persist as peak production in Myanmar will limit supply growth.
Almost all the tin-ore imported by China comes from Myanmar. Moreover,
limited reserves will also be reflected in tin ore production in Indonesia. As
such, with global refined tin production to remain flattish, this will be
reflected in a global market deficit in refined tin in 2018. We assume an
average refined tin price of USD21,000/tonne in 2018 and USD22,000/tonne
in 2019.
Top picks: TINS. Within metal-mining, we prefer tin due to supply risk amid
muted demand growth, whereas nickel will only show strong demand in the
longer term. We like TINS given the expectation of better tin prices and
production volume which will enhance net profits. For nickel exposure, INCO
x Stefanus Darmagiri is preferable since the company’s share price is heavily correlated to nickel
(62-21) 29 555 831 price movements.
stefanus.darmagiri@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Timah TINS IJ BUY 1,100 5,958 23.2 22.5 1.0 1.0 6.2
Vale Indonesia INCO IJ HOLD 3,100 28,319 n/m 111.7 1.1 1.1 1.0
Aneka Tambang ANTM IJ HOLD 700 15,139 n/m n/m 0.8 0.8 (0.4)
Source: Bloomberg Source: Resources and Energy Quarterly, ABS, IEA, Danareksa Sekuritas
Exhibit 3. Combine nickel inventory level Exhibit 4. China’s nickel based stainless steel production
tonnes '000 tonnes
600,000 LME Inventory SHFE Inventory
1,900
500,000 1,800
1,700
400,000 1,600
300,000 1,500
1,400
200,000
1,300
100,000 1,200
1,100
0
1,000
Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
NEUTRAL Pharmaceutical
Plenty of room for growth but high valuations
KAEF relative to JCI Index The government’s continued focus on providing better healthcare
xxxx
facilities/access and an increasing aging population ahead should ensure
solid growth for pharmaceutical companies, in our view. It is also worth
noting that in 2018, the government allocated 5% of the total state budget
for healthcare spending - the main source of growth for pharmaceutical
companies over the past few years. Nonetheless, valuations in the sector are
at a premium. As such, we maintain our NEUTRAL stance on the sector.
FY18F sector earnings growth of 10.5% yoy. At present, the growth in the
pharmaceutical industry hinges on government spending on healthcare. For
2018, the government will continue to allocate 5% of the total state budget
for healthcare spending (IDR110.2tn), while the Ministry of Health’s allocation
for JKN reached IDR25.5tn. Against this backdrop, we expect the
Source : Bloomberg pharmaceutical companies under our coverage to book 2018F top line growth
of 9.9% yoy. For Kalbe Farma, the increasing contribution from generic drugs
will put pressure on margins in the prescription division. However, thanks to
the solid performance of the OTC/Consumer Health and nutrition segments,
we estimate the company to maintain margins in 2018F, thereby allowing
10.3% yoy earnings growth. For Kimia Farma, we believe the company
remains the major beneficiary of the National Health Program. As such, we
estimate that KAEF will book FY17 top line and bottom line growth of 13.8%
and 12.1% yoy, respectively.
Exhibit 3. Population above 65 years old – 2015-2035 (%) Exhibit 4. Healthcare allocation in government spending (IDR tn)
% of total 140
population
16 14.44 111
104.9
14
11.9 100 92.3
12
9.79
10
8.03 65.9
8 6.86 59.7
60
6 46.1
4
2
20
0
2013 2014 2015 2016 2017F 2018F
2015 2020 2025 2030 2035
Exhibit 5. KLBF revenue, operating & earnings, 2015-18F Exhibit 6. KAEF revenue, operating and earnings, 2015-18F
25 20.0% 8.0 20.0%
15.0% 14.1%
6.0 12.1% 15.0%
14.7% 10.0%
15 4.0 10.0%
10.3%
5.0%
2.0 2.1% 2.3% 5.0%
4.9%
0.0%
- 0.0%
5 -5.0% 2015 2016 2017F 2018F
-3.0%
2015 2016 2017F 2018F
Revenue - IDR tn (LHS) Operating margin (RHS)
Revenue - IDR tn (LHS) Operating margin (RHS)
NEUTRAL Plantation
2018: The Year of Indifference
AALI relative to JCI Index We forecast a higher stock-to-use ratio of 19.0% (vs. 17.0% in FY17) despite
xxxx
stronger consumption with potential higher palm oil imports by India and
China. However, higher production from continued yield recovery could
counter the positive impact of stronger demand. We assume CPO prices of
MYR2,800/ton and MYR2,700/ton in FY17 and FY18 respectively. Maintain
neutral on the plantation sector.
Maintain neutral. We stick with our neutral call on the sector, with LSIP as our
top pick given its cheap valuation, clean balance sheet and good stock
liquidity. We think LSIP will be the best play to monetize short-term volatility
in CPO prices. We assume a CPO price of MYR2,800/ton and MYR2,700/ton in
FY17 and FY18 respectively. Currently, the sector is trading at 13.2x PE (-1SD)
and EV/Ha of USD8,149 (-1.5SD).
x Yudha Gautama
(62-21) 2955 5888 ext 3509
yudha.gautama@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Astra Agro Lestari AALI IJ HOLD 14,300 25,117.2 13.2 13.6 1.4 1.3 9.7
London Sumatra LSIP IJ BUY 1,770 8,627.3 10.5 10.4 1.0 1.0 9.8
Sampoerna Agro SGRO IJ SELL 2,240 4,673.9 16.5 15.5 1.3 1.2 8.0
Exhibit 3. CHINA PALM OIL INVENTORY STILL BELOW AVERAGE Exhibit 4. INDONESIA BIODIESEL ABSORPTION TREND
(mn tons) (mn KL)
1.60 3.00 2.74
1.40
2.50
1.20
1.00 2.00 1.84 1.79
0.80
1.50
0.60 1.05
0.92
0.40 1.00
0.67
0.20 0.36
0.50
0.22
-
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
May-12
May-13
May-14
May-15
May-16
May-17
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
-
2010 2011 2012 2013 2014 2015 2016 11M17
Indonesia Biodiesel Absorption (mn KL)
China Palm Oil Inventory (mn tons)
18,000 +2 sd
25.0 +2 sd
16,000 +1 sd
+1 sd
20.0 14,000
mean mean
12,000
15.0 -1 sd 10,000 -1 sd
8,000
10.0 -2 sd -2 sd
6,000
5.0 4,000
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
P/E -2 std -1 std mean +1 std +2 std EV/Ha -2 std -1 std mean +1 std +2 std
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
NEUTRAL Poultry
Expecting better stability in supply and demand
CPIN relative to JCI Index We are currently expecting a narrowing gap between DOC and Broiler supply
xxxx and demand, thanks to continuous efforts from the government through
culling programs, which will result in much more stable ASP outlook. The key
growth driver for poultry players, we think, will be in volume terms instead
of ASP, which will benefit big poultry players like CPIN and JPFA the most
due to its large economic of scale. Meanwhile, corn prices have been in an
attempt to be hedged by building more dry corn silos.
Hedging corn price strategy implemented. The main concern for poultry
industry in 2017 has been higher corn prices since the government banned
Source : Bloomberg import corn in early 2017 for local farmer protection. The government has set
up a floor price for local corn price at around IDR4,000/kg but this price is
even higher compared to the normal import corn price, which is usually in
range of IDR3,200-3,500/kg. Many smaller non-listed poultry companies
became less competitive due to 1) weak infrastructure, 2) smaller economic
scale, and 3) weak cost structure that have made them unable to hedge the
corn price fully. This, we believe, once again has been benefitting large poultry
players the most, such as CPIN and JPFA.
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Charoen Pokphand Ind. CPIN IJ HOLD 3,100 50,997.8 19.8 15.0 3.1 2.6 19.1
Japfa Comfeed Indonesia JPFA IJ BUY 1,650 14,776.6 10.6 8.4 1.5 1.3 16.0
Malindo Feedmill Indonesia MAIN IJ HOLD 800 1,656.7 42.0 22.0 0.9 0.8 3.9
Source: JPFA Survey in West Java Source: JFPA Survey in West Java
Exhibit 3. Corn ASP +5% sensitivity to net profits Exhibit 4. Soybean meal ASP +5% sensitivity to net profits
Source: Company, Danareksa Sekuritas Estimates Source: Company, Danareksa Sekuritas Estimates
Exhibit 5. DOC ASP +5% sensitivity to net profits Exhibit 2. Broiler ASP +5% sensitivity to net profits
Source: Company, Danareksa Sekuritas Estimates Source: Company, Danareksa Sekuritas Estimates
NEUTRAL Property
Best to be selective
ASRI relative to JCI Index We maintain our NEUTRAL stance on the property sector for 2018. We do
xxxx
not see much improvement next year as we believe investors will be
reluctant to invest in property, while marketing sales will mostly be
supported by real homebuyers. Our top picks in the sector are PWON and
CTRA, which we believe will deliver strong financial performance in 2018
(with 15.4%yoy and 25.3%yoy revenue growth), outperforming its peers that
only recorded flat revenue growth (+0.7%yoy).
Marketing sales in 11M17: still underpinned by bulk sales. In 11M17, based
on the indicative numbers, the aggregate marketing sales reached IDR20.6tn,
up by IDR1.9tn compared to the marketing sales in 10M17. This figure is
76.8% of the full year management marketing sales target of IDR26.8tn and
90.7% of our marketing sales target of IDR22.7tn. Among the individual
companies, we note that BSDE, PWON, and SMRA managed to outperform
their peers with their 11M17 marketing sales reaching 96.9%, 85.4%, and
87.4% of their targets. As such, we expect these companies to meet or fall
BSDE relative to JCI Index only slightly short (with 90-91% achievement) of their marketing sales targets.
xxxx
Outlook for 2018: Remain NEUTRAL. We do not foresee much improvement
in property demand in 2018 (we only expect aggregate marketing sales to
grow by 8.6%yoy, higher than our 2017 marketing sales growth estimate of
2.7%) as we believe that marketing sales will still be supported by real
homebuyers rather than investors. We believe that investors will remain
reluctant to invest in property considering: (i) limited price appreciation, (ii)
the historically low rental yields, (iii) the considerable price gap between the
primary and secondary property markets, (iv) uncertainty regarding the
presidential elections, (v) scrutiny from the tax authorities which encourages
people to place their money in banks or to invest in higher yielding assets,
such as government bonds.
Source : Bloomberg The varied take-up rates imply that buyers remain selective. Based on our
mapping of 34 launches conducted by companies under our coverage in 2017,
we note that the take-up rates for the product launches range widely from
one project to another. For instance, from 19 landed residential projects
launched in 11M17, the take-up rates range from 10.6% (Amarine phase 2
with 85 units available for sale) to 100% (Alegria with 184 units available for
sale). This clearly shows that customers remain selective when buying
property. While we do not foresee much improvement in demand in 2018, we
also believe that buyers will remain selective.
PWON and CTRA are our Top Picks for 2018. Given our optimism on the
outlook for the retail property segment, we believe PWON (BUY IDR720) -
which has the highest contribution from this segment - will outperform its
peers and deliver strong financial performance. In addition, we also expect
CTRA (BUY IDR1,350) to deliver strong financial performance in 2018 on the
x Antonia Febe Hartono, CFA back of revenues recognition from the bulk sales of serviced apartments, and
(62-21) 2955 5888 ext.3504
(ii) the normalization of revenues recognition after two years of slow revenues
recognition in 2015 and 2016. We have BUY call on SMRA due to cheap
antonia.hartono@danareksa.com
valuation.
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Alam Sutra ASRI IJ HOLD 400 7,034 5.0 8.7 0.8 0.8 9.4
Bumi Serpong Damai BSDE IJ BUY 2,000 31,950 8.1 11.5 1.3 1.2 10.9
Ciputra Development CTRA IJ BUY 1,350 17,970 23.1 14.4 1.6 1.4 10.5
Pakuwon Jati PWON IJ BUY 720 30,581 16.0 12.9 3.0 2.5 20.9
Summarecon Agung SMRA IJ BUY 1,100 12,407 43.2 32.9 1.9 1.8 5.7
Exhibit 3. Revenue contribution of companies under our coverage Exhibit 4. Payment profile of companies under our coverage
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
CTRA PWON ASRI SMRA BSDE CTRA BSDE SMRA ASRI PWON
Development Shopping centre Hotel Other recurring Inhouse financing Mortgage Cash
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. Properties’ historical discount to NAV Exhibit 6. Property’s sector historical forward trailing PE
45.0% (x )
-2SD 29
50.0%
24 2sd
-1SD
55.0% 19 1sd
Mean
mean14.09
60.0% 14
-1sd
+1SD
65.0% 9
-2sd
+2SD 4
70.0%
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
Jun 2016 Sep 2016 Dec 2016Mar 2017 Jun 2017 Sep 2017
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
OVERWEIGHT Retail
Benefitting from populist policies in 2018
RALS relative to JCI Index Taking advantage of the pre-elections year, we think this is a good
xxxx momentum play to invest on retail stocks for seasonality basis as we expect
a better Lebaran sales in 2018. Our top pick within the retail sector is RALS.
The penetration of e-commerce is inevitable in the next 5-7 years horizon, in
our view, but still in early stage for 2018. Continuous gross retail expansions
are on the cards, with companies focus on continue to be more efficient. We
are overweight on the retail sector.
The penetration of e-commerce is inevitable yet still in early stage next year.
E-commerce penetration is inevitable in the next 5-7 years horizon, but in our
view looking at 2018 alone, we believe the penetration is still in infancy (<10%
of overall retail transaction in Indonesia). Some limitation of growth are still
there, namely 1) low penetration of credit cards, 2) fears over online payment
fraud, 3) high logistic costs, and 4) limited local investors to fund the e-
commerce startups.
Top pick: RALS for momentum play. As we are currently expecting a better
Lebaran sales in 2018, we think this is a good momentum play to invest into a
stock like RALS for seasonality basis. RALS is our top pick in the sector given 1)
better expected 2018F sales performance to be followed by improving SSSG
and 2) a stable profits outlook, 3) a healthy balance sheet with strong cash
position, and 4) an attractive valuation. Risks to our call include lower than
expected GDP growth and lower purchasing power in 2018.
x Adeline Solaiman
(62-21) 2955 5888 ext.3503
adeline.solaiman@danareksa.com
Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (IDR) (IDRbn) 2017F 2018F 2017F 2018F 2018F
Ramayana Lestari Sentosa RALS IJ BUY 1,250 6,907.6 16.9 16.0 2.0 1.8 11.8
Matahari Department Store LPPF IJ BUY 12,500 30,920.2 16.0 14.9 13.1 10.0 76.0
Ace Hardware Indonesia ACES IJ BUY 1,300 19,519.9 24.9 22.1 6.2 5.9 27.3
Mitra Adiperkasa MAPI IJ BUY 8,100 10,252.9 26.9 20.6 2.9 2.6 13.2
Erajaya Swasembada ERAA IJ BUY 1,100 2,218.5 7.5 6.7 0.6 0.6 18.8
Matahari Putra Prima MPPA IJ SELL 350 2,291.0 n/m 54.7 1.0 1.0 1.8
EPS Consensus(IDR)
Profits stability; better earnings delivery. Due to solid expected sales next year,
we expect profitability to remain at least stable. This will filter through to better
2017F 2018F 2019F expected earnings delivery in 2018 of around 12.5% yoy. Meanwhile, on the
Danareksa 46.0 51.7 57.0 balance sheet side, ACES will remain in a strong net cash position. Also, the
Consensus 45.1 50.7 55.9 stock is expected to have a decent dividend yield at around 3.8% in our
Danareksa/Cons 2.0 2.1 2.0
estimate.
ACES relative to JCI Index Expected USD/IDR stability will cushion overall performance. Expected
USD/IDR stability will cushion solid performance for ACES’ overall performance
in 2018 as we notice that nearly 80% of ACES’ goods are imported. Based on
our sensitivity analysis, every 3% weakening of the USD/IDR will likely lead to
4-5% lower overall net profits. EPS growth is estimated to reach 12.5% yoy in
2018F.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Adeline Solaiman Revenue, (IDRbn) 4,743 4,936 5,769 6,483 7,142
(62-21) 2955 5888 ext.3503 EBITDA, (IDRbn) 759 795 973 1,097 1,212
adeline.solaiman@danareksa.com EBITDA Growth, (%) 2.4 4.7 22.4 12.8 10.5
Net profit (IDRbn) 588 713 783 882 972
EPS (IDR) 34.5 41.9 46.0 51.7 57.0
Natalia Sutanto
(62-21) 2955 5888 ext.3508
EPS growth (%) 5.1 21.3 9.8 12.5 10.2
natalia.sutanto@danareksa.com BVPS, (IDR) 154.2 179.1 185.4 193.3 201.0
DPS, (IDR) 15.6 16.7 39.8 43.9 49.4
PER (x) 33.2 27.4 24.9 22.1 20.1
PBV (x) 7.4 6.4 6.2 5.9 5.7
Dividend yield (%) 1.4 1.5 3.5 3.8 4.3
EV/EBITDA (x) 24.9 23.7 19.2 17.0 15.3
Source : ACES, Danareksa Estimates
ST Debt 22 5 5 5 5
Payables 127 108 189 181 267
Other Curr. Liabilities 262 276 280 284 288
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 226 294 297 300 303
Total Liabilities 639 682 771 770 863
Shareholder'sFunds 2,628 3,054 3,160 3,295 3,427
Minority interests 1 (5) 0 0 0
Total Equity & Liabilities 3,268 3,731 3,931 4,065 4,290
Potential growth from AMC. As Balangan’s thermal coal mine is only expected
EPS Consensus(USD Cents) to sustain its coal production as one concession will only start operation in 2019
(although the long-term coal production for this mine is expected to reach 7 –
2017F 2018F 2019F
8mn tonnes in the future), we expect potential growth to come from the
Danareksa 1.6 1.5 1.4 development of AMC as it has resources of around 1.27bn tonnes. AMC
Consensus 1.5 1.5 1.5 currently only operates 1 out of 7 CCoWs at Haju Mine with annual production
Danareksa/Cons 4.0 (1.1) (5.0) capacity of 1mn tonnes.
ADRO relative to JCI Index The power business shall sustain long-term growth. The company’s business
diversification into power plants is expected to sustain the company’s growth
over the long-term. This will help the company to reduce the volatility in its
current business models. In the power business, the subsidiary of ADRO, BPI is
expected to complete the construction of the Batang Power Plant (in which it
has a 34% stake) by 2020. ADRO is expected to supply around 5mn tonnes of
coal per annum to this power plant.
Maintain BUY with target price of IDR2,200 (based on DCF valuation with WACC
of 9.9%). We continue to like ADRO on its business diversification into power
plants which should sustain growth supported by adequate reserves. Our target
price implies 11.9x 2018F PE.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (USDmn) 2,684 2,524 3,303 3,371 3,374
EBITDA, (USDmn) 735 869 1,361 1,313 1,275
EBITDA Growth, (%) (15.8) 18.2 56.6 (3.5) (2.9)
Net profit (USDmn) 152 335 499 474 456
EPS (USDCents) 0.5 1.0 1.6 1.5 1.4
Stefanus Darmagiri EPS growth (%) (14.3) 119.5 49.2 (5.0) (3.9)
(62-21) 29 555 831
BVPS, (USDCents) 9.0 9.8 10.8 11.4 12.0
stefanus.darmagiri@danareksa.com
DPS, (USDCents) 0.2 0.2 0.2 0.6 0.9
PER (x) 27.8 12.7 8.5 8.9 9.3
PBV (x) 1.5 1.3 1.2 1.2 1.1
Dividend yield (%) 1.8 1.8 1.8 4.3 6.5
EV/EBITDA (x) 6.9 5.3 3.0 2.8 2.6
Source : ADRO, Danareksa Estimates
EPS Consensus(IDR)
….While ADHI acts as the contractor. ADHI is expected to use the IDR1.4tn of
funds received from its capital injection in 2015 for the development of TOD
2017F 2018F 2019F and depots. From the total construction costs of IDR22.0tn, ADHI is expected to
Danareksa 126.7 173.9 147.1 provide around IDR4.0tn by leveraging the IDR1.4tn capital injection received.
Consensus 146.9 220.0 259.5 Hence, ADHI is looking for IDR3.0tn-4.0tn of debts from overseas creditors with
Danareksa/Cons (13.7) (20.9) (43.3)
financial closing expected in Mar 18.
ADHI relative to JCI Index The first tranche of payment for the LRT project is targeted for Jan 18. So far
ADHI has not received any payment from the project while the receivables from
this project reached IDR4.3tn as of Sep 17. The value is expected to reach
around IDR5.0tn as of Dec 17. The first payment to ADHI is expected to be made
in mid-Jan 18. ADHI’s DER stood at 1.41x as of Sep 17. Assuming a maximum
DER of 3.0x and equity value of IDR5.6tn, the company may potentially raise
IDR8.8tn of funds through debts.
Maintain BUY. We expect the 2018 revenues to grow by 44.8% yoy and the net
income to grow by 37.3% yoy given the higher contribution from the Jakarta
LRT. We expect the project to generate IDR10.0tn of revenues in 2018 or double
the amount in 2017. Our target price of IDR2,800 implies 2018 PE of 15.7x.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 9,390 11,064 14,160 20,506 17,544
EBITDA, (IDRbn) 579 671 982 1,428 1,249
EBITDA Growth, (%) (8.0) 15.8 46.3 45.4 (12.5)
Net profit (IDRbn) 464 313 451 619 524
EPS (IDR) 202.8 88.0 126.7 173.9 147.1
Maria Renata EPS growth (%) 12.7 (56.6) 43.9 37.3 (15.4)
(62-21) 2955 5888 ext.3513 BVPS, (IDR) 2,254.5 1,525.8 1,738.9 2,028.7 2,243.1
maria.renata@danareksa.com
DPS, (IDR) 18.2 26.2 20.2 29.0 39.8
PER (x) 9.7 22.4 15.5 11.3 13.4
PBV (x) 0.9 1.3 1.1 1.0 0.9
Dividend yield (%) 0.9 1.3 1.0 1.5 2.0
EV/EBITDA (x) 10.0 11.8 9.6 7.9 8.9
Source : ADHI, Danareksa Estimates
Major shareholders
Rising ferronickel sales volume. Despite repair works conducted in 1Q17,
ANTM expects a slight increase in ferronickel production volume to 21,000
Government of Indonesia 65.0%
tonnes in 2017 (2016: 20,293 tonnes). The ferronickel production is expected
Estimated Free Float 35.0% to increase further to 23,000 tonnes in 2018 thanks to integration of the
Estimated free float (%) 35.0 operations of Pomalaa Ferronickel Plan Expansion Project (P3FP). Ferronickel
production jumped by 9.9% yoy to 15,813 tonnes in 9M17.
EPS Consensus(IDR)
2017F 2018F 2019F Energy conversion to coal lowered cash costs of production. The completion
Danareksa (11.0) (2.8) 0.3
of the construction of a coal based power plant with capacity of 2x30MW at
ANTM’s Pomalaa mining area in 4Q17 will help ANTM to maintain ferronickel
Consensus 3.2 6.7 21.0
cash costs of production at a competitive level. However, the company
Danareksa/Cons (440.5) (142.1) (98.8) experienced higher ferronickel cash costs (+4.1% yoy to USD3.52/lb in 9M17),
which, we believe, were due to higher coal prices and higher crude oil prices.
ANTM relative to JCI Index
Evaluating its investment at CGA. Due to the challenges from the operation of
Tayan Chemical Grade Alumina (CGA), Showa Denko (SDK) has ceased its
partnership with ANTM in the Tayan CGA project. SDK conveyed its 20% interest
in Tayan CGA to ANTM and/or a third party. As such, ANTM and its independent
advisors are conducting thorough financial, legal and commercial evaluations.
ANTM owns an 80% stake in the project.
Maintain HOLD. ANTM is expecting to book better earnings in 2018 owing to
higher nickel ore and ferronickel sales volume and better nickel prices albeit
with growth at a slow rate. However, the challenging operations of Tayan CGA
will impact the company’s earnings. Maintain HOLD with a target price of Rp700
(based on DCF valuation with WACC of 9.6% and long-term growth of 3%).
Source : Bloomberg Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 10,532 9,106 8,997 10,784 11,128
EBITDA, (IDRbn) 57 676 723 778 926
EBITDA Growth, (%) (91.3) 1,076.3 7.0 7.5 19.0
Net profit (IDRbn) (1,441) 65 (264) (68) 6
EPS (IDR) (109.5) 2.7 (11.0) (2.8) 0.3
Stefanus Darmagiri EPS growth (%) 40.4 (102.5) (507.2) (74.4) (108.9)
(62-21) 29 555 831 BVPS, (IDR) 1,391.7 766.1 755.1 752.3 752.5
stefanus.darmagiri@danareksa.com DPS, (IDR) 0.0 0.0 0.0 0.0 0.0
PER (x) n/m 233.6 n/m n/m 2,505.2
PBV (x) 0.5 0.8 0.8 0.8 0.8
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
EV/EBITDA (x) 303.1 26.1 26.9 29.2 26.5
Source : ANTM, Danareksa Estimates
Maintain BUY. While we expect the intense competition in the domestic car
market to persist, we maintain BUY recommendation as the stock offers upside
to our target price of IDR9,200 (based on SOTP valuation) with strong
performance from heavy equipment and the mining business expected to
support earnings in 2018. Our target price implies 17.8x 2018F PE.
Key Financials
Source : Bloomberg
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
PPOP, (IDRbn) 26,162 30,400 34,155 37,878 43,267
Net profit (IDRbn) 18,019 20,606 23,620 27,068 31,682
EPS (IDR) 730.8 835.8 958.0 1,097.9 1,285.0
EPS growth (%) 9.3 14.4 14.6 14.6 17.0
BVPS, (IDR) 3,624.8 4,560.3 5,371.7 6,310.6 7,429.3
PER (x) 28.9 25.2 22.0 19.2 16.4
Eka Savitri
(62-21) 2955 5888 ext 3506 PBV (x) 5.8 4.6 3.9 3.3 2.8
eka.savitri@danareksa.co.id Dividend yield (%) 0.6 0.6 0.7 0.8 0.8
ROAE (%) 21.9 20.5 19.3 18.8 18.7
Source : BBCA, Danareksa Estimates
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
PPOP, (IDRbn) 38,382 43,258 45,051 48,088 51,319
Net profit (IDRbn) 20,335 13,807 19,555 23,590 28,094
EPS (IDR) 435.7 295.9 419.0 505.5 602.0
EPS growth (%) 2.3 (32.1) 41.6 20.6 19.1
Eka Savitri BVPS, (IDR) 2,508.6 3,221.6 3,452.1 3,755.4 4,176.8
(62-21) 2955 5888 ext 3506
eka.savitri@danareksa.co.id PER (x) 17.2 25.3 17.8 14.8 12.4
PBV (x) 3.0 2.3 2.2 2.0 1.8
Dividend yield (%) 1.7 1.8 2.5 2.7 2.4
ROAE (%) 18.5 10.3 12.6 14.0 15.2
Source : BMRI, Danareksa Estimates
BUY with a TP of IDR830. We maintain our BUY call on BJTM with a GGM-
derived TP of IDR830 assuming 11% CoE, 15.1% sustainable ROAE and 3% long-
term growth. Our TP implies 1.5x 2018F P/BV. We believe that our target P/BV
multiple is reasonable given the ROAE projection is above the 16% level for the
next three years.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
PPOP, (IDRbn) 3,427 4,060 4,770 5,652 6,474
Net profit (IDRbn) 1,851 2,619 3,135 3,658 4,241
EPS (IDR) 174.9 247.4 296.1 345.5 400.6
EPS growth (%) 61.3 41.5 19.7 16.7 15.9
Eka Savitri BVPS, (IDR) 1,309.4 1,806.9 2,043.8 2,320.2 2,648.7
(62-21) 2955 5888 ext 3506
eka.savitri@danareksa.co.id PER (x) 16.6 11.7 9.8 8.4 7.2
PBV (x) 2.2 1.6 1.4 1.2 1.1
Dividend yield (%) 1.2 1.7 2.0 2.4 2.5
ROAE (%) 14.2 15.9 15.4 15.8 16.1
Source : BBTN, Danareksa Estimates
Key Financials
Source : Bloomberg Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
PPOP, (IDRbn) 3,246 3,479 2,919 3,572 4,006
23
Net profit (IDRbn) 1,702 1,752 1,273 1,628 1,945
EPS (IDR) 291.4 305.0 221.6 283.3 338.5
EPS growth (%) (8.9) 4.7 (27.3) 27.8 19.5
BVPS, (IDR) 2,367.9 2,797.9 2,900.8 3,099.1 3,346.2
PER (x) 8.5 8.1 11.2 8.8 7.3
Eka Savitri PBV (x) 1.0 0.9 0.9 0.8 0.7
(62-21) 2955 5888 ext 3506
eka.savitri@danareksa.co.id Dividend yield (%) 0.0 4.0 3.1 3.4 3.7
ROAE (%) 13.2 11.7 7.8 9.4 10.5
Source : BTPN, Danareksa Estimates
BEST relative to JCI Index Stellar financial performance expected in 4Q17 and 2018. We expect BEST to
record stellar financial performance in 4Q17, mainly supported by recognition
of 13ha of industrial land sales. Revenues are expected to reach IDR436bn
(+103.8%qoq) in 4Q17 with net profits of IDR162bn (+45.8%qoq). Meanwhile,
for 2018, we expect BEST to record 13.8%yoy revenues growth and 11.3%yoy
net profits growth, backed by an estimated 31ha backlog.
Reiterate BUY. We reiterate our BUY call on BEST with target price of IDR320.
In arriving on our target price, we use NAV based valuation. BEST currently
trades at a 78.3% discount to NAV, or nears to its historical +1SD discount to
NAV of 78.1%.
Expect a higher stripping ratio. Despite firm coal prices, PTBA’s stripping ratio
EPS Consensus(IDR) fell to 3.8x in 9M17 from 5.5x in 9M16. Hence, the total costs declined by 13.2%
2017F 2018F 2019F yoy. And with the company expecting a higher stripping ratio of around 4.5 –
Danareksa 306.5 305.1 330.1
5.0x for 2018 (up from this year’s expectation of 4.0x), cash costs will increase
further. As such, we expect a slight decline in the net margin to 18.7% in 2018
Consensus 287.5 280.3 278.1
from 18.9% in 2017.
Danareksa/Cons 6.6 8.9 18.7
PTBA relative to JCI Index The power business to sustain growth in the medium term. The company
currently operates three coal-based power plants, namely: a) Banjarsari
2x110MW, b) Tanjung Enim 3x10MW and c) Tarahan Port 2x8MW. Moreover,
its subsidiary Huadian Bukit Asam Power (HBAP) – in which PTBA has a 45%
stake - recently signed a power purchase agreement amendment with PLN for
the Central Banko power plant (Sumsel 8) with capacity of 2 x 620 MW. With
investment costs of USD1.7bn and an expected commercial operation date of
2021, the power business will provide sustained growth in earnings over the
medium term.
Maintain BUY with target price of IDR2,900 (based on DCF valuation with WACC
of 11.5% and long-term growth of 3%). The stock is currently trading
undemanding at 8.1x 2018F PE. Our target price implies 2018F PE of 9.5x.
Source : Bloomberg Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 13,734 14,059 17,653 17,743 19,753
EBITDA, (IDRbn) 2,826 2,876 4,662 4,768 5,281
EBITDA Growth, (%) 21.0 1.8 62.1 2.3 10.8
Net profit (IDRbn) 2,036 2,006 3,332 3,317 3,588
EPS (IDR) 187.3 184.6 306.5 305.1 330.1
Stefanus Darmagiri EPS growth (%) 9.4 (1.5) 66.1 (0.5) 8.2
(62-21) 29 555 831 BVPS, (IDR) 844.0 958.7 1,200.6 1,398.4 1,621.8
stefanus.darmagiri@danareksa.com DPS, (IDR) 64.9 56.2 64.6 107.3 106.8
PER (x) 13.1 13.3 8.0 8.1 7.5
PBV (x) 2.9 2.6 2.0 1.8 1.5
Dividend yield (%) 2.6 2.3 2.6 4.4 4.3
EV/EBITDA (x) 9.1 8.8 5.3 5.5 5.2
Source : PTBA, Danareksa Estimates
EPS Consensus(IDR)
Culling programs will help to stabilize DOC and Broiler ASP. Supported by the
government’s effort to reduce the supply and demand imbalances in the
2017F 2018F 2019F market, we expect that the trend of DOC and Broiler ASP is going to be much
Danareksa 157.1 207.7 250.9 more stable in the following years compared to 2015 level. We think the
Consensus 156.9 213.6 254.3 government’s will continue to propose more culling programs in 2018 to further
Danareksa/Cons 0.1 (2.8) (1.4)
tackle of the oversupply issues which we think will likely to remain in 2018.
CPIN relative to JCI Index Focus on corn price management. Internally, the management focus going
forward will be more on corn price hedging strategy. In this regard, CPIN will
utilize its dry corn silos. With better integrated infrastructure than its peers,
JPFA and MAIN, CPIN is well placed to manage its cost more effectively. The
recent increases in corn prices will particularly impact smaller poultry players,
making them less competitive. Against this backdrop (better cost efficiency
management and more stable DOC and Broiler ASP), we expect better gross
margins in 2018. This, we believe will translate to a better EBITDA margins and
earnings delivery.
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 29,921 38,257 50,612 56,483 62,848
EBITDA, (IDRbn) 4,032 5,225 4,678 5,747 6,721
EBITDA Growth, (%) 30.6 29.6 (10.5) 22.8 17.0
Adeline Solaiman Net profit (IDRbn) 1,741 2,247 2,576 3,405 4,114
(62-21) 2955 5888 ext.3503 EPS (IDR) 106.1 137.0 157.1 207.7 250.9
adeline.solaiman@danareksa.com
EPS growth (%) (0.5) 29.1 14.6 32.2 20.8
BVPS, (IDR) 778.9 862.2 996.5 1,179.0 1,396.7
DPS, (IDR) 16.9 29.5 21.7 25.1 33.2
PER (x) 29.3 22.7 19.8 15.0 12.4
PBV (x) 4.0 3.6 3.1 2.6 2.2
Dividend yield (%) 0.5 0.9 0.7 0.8 1.1
EV/EBITDA (x) 14.3 10.5 11.8 9.4 7.7
Source : CPIN, Danareksa Estimates
ERAA relative to JCI Index Financing costs may east, healthier balance sheet. We expect pretax profits to
grow by around 11.8% yoy in 2018F due to possibly lower financing costs.
Operationally, meanwhile, the management seeks to improve working capital
efficiency through better inventory control (AR and AP days). This, in turn, may
reduce gearing and give rise to a better cash position in our view. Meanwhile,
inventory days are expected to trend down slightly.
Maintain HOLD with unchanged TP. No further details were provided on the
company’s plans to develop an airport. As such, the capex for this plan is not
included in our forecast. The risk remains however and if the plans were
approved, the company would face the prospect of recording lower free cash
flow and additional debt. Therefore, with limited upside to our TP, we maintain
our HOLD recommendation with a TP of IDR83,800, based on the median value
of DCF valuation (WACC of 11.1% and TG of 4%) and +1SD average 2-year PE of
18.6x.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 70,366 76,274 84,069 92,797 103,145
EBITDA, (IDRbn) 11,654 12,058 12,932 14,095 15,155
EBITDA Growth, (%) 15.8 3.5 7.2 9.0 7.5
Net profit (IDRbn) 6,436 6,677 7,498 8,487 9,569
Natalia Sutanto EPS (IDR) 3,344.8 3,470.3 3,896.9 4,411.1 4,973.4
(62-21) 2955 5888 ext.3508 EPS growth (%) 19.0 3.8 12.3 13.2 12.7
natalia.sutanto@danareksa.com BVPS, (IDR) 19,697.7 20,522.4 21,828.4 25,128.8 28,845.0
DPS, (IDR) 800.0 2,600.0 2,599.2 1,110.6 1,257.2
PER (x) 23.6 22.8 20.3 17.9 15.9
PBV (x) 4.0 3.9 3.6 3.1 2.7
Dividend yield (%) 1.0 3.3 3.3 1.4 1.6
EV/EBITDA (x) 14.6 14.1 12.9 11.6 10.5
Source : GGRM, Danareksa Estimates
ST Debt 0 0 0 0 0
Payables 26 37 28 36 44
Other Curr. Liabilities 7 16 16 16 16
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 5 5 5 5 5
Total Liabilities 37 58 49 57 65
Shareholder'sFunds 272 282 320 344 369
Minority interests 71 73 106 117 128
Total Equity & Liabilities 381 413 475 518 562
Maintain HOLD. In our view, the new government regulation will create a more
level playing field in the cigarette industry, which ultimately should benefit the
big players including HMSP. Coupled with improving economic conditions in
2018, this should bode well for HMSP, we believe. Nonetheless, with limited
upside to our TP, we maintain our HOLD recommendation. The main risks to
our call include sluggish demand for cigarettes and unsupportive government
regulations.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 89,069 95,467 100,224 110,688 123,548
EBITDA, (IDRbn) 14,703 16,745 17,410 19,417 21,645
EBITDA Growth, (%) 2.3 13.9 4.0 11.5 11.5
Net profit (IDRbn) 10,363 12,762 13,097 14,307 15,990
EPS (IDR) 89.1 109.7 112.6 123.0 137.5
Natalia Sutanto EPS growth (%) 1.8 23.1 2.6 9.2 11.8
(62-21) 2955 5888 ext.3508 BVPS, (IDR) 275.2 293.8 298.7 311.2 327.9
natalia.sutanto@danareksa.com DPS, (IDR) 105.3 89.0 107.7 110.5 120.7
PER (x) 49.9 40.6 39.5 36.2 32.4
PBV (x) 16.2 15.1 14.9 14.3 13.6
Dividend yield (%) 2.4 2.0 2.4 2.5 2.7
EV/EBITDA (x) 35.1 30.6 29.5 26.4 23.6
Source : HMSP, Danareksa Estimates
ST Debt 0 0 0 0 0
Payables 3,191 3,871 3,650 4,138 4,566
Other Curr. Liabilities 781 1,898 2,200 2,409 2,676
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 2,021 2,564 2,783 3,021 3,280
Total Liabilities 5,994 8,333 8,633 9,568 10,521
Shareholder'sFunds 32,016 34,175 34,744 36,196 38,142
Minority interests 0 0 0 0 0
Total Equity & Liabilities 38,010 42,508 43,377 45,764 48,663
Maintain HOLD with a higher target price. We maintain our HOLD call with a
target price of IDR21,100 (based on DCF valuation with WACC of 11.9%). While
ITMG provides an attractive dividend yield and recently managed to acquire
small coalmining companies, we still have concerns over its reserves. The
upside potential comes from the possible acquisition of large sized coal mining
assets which would increase reserves significantly.
ST Debt 0 0 0 0 0
Payables 133 98 126 134 147
Other Curr. Liabilities 151 141 141 141 141
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 59 64 64 64 64
Total Liabilities 344 302 331 338 352
Shareholder'sFunds 835 907 1,002 1,058 1,118
Minority interests 0 0 0 0 0
Total Equity & Liabilities 1,178 1,210 1,332 1,396 1,470
ST Debt 0 0 0 0 0
Payables 1,622 2,089 1,930 2,005 2,112
Other Curr. Liabilities 1,066 1,099 1,111 1,135 1,182
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 1,085 824 802 793 789
Total Liabilities 3,772 4,012 3,843 3,932 4,083
Shareholder'sFunds 23,866 26,139 26,778 27,435 28,252
Minority interests 0 0 0 0 0
Total Equity & Liabilities 27,638 30,151 30,621 31,367 32,335
EPS Consensus(IDR)
Earnings growth expected to reach 10.3% yoy in FY18F. ICBP’s other divisions
(Snacks, Nutritional, Beverages and Seasonings) - which provided a combined
2017F 2018F 2019F contribution to revenues of 17% - also reported higher 3Q17 volume growth
Danareksa 333.9 368.4 407.9 despite stiffer competition which is also curbing margins. For 2018, we expect
Consensus 332.9 364.8 399.1 sales volume growth from Snacks and Beverages of 18% yoy and 2% yoy,
Danareksa/Cons 0.3 1.0 2.2
respectively. At the topline, we expect overall revenues to grow by 7.6% to
IDR39tn in FY18F. Combined with easing cost pressures, a better product mix,
ICBP relative to JCI Index higher ASP and continued efficiency in opex should all help the company to
record a FY18 operating margin of 14.6% with 10.3% yoy bottom line growth.
Maintain BUY with an unchanged TP. At the current share price, ICBP is trading
at FY18F PE of 24.2x, still below its average 2-year PE of 25x. In our view,
continued product innovation supported by the company’s extensive
distribution network will help the company to maintain its solid performance in
the pre-election year of 2018. This will give support to the share price. Maintain
BUY with an unchanged TP of IDR9,700.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 31,741 34,466 36,291 39,038 42,302
EBITDA, (IDRbn) 4,456 5,541 5,771 6,265 6,827
EBITDA Growth, (%) 24.0 24.3 4.1 8.6 9.0
Net profit (IDRbn) 3,001 3,600 3,894 4,296 4,757
EPS (IDR) 257.3 308.7 333.9 368.4 407.9
Natalia Sutanto EPS growth (%) 13.5 20.0 8.2 10.3 10.7
(62-21) 2955 5888 ext.3508 BVPS, (IDR) 1,325.2 1,506.1 1,686.5 1,888.7 2,113.4
natalia.sutanto@danareksa.com
DPS, (IDR) 11.0 13.2 14.2 15.7 17.4
PER (x) 34.7 28.9 26.7 24.2 21.9
PBV (x) 6.7 5.9 5.3 4.7 4.2
Dividend yield (%) 0.1 0.1 0.2 0.2 0.2
EV/EBITDA (x) 22.2 17.6 16.9 15.3 13.8
Source : ICBP, Danareksa Estimates
Key Financials
Source : Bloomberg Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 64,062 66,750 71,768 76,790 82,348
EBITDA, (IDRbn) 8,744 10,377 10,916 11,859 12,725
EBITDA Growth, (%) (2.3) 18.7 5.2 8.6 7.3
Net profit (IDRbn) 2,968 4,145 4,381 4,847 5,396
EPS (IDR) 338.0 472.0 499.0 552.0 614.6
EPS growth (%) (24.7) 39.6 5.7 10.6 11.3
BVPS, (IDR) 3,105.7 3,299.9 3,565.9 3,871.6 4,213.4
Natalia Sutanto DPS, (IDR) 220.0 168.0 235.0 248.4 274.8
(62-21) 2955 5888 ext.3508
PER (x) 22.3 16.0 15.1 13.7 12.3
natalia.sutanto@danareksa.com
PBV (x) 2.4 2.3 2.1 2.0 1.8
Dividend yield (%) 2.9 2.2 3.1 3.3 3.6
EV/EBITDA (x) 9.0 7.1 7.2 6.4 6.2
Source : INDF, Danareksa Estimates
BUY at TP IDR1,650. JPFA is our top pick within the poultry sector in Indonesia
due to 1) expected better stability in DOC and Broiler prices, 2) more
manageable corn prices, and 3) better consumption in 2018. Meanwhile, in
terms of valuation, JPFA remains attractive. We recommend to BUY on JPFA at
IDR1,650 (WACC 11.8% and 3% terminal growth). Risks to our call include lower
than expected GDP growth, weaker USD/IDR assumption, and volatility in corn
and soybean meal prices.
JSMR relative to JCI Index More toll roads may be tendered in 2018. The government plans to open
tender offers for six toll road projects to investors in 2018. These toll roads are:
Semarang – Demak, Semanan – Balaraja, Kamal - Balaraja – Teluknaga,
Samarinda – Bontang, Bawen – Jogja, and Cileunyi-Tasikmalaya-Cilacap.
However, three of the toll roads have been initiated by private entities,
including JSMR which has a partnership with UEM Group Bhd for the Cileunyi-
Tasikmalaya-Cilacap toll road (183km) with an investment of IDR35.0tn. Two
other toll roads initiated by private entities are: Semanan – Balaraja (31.7km) -
which was initiated by the Alam Sutra Group - and Kamal - Balaraja – Teluknaga
(48.3km) – which was initiated by the Salim Group and Agung Sedayu Group.
Maintain BUY. JSMR operates 665km of toll roads, giving it 62.2% market share.
The total traffic on JSMR’s toll roads accounts for around 80% of the total toll
road traffic in Indonesia. We expect 16.0%yoy revenues growth in 2018 on the
Source : Bloomberg
back of 11.8%yoy revenues growth from the existing toll roads. We expect the
existing toll roads to contribute 82% of total revenues in 2018.
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 7,631 8,832 9,866 11,443 13,349
EBITDA, (IDRbn) 2,514 3,044 3,286 3,314 3,562
Maria Renata EBITDA Growth, (%) 27.6 21.1 7.9 0.9 7.5
(62-21) 2955 5888 ext.3513 Net profit (IDRbn) 1,466 1,889 2,511 2,444 2,823
maria.renata@danareksa.com EPS (IDR) 215.6 277.0 345.9 336.8 388.9
EPS growth (%) 3.1 28.4 24.9 (2.6) 15.5
BVPS, (IDR) 1,532.1 2,005.4 2,177.1 2,444.7 2,766.2
DPS, (IDR) 67.7 40.4 52.1 69.2 67.4
PER (x) 28.8 22.4 17.9 18.4 15.9
PBV (x) 4.0 3.1 2.8 2.5 2.2
Dividend yield (%) 1.1 0.7 0.8 1.1 1.1
EV/EBITDA (x) 22.9 21.7 20.1 22.0 21.8
Source : JSMR, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 153
Exhibit 1. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 7,631 8,832 9,866 11,443 13,349
COGS (3,518) (4,023) (4,546) (5,523) (6,677)
Gross profit 4,113 4,809 5,320 5,920 6,672
EBITDA 2,514 3,044 3,286 3,314 3,562
Oper. profit 3,235 3,907 4,268 4,599 5,098
Interest income 218 203 0 0 0
Interest expense (1,405) (1,509) (1,261) (1,370) (1,534)
Forex Gain/(Loss) 0 0 0 0 0
Income From Assoc. Co’s (4) (7) (78) (78) (78)
Other Income (Expenses) 25 55 424 0 0
Pre-tax profit 2,068 2,650 3,353 3,151 3,487
Income tax (749) (847) (1,082) (1,153) (1,120)
Minority interest 147 86 240 446 456
Net profit 1,466 1,889 2,511 2,444 2,823
Core Net Profit 1,466 1,889 2,511 2,444 2,823
Key Financials
Source : Bloomberg
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 4,860 5,811 6,428 7,318 9,067
EBITDA, (IDRbn) 358 436 499 630 855
EBITDA Growth, (%) 1.3 21.6 14.5 26.4 35.7
Net profit (IDRbn) 261 267 305 342 442
EPS (IDR) 47.1 48.1 54.9 61.6 79.5
EPS growth (%) 2.1 2.3 14.1 12.1 29.2
BVPS, (IDR) 365.6 399.9 445.6 496.2 563.4
Natalia Sutanto DPS, (IDR) 8.4 9.0 9.6 11.0 12.3
(62-21) 2955 5888 ext.3508 PER (x) 54.8 53.6 47.0 41.9 32.4
natalia.sutanto@danareksa.com PBV (x) 7.1 6.5 5.8 5.2 4.6
Dividend yield (%) 0.3 0.3 0.4 0.4 0.5
EV/EBITDA (x) 39.6 33.3 31.1 25.8 18.8
Source : KAEF, Danareksa Estimates
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 3,604 3,493 3,246 3,402 3,566
EBITDA, (IDRbn) 462 270 241 275 306
EBITDA Growth, (%) 105.3 (41.7) (10.4) 13.8 11.2
Net profit (IDRbn) 263 181 115 145 163
EPS (IDR) 1,372.4 126.8 80.7 101.5 114.3
EPS growth (%) (99.9) (90.8) (36.4) 25.8 12.7
Natalia Sutanto BVPS, (IDR) 9,254.4 1,350.2 1,405.9 1,491.2 1,585.3
(62-21) 2955 5888 ext.3508 DPS, (IDR) 14.6 37.0 25.0 16.1 20.3
natalia.sutanto@danareksa.com
PER (x) 1.5 16.0 25.2 20.0 17.8
PBV (x) 0.2 1.5 1.4 1.4 1.3
Dividend yield (%) 0.7 1.8 1.2 0.8 1.0
EV/EBITDA (x) 6.6 12.3 12.6 10.7 9.5
Source : KINO, Danareksa Estimates
MAIN relative to JCI Index Are the biggest poultry players the winners? Yes. In our view, since the
government has started to more regulate the poultry industry in terms of local
corn prices and culling programs, the bigger the economies of scale will be take
more benefit, while the smaller it is will become less competitive. Even though
we believe in terms of EPS growth, MAIN will show a better performance next
year, but still the performance remain laggards compared to CPIN and JPFA.
HOLD with a TP of IDR800. For MAIN, its poor performance in 2017 will lead to
further financial leverage constraints in 2018, which will be the weakest
compared to its peers. We recommend to HOLD on MAIN with a TP of IDR800
(12.6% WACC with 3% terminal growth). The risks to our call include lower than
expected GDP growth and weaker purchasing power.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 4,775 5,246 5,359 5,900 6,491
EBITDA, (IDRbn) 376 677 354 398 448
EBITDA Growth, (%) 163.9 80.0 (47.7) 12.4 12.4
Adeline Solaiman Net profit (IDRbn) (63) 290 39 75 89
(62-21) 2955 5888 ext.3503 EPS (IDR) (28.1) 129.4 17.6 33.7 39.5
adeline.solaiman@danareksa.com EPS growth (%) (40.7) (561.2) (86.4) 91.5 17.3
BVPS, (IDR) 693.4 822.8 840.6 874.6 914.4
DPS, (IDR) 0.0 0.6 0.3 0.1 0.2
PER (x) n/m 5.7 42.0 22.0 18.7
PBV (x) 1.1 0.9 0.9 0.8 0.8
Dividend yield (%) 0.0 0.1 0.0 0.0 0.0
EV/EBITDA (x) 8.2 4.7 9.3 8.9 8.4
Source : MAIN, Danareksa Estimates
BUY with a TP of IDR12,500. The stock is attractive for its 1) strong net cash
position and 2) high dividend yield with a 70% payout ratio in 2018. We have a
BUY call on LPPF with a TP of IDR12,500 based on 17.5x P/E 2018F, nearly -1 std
based on the 5 years P/E band. We believe the stock is currently trading at an
attractive valuation and it has become too cheap to ignore. The risks to our call
include lower-than-expected GDP growth in 2018 and lower purchasing power.
Source : Bloomberg
Key Financials
Adeline Solaiman
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
(62-21) 2955 5888 ext.3503
adeline.solaiman@danareksa.com Revenue, (IDRbn) 9,007 9,897 9,897 10,542 11,209
EBITDA, (IDRbn) 2,570 2,788 2,671 2,879 3,092
EBITDA Growth, (%) 9.9 8.5 (4.2) 7.8 7.4
Natalia Sutanto Net profit (IDRbn) 1,799 2,020 1,928 2,079 2,234
(62-21) 2955 5888 ext.3508 EPS (IDR) 611.0 692.4 660.8 712.6 766.0
natalia.sutanto@danareksa.com EPS growth (%) 27.3 13.3 (4.6) 7.8 7.5
BVPS, (IDR) 375.8 636.0 810.6 1,063.6 1,337.9
DPS, (IDR) 295.5 435.6 491.6 469.2 506.0
PER (x) 17.3 15.3 16.0 14.9 13.8
PBV (x) 28.2 16.7 13.1 10.0 7.9
Dividend yield (%) 2.8 4.1 4.6 4.4 4.8
EV/EBITDA (x) 11.8 10.5 10.8 9.8 8.9
Source : LPPF, Danareksa Estimates
ST Debt 0 0 0 0 0
Payables 1,704 1,791 1,705 1,951 2,072
Other Curr. Liabilities 735 797 805 813 821
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 344 415 419 424 428
Total Liabilities 2,783 3,004 2,930 3,188 3,321
Shareholder'sFunds 1,106 1,855 2,365 3,103 3,903
Minority interests 0 0 0 0 0
Total Equity & Liabilities 3,889 4,859 5,294 6,291 7,223
Key Financials
Adeline Solaiman Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
(62-21) 2955 5888 ext.3503 Revenue, (IDRbn) 13,802 13,527 13,552 13,989 14,535
adeline.solaiman@danareksa.com EBITDA, (IDRbn) 628 516 231 349 376
EBITDA Growth, (%) (30.9) (17.9) (55.2) 51.0 7.8
Net profit (IDRbn) 223 38 (41) 42 56
Natalia Sutanto EPS (IDR) 41.4 7.2 (7.6) 7.8 10.5
(62-21) 2955 5888 ext.3508
EPS growth (%) (59.8) (82.7) (206.4) (202.3) 34.8
natalia.sutanto@danareksa.com
BVPS, (IDR) 467.5 451.8 440.6 448.4 455.0
DPS, (IDR) (43.9) (22.8) (3.6) 0.0 (3.9)
PER (x) 10.3 59.5 n/m 54.7 40.6
PBV (x) 0.9 0.9 1.0 1.0 0.9
Dividend yield (%) (10.3) (5.4) (0.8) 0.0 (0.9)
EV/EBITDA (x) 4.0 5.4 12.3 8.1 7.5
Source : MPPA, Danareksa Estimates
Key Financials
Source : Bloomberg Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 14,819 18,350 20,110 22,139 24,780
EBITDA, (IDRbn) 2,331 2,830 2,635 2,960 3,343
EBITDA Growth, (%) 79.1 21.4 (6.9) 12.4 12.9
Net profit (IDRbn) 1,220 1,355 1,277 1,410 1,605
EPS (IDR) 54.6 60.6 57.1 63.1 71.8
EPS growth (%) 202.4 11.0 (5.8) 10.4 13.9
BVPS, (IDR) 227.1 273.8 312.7 358.6 411.5
Natalia Sutanto DPS, (IDR) 6.7 12.3 18.2 17.1 18.9
(62-21) 2955 5888 ext.3508 PER (x) 40.9 36.8 39.1 35.4 31.1
natalia.sutanto@danareksa.com
PBV (x) 9.8 8.1 7.1 6.2 5.4
Dividend yield (%) 0.3 0.6 0.8 0.8 0.8
EV/EBITDA (x) 22.3 18.4 19.8 17.4 15.3
Source : MYOR, Danareksa Estimates
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 6,445 6,730 6,887 7,266 7,702
EBITDA, (IDRbn) 2,498 2,738 2,962 3,197 3,389
EBITDA Growth, (%) (10.1) 9.6 8.2 8.0 6.0
Adeline Solaiman Net profit (IDRbn) 1,186 1,369 1,474 1,760 1,935
(62-21) 2955 5888 ext.3503 EPS (IDR) 83.1 95.9 103.2 123.3 135.6
adeline.solaiman@danareksa.com EPS growth (%) (32.7) 15.4 7.7 19.5 9.9
BVPS, (IDR) 628.0 617.7 641.1 712.8 786.7
DPS, (IDR) 60.3 41.2 47.9 51.6 61.7
PER (x) 15.1 13.1 12.2 10.2 9.3
PBV (x) 2.0 2.0 2.0 1.8 1.6
Dividend yield (%) 4.8 3.3 3.8 4.1 4.9
EV/EBITDA (x) 8.5 7.7 7.0 6.3 5.8
Source : MNCN, Danareksa Estimates
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Adeline Solaiman
(62-21) 2955 5888 ext.3503 Revenue, (IDRbn) 12,833 14,150 16,154 18,560 21,342
adeline.solaiman@danareksa.com EBITDA, (IDRbn) 1,120 1,532 1,809 2,120 2,470
EBITDA Growth, (%) 2.4 36.8 18.1 17.2 16.5
Net profit (IDRbn) 37 208 381 499 643
Natalia Sutanto EPS (IDR) 22.6 126.1 230.1 301.5 388.5
(62-21) 2955 5888 ext.3508 EPS growth (%) (52.8) 458.4 82.5 31.0 28.9
natalia.sutanto@danareksa.com
BVPS, (IDR) 1,800.2 1,939.0 2,150.8 2,418.4 2,762.3
DPS, (IDR) 0.0 0.0 18.9 34.5 45.2
PER (x) 274.6 49.2 26.9 20.6 16.0
PBV (x) 3.4 3.2 2.9 2.6 2.2
Dividend yield (%) 0.0 0.0 0.3 0.6 0.7
EV/EBITDA (x) 12.0 8.6 7.3 6.1 5.2
Source : MAPI, Danareksa Estimates
We reiterate our BUY call. We reiterate our BUY call on PWON with target price
of IDR720. In arriving on our target price, we use SOTP based valuation, a WACC
of 12.6%, Terminal Growth of 4.0%, and target discount to NAV of 40%.
Although we remain cautious on the outlook for property demand next year,
we believe PWON with its strong recurring income will be more resilient.
PWON currently trades at a 47.1% discount to NAV, near to its historical +1SD
of 49.3%.
Source : Bloomberg
Key Financials
Antonia Febe Hartono, CFA Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
(62-21) 2955 5888 ext.3504 Revenue, (IDRbn) 4,625 4,841 5,726 6,609 6,790
antonia.hartono@danareksa.com EBITDA, (IDRbn) 2,558 2,593 2,984 3,337 3,422
EBITDA Growth, (%) 3.5 1.4 15.1 11.8 2.5
Net profit (IDRbn) 1,262 1,671 1,913 2,373 2,585
Natalia Sutanto EPS (IDR) 26.2 34.7 39.7 49.3 53.7
(62-21) 2955 5888 ext.3508
EPS growth (%) (49.8) 32.4 14.5 24.0 9.0
natalia.sutanto@danareksa.com
BVPS, (IDR) 149.9 180.3 214.1 256.5 301.8
DPS, (IDR) 4.5 4.5 5.9 6.8 8.4
PER (x) 24.2 18.3 16.0 12.9 11.8
PBV (x) 4.2 3.5 3.0 2.5 2.1
Dividend yield (%) 0.7 0.7 0.9 1.1 1.3
EV/EBITDA (x) 13.1 12.9 11.1 9.5 9.0
Source : PWON, Danareksa Estimates
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 14,217 16,459 22,742 30,448 37,177
EBITDA, (IDRbn) 1,584 2,044 2,752 3,873 4,593
EBITDA Growth, (%) 25.3 29.0 34.6 40.7 18.6
Net profit (IDRbn) 740 1,023 1,422 2,094 2,672
Maria Renata EPS (IDR) 119.4 165.1 229.3 337.8 430.9
(62-21) 2955 5888 ext.3513 EPS growth (%) 39.2 38.2 38.9 47.3 27.6
maria.renata@danareksa.com BVPS, (IDR) 478.0 1,330.9 1,510.7 1,779.7 2,109.3
DPS, (IDR) 22.0 23.9 49.5 68.8 101.3
PER (x) 21.7 15.7 11.3 7.7 6.0
PBV (x) 5.4 1.9 1.7 1.5 1.2
Dividend yield (%) 0.8 0.9 1.9 2.7 3.9
EV/EBITDA (x) 10.2 6.7 6.9 5.4 4.7
Source : PTPP, Danareksa Estimates
Maintain BUY with a lower TP of Rp1,770, based on 14.5x sector P/E (-0.5SD).
We think LSIP will be the best play to monetize short-term volatility in CPO
prices given its: 1) cheap valuation, 2) clean financials, 3) higher earnings
sensitivity to the CPO price, and 4) good stock liquidity. Currently, the counter
is trading at 10.4x FY18 P/E and EV/Ha of USD5,555.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 4,190 3,848 4,517 4,661 4,773
EBITDA, (IDRbn) 1,091 1,159 1,371 1,407 1,473
EBITDA Growth, (%) (26.8) 6.2 18.2 2.7 4.7
Net profit (IDRbn) 623 594 819 833 871
Yudha Gautama EPS (IDR) 91.4 87.1 120.0 122.1 127.7
(62-21) 2955 5888 ext 3509
EPS growth (%) (32.9) (4.7) 37.9 1.7 4.6
yudha.gautama@danareksa.com
BVPS, (IDR) 1,074.9 1,120.3 1,205.5 1,279.6 1,358.4
DPS, (IDR) 53.0 37.0 34.8 48.0 48.8
PER (x) 13.8 14.5 10.5 10.4 9.9
PBV (x) 1.2 1.1 1.0 1.0 0.9
Dividend yield (%) 4.2 2.9 2.8 3.8 3.9
EV/EBITDA (x) 7.2 6.5 4.9 4.6 4.2
Source : LSIP, Danareksa Estimates
ST Debt 0 0 0 0 0
Payables 309 241 369 376 373
Other Curr. Liabilities 262 539 563 575 597
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 940 1,032 1,032 1,032 1,032
Total Liabilities 1,511 1,813 1,964 1,984 2,002
Shareholder'sFunds 7,331 7,640 8,221 8,727 9,264
Minority interests 7 6 6 6 6
Total Equity & Liabilities 8,849 9,459 10,191 10,716 11,273
ST Debt 0 0 0 0 0
Payables 54 39 32 32 27
Other Curr. Liabilities 776 356 313 323 282
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 17 20 23 28 32
Total Liabilities 847 415 369 382 341
Shareholder'sFunds 7,158 7,385 7,458 7,829 8,060
Minority interests 3 3 3 3 3
Total Equity & Liabilities 8,007 7,804 7,830 8,215 8,405
RALS relative to JCI Index Further innovation from its new store concept “Ramayana Prime”. In early
December 2017, RALS successfully launched a new store concept called
“Ramayana Prime” in City Plaza, Jatinegara (8,353 sqm). This is the 114 th store
owned by the company and part of the fourth new store expansion strategy
following store openings at Harapan Indah, Pondok Aren, and Cikupa.
“Ramayana Prime” is integrated with a 7 Day Premium Hotel, Zone 2000, and
Cinema 21. We believe the new concept will give a fresh image for RALS as part
of the management’s transformation strategy in terms of store layout,
merchandising, and customer experience.
Top pick: BUY with a TP of IDR1,250. RALS is our top pick in the sector as we
believe the stock is a momentum play during the pre-election year. We have a
BUY call on RALS with a TP of IDR1,250, based on 19.5x P/E 2018F based on
2012-2017 mean, reflecting +6% yoy EPS growth 2018F. The risks to our call
Source : Bloomberg include lower-than-expected GDP growth and weaker purchasing power.
Key Financials
Adeline Solaiman Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
(62-21) 2955 5888 ext.3503 Revenue, (IDRbn) 5,533 5,857 5,859 6,210 6,585
adeline.solaiman@danareksa.com EBITDA, (IDRbn) 419 544 544 577 612
EBITDA Growth, (%) (14.7) 29.8 0.0 6.0 6.0
Natalia Sutanto Net profit (IDRbn) 336 408 409 433 459
(62-21) 2955 5888 ext.3508 EPS (IDR) 47.6 60.0 60.0 63.6 67.5
natalia.sutanto@danareksa.com EPS growth (%) (4.8) 26.0 0.0 6.0 6.0
BVPS, (IDR) 472.6 490.4 519.8 554.7 591.9
DPS, (IDR) 27.2 30.3 30.6 28.6 30.3
PER (x) 21.3 16.9 16.9 16.0 15.0
PBV (x) 2.1 2.1 2.0 1.8 1.7
Dividend yield (%) 2.7 3.0 3.0 2.8 3.0
EV/EBITDA (x) 15.1 11.6 11.3 10.4 9.4
Source : RALS, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 195
Exhibit 1. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 5,533 5,857 5,859 6,210 6,585
COGS (3,537) (3,655) (3,656) (3,875) (4,109)
Gross profit 1,996 2,202 2,203 2,335 2,476
EBITDA 419 544 544 577 612
Oper. profit 234 357 358 379 402
Interest income 114 97 97 103 109
Interest expense 0 0 0 0 0
Forex Gain/(Loss) 0 0 0 0 0
Income From Assoc. Co’s 0 0 0 0 0
Other Income (Expenses) 17 11 11 11 12
Pre-tax profit 365 465 465 493 523
Income tax (29) (57) (57) (60) (64)
Minority interest 0 0 0 0 0
Net profit 336 408 409 433 459
Core Net Profit 336 408 409 433 459
ST Debt 0 0 0 0 0
Payables 900 904 899 1,033 1,049
Other Curr. Liabilities 61 105 106 106 106
Long Term Debt 0 0 0 0 0
Other LT. Liabilities 280 301 302 304 305
Total Liabilities 1,241 1,310 1,307 1,443 1,461
Shareholder'sFunds 3,334 3,337 3,537 3,775 4,028
Minority interests 0 0 0 0 0
Total Equity & Liabilities 4,575 4,647 4,844 5,218 5,489
Reiterate SELL. We reiterate our SELL call on SMBR with target price of IDR460.
To arrive at our target price, we use a DCF based valuation with WACC of 11.4%
and Terminal Growth of 3.0%. Our target price implies 30.3x 2018F P/E, below
its historical mean forward trailing P/E of 56.0x. Despite we expect margin
improvement will be on the card, we do not think the current valuation for
SMBR that reached 218.3x 2018F P/E (higher than its historical +1SD of 200.6x)
can be justified. To arrive at the current price, we should use either one of these
assumptions: ASP growth of 27.0%yoy starting from 2018 to 2020, Sales volume
growth of 95%yoy starting from 2018 to 2022, or Coal price assumption of -
USD650/ton.
Source : Bloomberg Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRmn) 1,461,248 1,522,808 1,481,502 1,726,115 1,859,171
Antonia Febe Hartono, CFA EBITDA, (IDRmn) 422,503 412,447 386,760 490,808 564,629
(62-21) 2955 5888 ext.3504
EBITDA Growth, (%) 31.3 (2.4) (6.2) 26.9 15.0
antonia.hartono@danareksa.com
Net profit (IDRmn) 354,180 259,087 168,767 150,137 166,800
EPS (IDR) 36.0 26.2 17.0 15.2 16.8
Stefanus Darmagiri EPS growth (%) 5.4 (27.3) (34.9) (11.0) 11.1
(62-21) 29 555 831 BVPS, (IDR) 299.8 315.2 328.0 339.4 352.0
stefanus.darmagiri@danareksa.com DPS, (IDR) 8.3 8.9 4.3 3.8 4.2
PER (x) 91.9 126.5 194.2 218.3 196.5
PBV (x) 11.0 10.5 10.1 9.8 9.4
Dividend yield (%) 0.3 0.3 0.1 0.1 0.1
EV/EBITDA (x) 74.1 80.2 85.9 69.0 59.7
Source : SMBR, Danareksa Estimates
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 4,238 4,524 4,530 4,779 5,066
EBITDA, (IDRbn) 2,138 2,138 2,114 2,259 2,424
EBITDA Growth, (%) 5.7 0.0 (1.2) 6.9 7.3
Adeline Solaiman Net profit (IDRbn) 1,524 1,503 1,488 1,601 1,725
(62-21) 2955 5888 ext.3503
EPS (IDR) 104.2 102.8 101.8 109.5 118.0
adeline.solaiman@danareksa.com
EPS growth (%) 4.8 (1.3) (1.0) 7.6 7.7
BVPS, (IDR) 215.2 234.3 256.1 284.5 315.2
DPS, (IDR) 126.6 82.9 81.4 81.4 87.5
PER (x) 23.5 23.8 24.1 22.4 20.8
PBV (x) 11.4 10.5 9.6 8.6 7.8
Dividend yield (%) 5.2 3.4 3.3 3.3 3.6
EV/EBITDA (x) 16.5 16.6 16.6 15.4 14.2
Source : SCMA, Danareksa Estimates
We reiterate our HOLD call. We reiterate our HOLD call on SSIA with target
price of IDR540. To arrive at our target price, we use SOTP based valuation with
WACC of 12.1%, Terminal Growth of 4.0%, and 71% discount to NAV (implying
+1.5SD historical discount.
Source : Bloomberg Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 4,868 3,797 3,113 3,243 3,820
Antonia Febe Hartono, CFA EBITDA, (IDRbn) 710 597 339 323 465
(62-21) 2955 5888 ext.3504
EBITDA Growth, (%) 5.9 (16.0) (43.1) (4.7) 43.7
antonia.hartono@danareksa.com
Net profit (IDRbn) 302 62 1,130 (101) 3
EPS (IDR) 64.3 13.3 240.2 (21.6) 0.6
Natalia Sutanto EPS growth (%) (27.5) (79.3) 1,709.2 (109.0) (102.9)
(62-21) 2955 5888 ext.3508 BVPS, (IDR) 618.1 618.9 805.9 693.8 694.4
natalia.sutanto@danareksa.com DPS, (IDR) 17.9 9.6 10.6 48.0 0.0
PER (x) 7.2 35.0 1.9 n/m 732.9
PBV (x) 0.8 0.7 0.6 0.7 0.7
Dividend yield (%) 3.9 2.1 2.3 10.4 0.0
EV/EBITDA (x) 3.7 5.2 10.8 9.4 7.6
Source : SSIA, Danareksa Estimates
Maintain BUY. As we raise our refined tin sales forecast, we revise up our net
profits estimates by 15.8 – 21.5% for 2017 – 2019. We maintain our BUY
recommendation on the stock with a target price of Rp1,100 (based on DCF
valuation with WACC of 11.3%). Our target price implies 21.2x 2018F PE.
Maintain HOLD. UNVR has outperformed the JCI by 21.2% ytd, resulting in a
premium valuation of FY18F PE of 51.4x, around its +2SD of its average 3-year
PE. We view UNVR as the proxy to Indonesia’s consumer sector, noting its
generous dividends and solid track record. Nonetheless, with limited upside,
we maintain our HOLD recommendation on the stock with an unchanged TP of
IDR 52,000.
Maintain BUY. Given the high coal prices, we maintain our BUY
recommendation with target price of IDR38,000 (based on DCF valuation with
WACC of 12.3% and long-term growth of 3%). Our new target price implies
16.6x 2018F PE. Upside potential comes from better-than-expected Komatsu
sales volume.
Source : Bloomberg Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 49,347 45,539 61,442 69,928 74,893
EBITDA, (IDRbn) 12,403 9,150 14,240 16,294 17,749
EBITDA Growth, (%) 5.0 (26.2) 55.6 14.4 8.9
Net profit (IDRbn) 3,853 5,002 7,463 8,439 9,337
EPS (IDR) 1,033.1 1,341.0 2,000.7 2,262.3 2,503.0
Stefanus Darmagiri EPS growth (%) (28.1) 29.8 49.2 13.1 10.6
(62-21) 29 555 831 BVPS, (IDR) 10,165.8 10,954.0 12,313.0 13,771.6 15,332.6
stefanus.darmagiri@danareksa.com DPS, (IDR) 527.1 449.6 613.7 830.9 933.3
PER (x) 31.8 24.5 16.4 14.5 13.1
PBV (x) 3.2 3.0 2.7 2.4 2.1
Dividend yield (%) 1.6 1.4 1.9 2.5 2.8
EV/EBITDA (x) 8.8 11.4 7.2 6.1 5.3
Source : UNTR, Danareksa Estimates
Maintain HOLD. Amid firm global nickel demand for electric vehicles should
sustain nickel prices over the long-term, we believe that nickel prices will
increase at a slower rate over the next three years as supply concerns will ease.
We maintain our HOLD recommendation with a target price of IDR3,100 (based
on DCF valuation with WACC of 11.3% and long-term growth of 3%) on concerns
on higher energy costs.
ST Debt 36 36 38 38 0
Payables 86 64 76 79 86
Other Curr. Liabilities 27 31 43 44 48
Long Term Debt 110 73 38 0 0
Other LT. Liabilities 197 186 177 184 201
Total Liabilities 455 391 370 345 335
Shareholder'sFunds 1,834 1,835 1,829 1,848 1,888
Minority interests 0 0 0 0 0
Total Equity & Liabilities 2,289 2,225 2,199 2,193 2,223
Valuation. On the back of the anticipated full payment for the Becakayu project
in 2018, we have a BUY call on WSBP with a target price of IDR520. Our target
price implies 2018 PE of 9.8x. WSBP is trading at an attractive valuation which
is far below the IPO PE of 21.2x.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 2,644 4,717 7,604 9,172 11,070
EBITDA, (IDRbn) 363 970 1,590 1,879 2,111
EBITDA Growth, (%) 156.1 166.9 63.9 18.2 12.3
Net profit (IDRbn) 334 635 1,132 1,347 1,510
EPS (IDR) 21.1 33.8 44.1 52.4 58.8
Maria Renata EPS growth (%) 0.0 60.1 30.2 19.0 12.1
(62-21) 2955 5888 ext.3513 BVPS, (IDR) 84.1 394.8 320.1 359.3 402.3
maria.renata@danareksa.com DPS, (IDR) 0.0 0.0 12.4 13.2 15.7
PER (x) 18.1 11.3 8.7 7.3 6.5
PBV (x) 4.5 1.0 1.2 1.1 0.9
Dividend yield (%) 0.0 0.0 3.2 3.5 4.1
EV/EBITDA (x) 28.8 9.2 7.5 7.7 4.1
Source : WSBP, Danareksa Estimates
Toll roads divestment. WSKT plans to divest 10 of its toll roads. Investors are
welcomed to purchase the toll roads separately or in a bundle. As part of its
backup plans, the management is also preparing to form a holding company for
seven toll roads that are part of the Trans Java toll road. WSKT would hold the
IPO for the holding company by mid-2018.
Valuation. WTON has a healthy balance sheet and no turnkey projects on its
book. With 0.50x DER as of Sep 17, WTON still has plenty of room for debt
raising if necessary for its working capital and capex. We have a BUY
recommendation on WTON with a TP of IDR800. Our target price implies 2018
Source : Bloomberg
PE of 16.0x.
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 2,653 3,482 4,785 5,766 7,057
EBITDA, (IDRbn) 149 271 361 446 562
EBITDA Growth, (%) (54.4) 82.6 33.2 23.3 26.0
Maria Renata Net profit (IDRbn) 170 291 349 420 516
(62-21) 2955 5888 ext.3513
EPS (IDR) 19.5 34.9 41.9 50.4 61.9
maria.renata@danareksa.com
EPS growth (%) (49.9) 79.1 20.2 20.2 22.9
BVPS, (IDR) 253.0 290.5 322.6 360.4 407.2
DPS, (IDR) 11.8 6.3 9.8 12.6 15.1
PER (x) 25.6 14.3 11.9 9.9 8.0
PBV (x) 2.0 1.7 1.5 1.4 1.2
Dividend yield (%) 2.4 1.3 2.0 2.5 3.0
EV/EBITDA (x) 26.0 16.5 12.8 10.3 8.0
Source : WTON, Danareksa Estimates
WIKA relative to JCI Index 2018 targets. We expect WIKA’s 2018 revenues to reach IDR27.1tn (+21.0%yoy)
with net income of IDR1.3tn (+21.4%yoy). The 2018 order book is targeted to
reach IDR129.2tn, 22.4%yoy higher than the IDR105.5tn targeted in 2017. This
is supported by 20%yoy growth in new contracts to IDR51.1tn and IDR78.1tn of
carry over contracts.
Maintain BUY. WIKA has a healthy balance sheet with a lot of room for debt
raising if needed for the funding of working capital and investments. As of Sep
17, the DER stood at 0.66x. Based on a maximum DER of 3.0x (sectoral common
practice) and equity value the same as it was in Sep 17, WIKA is still able to raise
around IDR30.8tn of debts. Given this backdrop, we maintain our BUY call on
WIKA with a TP of IDR2,100. Our TP implies 14.0x 2018 PE.
Source : Bloomberg
Key Financials
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 13,620 15,669 22,409 27,116 34,215
EBITDA, (IDRbn) 1,374 1,888 2,044 2,680 3,487
EBITDA Growth, (%) 5.0 37.4 8.3 31.1 30.1
Maria Renata Net profit (IDRbn) 625 1,012 1,091 1,325 1,658
(62-21) 2955 5888 ext.3513 EPS (IDR) 101.8 114.1 121.7 147.7 184.8
maria.renata@danareksa.com EPS growth (%) 1.6 12.1 6.6 21.4 25.1
BVPS, (IDR) 712.6 1,284.7 1,357.8 1,469.0 1,609.5
DPS, (IDR) 13.7 13.9 33.8 36.5 44.3
PER (x) 15.5 13.8 13.0 10.7 8.5
PBV (x) 2.2 1.2 1.2 1.1 1.0
Dividend yield (%) 0.9 0.9 2.1 2.3 2.8
EV/EBITDA (x) 11.0 6.2 6.9 5.2 4.2
Source : WIKA, Danareksa Estimates
240
PT Danareksa Sekuritas
Gedung Danareksa
Jl. Merdeka Selatan, No.14
Jakarta, INDONESIA
Tel : (62-21) 2955 5777 Fax : (62 21) 350 1709
DISCLAIMER
The information contained in this report has been taken from sources which we deem reliable. However, none of P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective
employees and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the accuracy or completeness of the
information and opinions contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue hereof.
This document does not constitute, nor is it calculated to invite, an offer or invitation to subscribe for or purchase any securities or financial instruments and neither this document nor anything
contained herein shall form the basis for or be relied upon in connection with any contract or commitment whatsoever.
To the extent that any securities or financial instruments or issues are discussed in this report, please note that P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective
employees and/or agents may from time to time make markets in such securities or financial instruments, hold share options, rights and/or warrants in respect thereof and may, as principal or
agent, buy or sell such securities or financial instruments.
No action has been or will be taken in any country or jurisdiction that would permit a public offering of any investments referred to in this document, or possession or distribution of this
document, or any other offering or publicity material relating to any company or investment mentioned in this document, in any country or jurisdiction where action for that purpose is required.
We have no responsibility to update this report in respect of events and circumstances occurring after the date of this report.
We expressly disclaim any responsibility or liability (express or implied) of P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective employees and/or agents whatsoever
and howsoever arising (including, without limitation for any claims, proceedings, actions, suits, losses, expenses, damages or costs) which may be brought against or suffered by any person as a
result of acting in reliance upon the whole or any part of the contents of this report and neither P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective employees and/or
agents accepts liability for any errors, omissions or mis-statements, negligent or otherwise, in this report and any liability in respect of this report or any inaccuracy herein or omission herefrom
which might otherwise arise is hereby expressly disclaimed.
Accordingly, none of P.T Danareksa Sekuritas and/or its affiliated companies and/or their respective employees and/or agents shall be liable for any direct, indirect or consequential loss or
damage suffered by any person as a result of relying on any statement or omission in any information contained in this report.
The information contained in this report is not to be taken as any recommendation made by P.T. Danareksa Sekuritas and/or its affiliated companies and/or their employees and/or agents to
enter into any agreement with regard to any investment mentioned in this document. This report is prepared for general circulation. It does not have regard to the specific person who may
receive this report. In considering any investment you should make your own independent assessment and seek your own professional financial and legal advice.
U.S. Distribution: This report is only intended for distribution in the United States to “major U.S. institutional investors” as defined by Rule 15a-6 under the Securities Exchange Act of 1934 and may
not be reproduced, transmitted and/or distributed, directly or indirectly, to any other person in the United States.
Hong Kong Distribution: This document has not been registered as a prospectus with the Registrar of Companies in Hong Kong and may not be issued or passed on in Hong Kong to any persons
other than to a person whose ordinary business is to buy and sell shares or debentures.
UK Distribution : This document has not been approved as an investment advertisement in the United Kingdom pursuant to Section 57 of the Financial Services Act 1986 and may not be issued or
passed on in the United Kingdom except to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemption) Order 1996 or is a
person to whom the document may otherwise lawfully be issued or passed on. At your request, this report is being provided to you as a potential investor who is a person of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisement) (Exemption) Order 1995 despite our pointing out to you that this report should not be relied upon by you. Accordingly
any degree of reliance placed on this report in your decision to make any investment will be at your own risk.
Japanese Distribution: This report is not intended to serve as a solicitation in connection with any offering or secondary distribution of securities under the Securities and Exchange Law, nor does it
contain any ‘investment judgment’ under the Investments Advisory Business Law.