Good morning,
Astra International:
Robust Auto Sales, But Bumpy On Finance Services
May
sales numbers indicate that Astra’s car wholesale would continue improving MoM.
2W vehicles also maintained its robust sales. Maintain BUY with a lower
SOP-based TP of IDR7,350 (from IDR7,400, 11% upside). The reduced TP is
triggered by its lower financial services unit value while our lower forecast
is due to a drop in our CPO price estimate. Agri and its financial services
unit accounts for c.17% of Astra’s value. A majority of Astra’s earnings and
fair value are still driven by its auto business.
¨ Improved vehicle
wholesale.
We expect Astra International (Astra) vehicle sales recovery – which started in
March – to continue to improve in 2H16. Astra’s car monthly wholesale increased
to 3.6% MoM. Motorcycle wholesale also showed robust growth on a YoY basis,
despite declining MoM. Its vehicle wholesale were better than national sales
volume, which was lower.
¨ In our calculation,
Astra’s car market share increased to 50.8% in 5M16 (vs 50.3% in 5M15), while
its motorcycle market share rose to 72.7% (from 68.1% in 5M15). The
low-cost-green car (LCGC) and medium-SUV Toyota Fortuner were the main
drivers of car sales growth. Astra has reduced its inventory days to a lower
level at its distributors (currently one month, from two months), hence the
company can now better manage its sales.
¨ However, Astra Agro
Lestari (Agri) earnings were lower. Given the lower CPO price assumption, we
revise down our FY16 and FY17 earnings estimates to IDR17trn (-6%) and IDR19trn
(-4%). While we continue to expect some price support for CPO in the near term
(on the back of the current low inventory levels), we believe the impact of the
El Nino on CPO prices has already been fully reflected. The catalyst required
to move prices upward in a significant manner would be a turnaround in demand
growth. Its agribusiness accounted for 14% of Astra’s 1Q16 earnings.
¨ Reduced TP on lower
financial services unit value. We lower our SOP-based TP to IDR7,350,
driven by its lower financial services unit value. While its vehicle finance
unit’s credit quality has been improving, non-performing loans (NPLs) from Bank
Permata (Astra holds a 44.6% stake) is likely to increase in 2Q. In the latest
monthly financial report, the bank continue to book high asset impairment
allocation. Bank Permata’s loan loss coverage (LLC) ratio was ~130%, still low
compared to other local banks which have LLC ratios averaging at 140-150%.
¨ Maintain BUY. Although Agri and its
financial services unit were a drag, we maintain BUY on Astra. Both units
account for only c.17% of Astra’s fair value, while 75% of Astra’s fair value
is still related to its auto business. Auto and its related financing accounted
for c.70% of the company’s consolidated earnings. We see auto sales improving
significantly in the near future. Main risks in our call are weaker consumer
spending and the depreciation of IDR against USD. (Andrey Wijaya)
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Media Highlights:
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Economics
House of
Representative requested lower budget deficit in the revised state budget
Corporates
Adhi Karya achieved
IDR5.3trn new contracts in May 2016
Adhi Karya(ADHI IJ,
BUY, TP: IDR3,400)achieved IDR5.3trn (+14.5%YoY) new contracts in 5M16,
accounted for 21.5% to FY16's target. The new contracts came from SOEs
(52.3%), Private (24.6%), central government (20.5%), and local government
(2.6%). We remain positive on Adhi, as we believe its new contracts will likely
to spike up in 2H16 and LRT greater Jakarta Contract will be signed in 2H16.
Matahari Department
Store launched its mobile app
Waskita obtained
loan worth IDR3.7trn
Wijaya Karya and
Posco ready to work on LPG project which owned by Pertamina
Modernland Realty
aims for IDR230bn marketing sales
Metland revise up
its marketing sales target to IDR1.4trn
Government to
auction 2 new toll roads in cross-subsidy
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Best regards,
Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia
