RHB Indonesia Morning Cuppa - 26 July 2016- (Regional Construction, BTN, BTPN) Unknown Selasa, 26 Juli 2016

Good morning, Regional Construction: As Many As Stars In The Sky Although four ASEAN countries – Indonesia, Malaysia, Singapore and Thailand – are facing the threat of an economic slowdown, each is relying on different engines to stimulate their economies. All four countries (based on our survey in each capital city) still report progress in terms of construction activities from both the private and public sectors. Our RHB construction analysts maintain their positive view on the sector with Top Picks as follows: 1. Indonesia: Adhi Karya Persero; 2. Malaysia: Sunway Construction and Gadang Holdings; 3. Thailand: Sino-Thai Engineering & Construction. ¨ Different engines in different countries. In order to boost their economies and prevent a slowdown, Singapore and Malaysia are focusing on export growth and domestic consumption respectively, while Thailand and Indonesia are relying on investments in public infrastructure projects. In spite of the different stimulus instruments, construction activities remain abundant within a 3km radius around the centre of each capital city – we counted many cranes working actively in our surveyed area. Kuala Lumpur ranks the top among the four, with 131 cranes. Bangkok came in second with 112 cranes. Jakarta and Singapore are almost equal, with about 66 and 52 cranes respectively. What can be learnt from the crane survey? ¨ Indonesia: Jakarta, with many infrastructure projects under construction, is set to develop new projects. This is especially in terms of new skyscrapers aligned with mass rapid transit (MRT) routes. In the meantime, Indonesia’s residential property sector has been facing slow demand growth since FY15, which has led to delays of developers’ new project launches. Still, office and apartment projects under construction remain on track and are a dominant presence in Jakarta’s central business district (CBD). ¨ Malaysia: The busiest construction activities in this country will not end soon, as the Government has assured new infrastructure projects will be implemented as planned. However, there is a likely trend for developers to slow down their launches for residential and non-residential projects due to the weak property market. Our analyst believes infrastructure spending by the Government will boost new construction projects awarded to contractors in FY16-17. ¨ Singapore: As the most developed and most congested country among the four (with a construction cycle that is getting ahead of the others), Singapore is focusing on quality rather than quantity. There is a growing number of new mixed-use projects plus energy-efficient buildings. These are supported by planned construction of more transportation alternatives for a better access to the CBD area. ¨ Thailand: Bangkok’s CBD is dominated by SET-listed companies’ condominium projects for the mid- to high-end market. There are obvious trends in the CBD, including: i. Facility expansion of long-term growth businesses such as hospitals and a university campus; ii. The game of mixed-use projects played by Thai landlords; iii. Initial signs that the hotel sector will expand to a new location in the CBD. (Dony Gunawan, Ng Sem Guan CFA, Jarick Seet, Chatree Srismaicharoen)

Result Reviews:

Bank Tabungan Negara (BBTN IJ, BUY, TP: IDR2,150) - Strong QoQ performance BTN announced its result yesterday evening-strong qoq perfomance. BUY maintained with IDR2,150 TP (implying 1.4x/1.3x 2016/17F P/BV, respectively). Key highlights: ¨ Net interest income in 1H16 represents 45.1%/46.3% of our/consensus forecast. ¨ While on qoq basis, net interest income grew 10.5%. ¨ Lower non-interest income contribution due to shorter working days in 2Q16 coming from Ramadhan and Hari Raya celebration. ¨ Stable credit cost given substantial mortgage in its loan book (71.7% of total loan book in June-2016) as mortgage already secured by the properties themselves. ¨ ROAE slightly down to 13.7% in 2Q16 due to higher equity base coming from asset revaluation of IDR3trn. ¨ 1H16’s earnings represents 46.2% of our/consensus forecast. (Eka Savitri) Bank Tabungan Pensiunan Nasional (BTPN IJ, Neutral, TP: IDR2,900)- 2Q16 result BTPN just released its 1H16 result – strong qoq performance. More updates as BTPN will have analyst meeting this morning. Key highlights ¨ Net interest income in 1H16 represents 51.2%/50.1% of our/consensus forecast. ¨ Net interest margin (NIM) expanded to 12.2% in 2Q16 due to a lower blended CoF by c.76bps on qoq basis. ¨ Cost to income ratio (CIR) still hover at above 60% as BTPN continue to invest aggressively in its new business unit (BTPN Wow! or branchless banking unit). ¨ Credit cost slightly uptick to 154bps in 2Q16 despite a stable NPL ratio of 0.7% by end-June 2016. ¨ Strong capital position with CAR of 24% as of June-2016 given that BTPN does not distribute dividend for the past nine years. (Eka Savitri)

Media Highlights:

Economics Bank Indonesia sees current account deficit at 2.1% of GDP Corporates Adhi Karya aims for Cisumdawu toll road and LRT contract Telekomunikasi Indonesia to rely on internal cash Waskita Karya aims IDR10trn from Waskita Beton IPO Tambang Batubara Bukit Asam’s sales volume increased by 11% in 1H16 Total Bangun obtained 76% of new contracts target High Speed Railway (HSR) update: Ministry of Transportation still waiting for technical documents Best regards, Helmy Kristanto Director Head of Indonesia Research PT. RHB Securities Indonesia

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Tags: Features