RHB Indonesia Morning Cuppa - 2 August 2016- (Inflation, MNC, MAP, Surya Citra Media)

Good morning,

Inflation Eases Back In July

¨ The headline inflation decreased to 3.2% y-o-y in July, down from +3.5% in June. The slower increase in prices of raw food products and a larger deflation in transport contributed to the decrease but were partly offset by acceleration in the costs of housing & utilities, clothing, and education.

¨ M-o-m inflation recorded an increase of 0.7%, stabilising from the previous month.

¨ Moving forward, we expect inflation to moderate to an average of 4.0% in 2016, from our previous forecast of +5.0% and +6.4% in 2015, on account of low crude oil prices and relatively soft economic growth.

¨ As the inflation will likely continue to be benign after Ied-Fitr and school holiday and given that BI mentioned there is still a need for additional easing to stimulate growth, we expect another 25 bps cut to 7-Day (Reverse) Repo rate in 2H 2016. This may come in the early part of the 2H, if the economic growth in 2Q remains soft. (Rizki Fajar)

Link to report: Inflation Eases Back In July

Link to Daily report: Indonesia Morning Cuppa - 020816

Result Reviews:

Media Nusantara Citra (MNCN IJ, BUY, TP: IDR2,500), 2Q16 Results inline

We maintain our BUY call on Media Nusantara and DCF based TP of IDR2,500 (16x FY16F P/E) pending the results call schedulled for 3 August 2016 (4.30 PM JKT time). We continue to like Media Nusantara on the back of:

1. Strong audience share performance

2. Margins improvement from integrated TV stations

3. Management priority to pay down its USD debt at the end of 2016

4. The possibility of higher dividends in FY17 from higher FCF

Based on the 2Q16 results performance – we have seen that the strong audience share performance from the RCTI TV stations led the company to report a stronger topline growth compare to its peers. (David Hartono)

Mitra Adi Perkasa (MAPI IJ, Under Review), Improving margin

Highlights

¨ 2Q16 sales were at 47% of both our and consensus FY16F sales estimates, an increase of 10.3% QoQ due to the strong spending during the Lebaran season

¨ 2Q16 net income was at 39% of our and 24% of consensus FY16F net income estimates

¨ Gross margin slightly improved by 20bps QoQ despite the continuation of aggressive discounting in its stores

¨ Interest expense is higher due to the additional IDR290bn short-term bank loan in 1Q16 with net gearing of 76% in 1H16

¨ Monthly SSSG is recorded at 21% in June 2016 and 6% in 1H16 due to the Lebaran shopping with Specialty Stores segment contributed the highest with 1H16 SSSG of 8%

¨ The company currently owns 1,942 retail stores, a mere addition compared to 1,938 stores in FY15. The numbers of retail stores are after the company’s decision to close down several of their non-performing stores. (Kristine Putri)

Surya Citra Media (SCMA IJ, Neutral, TP: IDR3,300), 2Q16 Results inline

We maintain our NEUTRAL call on Surya Citra and DCF based TP of IDR3,300 (26x FY16F P/E) pending the results call schedulled for 1 August 2016 (4.30 PM JKT time). We remains cautious on SCTV’s prime time audience share number which may pose an earnings risk in the second half of the year if it does not recover. Despite, some improvement in audience share since May – it was supported by a higher capex programs like Indonesia Super League, and outsource contents. (David Hartono)

Media Highlights:

Corporates

BSDE acquired IDR1.4trn worth landbank

Bumi Serpong Damai (BSDE IJ, BUY, TP 2,540) through its subsidiary, Duta Pertiwi (DUTI IJ, NR) bought 120ha land in Benowo, Surabaya. Total acquisition cost is IDR1.4trn where post acquisition total land in the area should reach 440ha. The acquisition is based on JV /partnership scheme where land owner will inject capital to BSD’s subsidiary, PT Mitra Karya Mutliguna. The land owner is PT Fortune Mate Indonesia (FORU IJ, NR) where based on recent press release by Fortune Mate through its subsidiary, PT Multi Bangun Sarana (MBS) by injecting 18% equity or equivalent to IDR263.99bn to Mitra Karya.

Comments: The acquisition should translate into land cost of IDR1.2m/sqm. Based on our research, the exisiting FORU’s residential properties is priced between IDR520m to IDR1.5bn per unit with land lot is priced at IDR4.6m/sqm. Based on the news, with additional 120ha, the company might have to revise the initial plan from building warehouses to integrate it with residential. Overall, we are positive on the acquisition as it should maximized the value of the land given it is primely located near Teluk Lamong port. BSDE’s share price still laggard compare to its peers with currently still trade at 40trn market cap or 43% of our estimated RNAV of IDR93trn. BUY, TP IDR2,540. (Lydia Suwandi)

AKR Corporindo prepares USD600m for power plant project

Kalbe Farma to partner up with foreign company

PGN to cut gas sales volume target

Siloam targets to build ten hospitals per year

Garuda recorded USD63.2m loss in 1H16

Tiga Pilar Sejahtera realised IDR200bn capex

Total Bangun Persada invested IDR130bn on a 7,000 sqm land

Our Recent Publication:

Company Results: Indocement Tunggal Prakarsa: Likely Better 2H Sales, But Rivalry To Stay Fierce

Link to report: Indocement Tunggal Prakarsa : Likely Better 2H Sales, But Rivalry To Stay Fierce

Company Results: Nippon Indosari: Earnings Likely To Normalise In 3Q16

Link to report: Nippon Indosari Corpindo : Earnings Likely To Normalise In 3Q16