Good morning,
Astra International: New Growth Engines From Mining
Arms
Following coal price recovery, mining contracting and
coal-mining are likely to be the next growth engines. We think market consensus
has not factored in higher coal prices into Astra’s F17F earnings. We lift our
FY17F-18F earnings and raise our SOP-based TP to IDR9,000 (from IDR8,500, 16%
upside), implying 18x FY17F P/E, driven by:
1. Higher forecast earnings from its mining unit;
2. Likely better 4W vehicles sales in 2H16.
Reiterate BUY.
♦ Likely better earnings from mining arms. Lower coal production from China
should boost international coal prices. Following the coal price recovery, we
anticipate higher earnings from Astra International’s (Astra) mining arms,
driven by both its mining contractor and coal mining units. Astra’s PT
Pamapersada Nusantara (Pama), which is also Indonesia’s biggest coal mining
contractor by production volume, should benefit in this situation. In addition,
coal mining will be another growth driver, given higher coal sales volume and
the recovery in the selling price. Astra’s coal-mining unit, PT Asmin Bara
Bronang (ABB) is on track to increase coal output in FY17.
♦ Further, we believe that, with new Coordinating Maritime and
Resources Affairs Minister Mr Luhut Binsar Pandjaitan at the helm, the progress
of power plant development in Indonesia is likely to be faster. This will also
improve the outlook for domestic coal consumption.
♦ Calya and Sigra to be on the road soon. On 11 Aug, during the Gaikindo
Indonesia International Auto Show (GIIAS), Astra is officially launching the
Toyota Calya and Daihatsu Sigra.
Both are new budget multi-purpose vehicle (MPV) 7-seater models with 1.2-litre
engines. At a price range of IDR130-150m/unit, we believe this is very
affordable for the majority of Indonesia’s middle-income earners.
♦ We believe the Calya and Sigra
should boost Astra’s auto sales, since these models are aimed towards customers
who want to buy an MPV, but at the price of low-cost green cars (LCGC). Astra
did not disclose the estimated monthly sales for the Calya
and Sigra. However, we estimate a monthly production rate of
5,000 units for both models in total, ie around 10% of Astra’s car monthly
sales.
♦ Maintain BUY. Following higher earnings estimates for its mining
units, we lift Astra’s FY17F-18F earnings by 5% to IDR19trn and IDR22trn
respectively. We also increase our SOP-based TP to IDR9,000 (from IDR8,500),
implying 18x FY17F P/E. While rising non-performing loans (NPLs) at PT Bank
Permata Tbk are a key risk to our call, our sensitivity analysis indicates its
impact on Astra’s value should not be significant.
Link to report: Astra International : New Growth
Engines From Mining Arms
Regional Oil&Gas
(Overweight), Screening For The Strongest Companies
We assess the strength of the 30 oil & gas stocks under our
coverage from across four countries. Using liquidity and solvency ratios we
identified firms that were/are financially strong over the 2013-2016F period.
The results should not come as a surprise. Those that remained financially strong
were in the downstream and midstream subsectors, with concentration being in
Thailand and Malaysia. We like to highlight Petronas Chemicals, which stands
out in all ratios as the most financially strong company within our oil &
gas universe. (Kannika Siamwalla, CFA, Norman Choong, CFA, Wan Mohd Zahidi)
Economics
Indonesian consumer confidence index increased by 0.4%
MoM
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project to Pemping Island
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Wijaya Karya to build Keramasan flyover
Pelayaran Tempura Mas to add 3 new fleets
Sri Rejeki Isman aims 15% net profit growth
Palapa Ring project start to built in September
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Helmy Kristanto
Best regards,
Best regards,
RHB Securities
Indonesia
