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Good morning,
BI
Maintains The Key Rate at 4.75%
¨ Bank Indonesia (BI) board of governors’ meeting maintained the
BI 7-day Reverse Repo (RR) rate, the benchmark policy rate,
at 4.75% on 17thNovember 2016. Similarly, deposit facility and
lending rates were maintained at4.00% and 5.50% respectively.BI believes that
the move is prudent, in response to increasingly uncertain global financial
markets in the wake of the US election result and against a stable domestic
macroeconomic backdrop. This is reflected in low inflation and a narrower
current account deficit. BI considers existing monetary and macroprudential policy easing adequate to preserve growth
momentum. Furthermore, inflation in 2016 is expected to ease to near the
floor of the target range of 3-5% in the 3.0-3.2% range.
¨ Separately, the BI predicts muted economic growth in 4Q, in
line with fiscal consolidation, which will bring growth to around 5%
this year. Nevertheless, the economy is projected to expand in 2017, in the
5.0-5.4% range. Overall, we are of the view that moderate inflation, recent
government deregulation, the successful implementation of the tax amnesty
bill, and BI’s aggressive monetary easing will likely boost consumption and
private investment moving forward. In addition, prices of Indonesia’s major
commodities are rising, such as crude palm oil (CPO), coal, and metal that
would support rural household spending.
¨ On the global economic outlook, the BI expects the global
economic recovery to persist, albeit slowly, with commodity prices beginning
to rebound. US growth has shown signs of recovery, reflected by GDP growth,
stable unemployment rate and rising inflation. In line with that, the chance
of Fed fund rate hike has increased in December 2016.On the other hand,
limited economic growth is expected on other advanced countries, including
European Union, while developing countries such as China and India are
predicted to continue to drive the global economy.
¨ Indonesian financial system remains stable, underpinned by a
resilient banking system and relatively sound financial markets. In
September, the Capital Adequacy Ratio (CAR) of banks remained high at 22.3%,
which is above the minimum threshold of 8%. At the same time, non-performing
loans (NPL) remained relatively stable at3.1% (gross) or 1.4% (net) of total
loans. Meanwhile, deposit and loan growth moderated to 3.2%and6.5% y-o-y in
3Q, down from +7.9% and +5.9%in the previous quarter.
¨ Going forward, we believe inflation will likely remain moderate
in 4Q2016 and in 2017due to low fuel prices and stable domestic demand. In
addition, the current account deficit in the balance of payments will likely
be manageable although the rupiah may continue to face external headwinds, as
expectation on the US raising interest rates has increased. This will likely
provide room, albeit limited, for the BI to maintain its loose monetary and
macroprudential policy. For the rest of the year, we expect the BI to retain
its policy rate unchanged at the current level. Further out, we expect the
BI to slash its key policy rate by another 25 basis points in 2017 to
support economic growth. (Rizki Fajar)
Link
to report: BI Maintains The Key Rate at 4.75%
Link
to Daily report: Indonesia Morning Cuppa - 181116
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Company
Highlights:
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Astra’s higher market shares in
October
Astra International continued gaining
market shares in which its 4W and 2W market shares increased to 60% in
October (Sept: 59.9%) and 78.2% in Oct (Sept: 76.1%), respectively. Higher 4W
market shares was driven by low cost green cars (LCGC) sales which increased
by 7% MoM. In term of sales volume, Astra cars wholesales slightly declined
to 55,197 units (-0.5% MoM), while that of motorcycles rose to 446,611 units
(+5.5% MoM).
In 10M16, Astra cars wholesales grew 11.6%
YoY, much faster than that of national wholesales growth which was merely
2.6% YoY. For 2W, Astra’s motorcycles wholesales declined merely 2.7% YoY,
while national motorcycles sales fell 9.2% YoY.
Astra is strengthening its position both in
4W and 2W domestic market. We maintain BUY with DCF base TP of IDR9,250 (18%
upside), implying 19x FY17F P/E. (Andrey Wijaya)
Key highlight of conference call with
Indocement management:
1. Higher coal price likely to affect Indocement
production costs in 1Q17 since majority coal are purchased under contracts
price. Coal accounted for around 30% of Indocement COGS.
2. Indocement expects the commencing of new P14 plant
which has lower production costs would partially offset higher coal price.
3. Indocement launched second-tier brand, Rajawali which
will be sold in selected areas. Indocement estimates that Rajawali sales to
be small, around 20,000 tonnes in FY16 (Indocement sales were 13.5m tonnes in
10M16). Rajawali EBIT margin is lower than Tiga Roda.
4. Indocement may not distribute special dividend for FY16
earning since the company is accumulating cash in preparation for acquisition
or expansion of cement grinding plant.
5. New cement plant construction in Pati likely to be
delay.
We have not factored higher coal price in
our forecast. Maintain Neutral with DCF-derived TP of IDR17,900 (21% upside),
implying 14x FY17F P/E. (Andrey Wijaya)
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Media
Highlights:
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Economics
Bank Indonesia cut 2017 GDP growth outlook
Corporates
Astra International realised 50% of FY16’s
capex until 9M16
Catur Sentosa closed HCG Indonesia
Unilever to maintain market share amid new
competition from Glico Wings
Fast Food Indonesia aims 10% revenue growth
in 2017
Pakuwon Jati revises pre-sales target for
2016
Ministry of Energy to cut gas price for 3
industries: petrochemical, fertilizer and steel
Reuters Survey: Indo palm exports likely
rose in October
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Our
Recent Publication:
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Results Review: Indosat: Taking The Lead In Data
Monetisation
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Company Update: Bank Negara Indonesia: Attractive
Valuations With Strong Fundamentals
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Economic Highlights: Both Exports and
Imports Finally Return to Growth in September
Link to report: Both Exports and
Imports Finally Return to Growth in September
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Sector Update: Coal
Mining: Sector Has Mixed Expectations For 2017
Link
to report: Coal Mining - Sector
Has Mixed Expectations For 2017
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Company Update: Summarecon Agung: Lower Gearing Is The Key
Link to report: Summarecon
Agung : Lower Gearing Is The Key
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Economic Highlights: Current Account
Deficit Improves In 3Q, And Surplus In Balance of Payments Continues
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Strategy: Currency
Woes Dampen Sentiment
Link
to report: Currency
Woes Dampen Sentiment
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Sector Update:
Regional Plantation: Disappointing Output Supports Bullish CPO Price Signal
Link
to report: Disappointing
Output Supports Bullish CPO Price Signal
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Company Update:
Nippon Indosari Corpindo : New SKU Launches, More Sales Force
Link
to report: Nippon
Indosari Corpindo : New SKU Launches, More Sales Force
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Company Update:
Pembangunan Perumahan Persero: Paving The Way For Stronger Growth
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Best regards,
Helmy Kristanto
Director
Head of Indonesia
Research
PT. RHB Securities
Indonesia
