RHB Indonesia - Exports And Imports Pick Up Strongly In Jan 2017 - (Export-Import, Waskita Karya, Adhi Karya, BI 7 Days RR Rate) Unknown Jumat, 17 Februari 2017



Dear Siti,

Good morning,

Exports And Imports Pick Up Strongly In Jan 2017

Exports increased 27.7% YoY in Jan 2017, led by an acceleration in non-oil & gas exports. Moving forward, we envisage exports of goods and services to return to a growth of 6.8% in 2017, from -3.9% in 2016 on:
1. A low base effect;

2. A more stable-to-modest pick-up in primary commodity prices;
3. A gradual improvement in world merchandise trade volume.
¨ We expect the current account deficit to improve in 1Q17. In Jan 2017, Indonesia’s trade surplus increased to USD1.4bn, from +USD1.0bn in Dec 2016. This points to a higher trade surplus in 1Q17, suggesting that the country’s current account deficit in the balance of payments could improve during the quarter.
¨ Exports picked up in Jan 2017. This was mainly on account of an acceleration in non-oil & gas exports and a rebound in oil & gas exports, particularly on higher prices.
¨ Acceleration in exports was broad-based. This was mainly on the back of a pick-up in exports to the EU, the US, Japan, China and India.
¨ Imports registered faster growth during the month. Imports recorded a faster pace of growth, rising 14.5% YoY, on account of a rebound in volume of non-oil & gas and oil & gas imports along with a pick-up in prices of oil & gas imports. (Rizki Fajar)

Results Review:

Waskita Karya (WSKT IJ, BUY, TP: IDR3,750), Waskita Karya FY16’s Results
♦ Wasktita Karya’s(WSKT IJ, BUY, TP: IDR3,750) net profit reached IDR1.714trn (+64% YoY), 104.6%/106.0% to our /consensus estimates, backed by lower interest expense than we expected.
♦ Its revenue only stood at IDR23.8trn, 90.1%/96.6% to our/consensus estimates as some toll road projects were pushed to this year.
♦ Its FY16’s GM was at 16.7% (our estimate: 16.3%) , supported by high GM in 2Q16 of 19.3%.
♦ In quarterly basis, Waskita recorded IDR9.8trn (+45%YoY, +65%QoQ) in revenue and IDR627bn (-3%YoY, +25% YoY) in NPAT. We see a seasonality shift in its earnings, as 4Q16’s earnings only represent 37% of FY16’s earnings vs its average 4yr historical seasonality of 68%.
♦ The management aims IDR3.5trn net profit this year, 58.6% above our estimates, propped up by up to five toll road investments in FY17F. Maintain BUY on the stock and we are reviewing our TP. (Dony Gunawan)

Adhi Karya (ADHI IJ, Neutral, TP: IDR2,085), Adhi Karya FY16’s Results
♦ Adhi Karya (ADHI IJ, NEUTRAL, TP: IDR2,085) posted IDR313bn (-32.4%YoY) net profit in FY16, 18% above our estimates of IDR266bn due to lower tax expense and higher GM than we expected.
♦ The company recorded IDR11.1trn (+17.8%YoY) in FY16’s revenue, 93% to our FY estimate.
♦ Its gross margin level stood at 10.1%, higher than our estimate of 9.6%
♦ In quarterly basis, its net profit reached IDR198bn (-39%YoY, 231%QoQ), while its revenue grew +35.2% YoY,+110%QoQ.
♦ Maintain Neutral on the stock due to potential loss from EPC project up to IDR250bn this year and uncertainty in LRT Greater Jakarta’s remains high. (Dony Gunawan)
Economic Updates:

Bank Indonesia Still Maintains Key Rate At 4.75%
Bank Indonesia’s (BI) board of governors maintained the BI 7-day (Reverse) Repo rate – the benchmark policy rate – at 4.75% on 16 Feb 2017. Moving forward, albeit increasingly limited room, BI could still to cut its key policy rate by another 25bps in 2017, to support economic growth under stable IDR circumstances on:
1. Moderate inflationary pressure; and
2. Manageable current account deficit.
 ¨ Deposit facility and lending rates were also maintained, at 4% and 5.5% respectively. BI believes that the move is consistent with its efforts to preserve domestic economic growth while maintaining macroeconomic and financial stability. This is against a backdrop of global downside risks in the form of US policy direction and geopolitical risks in Europe, as well as domestic risks with regards to administered price inflation.
¨ BI maintains growth projection for 2017. The economy is projected to expand in 2017, in the 5-5.4% range, driven by exports and investment as financing increases from bank loans and non-bank financing, along with stronger government spending. On the other hand, strong household consumption is also predicted. Overall, we are of the view that moderate inflationary pressure, the recent government deregulation, successful implementation of the tax amnesty bill, and BI’s aggressive monetary easing last year would 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 will likely translate into higher rural household spending.
¨ BI expects global economy to improve, supported by gains in the US and China, albeit with several risks that demand vigilance. The US economy has been buoyed by increased consumption and investments, while growth in China has remained robust amid gradual economic rebalancing process. Looking forward, several global risks continue to demand heightened vigilance, including the impact of US fiscal expansion plan amid signals of monetary tightening that could lead to stronger US currency as well as earlier and faster than expected policy rate adjustment. In addition, US’s protectionism trade policy, the approval of “Hard Brexit”, as well as geopolitical risks in Europe can reduce the world trade volume and increase global uncertainty.
¨ Indonesian financial system remains stable, underpinned by a resilient banking system and relatively sound financial markets. In Dec 2016, the capital adequacy ratio (CAR) of banks remained high at 22.7%, which is above the minimum threshold of 8%. At the same time, non-performing loans (NPL) slightly lowered to 2.9% (gross) or 1.2% (net) of total loans. Meanwhile, deposit growth increased to 9.6% YoY in Dec 2016, up from +9.0% in Nov 2016 due to tax amnesty repatriation fund while loan growth moderated to 7.9% YoY in Dec 2016, down from +8.5% in Nov 2016.
¨ Going forward, we believe inflation will likely trend up but remain manageable in 2017 due to relatively low higher fuel prices and stable domestic demand. In addition, the current account deficit in the balance of payments will likely be contained although IDR may continue to face external headwinds, as expectations on the US raising interest rates this year have increased. While increasingly limited, the BI could still slash its key policy rate by another 25bps in 2017 to support economic growth, which moderated for two consecutive quarters in 3rd and 4Q last year. This will only happen under stable IDR circumstances. We believe the window for a rate cut may probably be made available until April this year as inflation could remain low during this period due to the harvest season. Thereafter, the preparation for the Ramadhan season and the possibility of a Fed rate hike as it gets closer to the 2H17 would likely close the room for further monetary easing. (Rizki Fajar)

Link to report: to be sent out later

Media Highlights:

Corporates

Unilever’s unaudited FY16 earning grew 9.2% YoY, in line
Based on FY16 unaudited result highlight, Unilever’s FY16 sales and earning increased to IDR40trn (+9.8% YoY) and IDR6.4trn (+9.2% YoY) respectively, in line with our and consensus estimates. Based on our calculation, 4Q16 earning reached IDR1.6trn (+12.9% QoQ, -0.8% YoY). Unilever revealed that its sales growth was driven by products innovation, such as Molto Super Sensorial and Sunsilk product re-launch. The company saw some strengthening of consumer demand in 2016, although has yet for fully recovered. We maintain our Neutral on the counter. (Andrey Wijaya)

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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia


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