Results Review:
Astra International (ASII IJ, BUY, TP: IDR9,100)
Tailwinds Dampen Outlook
Astra International (ASII IJ, BUY, TP: IDR9,100)
Tailwinds Dampen Outlook
We
see strong tailwinds for Astra’s automotive, mining, and agribusiness segments
ahead. Also, new loan provisions from Bank Permata are likely to decline after
a kitchen-sinking exercise on NPLs. This should boost the earnings of Astra’s
financing services business. 4Q16 core earnings came in line. The substantial
losses booked by its financial services unit were partially offset by improved
earnings from its automotive, agriculture and mining units. Nonetheless, we
maintain BUY as our DCF-based TP of IDR9,100 (19x/16x FY17/18F P/Es) offers a
13% upside.
¨ Tailwinds ahead. We see strong
tailwinds for Astra’s mining, agribusiness and automotive segments ahead,
driven by:
i. Higher coal prices and slower growth of
labour costs for its plantation unit, which may lift earnings;
ii. Its automotive unit is likely to maintain
strong sales growth, boosted by lower financing costs and the relaxation of the
loan-to-value (LTV) policy.
In addition, in 2017, Bank Permata is likely
to book lower new provisions for non-performing loans (NPLs). The bank’s
allowances for its impairment losses coverage ratio increased to 75% at end-Dec
2016 (from 51% at end-Mar 2016).
¨ In-line 4Q16 core
earnings. The
significant loss booked by Astra’s financial services arm – caused by
substantial new provisions allocated for NPLs – was partially offset by higher
earnings from its automotive unit, which benefited from lower sales discounts.
In addition, earnings of its agribusiness, heavy equipment and mining divisions
improved substantially, in line with the uptrend of coal and CPO prices in
4Q16.
¨ Maintain BUY. Our unchanged
SOP-based TP of IDR9,100 (13% upside) implies 19x and 16x P/Es for FY17F and
FY18F respectively. The rising NPL level at Bank Permata is a key risk to our
call – although our sensitivity analysis indicates its impact on Astra’s value
should not be significant.
Kindly click the following link for the full report: Astra International : Tailwinds Dampen Outlook
Andrey Wijaya
Senior Vice President
Research Analyst – Auto,
Consumer, Cement
PT. RHB Securities
Indonesia
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