RHB Indonesia - Surya Semesta Internusa - Key Takeaways From ASEAN Small Cap Book Launch (Surya Semesta Internusa, Bank Mandiri) Unknown Rabu, 26 April 2017




Good morning,

Surya Semesta Internusa - Key Takeaways From ASEAN Small Cap Book Launch
On 20 Apr, we launched our 2017 ASEAN 100 Small Cap Jewel book in KL, Malaysia. The event comprised top 25 selected small cap companies from Indonesia, Malaysia, Singapore, and Thailand. The event was a success as the ballroom was fully occupied by clients. RHB invited six corporates as speakers: three from Malaysia, one from Indonesia, one from Thailand, and one from Singapore. Surya was one of the presenters at the event. We would be having our own Small Cap book launch in Jakarta on 27 Apr. Our BUY call and IDR940 TP (27% upside) for Surya are maintained.


¨ Suryacipta City of Industry (SCI). Management indicated that there are 20ha of inquiries for Phase 3, although they acknowledged that it would be difficult to fulfill should there be an inquiry for more than 35ha from a single buyer. This is as the largest land area currently available in SCI is 35ha in a single plot. The targeted land sale for 2017 remains at 20ha.
¨ Subang land bank. As of 1Q17, Surya Semesta Internusa (Surya) managed to acquire 600ha of land in Subang, with acquisition cost ranging IDR100,000-150,000/sqm (vs IDR350,000-500,000/sqm in Karawang), which has increased from ~IDR50,000/sqm in 2015. Management also highlighted that selling prices in Subang would start at USD90-100/sqm that would translate to gross margin of 50-60%, in line with our assumptions. Main concerns at Subang would be the land acquisition process, where Surya needs to cooperate with the regional government in order to prevent speculators from buying the land prior to Surya being able to resolve issues regarding legal certification of the land (eg multiple overlapping certificate for a piece of land, and transforming indigenous-owned land or girik status into hereditary rights or Hak Milik).
¨ Nusa Raya Cipta (NRC). Management reiterated that NRC mainly focuses on high-rise projects and caters to private property developers such as Agung Podomoro Group, Intiland Group, Tokyuland Group, Astra group, Ciputra Group, and Sinarmas Group. Prior to NRC’s involvement in the toll road project (Cipali), NRC had been trying to avoid government-related projects due to concerns on transparency, as well as terms on payment. This was the management’s strategy to improve its performance by way of venturing into the infrastructure sector. This year, NRC is targeting IDR3.3trn of new contracts including a potential toll road project. Based on several media reports, the regional government of Central Java is preparing propositions to build three new toll roads that would be interconnected: Cipali-Kertajati, Cipali-Patimban, and to Geopark Ciletuh Sukabumi.
¨ Moderate 2017 guidance. We believe management is guiding rather moderately for 2017, with targeted land sales of 20ha, construction new contracts of IDR3.3trn, and hotel revenue of ~IDR800bn. Nonetheless, we estimate that Subang land sales would kick off in 2019 with ~8% contribution to total revenue. We forecast net income to grow at CAGR of 59% during 2016-2019. Maintain BUY with unchanged TP of IDR940 (60% discount to NAV). (Yualdo Tirtakencana)
Link to report: Surya Semesta Internusa : Key Takeaways From ASEAN Small Cap Book Launch
Link to Daily report: Indonesia Morning Cuppa 260417  



Results Review:

Bank Mandiri (BMRI IJ, Neutral, TP: IDR11,600), Still On Its Way to Improve The Performance

Mandiri just finished its 1Q17 analyst meeting. Our GGM-derived TP implies 1.66x 2017F P/BV multiple.

Key highlights:

1Q17 performance:
*Net interest income represents 22.2%/23.4% of our/consensus forecast supported by 14.2% YoY loans growth.
*Net interest margin (NIM) dropped to 5.9% due to a lower asset yield to 8.6% (1Q16: 8.9%) coming from high growth in corporate lending (+26.8% YoY). Loan yield in corporate lending fell by c.100bps to 9.8% on YoY comparison.
*Cost to income ratio (CIR) improved to 42.1% from 43.9% due to a 3.9% YoY opex growth.
*Gross non-performing loans (NPL) ratio stood at 4% (Mar-16: 3.2%, end-16: 4%).
*Credit cost hover at 328bps, still above 2017’s guidance of maximum 270bps as the Mandiri’s management argued it is part of front-loading strategyon one corporate borrower (bottled water company).
*Net profit of IDR4.1trn accounted for 22.7%/20.6% of our/consensus forecast.

What to expect:
*Loan growth would reach 13.4% YoY as we anticipate corporate lending would continue to be the main growth engine.
*Asset yield would continue to fall due to lower loan yield coming from higher corporate lending exposure. We expect lower asset yield at 8.7% in FY17 (FY16: 9%).
*NIM would slightly fall to 6% for FY17 (FY16: 6.1%) in our forecast.
*Please note that our earnings projection of IDR17.9trn is below consensus’ figure of IDR19.8trn as we expect 305bps credit cost with 3.7% gross NPL ratio by end of year. (Eka Savitri)

Media Highlights:

Corporate

Bank CIMB Niaga (BNGA IJ, NR) is now officially a BUKU IV bank along with four other banks. The bank now has IDR32trn of capital, higher than the requirement of IDR30trn to be categorized as a BUKU IV bank. This announcement was made in the company’s AGM, in which it was also announced that the company will not pay any dividends from FY16’s net profit. (Metro TV News)

Comment: Niaga is now upgraded to a BUKU IV bank (along with BCA, Mandiri, BRI and BNI) with core capital of IDR32trn as of Mar-17. Yet, Niaga has no plan yet to grow its business through anorganic growth. Instead, it would invest more towards network infrastructure while grow its consumer lending. Niaga will have its 1Q17 result conference call on Thursday evening (4 PM jakarta time). (Eka Savitri)

Bank Rakyat Indonesia eyes IDR213bn from bancassurance fee
Aneka Tambang has started building new ferronickel plant
Blue Bird prepares capex of IDR1trn in 2017
Garuda Indonesia to move all international flights to T3
Ministry of Finance to cut income tax rate

Our Recent Publication:
Results Review: Perusahaan Gas Negara – Improvement On Opex Normalisation And E&P Profit
Economics Update: BI Continues To Hold Key Policy Rate In April
Results Review: Arwana Citramulia – Better Sales Mix And Efficiency To Boost Earnings
Results Review: Bank Tabungan Negara – To Stay Housing-Centric
Economics Update: Exports And Imports Accelerate In March
Reinitiating Coverage: Surya Semesta Internusa – Subang Industrial Estate As a Future Driver
Sector Update: Retailing - Upper segments, mid-ticket items seem to fare better
Reinitiating Coverage: Delta Dunia Makmur –Strong Projected Earnings Growth In 2017F
Sector Update: Plantation – Inventory Restocking Has Begun
Company Update: Bank Rakyat Indonesia – Ample Room To Grow
Corporate News Flash: IPO Plan For F&B Subsidiary, MAP Boga?
Indonesia Strategy: Exuberance Over Positives Ahead


Best regards,

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



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