RHB Indonesia - Surya Semesta Internusa - Positive Outlook Unchanged (Surya Semesta Internusa) Unknown Senin, 08 Mei 2017




Good morning,

Surya Semesta Internusa – Positive Outlook Unchanged


¨ Lower-than-expected 1Q17 results... Surya Semesta Internusa (Surya Semesta) posted 1Q17 revenue of IDR794bn (-33% YoY), which translated to 20%/17% of our/consensus estimates respectively, and were below its average quarterly trend. Lower contributions from its construction, hospitality, and property businesses dragged down revenue in 1Q17.
1Q17 net profit came in at IDR3bn (-98% YoY) or equivalent to 1%/1% from our/consensus estimates, also below its average quarterly trend. Erosion in bottom line was due to lower growth in construction, hospitality, and property businesses.
¨ ......but QoQ improvement seen. The company recorded a turnaround in its bottomline as opposed to net losses in 4Q16. 1Q17 net margin improved by 750bps QoQ to 0.4%, mainly supported by the property business that increased 76% QoQ. Property net margin in 1Q17 also climbed to 37% from 5% previously. This was driven by a sharply higher accounting land sales in 1Q17 (+293% QoQ).
¨ Better new contracts collection. In 1Q17 Nusa Raya Cipta (NRC) managed to book higher new contracts of IDR530.2bn (+53% YoY) that accounted 16% of this year’s targeted new contracts of IDR3.3trn – this was also above 1Q16’s achievement of 12%. Main projects clinched in 1Q17 were the Yogya Sumber Sari Juction (Bandung), Mason Pine Hotel (Padalarang), Apsara Tower at The Kahyangan Solo Baru, and Gedung Showroom & Hotel (Surabaya).
¨ Share buyback plan. As mentioned in our previous report, Subang Industrial Estate As a Future Driver,(13 Apr 2017), the 435m share buyback plan is subject to shareholders’ approval that is scheduled for 5 May 2017, today. The plan would be effective for 18 months from the date of approval. This corporate exercise could provide an additional 10.2% upside to our RNAV estimate – we have factored this in our assumptions as we are confident that this plan would go through.
¨ Subang land acquisition. Up to 1Q17, the company had acquired 635ha in Subang. Looking at the land acquisition progress along with additional funds from its recent toll road divestment, we believe its target to acquire 1,000ha of land in Subang should be feasible by the end of this year.
¨ Maintain BUY. We reiterate our BUY call with unchanged TP of IDR940, based on a 60% discount to RNAV. The stock is currently trading at 2017F P/E of 11x. (Yualdo Tirtakencana)

Link to report: Surya Semesta Internusa : Positive Outlook Unchanged
Link to Daily report: Indonesia Morning Cuppa 080517



Economics Update:

Economic Growth Sustained In 1Q17

Indonesia’s 1Q17 GDP expanded 5% YoY, bouncing back from a moderation in the past two consecutive quarters. Going forward, we expect the archipelago’s economic growth to pick up slightly to 5.2% from +5% in 2016. GDP growth would continue to be supported by:
1. Rebound in Government spending as revenue collection improves;
2. Faster state budget disbursements for infrastructure projects;
3. Resilient household consumption;
4. Lower cost of borrowings
5. A pick-up in primary commodity prices.
¨ Economic growth picked up in 1Q17. It inched up to 5% YoY in 1Q17 (4Q16: +4.9%). This was attributed to a pick-up in net exports along with stronger domestic demand, on the back of Government consumption as a result of stronger state revenue.
¨ Investment held unchanged, though, as public investment in the first two months of 2017 was soft after fiscal consolidation in 2H16.
¨ An acceleration in net export was recorded during the quarter. Growth in real exports of goods & services picked up to 8% in 1Q17 (4Q16: +4.2%).
In the same vein, growth in real imports of goods & services picked up to 5% YoY in 1Q17 (4Q16: +2.8%). A sharper growth in exports vis-à-vis imports resulted in a higher positive net exports contribution during the quarter under review.
¨ Led by three major sectors. On the supply side, the uptick in GDP growth was led by an acceleration in manufacturing, agriculture, and trade. Note that these three biggest sectors contributed almost half of the economy. (Rizki Fajar)

Link to report to be sent out later

Sector Update:

Regional Oil & Gas – Stronger Together

OPEC and non-OPEC production cuts have had a material impact on the overall global oil markets. The cutting out c.260mbbls of global supplies that would otherwise enter the market has been no easy task. Should production cuts be further extended, the oil markets would be in a much stronger position than 12 months ago. We maintain our crude oil price forecast of USD60/bbl for 2017. With several changes made to our coverage, we downgrade our regional O&G sector to NEUTRAL (from Overweight). Top Picks are: PGN, AKRA, Yinson, Sapura Energy, Keppel and SPRC.

¨ Bear market blues. Last week, crude oil price fell below USD50/bbl for the first time since oil production cuts were announced in 4Q16. Concerns are now over the oil inventory that does not seem to be falling as well as fears that any effort made by OPEC and non-OPEC production cuts would be undermined by the potential rise in USD production, specifically shale oil.
¨ It is quite an understatement that the US oil production would offset the 1.8mbpd OPEC and non-OPEC production cuts. In order for this to happen, the incremental annual production from the US has to be equal or exceed the production cuts. The additional US production is forecasted at 0.35mbpd and 0.68mbpd putting US oil production at 9.2mbpd and 9.9mbpd for 2017 and 2018 respectively. This is still far from the production cuts imposed of 1.8mbpd and therefore the overall impact should be positive for the oil markets. Note that shale oil production is forecasted at 4.6mbpd for 2017.
¨ Oil markets are much stronger now compared to a scenario if there are no production cuts at all, as was the case 12 months ago. We performed three scenarios analysis as follows:
i. With production cuts extended at current levels until year-end, we expect that demand would outpace supply by 1Q17 onwards; global inventories should decline to c.380mbbls (from 765mbbls in 4Q16) and we should see a deficit of supply of c.1.05mbpd. We expect crude oil price to average USD60/bbl for FY17.
ii. Without production cuts being extended, we expect demand to outpace supply from 1Q17 onwards, with deficit of supply of c.0.45mbpd, and global inventories should decline to c.600mbbls. We expect crude oil to average USD55/bbl for FY17.
iii. Assuming no production cuts at all, we believe the oil markets would be in a much weaker position than they are now. That is, global inventories could rise to c.900mbbls, and an oversupply of c.0.35mbpd would be seen for FY17. Under this scenario, crude oil prices could average to a much lower USD40/bbl.
¨ Downgrade to NEUTRAL. As of 5 May, we have ceased coverage of seven of our Malaysia O&G stocks due to reallocation of resources. Over the past month, we have also downgraded Sembcorp Industries (Sembcorp) and Petronas Chemicals to NEUTRAL (from Buy). We also have downgraded the Thai O&G sector since February to NEUTRAL (from Overweight). As such, we are now NEUTRAL on the Regional O&G sector. Our Top Picks for the region are: Perusahaan Gas Negara (PGN), AKR Corporindo (AKRA), Yinson, Sapura Energy and Keppel Corp (Keppel). For Thailand, as most stocks have already reached our TP, we recommend Star Petroleum Refining (SPRC) as a pure dividend play. (Kannika Siamwalla, CFA)

Link to report: Stronger Together


Media Highlights:

Corporate

Indofood Sukses Makmur issues IDR2trn bond
Nusa Raya Cipta targets to book another IDR2.3trn in new contracts from May to December 2017
Domestic airplane passengers traffic slows while international passengers traffic picks up
35,000 MW electricity project: 37 power plants have operated

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Best regards,

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

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