RHB Indonesia - Exports And Imports Accelerate In May Unknown Jumat, 16 Juni 2017




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Exports And Imports Accelerate In May

Exports bounced back with an increase of 24.1% YoY in May, after slowing to a growth of 13.6% in April. This was led by a surge in non-oil & gas exports, mainly driven by a rebound in electrical and mechanical machinery/equipment. Moving forward, we envisage the export of goods and services to return to a growth of 10% in 2017, vis-à-vis the -3.9% recorded in 2016. This is on the back of a low base effect, a pick-up in primary commodity prices and a gradual improvement in world merchandise trade volumes.


¨ We expect the current account deficit (CAD) to widen in 2Q17. In May, the trade surplus narrowed further to USD0.5bn from USD1.2bn in April. This points towards a lower trade surplus in 2Q17 and suggests that Indonesia’s CAD in the balance of payments could widen during the quarter.
¨ Exports accelerated in May, mainly on account of a surge in non-oil & gas exports. This was driven largely by a rebound in exports of machineries and faster growth in the export of vehicles & parts, apparel, iron & steel, as well as a pick-up in gas and oil product exports, particularly on a rebound in volumes.
¨ Stronger growth in export was seen across both the advanced countries and emerging markets. This was mainly on the back of a faster increase in exports to Japan, ASEAN, China, the EU and US.
¨ Imports registered faster growth during the month. Likewise, imports recorded a more rapid pace of growth, rising 24% YoY. This was on account of a rebound in prices and a pick-up in volume of non-oil & gas imports. (Rizki Fajar)

Link to report: Exports And Imports Accelerate In May
Link to daily report: Indonesia Morning Cuppa 160617

Economics Update:

15th stimulus policy: Logistic focus
President Jokowi launched the 15th Economic Policy Package focusing on the national logistic system. The 15th stimulus mainly focus on the shipping industry, which will become one of the main transportation modes, supported by aggressive port development all across Indonesia. Reduction in overall high logistic cost would also become one of the main goals in the medium term.

The 15th stimulus main agenda would be in 3 areas:
¨ Strengthen the Indonesia National Single Window (INSW) and further deregulation
¨ Improve the competitiveness of logistic services providers
¨ Provide market opportunities to shipping, marine insurance, and ship maintenance industries

The government is looking to suppress logistic costs which currently make up 40% of retail prices, 72% of which is transportation costs. Furthermore, INSW is given more autonomy to enhance systems for export-import services, customs, and ports all across Indonesia.
There are five specific targets for the latest package:
¨ 0% import tax for 115 ship spare parts
¨ Indonesia’s shipping industry to serve export-import trades worth USD600mn / year
¨ 70-100 new ships worth USD700mn
¨ New job openings for 2,000 sailors
¨ Improvement of regional logistics system (SISLOGDA) to support flow of goods, control inflation, and reduce post-harvest damage of goods by 30%.

In our view, the latest stimulus resembles previous packages, which aim to further improve the logistic sector. We recalled that the 2nd stimulus policy package also include the reduction of VAT to zero for transportation sector’s spare part, including ships. 8th stimulus also provide 0% import tariff for airplane spare part.
The main beneficiaries from this new stimulus would be the shipping and shipyard company, although the former has also enjoyed reduction in VAT since the release of 2nd stimulus. The latest stimulus packages would confirm government’s continuity to strengthened macro foundation, whereby not only the government is aggressive in making capital spending, but also concomitantly provides various incentive to lure private sector to make new investment. The main drawback of those various stimulus policies would be the implementation and execution, especially given wide scope targets on the earlier policy package. Nonetheless, there have been some progress on the realisation and we continue to expect for further steady improvement in this area. (Helmy Kristanto)


BI Continues To Hold Key Policy Rate In June

Bank Indonesia’s (BI) board of governors held the BI 7-day (reverse) repo rate – the benchmark policy rate – unchanged at 4.75% on 15 June. We believe the Central Bank would maintain its key policy rate for the rest of 2017 on the back of moderate inflationary pressure and 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 maintain macroeconomic and financial stability, while preserving the domestic economic recovery process. This is against a backdrop of global risks in the form of the current discourse over US policy direction, geopolitical risks, along with the potential increase in commodity prices. There are also domestic risks with regard to upward changes in administered price inflation, as well as ongoing consolidation in the corporate and banking sectors, which has undermined the impact of economic stimulus.
¨ BI predicts economic growth to improve in 2Q, when compared to the previous quarter, supported by export growth, stronger investment, and a resilient household consumption. Export growth remains strong, in line with continuous recovery in the global economy as well as a hike in commodity prices. Investment performance increased on the back of higher building investment, mainly from government projects. Meanwhile, gains from the private property sector and non-building investment as well as activities in commodity and construction-based sectors also contributed to the stellar investment performance. Meanwhile, tenacious household consumption is expected to remain, bolstered by Eid-ul-Fitr allowance disbursements.
¨ Going forward, we believe inflation would likely trend up to 4.2% in 2017 (2016: +3.5%) but would remain manageable. This would be due to higher fuel prices and stronger domestic demand. In addition, the current account deficit in the balance of payments is likely to be contained, although the IDR may continue to face external headwinds, as expectations of further US interest rate hike this year increase.
Overall, we are of the view that moderate inflationary pressure, the recent deregulation of government policies, successful implementation of the tax amnesty bill and BI’s aggressive monetary easing last year would likely boost consumption and private investment moving forward.
¨ BI expects the global economy to keep improving, supported by gains in the US, Europe, China, Japan and other emerging markets, as well as rising commodity prices – albeit with several risks that require vigilance. As global economic growth improved, world trade volume and non-oil commodity prices also showed increases. Looking forward, several global risk factors continue to demand heightened vigilance, including the Federal Reserve’s plan to reduce its overall balance sheet and the impact on global financial markets, the Fed rate hike plans, and recent geopolitical risks in several regions.
¨ The Indonesian financial system remains stable, underpinned by a resilient banking system and relatively sound financial markets. In April, the capital adequacy ratio (CAR) for banks remained high at 22.6%. This is above the minimum threshold of 8%. Meanwhile, non-performing loans remained relatively stable at 3.1% (gross) or 1.4% (net). At the same time, loan growth increased to 9.5% in May, up from +9.2% the month earlier, driven by infrastructure and consumer loans. This is in line with rising economic activities and the impact from the previous easing in government and monetary policies. (Rizki Fajar)

Link to report to be sent out later
Company Update:

Summarecon Agung (SMRA IJ, Neutral, TP: IDR 1,420), Strong 5M17 presales
Summarecon posted strong 5M17 presales of IDR1,087bn (+77% YoY) or equivalent to 24% of this year’s target of IDR4,500bn. Presales in the month of May jumped +224% MoM mostly driven by the successfully sold out Bandung Magna commercial shop (66% contribution) followed by Kelapa Gading (15%), Serpong (12%), and Bekasi (8%). In terms of product mix, shoplots contributed 41.8% followed by houses 37.6%, apartments 16.7%, office space 3.5%, and landlots at 0.3% during May 17.

Although majority of Summarecon buyers’ were still opting for in-house cash installments, we also saw a shift in Summarecon buyers’ payment profile where mortgage users in 5M17 increased to 17% (vs 13% in 5M16) mostly driven by competitive mortgage rates. We expect this trend to continue and mortgages would become the preferred payment method in the future, supporting demand.

We expect the sector’s outlook to be more positive going forward following last year's catalysts: lower interest environment, tax reduction on property, and the completion of tax amnesty. Nonetheless, we are still cautious on Summarecon’s high gearing level, interest costs, and the low achievements on presales. Thus we maintain our Neutral call with TP of IDR 1,420, implying 52% discount to RNAV. (Yualdo Tirtakencana)

Media Highlights:

Corporate

Map Boga Adiperkasa sets IPO price at IDR1,680 per share
Map Boga Adiperkasa, subsidiary of Mitra Adiperkasa (MAPI IJ, BUY, TP: IDR7,400), has set its IPO price at IDR1,680 per share. The company is also lowering the amount of offered share to public to 22.17m share. Initially, the company was planning to issue new share at a maximum of 2.99% of total issued and paid-in capital. Besides that, the company will also offer 5% of total issued and paid-in capital for management and employee stock plan (MESOP) amounting to 108.54m share. Offering date is on 15-16 June 2017 with an allotment date on 19 June 2017. (Bisnis Indonesia)

Comment: This is only a technical listing, thus the small number of new shares. In Indonesian Stock Exchange, a listed public company need to have at least 300 shareholders to be considered as a public company. On valuation, MAP Boga’s Rp1.7tn market cap (~31x PE 2016A) is practically only letting the new shareholders to get into the company at the same level as General Atlantic valuation level, and we don’t think it’s a real reflection of Mitra’s F&B business valuation. In 1Q17, Mitra’s F&B business posted 26% revenue growth, 77% EBIT growth and 52% PBT growth. That said, we continue to like Mitra’s outlook. We see its high valuation multiple is justified by its potential profit growth rate. (Stifanus Sulistyo)

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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT RHB Sekuritas Indonesia

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