Good morning,
Adaro Energy –
Stronger Balance Sheet
Adaro
booked strong 9M17 earnings, above our/consensus’ expectation (87% and 81% of
our and consensus’ FY17F respectively). It is also the first time Adaro has
booked a net cash position since 2009, on the back of strong operating cash
flow generation and disciplined capital spending. We think this could trigger
a higher dividend payout ratio vs last year’s 30%. We fined-tuned our
assumptions to accomodate better costs, while maintaining our BUY call, with
unchanged TP of IDR2,300 (26% upside), implying FY18F P/E of 11.2x.
¨ Stronger balance
sheet.
This is the first time Adaro has reached a net cash position (USD141m in
9M17) since 2009, due to the combination of its strong operating cash flow
generation and moderate capex. In 9M17, Adaro also repaid USD96m of bank
loans, which decreased its interest-bearing debt.
¨ Potential higher
dividend payout ratio. Adaro’s dividend payout ratio fluctuates from year to
year, between 21% and 81%. We think piling up cash and cash equivalents of
USD1.2bn in 9M17 (excluding financial assets of USD259m) should increase its
dividend payout ratio from last year’s payout of 30%. This is as its average
debt repayment schedule from 2017 to 2019 is at a manageable level of around
USD171m per year.
¨ Maintaining its
FY17 target stripping ratio. Adaro’s stripping ratio in 9M17 is 4.65x,
still below its guidance of 4.85x for 2017. This is as the company
experienced heavy rains at its mining operations, which extended into 3Q.
Adaro still expects its blended average strip ratio to reach FY17 guidance of
4.85x, which would mean its 4Q17 stripping ratio could increase to 5.4x and
the quarter would incur increased production costs.
¨ Better-than-expected
9M17 earnings.
Adaro booked strong 9M17 earnings of USD372m (+78%YoY), beating our and
consensus’ expectations (reaching 87% and 81% respectively). This was on the
back of:
i. Higher 9M17 average selling price of USD57.90/tonne
(+41.7%YoY);
ii. Manageable costs;
iii. Lower realised stripping ratio of 4.65x in 9M17
(Adaro’s FY17 target of 4.85x vs our FY17F of 4.9x).
iv. Strong 3Q17 earnings of USD150m (+20%YoY, +73% QoQ) as
Adaro was able to maintain its quarterly profit margin despite stripping
ratio increasing to 5x in 3Q17 (2Q17: 4.3x, 3Q16: 4.7x).
¨ Reiterate BUY. We fine-tuned our
assumptions to accomodate better costs and increased FY17F-19F earnings by
9.6%, 9.1% and 0.1%, respectively. We maintained our BUY with unchanged TP of
IDR2,300, implying FY19F P/E of 11.2x, which we think justified considering
Adaro’s improved ROE. We think consensus’ earnings upgrades are likely, which
would be a near-term catalyst for share price performance
¨ Key risks to our BUY call
include a significant drop in coal prices and weaker-than-expected coal
demand. (Hariyanto Wijaya, CFA, CPA, CMT)
Link to report: Adaro Energy : Stronger Balance Sheet
Link to daily
report: Indonesia Morning Cuppa 011117
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Results Review:
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Unilever Indonesia (UNVR IJ, Neutral, TP:
IDR48,500), In line 9M17 earnings
Unilever’s 9M17 earning came in line with
expectation which rose to IDR5.2trn (+10% YoY), achieving 73% and 72% of our
and consensus full year estimates.
3Q17 earning slightly declined to IDR1.6trn
(-3.5% QoQ) which was driven by lower sales (-4.5% QoQ), while blended 3Q17
EBIT margin widened to 22% (2Q17: 21.5%). Note that Food and Refreshment
sales declined to IDR3trn (-15% QoQ), while home and personal care (HPC)
sales were flat QoQ.
We reiterate Neutral
with DCF-based IDR48,500 TP (2% downside), implying 52x FY17F P/E. (Andrey Wijaya)
Astra International (ASII IJ, BUY, TP:
IDR9,200), In line 9M17 earnings
Astra’s 9M17 earning came in line with
expectation, driven by improved 3Q17 earnings in all major units, such as
auto, agribusiness, and heavy equipment.
Auto distribution margin turned to
positive, while agribusiness benefited higher CPO price. We expect heavy
equipment to continue booking strong sales ahead.
Maintain BUY with
IDR9,200 TP (15% upside), implying 17x FY18F P/E. (Andrey Wijaya)
Indocement’s 9M17 earning below expectation
Indocement’s 9M17 earnings below
expectation which dropped to IDR1.4trn (-55% YoY), achieving merely 45% and
60% of our and consensus full-year estimates. This was driven by lower than
expected ASP (-9% YoY) and higher than expected operational costs (+10% YoY).
3Q17 earning increased to IDR505bn (+23%
QoQ) which driven by higher sales volume thanks to longer working capital days
and high sales cycle. However, 3Q17 ASP declined to IDR847,000/tonne (-2.1%
QoQ).
Maintain SELL with
DCF based TP of IDR12,800 (75% downside), implying 15x FY17F P/E. (Andrey Wijaya)
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Economics Update:
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September Loan And M2 Growth Pick Up
Indonesia’s money supply (M2) growth edged
up to 10.9% YoY in September (August: +10%) due to a pick-up in both net
domestic claims and foreign assets. Going forward, we expect broad money
supply to grow at a faster pace of 11% in 2017 (2016: +10%), underpinned by
stronger forecast economic growth.
¨ Private
credit picked up.
Total loan growth, likewise, picked up in September, due to stronger growth
in all types of loans. Going forward, we expect demand for private credit to
accelerate to 10% in 2017 (2016: +7.8%), aided by:
i.
A more accommodative policy environment following monetary policy
easing in 2016 and 2017;
ii.
Stronger projected economic growth.
¨ Deposit
growth also fastened,
as a pick-up in time and demand deposits, along with savings were recorded in
September.
¨ The
key policy rate would likely be maintained. We expect Bank Indonesia
(BI) to maintain its key policy rate at 4.25%, as inflation is likely to
remain manageable while external uncertainties linger
¨ The IDR continued to weaken against the USD. The domestic currency continued to weaken against its US counterpart as the situation in US turns more hawkish with higher possibility of Fed rate hike in December. This was after IDR weakening slightly in September. Going forward, we expect the IDR to remain steady and trade towards 13,300 per USD by end-2017. (Rizki Fajar) |
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Media Highlights:
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Corporate
Indonesia’s ease of
doing business ranking rises by 19 places
Panca Budi Targets
IDR857.01trn IPO Fund
Adi Sarana’s profit
grows by 84%
Link Net continues
to add number of customers
Kino forms two joint
venture
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Our
Recent Publication:
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Results Review: Nippon Indosari Corpindo –
Below Expectations Despite 3Q17 Earnings Jump
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Company Update: Summarecon Agung – Strong
Demand For Symphonia
Link to report: Summarecon
Agung : Strong Demand For Symphonia
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Results Review: Perusahaan Gas Negara – Some
Improvements, But Outlook Still Uncertain
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Results Review: Delta Dunia Makmur – Mining
Contracting Volume Growth To Continue
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Economics Update: 2018 State Budget:
Encouraging Investment And Infrastructure For Growth And Equality
|
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Economics Update: BI Pauses In October
After Easing August-September
Link to report: BI
Pauses In October After Easing August-September
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Company Update: Bekasi Fajar – Waiting On
Guidance For 9M17
Link to report: Bekasi
Fajar : Waiting On Guidance For 9M17
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Company Update: Arwana Citramulia – Revenue
Remains Robust Despite Elevated Costs
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Economics Update: September Exports
Moderate, Imports Pick Up
Link to report: September Exports
Moderate, Imports Pick Up
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Sector Update: Building Materials –
Infrastructure Projects Boost Bulk Cement Sales Growth
Link to report: Infrastructure
Projects Boost Bulk Cement Sales Growth
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Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto, Consumer, Cement
PT RHB Sekuritas Indonesia
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