RHB Indonesia Morning Cuppa - 12 February 2018 (Regional Oil & Gas, Balance of Payments, Astra International, Today's News)

Indonesia Morning Cuppa

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Regional Oil & Gas

The current turmoil in the financial markets has not affected the oil market’s fundamentals much. The crude oil market remains solid, with the wild card being Venezuela’s production, while shale production from the US could surprise more on the upside. This could add USD1.00-3.00/bbl to our crude oil prices of USD64.00/60.00 per bbl for 2018F/2019F onwards. The risk of re-pricing in the financial markets may affect the risk premium for our equity valuations, for which we provide sensitivity analyses. Top Picks: PTT, PTTGC, SPRC, Petronas Chemicals, PetronM and Yinson.

Analyst: Kannika Siamwalla, CFA (662) 862 9744

Link to report: Oil Market Remains Solid Despite Financial Turmoil

Morning Cuppa Full Report: Indonesia Morning Cuppa 120218

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Economic Update

CAD Widens In 4Q17, BOP Surplus Narrows

Indonesia’s current account in its BOP registered a higher deficit of USD5.8bn (2.2% of GDP) in 4Q17 as trade surplus declined. Moving forward, we expect the current account deficit (CAD) to continue to widen to USD20.4bn – or -1.9% of GDP – in 2018 from a deficit of USD18.9bn (-1.7% of GDP in 2017). This would be on expectations of a:

1. Smaller surplus in the merchandise trade account due to growing imports;

2. Larger deficit in the services account.

Analyst: Rizki Fajar (6221) 2970 7065

Link to report: will be sent out later

Morning Cuppa Full Report: Indonesia Morning Cuppa 120218

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Company Update

Astra peer, SAIC GM Wuling launched new med-MPV

Last week, Astra competitor, SAIC GM Wuling officially launched 1.8ltr MPV, Wuling Cortez with price range from IDR218m-268m. Cortez market positioning its quite unique since based on selling price it targets Toyota Avanza high-end customers, however based on cabin size, it likely targets low-end Toyota Innova buyers.

The launch of Wuling Cortez may pressure Astra sales in the short-term. Note that since the launch on Wuling Confero in August 2017, Wuling market shares has reached 1.3% in December.

However, we see that Astra likely to still maintain its dominance in Indonesia auto market thanks to its strong after sales service, such as spare parts availability, service station, re-sale value, and distribution network. Maintain BUY on Astra with SOP-based TP to IDR9,500 (13% upside), implying 16-15x FY18F-19F P/Es.

Analyst: Andrey Wijaya (6221) 2970 7058

Morning Cuppa Full Report: Indonesia Morning Cuppa 120218

Today’s News

Indika Energy targets 34m tonnes sales & production volume in 2018

Rice price still above government ceiling price

Adhi targets IDR23trn new contracts in 2018

BCA targets FY18F vehicles financing to grow by 9-10% YoY

Bekasi Fajar allocates IDR600bn FY18 capex

Indo Tambangraya allocates IDR82.16bn drilling cost in FY18

Beyond cabotage valid since May 2018

Jasa Marga to increase two toll roads tariffs

Top BUYs
		TP	Upside	Catalysts
		(IDR)	(%)	Catalysts
Astra International		9,500	13	Given the robust of the All New Toyota Rush and Daihatsu Terios sales orders, Astra has raised its monthly sales target. Its lowering of Daihatsu Terios’ selling price while positioning Toyota Rush at a higher class are seen as a good strategy to reclaim market share. We also see the company’s coal mining unit benefiting from higher coal prices. We raise its earnings estimates, and SOP-based TP to IDR9,500 (from IDR9,200, 13% upside), implying 16-15x FY18F-19F P/Es. Key risk is the intense competition in the auto industry. SAIC-GM Wuling just launched its 1.8-litre MPV – Wuling Cortez – with an attractive selling price. Maintain BUY.
BSD City		2,650	44	Expectations of higher marketing sales due to lower interest rates, which ought to incentivise mortgage users. BSD City has the largest proportion of mortgage users vis-à-vis other developers. There is also better monetisation from its large landbank.
Bukit Asam		4,100	20	Bukit Asam is the cheapest coal counter in our coal universe. We think earnings growth should be the catalyst for its share price. We believe investors’ concerns about a potential cost-plus margins formula in determining coal selling prices to domestic power plants should fade. This is based on our checks with several competent sources. The formula is only valid for coal sales to new mine mouth power plants. It is not for existing/under construction mine mouth power facilities.
Indofood Sukses Makmur		10,300	28	We expect higher domestic consumer spending in 2018. This would be thanks to the Government stimulus initiatives for low-end consumers. Indofood Sukses Makmur, as one of the largest food & beverage (F&B) players, should benefit from this situation. F&B accounted for around 62% of its total 9M17 EBIT. Higher flour prices may also boost Bogasari Flour Mills’ earnings, which accounted for around 14% of the company’s EBIT.
	Ramayana Lestari	1,550	34	Consumer spending recovery – especially from the lower income segment in 2018 – is likely to benefit Ramayana Lestari after a flat performance in 2017. This is due to increased subsidies by the Government that have been allocated in the 2018 budget via the Ministry of Social Affairs. In addition, President Joko Widodo’s (Jokowi) work-for-cash programme is likely to help raise consumer spending.