RHB Indonesia Morning Cuppa - 13 February 2018 (Plantation, Today's News)

Indonesia Morning Cuppa

Top Story

Sector Update

Plantation

Malaysia’s CPO output retreated MoM in January, in line with seasonal factors, while export levels saw a decent recovery from most major markets except for China. As a result, inventory levels started its downward march to 2.55m tonnes at end-January. We expect this decline to continue on the back of seasonally weaker output in the next few months. This, together with an anticipated weak soybean output in South America caused by dry weather, should result in CPO prices holding up in the near term. No change to our NEUTRAL sector call.

Analyst: Hoe Lee Leng (603) 9207 7605

Hariyanto Wijaya, CFA, CFP, CA, CPA, CFTe, CMT (6221) 2970 7061

Link to report: Inventory Levels Starting Its Downward March

Morning Cuppa Full Report: Inventory Levels Starting Its Downward March

Today’s News

Astra International invested USD150m in GO-JEK

Ministry of Energy and Minerals continue to deregulate 22 more regulations

Tunas Baru Lampung and Chandra Asri to issue bonds totaling IDR1.5trn

Wijaya Karya targets IDR1.96trn in FY18

Erajaya targets to open 250 outlets in 2018

Mitra Adiperkasa to expand its business to Vietnam and Thailand

Kapuas Prima Coal spends IDR718.97m for exploration in 1M18

Bank Danamon recorded IDR3.68trn in net profit for FY17

Motorcyle sales increase 16% QoQ

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.