RHB Indonesia Morning Cuppa - 15 February 2018 (Merdeka Copper Gold, Today's News)

Indonesia Morning Cuppa

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Merdeka Copper Gold

We visited Merdeka Copper Gold (MDKA IJ, NR) who began commercial operation in 2Q17 and started seeing healthy EBITDA and net profit in 3Q17. It expects to have an even better 4Q17 due to higher gold sales volume and stable ASP. The company looks to produce 4m tonnes of ore in 2018 after producing 3.3m tonnes in 2017, and it targets to expand that to 6m tonnes in 2019 to counteract the inevitable drop in mine grade. Based on the management’s indicative EBITDA, the company is trading at around 5.6-6.4x FY18F EV/EBITDA. We have no rating on the stock.

Analyst: Michael Halim (6221) 2783 0719

Morning Cuppa Full Report: Indonesia Morning Cuppa 150218

Today’s News

Cement sales performance

Tower Bersama allocates IDR1trn for tower construction this year

Bank Mandiri targets 13% YoY loan growth in FY18

Energi Mega Persada obtained new gas sale contract from Pertamina for FY19

Tunas Baru Lampung plans to offer as much as IDR1trn of bond

Waskita targets to operate 564km toll roads by the end of 1H18

Ramayana sees net sales of IDR539bn in January 2018

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.