RHB Indonesia Morning Cuppa - 26 February 2018 (Indah Kiat Pulp & Paper, Today's News)

Indonesia Morning Cuppa

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Site Visit Note

Indah Kiat Pulp & Paper

We took part in a group visit to the plant of Indah Kiat Pulp & Paper (INKP IJ, NR) in Perawang, Riau, Sumatra Island. Its plant in Perawang has an area of 2,400ha and produces 2.9m tonnes of pulp and 1.29mn tonnes of paper per year. The company expects its Revenue / EBITDA to grow by 11.7% / 28.6% in 2018, supported by stronger selling price. Indah Kiat is trading at FY18F / FY19F P/E of 7.7x / 7.4x, we do not have a rating on the stock.

Analyst: Michael Halim (6221) 2783 0719

Morning Cuppa Full Report: Indonesia Morning Cuppa 260217

Today’s News

Elnusa signs USD80m syndicated loan for capex allocation of IDR500bn in FY18

Wika Realty prepares IDR4.5trn investment for Jakarta River City project

Totalindo achieves 35% of FY18 new contracts target

Surya Esa Perkasa’s ammonia plant to operate in March

Wika Beton targets net income growth at 36.56% YoY in FY18

Arwana Citramulia targets IDR150bn net income in FY18

Pertamina increases its non-subsidised fuel price

Jasa Marga ready for odd-even rule on Cikampek

Indo Tambangraya’s FY17 results

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.