RHB Indonesia Morning Cuppa - 28 February 2018 (United Tractors, Astra International, Matahari Department Store, Vale Indonesia, Sentul City, Today's News)

Indonesia Morning Cuppa

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Company Update

United Tractors

Booster From Mining Heavy Equipment Sales

United Tractors has revised up its FY18 Komatsu sales guidance to 4,200 units (from 3,800 units), of which ~1,000 units (FY17: 800 units) are giant-sized mining heavy equipment. We think strong sales of the latter in 2018 are still the beginning of the upcycle in mining heavy equipment sales, as – based on our calculations – there are ~4,000 units of such equipment aged >5 years as at end-2017. This equipment should be in the replacement pipeline. We upgrade our call to BUY (from Neutral) with an unchanged DCF-derived IDR43,100 TP (18% upside).

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

Link to report: United Tractors : Booster From Mining Heavy Equipment Sales

Morning Cuppa Full Report: Indonesia Morning Cuppa 280218

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Results Review

Astra International

Broadly in line with 2017 results

Astra FY17 earning came in at IDR18.9trn (+25% YoY), achieving 96%/97% of our/consensus full-year estimates, broadly in line. Earning growth was driven by financial services and heavy equipment divisions.

Astra management is optimist on FY18 improving domestic economic and stable commodity prices, however competition in car market likely to remain intense. Maintain BUY with SOP based IDR9,500 TP (17% upside), implies to 16/15x FY18/19F P/Es.

Analyst: Andrey Wijaya (6221) 2970 7058

Morning Cuppa Full Report: Indonesia Morning Cuppa 280218

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Results Review

Matahari Department Store

In line with 2017 results

Matahari Department Store posted its 2017 that is in line with consensus estimates. Net sales grew by 1.3% YoY in 2017, while its net income fell by -5.6% YoY. It booked negative -1.2% SSSG for the year of 2017 despite booking 3.7% SSSG in 4Q17. The company believes that 2018 will be a recovery year for consumers, guiding positive 4-6% SSSG. Our recommendation is Under Review.

Analyst: Michael Halim (6221) 2783 0719

Morning Cuppa Full Report: Indonesia Morning Cuppa 280218

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Results Review

Vale Indonesia

2017 results below consensus

Vale Indonesia has posted its 2017 financial results that is below consensus estimates. Revenue was in line with consensus along with higher nickel price that went up by 27% in 2017. However, its bottom line was dragged down by rising oil and coal prices. Brent oil went up by 17.7% in 2017 while Newcastle coal went up by 11%. Production-wise, the company sees slightly lower output of 76,800 tonnes in 2017. We have no rating on the company.

Analyst: Michael Halim (6221) 2783 0719

Morning Cuppa Full Report: Indonesia Morning Cuppa 280218

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Visit Note

Sentul City

For FY18F the management targets marketing sales to reach IDR1.5trn (+25% YoY): 60% from high rise and 40% from landed residentials. Management also mentioned that there will be 4 landed residential clusters for sale in FY18 with target marketing sales of IDR650bn.

Meanwhile, FY18F revenue target is at IDR3.2trn with IDR1trn net income target. The company will also allocate ~IDR700bn for FY18 capex.

This year the company will also focus to restructure debts in order to reduce borrowing cost as much as 100bps. Net debt as of 9M17 was IDR789bn with interest expense of IDR75.85bn or net gearing of 8%.

Sampoerna University is slated to open in June 2018 and Aeon Mall is estimated to operate in 1Q19.

Currently management received inquiries of bulk land from foreign investor with estimated value around IDR1trn outside of marketing sales.

Going forward, management targets 15-20% CAGR growth on revenue from FY16-20F.

Based on consensus, the stock is trading at 26x FY18F PE with 90% discount to NAV using management’s guidance at IDR2,053/share. We do not have a rating for the stock.

Analyst: Yualdo Tirtakencana Yudoprawiro (6221) 2970 7062

Morning Cuppa Full Report: Indonesia Morning Cuppa 280218

Today’s News

Indonesia to keep electricity and fuel tariffs affordable

34 projects have been given green light after evaluation

Non-tax revenue from coal and mineral mining subsector reaches IDR6.7trn

Phone industry: local production surges, imports falls

Jasa Marga to operate three new toll roads in 1H18

Semen Indonesia’s power plants to operate in April 2018

PLN Batubara to acquire Adaro’s coal mining site in East Kalimantan

Bumi Resources Minerals seeks USD150m fund to develop gold mine in Palu

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.