RHB Indonesia Morning Cuppa - 9 February 2018 (Sawit Sumbermas Sarana, Vale Indonesia, Today's News)

Indonesia Morning Cuppa

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Sawit Sumbermas Sarana

FFB production to grow by between 10% and 15%YoY in FY18F

We met the President Director of Sawit Sumbermas Sarana Mr. Vallauthan Subraminam to know about the outlook of Sawit Sumbermas Sarana (SSMS IJ, Buy, IDR2,025). Mr. Vallauthan has around 40 years experience in palm oil industry. Followings are key takeaways from the meeting:

¨ FFB production to grow by between 10% and 15%YoY in FY18.

¨ On track to reach plantation area of 150,000 ha in 2021.

¨ More flexibility in managing cash flow after issuing a global bond of USD300m.

¨ The only plantation company in Jakarta LQ45 Index.

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

Morning Cuppa Full Report: Indonesia Morning Cuppa 090218

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Company Update

Vale Indonesia

We visited Vale Indonesia (INCO IJ, NR) to gain some insights on its 2017 performance and its future plans. The company has a stable annual nickel production at full capacity and a guaranteed must-take sales agreement. It is looking to increase its margins through plant modifications. We see that demand from nickel will receive a much-needed boost from the proliferation of electric vehicles. We have no rating on the counter.

Analyst: Michael Halim (6221) 2783 0719

Morning Cuppa Full Report: Indonesia Morning Cuppa 090218

Today’s News

Japan Credit Rating ugprades Indonesia’s rating

Bank Indonesia: housing prices rise for a fourth quarter in a row

Nielsen: ad spend rises 8% YoY

Adhi Karya to receive IDR3.88trn payment from LRT project

Ministry of Public Works and Housing sends warning to Waskita

Adaro allocates USD900m capex in FY18

Timah to increase non-tin business revenue in the next 10 years.

Tiga Pilar Sejahtera to restructure IDR900bn debt

Siloam to target BPJS market in Tangerang

BOSS to offer IDR400/share in IPO

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.