RHB Indonesia Morning Cuppa - 07 March 2018 (Adaro Energy, Consumer Confidence, Today's News)

Indonesia Morning Cuppa

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Results Review

Adaro Energy

Weak Results Due To Bad Weather

Adaro Energy’s FY17 results were lower than our (91%) and consensus (96%) expectations due to higher cost per unit of coal production, as La Nina brought heavy rain which curbed coal production in 4Q17. We think its profit margins should improve in FY18, on the back of higher estimated coal prices, while cost per coal unit production should normalise without La Nina. We fined-tuned our assumptions and revised our TP to IDR3,000 (from IDR3.100, 29% upside). We reiterate our BUY call given the stock’s undemanding valuations and high dividend yields.

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

Link to report: Adaro Energy : Weak Results Due To Bad Weather

Morning Cuppa Full Report: Indonesia Morning Cuppa 070318

Other Stories

Consumer confidence index falls to lowest since November

Consumer confidence index (CCI) falls to 122.5 in Feb from 126.1 in Jan, according to Bank Indonesia’s survey. Decline in CCI is on account to consumers tend to hold off spending on durable goods, in particular electronics, furniture, and home appliances. Although declining, Feb-18 CCI is still higher compared to that of in same period last year which was 117.1.

To stimulus consumer spending, the government is to disburse more subsidy, especially to low-end consumer. In addition, the government indicated to maintain electricity and subsidised fuel tariffs until 2019. The government likely to increase fuel subsidy for solar to IDR700/1,000/ltr (from IDR500/ltr), while additional subsidy for electricity is still being calculated. Maintain Overweight on Consumer sector.

Analyst: Andrey Wijaya (6221) 2970 7058

Morning Cuppa Full Report: Indonesia Morning Cuppa 070318

Today’s News

Indonesia’s January 2018 cement sales rise 10% YoY to 5.7m tonnes

Indonesia’s February 2018 tin exports at 7,207 tonnes

Timah to start nickel production in 1H18

Bekasi Fajar increases its industrial land price in FY18

Garuda Maintenance Facility to offer more shares in 3Q18

Matahari Putra Prima to focus on operational cost

Jasa Armada to add four units of vessels

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.