RHB Indonesia Morning Cuppa - 08 March 2018 (Arwana Citra Mulia, Pembangunan Perumahan, Today's News)

Indonesia Morning Cuppa

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Company Update

Arwana Citramulia

Better Sales Mix, Higher ASPs

Arwana is set to improve its sales mix, driven by higher UNO sales that offer better profit margins. We see room to increase ASP thanks to higher ceramic demand. Its 4Q17 earnings jumped thanks to widened EBIT margins. The company is adding production capacity at its Palembang plant too. While we maintain our IDR450 TP (32% upside) – which implies FY18F-19F P/Es of 19x and 16x respectively – we upgrade our call to BUY (from Neutral), since its share price fell 33% in the last six months. A key risk to our call is a weakened IDR, which may lift production costs.

Analyst: Andrey Wijaya (6221) 2970 7058

Link to report: Arwana Citramulia : Better Sales Mix, Higher ASPs

Morning Cuppa Full Report: Indonesia Morning Cuppa 080318

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News Update

Pembangunan Perumahan

2M18 new contracts

Pembangunan Perumahan (PTPP IJ, Under Review) succeeded to book new contracts amounting to IDR5.2trn in 2M18, whereas IDR2.86trn was achieved in February 2018 and the remaining IDR2.34trn was achieved in January 2018. This new contracts achievement equals to 10.6% of FY18 targeted new contracts amounting to IDR49trn. A number of new contracts won by the company throughout February 2018 are Ngurah Rai airport apron expansion project amounting to IDR1.36trn, Soekarno-Hatta Section I runway project amounting to IDR726bn, and Vasanta Park Cikarang project amounting to IDR466bn.

Comment: This 2M18 achievement represents 10.6% of PTPP’s new contracts target in 2018, which is lower than the achievement in 2M17 of 13.1%. However, this is still stronger than the 3-year average of 7%.

Analyst: Michael Halim (6221) 2783 0719

Morning Cuppa Full Report: Indonesia Morning Cuppa 080318

Today’s News

Moody’s: Indonesia’s rating may be hurt by fuel price freeze

Indonesia’s net foreign reserves fell to USD128.06bn in February 2018

Government records 14% tax revenue growth in February

Antam targets 19% YoY growth of ferronickel production and sales volume in FY18

Alam Sutera targets 81.8% YoY growth in marketing sales

Wijaya Karya and Pelindo III start to work on IDR1.3trn projects

Kalbe Farma allocates IDR200bn for Myanmar expansion

CIMB Niaga targets to book double-digit growth net income in FY18

Ciputra Development books IDR1trn marketing sales in 2M18

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.