RHB Indonesia Morning Cuppa - 21 March 2018 (Indofood CBP, Delta Dunia Makmur, Today's News)

Top Story

Company Update

Indofood CBP

Better Noodle Earnings But Higher Beverage Losses

We tweaked Indofood’s earnings estimates to reflect a better outlook for noodles earnings. Indofood is more optimistic on its snacks sales volume on the back of higher production capacity. However, these are likely to be offset by higher beverage losses. Maintain BUY with lower DCF-derived TP of IDR9,500 (from IDR9,700, 11% upside), which implies 2018F-2019F P/Es of 27x and 24x respectively. Key risks include a weaker IDR, which may increase production costs since the majority of raw materials are denominated in USD.

Analyst: Andrey Wijaya (6221) 2970 7058

Link to report: Indofood CBP : Better Noodle Earnings But Higher Beverage Losses

Morning Cuppa Full Report: Indonesia Morning Cuppa 210318

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Company Update

Delta Dunia Makmur

Volume Should Escalate In The Coming Months

Delta Dunia’s Feb 2018 overburden removal of 25.9m BCM (+4% MoM) has showed some improvement vs Jan 2018, on slightly better rainfall. We expect its mining contracting volume to escalate in the coming months when the dry season kicks in by May 2018. On the back of projected strong volume growth in 2018, we think Delta Dunia should book another decent earnings growth rate of 35.9% YoY in 2018. We fine-tune our assumptions and reiterate our BUY call with higher DCF-derived TP of IDR1,400 (from IDR1,300, 55% upside), which implies 2018F P/E of 8.7x.

Analyst: Hariyanto Wijaya, CFA, CFP, CA, CPA (Aust.), CFTe, CMT (6221) 2970 7062

Link to report: Delta Dunia Makmur : Volume Should Escalate In The Coming Months

Morning Cuppa Full Report: Indonesia Morning Cuppa 210318

Today’s News

Waskita Beton Precast’s FY18 performance target

Bekasi Fajar to acquire additional land in Bekasi

Krakatau Steel targets 30% YoY revenue growth in FY18

Tower Bersama Infrastructure plans to repurchase its shares

Adaro Energy to develop coal power plants in several ASEAN countries

United Tractors coal production to grow by 5% in early 2018

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.