RHB Indonesia Morning Cuppa - 22 March 2018 (Fed, Today's News)

Top Story

Economic Update

Fed hikes rates with more to come

After the latest FOMC meeting, the United States Federal Reserves (The Fed) raised interest rates and forecast at least two more hikes this year. Overnight lending rate was raised to 1.50-1.75% from 1.25-1.50%. The Fed also indicated that inflation should move higher after years below its 2% inflation target. Furthemore, forecast for real GDP growth was raised while unemployment rate forecast was lowered, signalling growing confidence in US economy.

Analyst: Rizki Fajar (6221) 2970 7065

Morning Cuppa Full Report: Indonesia Morning Cuppa 220318

Today’s News

Tower Bersama Infrastructure to issue USD850m bonds

Waskita Toll Road targets three toll roads divestments to finish by April 2018

Samindo Resources targets USD255m revenue in FY18F

Bank Mandiri pays IDR9.28trn dividend

Sawit Sumbermas targets 17% growth in CPO production for FY18

Indonesia DMO will require 92 mn tonnes of coal for power plants

Adira Multi Finance maintains NPF below 2% in FY18

Mitra Adiperkasa’s Sogo targets 12% sales growth in FY18

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.