RHB Indonesia Morning Cuppa - 27 March 2018 (Delta Dunia Makmur, United Tractors, Today's News)

Top Story

Company Update

Delta Dunia Makmur

Growing earnings

Delta Dunia booked FY17 reported a net profit of USD47m (+25.9%YoY), which was in line with our estimates but below consensus’ expectations. We think its reported earnings should grow sizably in FY18, on the back of strong volume growth in 2018 and non-recurring tax expenses of ~USD33m in FY17, which are unlikely to re-occur this year. We reiterate our BUY call on Delta Dunia with an unchanged IDR1,400 TP (44% upside), which implies FY18F P/E of 8.9x.

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

Link to report: Delta Dunia Makmur : Growing Earnings

Morning Cuppa Full Report: Indonesia Morning Cuppa 270318

Other Stories

Company Update

United Tractors

February’18 operational statistics is on track

United Tractors booked February’18 Komatsu sales of 351 units (+33%YoY, -13%MoM), which mining sectors (+104%YoY, -3%MoM) as the main driver of demand. Lower MoM sales due to less working days. Sales to construction sector decreased to 49 units (-11%YoY, -47%MoM) in February’18 because United Tractors diverts some small-sized heavy equipment to mining sector due to limited heavy equipment supply.

February’18 overburden removal increased to 67.7m BCM (+24%YoY, +1%MoM) and coal production increased to 8.6m tonnes (+8%YoY, -1%MoM). Its stripping ratio increased to 7.9x in February’18 (vs 6.9x in February’17 vs 7.7x in January’17).

We reiterate Buy call on United Tractors (UNTR IJ, Buy, TP: IDR43,100) as we think United Tractors should be a beneficiary of recovery in mining contracting business and weakening Rupiah.

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

Morning Cuppa Full Report: Indonesia Morning Cuppa 270318

Today’s News

Sarana Menara Nusantara to acquire Komet Infra Nusantara

Wika Gedung receives IDR2.29trn new contracts in 3M18

Cement consumption to grow 4-5% YoY in 1Q18, says association

Government to extend toll road concessions to 50 years regarding toll roads’ tariffs reduction

Delta Dunia targets new contracts of USD2bn

Sumber Alfaria to issue IDR1trn bonds

Petrosea to extend contract with Kideco

Surya Esa Perkasa’s new ammonia plant to operate in April 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.