RHB Indonesia Morning Cuppa - 28 March 2018 (Alam Sutera, Adaro Energy, Today's News)

Top Story

Company Update

Alam Sutera

Outlook Remains Positive

Alam Sutera booked strong FY17 earnings that beat our and consensus estimates. This was due to revenue recognition of land sales to CFLD, houses, apartments, and our previously conservative estimates. Going forward, we revise our marketing sales and adjust our revenue recognition method, which leads to a higher FY18F earnings. Maintain BUY with a lower SOP-based TP of IDR470 (from IDR540, 22% upside) implying a 68% discount to NAV. The counter is currently trading at a 73% discount to NAV.

Analyst: Yualdo Tirtakencana Yudoprawiro (6221) 2970 7062

Link to report: Alam Sutera : Outlook Remains Positive

Morning Cuppa Full Report: Indonesia Morning Cuppa 280318

Other Stories

Corporate News Flash

Adaro Energy

Acquiring Kestrel Coking Coal Mine

Adaro Energy, together with EMR Capital, have entered into a binding agreement to acquire Rio Tinto’s 80% stake in the Kestrel coking coal mine for total cash consideration of USD2.25bn. Considering the company’s FY17 cash balance (~USD1.2bn), sizable FY18 capex of ~USD750-900m, and allocated cash for a final dividend, we think Adaro Energy is funding most of the acquisition cost via bank loans. These costs imply EV/coal reserves of ~USD19/tonne, which is at a fair value in our view. We think the acquisition of the mine is an accretive acquisition and a significant milestone in its strategic expansion of its metallurgical coal portfolio. We maintain our assumptions without factoring in the Kestrel acquisition until further details emerge. We reiterate our BUY call with an unchanged IDR2,800 TP (37% upside).

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

Link to report: Adaro Energy : Acquiring Kestrel Coking Coal Mine

Morning Cuppa Full Report: Indonesia Morning Cuppa 280318

Today’s News

World Bank predicts Indonesia economics to grow by 5.3% in 2018

Ramayana Lestari Santosa’s FY17 results review

Jasa Marga and Waskita Karya targets to receive IDR8trn funds

Intiland receives IDR2.3trn from Promenade projects

Oil and gas upstream investments reached USD1.8bn in February 2018

Bumi Resources targets to reach USD5bn in revenue for 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.