RHB Indonesia Morning Cuppa - 02 April 2018 (Economic Outlook, Money Supply, Today's News)

Indonesia Morning Cuppa

Top Story

Economic Update

Stronger Growth Amid External Headwinds

Despite the increasingly protectionist stance in US trade policies, we still expect Indonesia’s economy to grow at a slightly faster pace of 5.3% YoY this year, compared with 5.1% YoY in 2017. This is premised on the country’s limited exposure to the value chain, and on account of a pick-up in government spending, as the 2019 presidential election nears. Stronger growth in investments, and a marginal improvement in consumption growth during the year would also help.

Analyst: Rizki Fajar (6221) 2970 7065

Link to report: Stronger Growth Amid External Headwinds

Morning Cuppa Full Report: Indonesia Morning Cuppa 020418

Other Stories

Economic Update

February M2 Edges Down, Loans Growth Picks Up

Indonesia’s broad money supply (M2) growth edged down to 8.3% YoY in February (January: +8.4%) due to a slowdown in net foreign assets. This was in line with the capital outflow during the month. Going forward, however, we expect broad money to pick up pace to 10.4% YoY in 2018 (2017: 8.3%), underpinned by stronger economic growth and the upcoming elections.

Analyst: Rizki Fajar (6221) 2970 7065

Link to report: February M2 Edges Down, Loans Growth Picks Up
Morning Cuppa Full Report: Indonesia Morning Cuppa 020418

Today’s News

Siloam International allocates IDR1trn capex in FY18

Bumi Resources targets USD5.49bn revenue in FY18

Sky Energy to expand using IPO funds

Duta Inti Daya plans to build 40 new stores in FY18

Indosat allocates IDR8trn in capital expenditure for FY18

Ministry of Trade sets the poultry floor price to avoid price jump

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.