RHB Indonesia Morning Cuppa - 04 April 2018 (Harum Energy, Today's News)

Indonesia Morning Cuppa

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Company Update

Harum Energy

Firing On All Cylinders

We expect the coal production at MSJ, a subsidiary of Harum, to recover to 4.5m tonnes in FY18, from its low of 3.2m tonnes in FY16, which is still below its peak level of c.9.7m tonnes from FY13. Harum’s other subsidiary, KUP, would commence its first production during 4Q18. Meanwhile, Harum’s JV PT Santan Batubara would re-commence its production in 2H18. We consider the sizable net cash position of USD266m, could enable Harum to make accretive acquitions going forward. We reiterate our BUY call with an unchanged DCF-derived TP of IDR3,300 (23% upside).

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

Link to report: Harum Energy : Firing On All Cylinders

Morning Cuppa Full Report: Indonesia Morning Cuppa 040418

Today’s News

Perry Warjiyo to step up BI’s role

Government sets Perusahaan Gas Negara’s valuation

Waskita Beton Precast receives IDR3.22trn term payment and books IDR2.12trn new contracts in 1Q18

Kalbe Farma and Kimia Farma anticipate increase in raw materials imported from China

Sampoerna Agro allocates IDR1trn capex in FY18

Ciputra Development booked IDR1trn of marketing sales in 2M18

Matahari Department Store to open new stores for Lebaran season

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.