RHB Indonesia Morning Cuppa - 11 April 2018 (Tax Incentive, Waskita Karya, Plantation, Today's News)

Indonesia Morning Cuppa

Top Story

Strategy

Tax Incentive To Accelerate Economic Growth

We see the new corporate income tax incentive – with its simplified procedures – accelerating manufacturing growth, which is likely to create new employment and boost domestic demand. The Finance Ministry has increased the number of recipients to 17 industries from eight previously. There is also one tariff now and a 100% tax holiday from a range of 10-100% previously. For the companies under our coverage, the key beneficiaries are Astra, XL Axiata and Aneka Gas. The key risk is execution, as the implementation policy remains unclear.

Analyst: Andrey Wijaya (6221) 2970 7058 | Rizki Fajar (6221) 29707065

Link to report: Tax Incentive To Accelerate Economic Growth

Morning Cuppa Full Report: Indonesia Morning Cuppa 110418

Other Stories

Company Update

Waskita Karya

Company issues IDR5trn mutual fund for Trans-Java toll road subsidiary

Waskita Karya, through its subsidiary Waskita Toll Road, has issued a mutual fund worth IDR5trn with an underlying of the shares of its Trans-Java toll road subsidiary. The subsidiary is called Waskita Transjawa Toll Road (WTTR) that engages in three toll roads in Java: Kanci-Pejagan, Pejagan-Pemalang, and Pasuruan-Probolinggo.

The transaction scheme involves two stages. In the first stage, Waskita Toll Road will transfer 57.14% of WTTR’s shares to the mutual fund worth IDR2.85trn. In the second stage, WTTR will issue new shares of 30% from its existing capital worth IDR2.15trn. After the transaction is finished, Waskita Toll Road will have a 30% stake in WTTR (prev. 99.9%) while the mutual fund will hold 70%.

Analyst: Michael Halim (6221) 2783 0719

Sector Update

Plantation

CPO Prices To Remain Range-Bound

Malaysian inventory levels continue their decline, as production recovers particularly from Sabah, Pahang and Johor. While strong productivity should benefit companies, CPO prices remain benign, reacting to various external factors like exchange rates, trade tariffs and weather issues. We maintain our NEUTRAL sector call, as we expect CPO prices to remain relatively range-bound for the next six months, at least. We prefer stocks with a specific catalyst or extremely attractive valuations, like FGV and SOP in Malaysia, Wilmar in Singapore and London Sumatra in Indonesia.

Analyst: Hoe Lee Leng +603 9280 8860 | Hariyanto Wijaya, +6221 2970 7061

Link to report: CPO Prices To Remain Range-Bound

Today’s News

Timah allocates expansion funds to Nigeria

Motorcycle sales increase by 3.5% YoY in 1Q18

Pembangunan Perumahan books IDR9.3trn new contracts in 1Q18

Astra Agro Lestari to target new market and to distribute dividend in May 2018

PP Properti to expand to Kertajati airport, West Java

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		9,500	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 64% of its total FY17 EBIT. The company is attractively trading at low earning multiple.
	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.