Tuesday, 7 April 2015
OVERWEIGHT
Foreign fund flow
2015 Ytd Regional Performance
2015 Ytd Sectoral Performance
Helmy Kristanto
(62-21) 2955 5824
[email protected]
Armando Marulitua
(62-21) 2955 5817
[email protected]
Danareksa research reports are also
available at Reuters Multex and First
Call Direct and Bloomberg.
Weekly Report
Making Progress
Progress on infrastructure development is becoming increasingly critical as it will be a measure
of the government’s execution capabilities, which, encouragingly, have started to show some
signs of progress with: 1) the empowerment of land acquisition law through the recent
presidential decree; 2) the solid progress made on the Cikapali toll road (which will be the first
major toll road to be completed since 1985); and 3) 70% completion of the infrastructure
package tenders. Last week, the JCI delivered a positive return, partly driven by window
dressing, but also thanks to a resumption of foreign inflows after three consecutive weeks of
outflows.
Some signs of progress
After Jokowi took office, hopes were raised that infrastructure development would be
accelerated, especially given the government’s bold growth target. The foundations for such plans
were laid down through the approval of a strong infrastructure budget earlier this year. Progress
in this regard is now becoming increasingly critical since it will be viewed as the measure of the
government’s execution capabilities, which so far have been perceived to be solid. Although some
delays can be expected during the initial stage of such a major transformation - due to
administrative and delivery reasons - some progress has already started to be seen:
1. The recent empowerment of the land acquisition law through the release of Presidential Decree
no. 30, 2015, for which (under the revised law) there are two main elements: a. for land
acquisition, the financing can come from all sources, including project owners and private
investors (as opposed to only the state or regional budgets previously). The acquisition cost will
then be refunded through the state or regional budgets upon completion of the land acquisition.
Whilst this change looks to place a lighter burden on the government, we believe that it may be
more effective in expediting progress; and b. the land acquisition law can be applicable to all
projects at any stage of completion vs fulfillment of the initial 75% land clearing threshold as
stipulated in Perpres no 99 2014.
2. The soon-to-be-completed Cikampek-Palimanan (Cikapali) 117 km-long toll road, which will
become the country’s longest toll road section. Physical progress has so far reached 93% with
completion of the toll road expected within the next two months. Traffic is estimated at around
25k vehicles per day, rising sharply to around 80k/day during the Eid holiday period. Progress on
this toll road has come under the watchful eye of the government which is keen for the deadlines
to be met; thereby setting the benchmark for other projects which will follow.
3. The Ministry of Public Works and Housing has stated that progress for the tender of 13,634
infrastructure packages has now reached 70%, or 9,578 packages with total contract value of
Rp59tn from the budget of Rp77tn by early April 2015. The delay in the tender progress owes to
changes in the organization of the Ministry of Public Works and Housing and because some multiyear projects are still awaiting MoF approval – which, we believe, is not alarming. Despite this, the
government is keen to ensure that the tender process is accelerated with 100% of the target
reached by the end of May 2015.
A more favorable IDR; some earnings revisions
Whilst the 2014 corporate results look to be inline (at 97% of our full year sales forecasts and
100.6% of our full year bottom line estimates), the weak demand data reported so far this year in
several industries signals potential disappointment. As we have highlighted in our previous report,
demand weakness on a y-y basis has been palpable in autos (2W and 4W), cement and heavy
equipment. Adding to our concerns, the recent IDR weakness points to a bleaker outlook for
margins. Whilst the March data might bring some relief (on a m-m basis, comparisons will be
aided by more working days), it will not be sufficient to reverse the negative growth on a y-y basis,
in our view. Nonetheless, the recent appreciation of the rupiah is encouraging, and coupled with
improvements on Indonesia’s macroeconomic front, we anticipate a more conducive environment
for companies in 2H. In recent weeks we have trimmed our 2015 earnings estimates for
consumers (due to weaker-than-expected 2014 results), mining stocks (lower coal and nickel price
assumptions) and telecoms (lower management guidance).
Resumption of inflows
The JCI gained 1.1% w-w, partly helped by 1Q15’s window dressing. Property was the best
performing sector, up 3.4% w-w, which we believe was mainly driven by the expectation of 1.
more-relaxed government regulatory change than initially believed and 2. further interest rate
cuts which would boost demand. Foreign inflows resumed last week reaching IDR1.46tn - the first
weekly inflows after three weeks of outflows amounting to IDR7.0tn. Market catalysts are,
arguably, still lacking at this stage, in our view. The announcement of demand data in the coming
weeks and the 1Q15 results by the end of the month will be closely followed, although there could
be disappointments in regard to the latter. We continue to maintain our Overweight call on the
market with a year-end index target of 5,900.
7 April 2015
Weekly Report
Exhibit 1. Regional weekly performance
Exhibit 2. Regional Ytd 2015 performance
Source: Bloomberg, as of 2 Apr 2015
Source: Bloomberg, as of 2 Apr 2015
Exhibit 3. Sector weekly performance
Exhibit 4. Sector Ytd 2015 performance
Source: Bloomberg, as of 2 Apr 2015
Source: Bloomberg, as of 2 Apr 2015
Exhibit 5. Average daily transactions
Exhibit 6. Foreign fund flows
Source: IDX, as of 2 Apr 2015
Source: IDX, as of 2 Apr 2015
2
7 April 2015
Weekly Report
Exhibit 7. Regional market valuations
2015F
2016F
Philippines
20.2
17.8
Malaysia
16.8
15.5
NKY
18.6
16.9
Singapore
14.1
12.9
JCI
16.3
13.8
Dow Jones
16.2
14.6
Sensex
15.8
13.3
Thailand
15.1
13.2
FTSE
16.0
14.0
Hongkong
12.1
10.9
China
15.4
13.4
Taiwan
13.2
12.3
Average
15.5
13.7
Exhibit 8. JCI Valuation
Source: Bloomberg, as of 2 Apr 2015
Source: Danareksa Sekuritas, as of 2 Apr 2015
Exhibit 9. USD/IDR performance
Exhibit 10. CDS - 5 years
Source: Bloomberg, as of 2 Apr2015
Source: Bloomberg, as of 2 Apr 2015
Exhibit 11. Danareksa bonds yield index
Exhibit 12. Country risk premium
Source: Danareksa Sekuritas, as of 2 Apr 2015
Source: Danareksa Sekuritas, as of 2 Apr 2015
3
7 April 2015
Weekly Report
Exhibit 13. Winners within our coverage
Exhibit 14. Losers within our coverage
Source: Bloomberg and Danareksa Sekuritas, as of 2 Apr 2015
Source: Bloomberg and Danareksa Sekuritas, as of 2 Apr 2015
Exhibit 15. Winners within our coverage (Weekly)
Exhibit 16. Losers within our coverage (Weekly)
Source: Bloomberg and Danareksa Sekuritas, as of 2 Apr 2015
Source: Bloomberg and Danareksa Sekuritas, as of 2 Apr 2015
Exhibit 17. Government policy package to aid rupiah
1 Fiscal incentives in the form of tax allowance for foreign companies that reinvest their earnings in Indonesia and local
companies that export at least 30% of their total production, as well as tax breaks for companies that invest in research
and development and those in shipping and railway industries.
2 Import duties and temporary anti-dumping measures to protect local industries.
3 Visa waivers for nationals of 30 countries.
4 Increase in mandatory biodiesel mix from currently 10% to 15% in diesel.
5 Requirement for commodity exporters to file L/C to the government to improve monitoring of Indonesia's foreign
exchange exports.
6 Merger of domestic state-run insurance firms.
Source: Various publications
4
7 April 2015
Weekly Report
Exhibit 18. Foreign reserves vs USD/IDR exchange rate
Source: Various publications
Exhibit 19. FY14 Results
Source: Company, Danareksa Sekuritas
5
7 April 2015
Weekly Report
Exhibit 20. One week report wrap
Date
Company
Title
Key Point
6-Apr-15
PTBA
Standing out from the crowd
2-Apr-15
ECII
Enticing valuation
2-Apr-15
BBCA
Quality but at a hefty price
1-Apr-15
SILO
To Retain Its Dominance
Despite unfavorable coal prices which will encourage coal miners to either maintain or reduce coal
production, we still believe that Bukit Asam (PTBA) will be able to maintain double-digit coal production of 3year CAGR of 11% in 2014 – 2017. Maintain BUY with a lower Target Price of Rp13,500
ECII booked Rp129bn of net profits in FY14, down 37% yoy, mainly due to increasing rental and service charge
expenses. This year’s focus will be on increasing operating performance and efficiencies through the
implementation of new IT systems. At the same time, the company will also continue to undertake further store
expansion.
BBCA’s market share in deposits declined as the competitive environment in CASA tightened. Notably, its CASA
to deposits ratio fell to 75.1% as of December 2014 from 78.9% as of December 2013 – a reflection of the tight
liquidity conditions in 2014. Yet, we expect this ratio edge up to 75.9% by December 2015F, since we expect
liquidity to improve this year.We upgrade our TP to IDR14,050, implying PBV of 3.7-3.1x for 2015-16F. HOLD
maintained.
We initiate coverage on Siloam Hospitals with a BUY recommendation and a Target Price of IDR15,750 based
on DCF valuation. Our Target Price implies 31x/23x 2015F/16F EV/EBITDA, putting the stock at a premium to
its regional peers. However, we believe this premium is justified given: 1) Siloam’s leading position in
Indonesia’s growing healthcare Industry, 2) its aggressive expansion plans to build 20 new hospitals over the
next three years, and 3) its high EBITDA estimated growth of 42% in 2014-2017F.
Source: Danareksa Sekuritas
6
Danareksa Quant Model
7 April 2015
Weekly Report
DQM model commentary:
Last week the JCI moved in green territory, recording a positive w-w return of 1.1% thanks to the strengthening in all sectors except for miscellaneous. This week, our DQM model
predicts another strengthening in the market with most big caps stocks (esp. banking and consumer) are expected to strengthen. However, some big cap stocks such as TLKM,
GGRM, UNTR, PTBA, and ADRO are expected to record negative w-w performance. (Please see the details in the table above).
8