1. business and industrial
2. company
3. earnings

Tuesday, 28 April 2015
OVERWEIGHT
Foreign fund flow
2015 Ytd Regional Performance
Weekly Report
Reality bites
The Indonesian market took a beating yesterday, with the JCI slumping 3.5% on large foreign
outflows. In our view, investor concerns are currently centered on three main issues: 1.
Disappointing 1Q15 results; 2. Weak 1Q15 GDP figures; and 3. The imminent executions of a
number of death row inmates which could disrupt bilateral relations and economic
partnerships. In our view, the auto parts, construction, consumer and healthcare sectors can still
deliver good performance, while the autos, cement, commodities and retail sectors may be
more likely to underperform in 1Q15.
Market meltdown: 3.5% collapse on Monday
Indonesian stocks took a major hit yesterday, down 3.5% with huge foreign outflows of IDR2.2tn.
In our view, there are three main issues which may reduce investor appetite for stocks in the short
term; 1. Disappointing 1Q15 results. This does not come as a major surprise to us, however, as we
have been expecting most corporates to report weaker-than-expected performance in 1Q15 given
that several sectors have shown demand weakness since earlier this year. The weak IDR ytd has
also put further pressure on margins, 2. Weak 1Q15 GDP figures - which would open up the
possibility of the government revising down its 2015 economic growth target of 5.7% and 3. The
signal given by the Indonesian government that it will go ahead with the executions of a number
of inmates convicted of serious drugs offenses, all of whom but one are foreigners, which will
potentially harm bilateral relations – especially economic – with several countries, most notably
Australia, Brazil and France. Longer term, Indonesia’s main story remains the prospect of massive
government infrastructure spending - which will be more prevalent in the second half.
1Q15: the good and the bad
In regard to the 1Q15 results, there are seven companies under our coverage that have released
their results so far (exhibit 17). The consumer stocks appear to have delivered better-thanexpected results, with margins improvement on the back of better costs management. The
banking sector has shown steady performance, yet with a slight deterioration in NPLs. By contrast,
commodities have been the worst performer, hit by soft demand and lower commodity prices,
which have squeezed margins and hurt the bottom line.
In our view, despite the general weakness seen in the domestic economy, there are still several
sectors which can still deliver good performance, namely: the auto parts, construction, consumer
and health care sectors. By contrast, the autos, cement, hard and soft commodities, and retail
sectors are more likely to deliver weak results. The performance of banking, property and telcos
should still be within expectations.
2015 Ytd Sector Performance
Automotive
Auto-parts
Banking
Cement
Helmy Kristanto
(62-21) 2955 5824
h elm yk@d an ar eksa.co m
Armando Marulitua
(62-21) 2955 5817
ar m an d o m @d an ar eksa.co m
Construction
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Call Direct and Bloomberg.
Consumer
Demand for both 4W and 2W has been exceptionally weak this year, with car sales down
14.1% y-y in 1Q15 and 2W sales down 25% y-y. Adding to the sector’s woes is the
considerable depreciation of the IDR, which will put further pressure on margins. Stiff
competition from Honda also weakened the dominance of Toyota and Daihatsu: Toyota’s
market share fell 5ppt y-y while Daihatsu’s is flat.
Revenues should grow in-line with our mid-teens projection given higher exports. The higher
exports portion should be sufficient to counter the slowdown in the domestic auto industry.
In addition, better margins can also be expected given the higher exports portion and
subdued raw material prices during the period.
The 1Q15 results will likely be inline with our numbers – albeit with slightly lower-thanexpected loans growth. We also believe that the blended CoF in 1Q15 should be relatively flat
on a QoQ basis. Nonetheless, assets quality will deteriorate slightly in our view due to the
slower economic growth in the country. BBCA will likely outperform, supported by its low
blended CoF with good assets quality. However, we maintain our HOLD call on the stock as
the valuation is already rich at 3.9x PBV for 2015F.
Cement demand has been fairly weak this year, with 1Q15 domestic sales down 3.2% y-y,
despite expectations of stronger property demand and more government projects. The weak
cement demand has also sparked concerns over a potential price war, although we believe it
is still too early to conclude that such a scenario will unfold. In 2H, cement demand is likely to
strengthen, underpinned by the start of major infrastructure projects. Among the large
cement companies, Semen Indonesia has outperformed with its market share expanding to
44.8%.
The first quarter is always the slowest quarter for the construction sector. However, we
believe that only PTPP and WSKT can deliver growth above 20%y-y in 1Q15 given their huge
backlog orders. WIKA’s growth, by comparison, will be in the low-to-mid teens, while ADHI
might potentially still record declining growth.
Gauging from the consumer staples companies that have reported their earnings so far, we
note that despite slower top line growth, the companies have booked better-than-expected
margins, helped by weaker commodity prices. Under the current conditions, while we believe
28 April 2015
Weekly Report
Healthcare
Coal Mining
Metal
Mining
Plantations
Property
Telecommun
ications
Towers
Media
Oil and gas
Retail
that raising ASP may only be appropriate for select goods, and that sales volumes are unlikely
to increase - thus limiting growth - the defensive nature of the products should keep revenues
buoyant. Furthermore, cost-savings, which may come from lower raw material prices and
lower transportation costs, should pave the way for better results. That said, in the midst of
an economic slowdown in which most companies’ earnings are declining, consumer staples
may provide a shelter for its defensiveness.
Given its defensive characteristics, demand for healthcare in 1Q15 will remain solid in our
view. This will be reflected in the solid topline growth of hospitals and pharmaceutical
companies. Challenges have emerged for pharmaceutical companies, however, given the
persistent rupiah depreciation in 2015. This will result in higher raw material costs. In this
regard, we expect the margins of pharmaceutical companies to come under pressure, thus
hitting 1Q15 profitability. The impact will be less severe for companies which have the ability
to pass on higher costs like Kalbe Farma. Nonetheless, we don’t expect the weaker rupiah to
have a significant impact on the hospitals business. Hence, hospital operators should record
solid earnings growth and sound profitability in 1Q15, in our view.
Unfavorable coal prices (down by 20% yoy in 1Q15), which led several coal producers to
either maintain or cut production, will be reflected in weak 1Q15 results of companies
operating in Indonesia’s coal mining sector. However, we believe that the impact from the
slump in crude oil prices – which accounts for about 5 – 30% of the total production costs may cushion performance in 1Q15. In Indonesia’s coal mining sector, we continue to like Bukit
Asam (PTBA IJ) given expectations of double-digit coal production going forward supported by
a) the start of operations of several infrastructure projects, such as the Tarahan port facility
and upgrading of railway capacity in 1H15 and b) the operation of its new power plant at
Banjarsari, which will require about 1.4mn tons of coal per annum.
With the average LME (London Metal Exchange) nickel price down by only 2% yoy to
US$14,380/ton in 1Q15, we believe that the companies with greater exposure to nickel may
maintain their net profits in 1Q15 as we foresee that those companies benefitted from the
slump in crude oil prices since energy costs account for about 35 – 40% of the total cost of
production. We continue to like Vale Indonesia (INCO) as a result of greater nickel exposure
and the company’s focus on continued efficiency as well as a lower cost of production thanks
to the slump in crude oil prices. However, in the tin sector, the 19% yoy decline in the LME tin
price is reflected in the weak result of Timah (TINS) in 1Q15.
Despite low production due to seasonality, the CPO price weakened further in 1Q15,
averaging MYR2,265/tonne, down 16% y-y. Demand is also fairly soft, putting more pressure
on the financials of plantations companies in 1Q15. As a result, the 1Q15 figures are expected
to be below expectations. Nonetheless, positive support for CPO prices over the longer term
might come from more stringent implementation of the mandatory biodiesel program in
Indonesia, for which the content was recently raised to 15% from 10%. While execution
continues to remain unclear, we see more serious efforts from the government, especially
with the implementation of the USD50/tonne levy, which will partly be used to support the
subsidies given in the biodiesel program.
Results from the property sector will be broadly in line with estimates, following the
construction progress of projects. Note that we didn’t expect any extraordinary income in our
calculations for all the property companies under our coverage. The bottom line might be
volatile for property companies which have a large portion of USD debt in their balance sheet,
such as ASRI and LPKR in our coverage. Unlike other property companies, MTLA’s housing
sales are affected by seasonality – most revenues are booked in the fourth quarter. In terms
of marketing sales, no significant project launches took place in 1Q15.
Results will be relatively in line with estimates at the operating level given the defensive
nature of the sector. The bottom line may be quite volatile, however, for ISAT and EXCL given
the high portion of USD-denominated debt in the balance sheet. For XL, gains from the sale of
towers should be recognized in 1Q15. XL will start amortizing deferred revenues related to
the sale and leaseback of its towers at a rate of IDR450bn per annum (gain), which should
partly cushion its bottom line.
The operating result should be weak for TBIG which will stop recognizing revenues from BTel
(other tower providers stopped recognizing revenues from BTel in 4Q14). Also, there is a
potential of devaluation of investment properties at TBIG from the exclusion of tenancies
(and future revenues) from BTel. For the other two tower operators (TOWR and SUPR),
operating results should be in line with estimates.
The operating results should be weak but in line for MNC Sky Vision given lackluster economic
growth which will likely translate into slow subs growth. In addition, 5% Rupiah depreciation
in the quarter will result in forex losses of around IDR15bn from its USD-denominated debt.
The result from PGN will be weak given the absence of LNG sales in 1Q15 due to poor demand
from PLN. Sales volume will be down by 40-50mmcfd on a quarterly basis.
We expect weak results overall for companies within the retail sector in 1Q15, looking at the
operational numbers that have been announced. The economic slowdown has translated into
lower consumer purchasing power, which directly leads to lower demand for retail products.
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28 April 2015
Weekly Report
For most retailers in our coverage (ACES and RALS), the SSG was negative in 1Q15, with the
weakest performance booked in the out of Java stores. For MAPI, we don’t expect profitability
to improve in 1Q15, as the inventory level was still high at the end of 2014. Besides that, the
first quarter has always been the quietest quarter for the sector; hence, performance should
improve in the following quarters.
Exhibit 1. Regional weekly performance
Exhibit 2. Regional Ytd 2015 performance
Source: Bloomberg, as of 24 Apr 2015
Source: Bloomberg, as of 24 Apr 2015
Exhibit 3. Sector weekly performance
Exhibit 4. Sector Ytd 2015 performance
Source: Bloomberg, as of 24 Apr 2015
Source: Bloomberg, as of 24 Apr 2015
Exhibit 5. Average daily transactions
Exhibit 6. Foreign fund flows
Source: IDX, as of 24 Apr 2015
Source: IDX, as of 24 Apr 2015
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28 April 2015
Weekly Report
Exhibit 7. Regional market valuations
2015F
2016F
Philippines
20.1
17.8
Malaysia
17.1
15.7
NKY
19.1
17.3
Singapore
14.4
13.1
JCI
16.3
13.8
Dow Jones
16.3
14.9
Sensex
15.4
13.0
Thailand
15.5
13.5
FTSE
16.9
14.5
Hongkong
13.5
12.0
China
17.7
15.2
Taiwan
13.8
12.3
Average
16.0
14.1
Exhibit 8. JCI Valuation
Source: Bloomberg, as of 24 Apr 2015
Source: Danareksa Sekuritas, as of 24 Apr 2015
Exhibit 9. USD/IDR performance
Exhibit 10. CDS - 5 years
Source: Bloomberg, as of 24 Apr2015
Source: Bloomberg, as of 24 Apr 2015
Exhibit 11. Danareksa bonds yield index
Exhibit 12. Country risk premium
Source: Danareksa Sekuritas, as of 24 Apr 2015
Source: Danareksa Sekuritas, as of 24 Apr 2015
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28 April 2015
Weekly Report
Exhibit 13. Winners within our coverage
Exhibit 14. Losers within our coverage
Source: Bloomberg and Danareksa Sekuritas, as of 24 Apr 2015
Source: Bloomberg and Danareksa Sekuritas, as of 24 Apr 2015
Exhibit 15. Winners within our coverage (Weekly)
Exhibit 16. Losers within our coverage (Weekly)
Source: Bloomberg and Danareksa Sekuritas, as of 24 Apr 2015
Source: Bloomberg and Danareksa Sekuritas, as of 24 Apr 2015
Exhibit 17. 1Q15 Result Wrap
Revenue (Rp bn)
Actual
BBNI (NII)
UNVR
Result
Estimate (FY15) YoY Growth (%)
6,097
25,115
Net Profit (Rp bn)
A/F
Actual
15
24.3
SILO
35
Result
Estimate (FY15) YoY Growth (%)
102
A/F
30
34.3
9,413
38,915
8
24.2
ROTI
67
203
(0)
33.1
10,945
45,736
22
23.9
UNVR
1,592
6,091
17
26.1
ROTI
519
2,249
16
23.1
BMRI
5,138
22,087
4
23.3
SILO
976
4,791
30
20.4
BBNI
2,817
12,142
18
23.2
TINS
1,356
6,680
10
20.3
AALI
156
2,770
(80)
5.6
AALI
3,233
16,618
(13)
19.5
TINS
(19)
651
(120)
-2.9
32,539
140,104
34
23.2
Overall FY14 Result
1.4
22.2
BMRI (NII)
Overall FY14 Result
9,786
44,046
Source: Companies
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28 April 2015
Weekly Report
Exhibit 18. One-week report wrap
Date
Company
Title
27-Apr-15
UNTR
23-Apr-15
BBTN
22-Apr-15
MSKY
21-Apr-15
Weekly report
Komatsu sales volume remained weak in Mar After United Tractors (UNTR) reported better monthly Komatsu sales volume in Feb 2015 (+12.7% mom), its
2015
sales volume went down by 11.3% mom in Mar 2015 with unfavorable commodity price resulted on a decline
in sales volume for mining sector. As such, its Komatsu sales volume was still declined by 37.0% yoy to 763
units in 1Q15. Maintain HOLD.
Facing a challenging but promising future
In 2015, the new government’s “one million houses” program should support BBTN’s business. Yet funding
scheme is the key factor with the most possible scenario on raising government’s portion to 90%. As such, for
2015F, we expect the bank’s mortgage loans to grow by 18.9%. Going forward, we expect assets quality to
improve with the gross NPLs of 3.7% as of December 2015F. Maintain BUY.
Challenging outlook
We believe continue challenging economic condition in 2015 will translate to another weak growth in pay TV
industry. With expected weak economic growth in 2015, we believe that subs growth will not be overly
exciting this year and cut our industry subs growth estimate to 8% from 14% previously. Also, intense
competition in the industry makes it difficult for the company to increase package price, thus increasing ARPU
is a tall order presently. Hold with TP of IDR1,410.
The conduit of action
The IDR finally bucked its downward trend, appreciating 1.5% MTD after the government took decisive
measures to support the currency. Furthermore, trade surpluses in three-straight months have created a more
favorable outlook for the CAD, which, in turn, provides the foundations for further IDR strengthening.
Maintain Overweight.
Key Point
Source: Danareksa Sekuritas
6
Danareksa Quant Model
28 April 2015
Weekly Report
DQM model commentary:
Last week the JCI strengthen, up 0.5% w-w underpinned by a jump in consumer sector's stocks. This is inline with our model's prediction last week. This week, our DQM model
forecast a weakening in the market with most big caps stocks are expected to record negative w-w performance. Most of big caps stocks will fall into red territory according to our
model. Nevertheless, our model also forecasts some stocks such as ASII, BMRI and BBRI to record a positive w-w performance. (Please see the details in the table above).
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