Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Thematic (Sector/Industry)

<ul>
<li>In our October 2021 insight, we correctly anticipated a catch-up trade in Indonesian coal names: GEO is up 66.45%, Adaro is up 102% and ITMG is up 37.4%.</li>
<li>Coal is the new tobacco as coal stays stronger for longer due to limited capacity expansion. At spot prices, FY22 div yield is 48% for Adaro and 65% for ITMG.</li>
<li>Shares have re-rated but not as fast as improvement in profits, given historical payout ratios dividend yields in 2022 could be astronomically high capping downside risks.</li>
</ul>


In our October 2021 insight, we correctly anticipated a catch-up trade in Indonesian coal names: GEO is up 66.45%, Adaro is up 102% and ITMG is up 37.4%.
Coal is the new tobacco as coal stays stronger for longer due to limited capacity expansion. At spot prices, FY22 div yield is 48% for Adaro and 65% for ITMG.
Shares have re-rated but not as fast as improvement in profits, given historical payout ratios dividend yields in 2022 could be astronomically high capping downside risks.


Indonesian Coal = the New Tobacco? Dividend Bonanza Coming: 48-65% Dividend Yields Possible

Equity Bottom-Up

It has been almost two years since we last wrote about <a href="https://www.smartkarma.com/entities/geo-energy-resources-ltd" target="_blank" data-smartkarma-citation="entities:8717:1" rel="noopener">Geo Energy Resources (GERL SP)</a>. Our last insight can be found here <a href="https://www.smartkarma.com/insights/geo-energy-gerl-sp-distressed-bonds-and-share-price-versus-optimistic-management-who-is-right" target="_blank" data-smartkarma-citation="insights:34887" rel="noopener">Geo Energy (GERL SP): Distressed Bonds and Share Price Versus Optimistic Management; Who Is Right?</a> How things have changed!Back in late 2019, the coal price was hovering between 20-30 USD, Macquarie had bought 5% of the company for 0.29 SGD/share in November 2018 and Geo was generating losses as the coal price was below its cost of production. Entering 4Q21 the coal price is at stratospheric highs (117 USD for October 2021 delivery) and Geo is earning record profits.In a public disclosure, the company announced it made 26.5M USD in EBITDA in July 2021 alone. This was with coal prices around +/-50 USD/ton. Today coal prices are well over 100 USD. We estimate at current prices Geo is making at least 45M-50M USD in EBITDA every month! Compare this to the market cap of 320M USD currently. In 2H EBITDA at current market prices could total +/- 225M USD alone. 1H2021 EBITDA was 78M USD. Recall, Geo has no debt and 60M USD in cash.Mr. Market is slowly waking up to this reality pushing the stock up over 70% YTD (most of the gain came in the last few trading sessions). Many Indonesian-listed peers such as <a href="https://www.smartkarma.com/entities/adaro-energy-tbk-pt" target="_blank" data-smartkarma-citation="entities:6061:1" rel="noopener">Adaro Energy (ADRO IJ)</a>, <a href="https://www.smartkarma.com/entities/tambang-batubara-bukit-asam" target="_blank" data-smartkarma-citation="entities:1189:1" rel="noopener">Tambang Batubara Bukit Asam (PTBA IJ)</a>, and coal contractor <a href="https://www.smartkarma.com/entities/united-tractors-tbk-pt" target="_blank" data-smartkarma-citation="entities:698:1" rel="noopener">United Tractors (UNTR IJ)</a> have also underperformed vs the underlying commodity.  However, this is not true of US-listed peers such as <a href="https://www.smartkarma.com/entities/consol-energy-inc-61c2f282-fc00-497d-9066-606d78f6fe82" target="_blank" data-smartkarma-citation="entities:26245:1" rel="noopener">Consol Energy (CEIX US)</a> and <a href="https://www.smartkarma.com/entities/peabody-energy-corp" target="_blank" data-smartkarma-citation="entities:6430:1" rel="noopener">Peabody Energy (BTU US)</a> which are up 345% and 606% respectively YTD.We expect a 4Q21 catch-up trade-in Indonesian-related coal names that could be violent. While prices will surely cool off in 2022 they might not drop all the way below the cost of production once again. Geo has a 30% dividend policy so investors are sure to see massive dividends (est. 18% div yield) come March 2022. Board member Jim Rogers should hopefully make sure the cash is not squandered on doing an expensive M&amp;A deal but is returned to shareholders.

It has been almost two years since we last wrote about Geo Energy Resources (GERL SP). Our last insight can be found here Geo Energy (GERL SP): Distressed Bonds and Share Price Versus Optimistic Management; Who Is Right? How things have changed!Back in late 2019, the coal price was hovering between 20-30 USD, Macquarie had bought 5% of the company for 0.29 SGD/share in November 2018 and Geo was generating losses as the coal price was below its cost of production. Entering 4Q21 the coal price is at stratospheric highs (117 USD for October 2021 delivery) and Geo is earning record profits.In a public disclosure, the company announced it made 26.5M USD in EBITDA in July 2021 alone. This was with coal prices around +/-50 USD/ton. Today coal prices are well over 100 USD. We estimate at current prices Geo is making at least 45M-50M USD in EBITDA every month! Compare this to the market cap of 320M USD currently. In 2H EBITDA at current market prices could total +/- 225M USD alone. 1H2021 EBITDA was 78M USD. Recall, Geo has no debt and 60M USD in cash.Mr. Market is slowly waking up to this reality pushing the stock up over 70% YTD (most of the gain came in the last few trading sessions). Many Indonesian-listed peers such as Adaro Energy (ADRO IJ), Tambang Batubara Bukit Asam (PTBA IJ), and coal contractor United Tractors (UNTR IJ) have also underperformed vs the underlying commodity.  However, this is not true of US-listed peers such as Consol Energy (CEIX US) and Peabody Energy (BTU US) which are up 345% and 606% respectively YTD.We expect a 4Q21 catch-up trade-in Indonesian-related coal names that could be violent. While prices will surely cool off in 2022 they might not drop all the way below the cost of production once again. Geo has a 30% dividend policy so investors are sure to see massive dividends (est. 18% div yield) come March 2022. Board member Jim Rogers should hopefully make sure the cash is not squandered on doing an expensive M&amp;A deal but is returned to shareholders.

Geo Energy: Indonesian Coal Market Beneficiary Trading at Distressed Multiple

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

Cross Asset Strategy

<ul>
<li>The past week saw insights on <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a>, <a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a>, <a href="https://www.smartkarma.com/entities/sermsuk-pcl" target="_blank" data-smartkarma-citation="entities:15918:1" rel="noopener">Sermsuk PCL (SSC TB)</a>, <a href="https://www.smartkarma.com/entities/pt-barito-renewables-energy-tbk" target="_blank" data-smartkarma-citation="entities:40150:1" rel="noopener">Barito Renewables Energy (BREN IJ)</a>, and <a href="https://www.smartkarma.com/entities/raffles-medical-group-ltd" target="_blank" data-smartkarma-citation="entities:879:1" rel="noopener">Raffles Medical Group (RFMD SP)</a>.</li>
<li>There were also insights on <a href="https://www.smartkarma.com/entities/yangzijiang-shipbuilding-holdings-limited" target="_blank" data-smartkarma-citation="entities:660:1" rel="noopener">Yangzijiang Shipbuilding (YZJSGD SP)</a>, <a href="https://www.smartkarma.com/entities/thai-union-group-pcl" target="_blank" data-smartkarma-citation="entities:161:1" rel="noopener">Thai Union Group (TU TB)</a>, and CrossASEAN Ground Zero which looks at <a href="https://www.smartkarma.com/entities/campina-ice-cream-industry-pt" target="_blank" data-smartkarma-citation="entities:26607:1" rel="noopener">Campina Ice Cream</a>, Xurya, and Mayapada Hospital.</li>
<li>The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.</li>
</ul>


The past week saw insights on Berli Jucker (BJC TB), Matahari Department Store (LPPF IJ), Sermsuk PCL (SSC TB), Barito Renewables Energy (BREN IJ), and Raffles Medical Group (RFMD SP).
There were also insights on Yangzijiang Shipbuilding (YZJSGD SP), Thai Union Group (TU TB), and CrossASEAN Ground Zero which looks at Campina Ice Cream, Xurya, and Mayapada Hospital.
The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.


The Week That Was in ASEAN@Smartkarma - Berli Jucker's Big C, Matahari Department Store, and BREN

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-6061'>Adaro Energy</a></li><li><a href='#lucror-entity-8954'>Greentown China</a></li><li><a href='#lucror-entity-22202'>Vedanta Resources</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Adaro EnergyGreentown ChinaVedanta Resources

Morning Views Asia: Adaro Energy, Greentown China, Vedanta Resources

External broker reports(aggregated public sources), BRI Danareksa Research

BRI Danareksa Research

External broker reports(aggregated public sources)

As a one-stop financial solution with the vision to be the most valuable securities house, BRI Danareksa Sekuritas (BRIDS) has maintained an excellent track record and extensive experience in the capital market as an underwriter, broker, and financial advisor for individual, institutional, foreign and domestic, private and government clients. Established in 1992, PT Danareksa Sekuritas is a securities company that performs activities as a securities broker, underwriter, or arranger and financial advisor.

<ul><li>Our FY23 results recap shows market EPS growth of -12% yoy, but growth would reach +4.1% if we exclude one-offs (mainly from GOTO).</li><li>We see mixed growth prospects for 1Q24 with ST headwinds in Banks and Telco, but possible outperformers in Consumers, Retail, Healthcare.</li><li>We reiterate our view on commodities as a possible ST tactical play, along with the defensive domestic names for preferred 2Q24 exposure.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Our FY23 results recap shows market EPS growth of -12% yoy, but growth would reach +4.1% if we exclude one-offs (mainly from GOTO).We see mixed growth prospects for 1Q24 with ST headwinds in Banks and Telco, but possible outperformers in Consumers, Retail, Healthcare.We reiterate our view on commodities as a possible ST tactical play, along with the defensive domestic names for preferred 2Q24 exposure.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Equity Strategy: Short-Term Domestic Growth Challenges in 2Q24 May Drive Further De-Risking

Indonesia

PT Adaro Energy Tbk is a coal mining company. The Company and its subsidiaries currently deal in coal mining and trade, coal infrastructure and logistics, and mining contractor services.

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Adaro Energy (ADRO IJ)

Indonesian Coal = the New Tobacco? Dividend Bonanza Coming: 48-65% Dividend Yields Possible

Coal is the new tobacco and could remain stronger for longer with Russian coal out of the market. Shares have re-rated but dividend yields in FY22...

Nicolas Van Broekhoven

Geo Energy: Indonesian Coal Market Beneficiary Trading at Distressed Multiple

GEO has run 70% YTD but has lagged US-listed coal peers such as Consol and Peabody which are up respectively 345% and 606% YTD. We expect a violent...

Nicolas Van Broekhoven

The Week That Was in ASEAN@Smartkarma - Berli Jucker's Big C, Matahari Department Store, and BREN

The past week saw insights on Berli Jucker (BJC TB), Matahari Department Store (LPPF IJ), Sermsuk PCL (SSC TB), Barito Renewables Energy (BREN IJ),...

Angus Mackintosh

Morning Views Asia: Adaro Energy, Greentown China, Vedanta Resources

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Equity Strategy: Short-Term Domestic Growth Challenges in 2Q24 May Drive Further De-Risking

Our FY23 results recap shows market EPS growth of -12% yoy, but growth would reach +4.1% if we exclude one-offs (mainly from GOTO).

BRI Danareksa Research

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