ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN 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>Indonesian Digital Banks are an increasing focus for investors given their potential to serve the huge numbers of underbanked in Indonesia through tapping into e-commerce and fintech ecosystems and customers.</li>
<li>Players such as <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago,</a><a href="https://www.smartkarma.com/entities/allo-bank-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:33551:1" rel="noopener">Allo Bank Indonesia</a>, <a href="https://www.smartkarma.com/entities/pt-bank-neo-commerce-tbk" target="_blank" data-smartkarma-citation="entities:15245:1" rel="noopener">PT Bank Neo Commerce,</a> and <a href="https://www.smartkarma.com/entities/bank-rakyat-indo-agroniaga" target="_blank" data-smartkarma-citation="entities:16626:1" rel="noopener">Bank Rakyat Indo Agroniaga</a> lead the field with the potential to tap their respective potential ecosystems.</li>
<li>We prefer <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago</a> and <a href="https://www.smartkarma.com/entities/allo-bank-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:33551:1" rel="noopener">Allo Bank Indonesia</a>, given the former's exposure to the <a href="https://www.smartkarma.com/entities/goto-gojek-tokopedia" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">GoTo</a>'s ecosystem and the latter's to CT Corp, <a href="https://www.smartkarma.com/entities/bukalapak" target="_blank" data-smartkarma-citation="entities:33575:1" rel="noopener">Bukalapak</a>, and <a href="https://www.smartkarma.com/entities/grab-holdings-inc" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (GRAB US)</a>. </li>
</ul>


Indonesian Digital Banks are an increasing focus for investors given their potential to serve the huge numbers of underbanked in Indonesia through tapping into e-commerce and fintech ecosystems and customers.
Players such as Bank Jago,Allo Bank Indonesia, PT Bank Neo Commerce, and Bank Rakyat Indo Agroniaga lead the field with the potential to tap their respective potential ecosystems.
We prefer Bank Jago and Allo Bank Indonesia, given the former's exposure to the GoTo's ecosystem and the latter's to CT Corp, Bukalapak, and Grab (GRAB US). 


Indonesian Digital Banks - Ecosystems and Channels

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

GoTo Gojek Tokopedia Tbk PT / Event-Driven

<ul>
<li>The IDX has announced that <a href="https://www.smartkarma.com/entities/goto-gojek-tokopedia" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">GoTo (GOTO IJ)</a> will be included in the IDX30, LQ45 and IDX80 indices at a float of 66.4% at the close on 7 June.</li>
<li>
<a href="https://www.smartkarma.com/entities/waskita-karya-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:15739:1" rel="noopener">Waskita Karya (Persero) (WSKT IJ)</a> will be deleted from the IDX30 and LQ45 indices, while <a href="https://www.smartkarma.com/entities/buyung-poetra-sembada-pt" target="_blank" data-smartkarma-citation="entities:28454:1" rel="noopener">Buyung Poetra Sembada PT (HOKI IJ)</a> will be deleted from the IDX80 index.</li>
<li>Passive trackers need to buy around 12.78% of the real float on <a href="https://www.smartkarma.com/entities/goto-gojek-tokopedia" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">GoTo (GOTO IJ)</a>. Add the impact from open ended funds and that could move up to 20%. </li>
</ul>


The IDX has announced that GoTo (GOTO IJ) will be included in the IDX30, LQ45 and IDX80 indices at a float of 66.4% at the close on 7 June.

Waskita Karya (Persero) (WSKT IJ) will be deleted from the IDX30 and LQ45 indices, while Buyung Poetra Sembada PT (HOKI IJ) will be deleted from the IDX80 index.
Passive trackers need to buy around 12.78% of the real float on GoTo (GOTO IJ). Add the impact from open ended funds and that could move up to 20%. 


GoTo Index Inclusion: Fast Entry to IDX30, LQ45, IDX80 Confirmed; BIG Buying Next Week

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bfi-finance-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:8447:1" rel="noopener">BFI Finance Indonesia (BFIN IJ)</a> released an impressive set of FY2021 results, as new financing picked up significantly and funding and credit costs declined in 4Q2021.</li>
<li>Management is optimistic on the outlook for new financing in 2022 plus the potential for significant tailwinds from the association with GoTo plus inorganic growth opportunities. </li>
<li>
<a href="https://www.smartkarma.com/entities/bfi-finance-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:8447:1" rel="noopener">BFI Finance Indonesia</a> trades on 2.2x FY22E PBV with a forecast ROE of 16.2%, above its 5-year average PBV but it deserves a re-rating given its association with GoTo.</li>
</ul>



BFI Finance Indonesia (BFIN IJ) released an impressive set of FY2021 results, as new financing picked up significantly and funding and credit costs declined in 4Q2021.
Management is optimistic on the outlook for new financing in 2022 plus the potential for significant tailwinds from the association with GoTo plus inorganic growth opportunities. 

BFI Finance Indonesia trades on 2.2x FY22E PBV with a forecast ROE of 16.2%, above its 5-year average PBV but it deserves a re-rating given its association with GoTo.


BFI Finance Indonesia (BFIN IJ) - Catching a Digital Wave with GoTo?

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Active GEM managers are increasing allocations in Indonesian stocks, with all 4 of our measures of ownership increasing over the last 6-months</li>
<li>
<a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> is far and away the most favoured stock, held by 46% of the active EM managers in our analysis</li>
<li>However, active GEM funds are a long way from their maximum allocations in Indonesian stocks, there is plenty of headroom for allocations to grow further from here.</li>
</ul>


Active GEM managers are increasing allocations in Indonesian stocks, with all 4 of our measures of ownership increasing over the last 6-months

Bank Central Asia (BBCA IJ) is far and away the most favoured stock, held by 46% of the active EM managers in our analysis
However, active GEM funds are a long way from their maximum allocations in Indonesian stocks, there is plenty of headroom for allocations to grow further from here.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

There is a BIG trade coming up starting next Monday. If you have exposure in Indonesia, it is worth thinking about. <hr>Back in January 2021, Bloomberg reported that <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> - the country's largest lender by assets - was "exploring a plan to raise at least US$1bn through a rights issue."Almost a year ago in October 2020 BBRI signed a conditional deal to merge their Shariah-compliant unit with those of <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a> and <a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia Persero (BBNI IJ)</a> and there had been talks (since Feb 2020?) with the government for BBRI to take over state-owned pawnshop lender PT Pegadaian and financing firm PT Permodalan Nasional Madani to provide affordable loans to SMEs. A deal for BBRI to take over those two firms was <a href="https://www.reuters.com/article/bank-bri-ma-idUSL4N2KE2J5" target="_blank" rel="noopener">decided</a> in early February, and the need for a rights issue was set, though this required parliamentary approval and BBRI needed shareholder approval for the rights issue - which it announced in June and <a href="https://www.thejakartapost.com/adv/2021/07/23/bri-egms-approves-rights-issue-of-28-billion-shares.html" target="_blank" rel="noopener">received</a> in July - under the mechanism of Capital Increase by Granting Securities Subscription Rights First (PMHMETD). <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> discussed the bank's initiatives and aspirations in the micro lending space in <a href="https://www.smartkarma.com/insights/bank-rakyat-indonesia-bbri-ij-both-micro-and-digital" target="_blank" data-smartkarma-citation="insights:48613" rel="noopener">Bank Rakyat Indonesia (BBRI IJ) - Both Micro and Digital</a> in February followed by a discussion of the rights issue itself in early July in <a href="https://www.smartkarma.com/insights/bank-rakyat-indonesia-bbri-ij-ultra-micro-and-digital-aspirations-in-place" target="_blank" data-smartkarma-citation="insights:54111" rel="noopener">Bank Rakyat Indonesia (BBRI IJ) - Ultra-Micro and Digital Aspirations in Place</a>. Angus made a strong case for the bank in both insights and they are worth a read. The shares have basically had an overhang in place since early this year but in June when it became clear the rights issue would be Very Large, that overhang became more pronounced. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/528/original/Screenshot+2021-09-08+at+2.18.15+PM.png?1631081912" class="editor-image img-responsive" data-smartkarma-image-id="228528"></figure></section>The presentation made to get this past shareholders (never really in doubt as the govt owns 57%) announced the development of an "Ultra-Micro segment" to create an Ultra-Micro Ecosystem as the foundation for further growth, structured under Ultra Micro Holding owned by BRI, in the form of previous precedents of SOE development platforms such as Biofarma/<a href="https://www.smartkarma.com/entities/indofarma-tbk-pt" target="_blank" data-smartkarma-citation="entities:5319:1" rel="noopener">Indofarma (INAF IJ)</a> and Inalum's investment in Indonesian mining companies. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/527/original/Screenshot+2021-09-08+at+2.02.45+PM.png?1631080980" class="editor-image img-responsive" data-smartkarma-image-id="228527"></figure></section>The way this would be done is a rights offering to offer 230,128,553 rights for every 1,000,000,000 Existing Shares (roughly 0.23013 for 1), with the government contributing its ownership of Pegadaian and PNM in kind to fulfil its rights exercise consideration payment.That means the ~0.23 to 1 Rights Offering would be in effect for the other 43% of holders, which is a vast array of local and international institutions and local retail shareholders, with an Exercise Price of IDR 3400/share, and assuming 100% participation, that would garner IDR 41.15trln in proceeds, which, according to the roadshow <a href="https://www.ir-bri.com/misc/PS/2021/RI-Deal-Roadshow-Presentation-Final.pdf" target="_blank" rel="noopener">presentation</a> released in early September, "will be used for working capital for BRI in order to develop an ultra-micro ecosystem as well as micro and small businesses."The shares traded on the regular market went ex-rights today. Rights will be distributed on 10 September, traded from 13-22 September and exercised in the same period, with the last day for Excess Rights Subscription the 24 September and allotment of Excess Rights on 27 September.There is considerable opportunity here. Some short-term, some longer-term. But it is considerable because there is a fair bit of potential overhang here.I consider the opportunity set below the fold.

There is a BIG trade coming up starting next Monday. If you have exposure in Indonesia, it is worth thinking about. Back in January 2021, Bloomberg reported that Bank Rakyat Indonesia Persero (BBRI IJ) - the country's largest lender by assets - was "exploring a plan to raise at least US$1bn through a rights issue."Almost a year ago in October 2020 BBRI signed a conditional deal to merge their Shariah-compliant unit with those of Bank Mandiri Persero (BMRI IJ) and Bank Negara Indonesia Persero (BBNI IJ) and there had been talks (since Feb 2020?) with the government for BBRI to take over state-owned pawnshop lender PT Pegadaian and financing firm PT Permodalan Nasional Madani to provide affordable loans to SMEs. A deal for BBRI to take over those two firms was decided in early February, and the need for a rights issue was set, though this required parliamentary approval and BBRI needed shareholder approval for the rights issue - which it announced in June and received in July - under the mechanism of Capital Increase by Granting Securities Subscription Rights First (PMHMETD). Angus Mackintosh discussed the bank's initiatives and aspirations in the micro lending space in Bank Rakyat Indonesia (BBRI IJ) - Both Micro and Digital in February followed by a discussion of the rights issue itself in early July in Bank Rakyat Indonesia (BBRI IJ) - Ultra-Micro and Digital Aspirations in Place. Angus made a strong case for the bank in both insights and they are worth a read. The shares have basically had an overhang in place since early this year but in June when it became clear the rights issue would be Very Large, that overhang became more pronounced. The presentation made to get this past shareholders (never really in doubt as the govt owns 57%) announced the development of an "Ultra-Micro segment" to create an Ultra-Micro Ecosystem as the foundation for further growth, structured under Ultra Micro Holding owned by BRI, in the form of previous precedents of SOE development platforms such as Biofarma/Indofarma (INAF IJ) and Inalum's investment in Indonesian mining companies. The way this would be done is a rights offering to offer 230,128,553 rights for every 1,000,000,000 Existing Shares (roughly 0.23013 for 1), with the government contributing its ownership of Pegadaian and PNM in kind to fulfil its rights exercise consideration payment.That means the ~0.23 to 1 Rights Offering would be in effect for the other 43% of holders, which is a vast array of local and international institutions and local retail shareholders, with an Exercise Price of IDR 3400/share, and assuming 100% participation, that would garner IDR 41.15trln in proceeds, which, according to the roadshow presentation released in early September, "will be used for working capital for BRI in order to develop an ultra-micro ecosystem as well as micro and small businesses."The shares traded on the regular market went ex-rights today. Rights will be distributed on 10 September, traded from 13-22 September and exercised in the same period, with the last day for Excess Rights Subscription the 24 September and allotment of Excess Rights on 27 September.There is considerable opportunity here. Some short-term, some longer-term. But it is considerable because there is a fair bit of potential overhang here.I consider the opportunity set below the fold. 

Bank Rakyat Indonesia (BBRI)'s Mega Rights Issue - Plenty of Opportunity Short-Term and Long-Term

Indonesia

PT Bank Central Asia Tbk provides banking and related services.  The Bank also provides custodianship, trusteeship, and management of pension funds of financial institutions.  Through its subsidiaries, the Bank also provides leasing and consumer financing services.

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Bank Central Asia (BBCA IJ)

Indonesian Digital Banks - Ecosystems and Channels

Indonesian Digital Banks are an increasing focus for investors with the potential to serve the huge numbers of underbanked in Indonesia through...

Angus Mackintosh

GoTo Index Inclusion: Fast Entry to IDX30, LQ45, IDX80 Confirmed; BIG Buying Next Week

IDX will add GOTO to the IDX30, LQ45 & IDX80 indices at the close on 7 June. A float of 66.4% (vs 4% real float) will require passive trackers to...

Brian Freitas

BFI Finance Indonesia (BFIN IJ) - Catching a Digital Wave with GoTo?

BFIN is optimistic on the outlook for new financing in 2022 plus the potential for significant tailwinds to come from the association with GoTo...

Angus Mackintosh

Active GEM Funds: Indonesia Rebound

Active GEM managers are increasing allocations in Indonesian stocks, with all 4 of our measures of ownership increasing over the last 6-months

Steven Holden

Bank Rakyat Indonesia (BBRI)'s Mega Rights Issue - Plenty of Opportunity Short-Term and Long-Term

Bank Rakyat (BBRI) Indonesia's largest bank by assets, has a rights issue (stock went ex-rights today). The bank hopes to raise $2.8bn from its...

Travis Lundy

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