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

Equity Bottom-Up

Matahari Department Store / Equity Bottom-Up

A conversation with the management of <a href="https://www.smartkarma.com/entities/5230" target="_blank" data-smartkarma-citation="entities:5230:1">PT Matahari Department Store (LPPF IJ)</a> in Jakarta revealed that 3Q17 has continued to see sluggish SSSG. The headline number for 3Q17 will be heavily skewed by different timing of the Lebaran holiday and is likely to see a 20% YoY decline. The 2H17 will see a "weak recovery', according to the company, as it may take time for the government infrastructure spending to feed through to the underlying economy. The real recovery is not likely to materialize until 2018. <a href="https://www.smartkarma.com/entities/5230" target="_blank" data-smartkarma-citation="entities:5230:1">PT Matahari Department Store (LPPF IJ)</a> maintains that competition from online players is still having a limited impact and still accounts for only 2%-4% of total retail sales. The company's online strategy through <a href="http://www.mataharimall.com" target="_blank">www.mataharimall.com</a> is making good progress, with 133,000 transactions through www.mataharistore.com in 2Q17 versus 67,000 in 1Q17. One key advantage for <a href="https://www.smartkarma.com/entities/5230" target="_blank" data-smartkarma-citation="entities:5230:1">PT Matahari Department Store (LPPF IJ)</a> comes with its local distribution network along with its stable of popular in-house brands such as Nevada and Coles the trust factor on issues such as sizing and quality.<a href="https://www.smartkarma.com/entities/5230" target="_blank" data-smartkarma-citation="entities:5230:1">PT Matahari Department Store (LPPF IJ)</a> s facing pressure from a slower economy, as well as competition from online players. The magnitude of the impact from online competition is difficult to measure at this stage but money flowing into Indonesia from the likes <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding Ltd (BABA US)</a> to Tokopedia is unprecedented and is bound to have some impact. An overall pickup in the underlying economy should help SSSG but this will not likely take shape until 2018. The stock has been sold off significantly on investor's concerns about competition and that growth has tempered significantly. According to Bloomberg Consensus, the stock trades on 13.5x FY17E and 12.4x FY18E, with forecast EPS growth of +3.1% and +9.1%. Following the correction in the share price, it now has a dividend yield of 5% for FY17E. It is starting to look attractive on valuations but there may be a further negative surprise with the 3Q17 numbers, which could cause a further correction.

A conversation with the management of PT Matahari Department Store (LPPF IJ) in Jakarta revealed that 3Q17 has continued to see sluggish SSSG. The headline number for 3Q17 will be heavily skewed by different timing of the Lebaran holiday and is likely to see a 20% YoY decline. The 2H17 will see a "weak recovery', according to the company, as it may take time for the government infrastructure spending to feed through to the underlying economy. The real recovery is not likely to materialize until 2018. PT Matahari Department Store (LPPF IJ) maintains that competition from online players is still having a limited impact and still accounts for only 2%-4% of total retail sales. The company's online strategy through www.mataharimall.com is making good progress, with 133,000 transactions through www.mataharistore.com in 2Q17 versus 67,000 in 1Q17. One key advantage for PT Matahari Department Store (LPPF IJ) comes with its local distribution network along with its stable of popular in-house brands such as Nevada and Coles the trust factor on issues such as sizing and quality.PT Matahari Department Store (LPPF IJ) s facing pressure from a slower economy, as well as competition from online players. The magnitude of the impact from online competition is difficult to measure at this stage but money flowing into Indonesia from the likes Alibaba Group Holding Ltd (BABA US) to Tokopedia is unprecedented and is bound to have some impact. An overall pickup in the underlying economy should help SSSG but this will not likely take shape until 2018. The stock has been sold off significantly on investor's concerns about competition and that growth has tempered significantly. According to Bloomberg Consensus, the stock trades on 13.5x FY17E and 12.4x FY18E, with forecast EPS growth of +3.1% and +9.1%. Following the correction in the share price, it now has a dividend yield of 5% for FY17E. It is starting to look attractive on valuations but there may be a further negative surprise with the 3Q17 numbers, which could cause a further correction. 

Matahari Department Store - Can Local Knowledge Win the Game? On the Ground in J -Town

ASEAN (Indo) & China-focused. Ex-Deputy HoR UBS.

Johannes Salim, CFA

<ul><li>Conference call with the IR of <a href="https://www.smartkarma.com/entities/18869" target="_blank" data-smartkarma-citation="entities:18869:1">Erajaya Swasembada Tbk Pt (ERAA IJ)</a> reveals that general consumption in 1H17 was weaker-than-anticipated.</li><li>Erajaya's smartphone business appears vulnerable to offline-to-online consumption shift although the shift remains in early innings.</li><li>Declining, razor-thin margins also imply a cut-throat industry competition.</li><li>Erajaya stock (at 7x 2017 PE and 0.6x 2017 PB) seems to be in a classic value trap situation.</li></ul>

Conference call with the IR of Erajaya Swasembada Tbk Pt (ERAA IJ) reveals that general consumption in 1H17 was weaker-than-anticipated.Erajaya's smartphone business appears vulnerable to offline-to-online consumption shift although the shift remains in early innings.Declining, razor-thin margins also imply a cut-throat industry competition.Erajaya stock (at 7x 2017 PE and 0.6x 2017 PB) seems to be in a classic value trap situation.

Erajaya Swasembada: Early Round Loser in Offline-To-Online Consumption Shift?

Indonesia

PT Sat Nusapersada Tbk supplies printed circuit boards (PCB's) and mechanical parts assembly for supply multinational industries located in Batam.

P.T. Multipolar Technology Tbk provides IT solutions. The Company offers services in hardware infrastructure, software solutions, and consulting services.

PT Centratama Telekomunikasi Indonesia Tbk provides information technology solution and internet services such as dial up access, leased line, web hosting, co-location, banner, e-mail, roaming, and mailing list. The Company's website includes Lelang88.com, Apakabar.com, Iklanmini.co.id and Centrin.net.id.

Centratama Telekomuniks Indonesia (CENT IJ)

PT First Media Tbk provides television and broadband access services to residential and commercial areas using its hybrid fiber optic coaxial (HFC) networks.

PT Indoritel Makmur Internasional Tbk operates as an investment holding company. The Company is primarily focused on the consumer and retail industries in Indonesia.

NAGANO KEIKI CO., LTD. manufactures measuring instruments such as pressure gauges, transmitters, and temperature gauges primarily used for automobiles. The Company also makes equipment for the semiconductor industry, such as pressure regulators, transducers, digital pressure gauges, and power supplies.

Edom Technology Co., Ltd. distributes ICs (Integrated Circuits), electronic components, memory, and discrete device products.  The Company's products are applied to multimedia, like DVD decoder software, portable products, such as notebook computer graphic chips, and communication products used for cellular phones and wireless web access.

Nippon Signal Company, Limited. manufactures and sells traffic signals. The Company also develops control system equipment such as ticket vending machines, automatic passenger gates, and automatic check in machines. Nippon Signal's products are used for railway stations, airports, and parking lots.

Jarllytec Co., Ltd. manufactures and distributes hinges and optical fiber connectors. The Company's hinge products are mainly used for notebook personal computers and liquid crystal display (LCD) monitors, while its optical fiber connectors are mainly used for optical signal transmission systems.

Shenzhen Huakong SEG Co Ltd is mainly engaged in trading of electronic components and LCD TVs. It also operates warehouse rental business.

Newcapec Electronics Company Limited provides smart card system software. The Company also offers a range of terminal development, production, integration, sales  and services.

Shenzhen Sunshine Laser & Electronics Technology Company Limited provides laser cutting and laser drilling services.  The Company's main products and services include laser templates, precision metal parts, flexible circuit board laser forming and laser drilling services.

Shenzhen Sunshine Lsr& Elcts Tech (300227 CH)

JALCO Holdings Inc. is a holding company that manages pachinko and slot machines  related business. The group also leases equipments and provides loans and other  financing activities. They also lease properties to operate amusument facilities.

JiangXi Sanchuan Water Meter Co., Ltd manufactures water meters, intelligent card meters, remote and compound water meters, water supply systems, and drainage pipe fittings.  The Company also provides water management application software technology.

Jiangxi Sanchuan Water Meter Co, Ltd. (300066 CH)

Flytech Technology Co., Ltd. manufactures and sells Book PCs, POS (Point of Sales) PCs, Net PCs, and other computer peripherals.  The Company markets its products worldwide.

PT Erajaya Swasembada Tbk distributes and retails cellular telephones.  The Company is licensed to distribute international brands of cell phones, and operates a chain of retail shops in Indonesia.

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Erajaya Swasembada (ERAA IJ)

Matahari Department Store - Can Local Knowledge Win the Game? On the Ground in J -Town

A conversation with the management of PT Matahari Department Store (LPPF IJ) in Jakarta revealed that 3Q17 has continued to see sluggish SSSG. The...

Angus Mackintosh

Erajaya Swasembada: Early Round Loser in Offline-To-Online Consumption Shift?

Conference call with the IR of Erajaya Swasembada Tbk Pt (ERAA IJ) reveals that general consumption in 1H17 was weaker-than-anticipated. Erajaya's...

Johannes Salim, CFA

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