ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Thematic (Sector/Industry)

I spent an interesting hour in Pacific Place, Jakarta with the Country Head of Jones Lang Lasalle (JLL) Indonesia, thrashing through the state of the Indonesian Property Market, top to bottom. The stellar growth at JLL reflects the strong growth in the commercial property market in Jakarta, with a total of around 700 employees today versus around 80 staff six years ago. This rapid expansion reflects the rapid growth, as well as the increase in outsourcing of property management in the commercial space, especially by foreigners in Indonesia. The office market continues to face an oversupply situation, with around two years of supply to be digested. This means rising vacancies and falling rents. Office vacancies sit around 16% but may hit 25-30% before bottoming out. Mixed-use projects are the winners in the office space and easy access is paramount, given Jakarta's love affair with traffic.The demand bright spots are coming from e-commerce and business services.The retail property market is in a much better state, given that the five-year-old moratorium on new malls in central Jakarta remains in place, choking off any major new supply. That said, it is a competitive market and the success of satellite malls in areas such as Serpong, suggests some dilution to the draw of central Jakarta offerings.Industrial property is stabilising after a period of consolidation following rapid price appreciation over the past five years. E-commerce, FMCG and Third party Logistics (3PL) customers are the drivers. Land prices rose by around 300% over the last five years. <a href="https://www.smartkarma.com/entities/7755" target="_blank" data-smartkarma-citation="entities:7755:1">Kawasan Industri Jababeka Tbk Pt (KIJA IJ)</a> is an interesting way to play the recovering industrial properties. 50% of the companies profits come from utilities such as power and water. It has also diversified to Central Java with a new estate in Kendal, near Semarang, a JV with <a href="https://www.smartkarma.com/entities/1087" target="_blank" data-smartkarma-citation="entities:1087:1">Sembcorp Industries Ltd (SCI SP)</a>. The residential property market remains lackluster, given that the rapid price rises between 2011 and 2014 are still having a lingering effect on affordability, with a recovery being delayed by a period of intensive tax scrutiny (coined by some as "tax-terrorism") in early 2016 followed by whole tax amnesty period and the tax payments that had to be made. 2017 should hold better prospects with the tax issues fading somewhat and banks focusing on growing their mortgage loan books, in a falling interest rate environment.The uncertainty around who may be looking over your shoulder, should you decide to buy a new property for investment has stymied the recovery in the residential market. As a result, the listed developers have undershot on their marketing sales targets in 2016. The major developers such as <a href="https://www.smartkarma.com/entities/5693" target="_blank" data-smartkarma-citation="entities:5693:1">Summarecon Agung Tbk Pt (SMRA IJ)</a>, <a href="https://www.smartkarma.com/entities/15498" target="_blank" data-smartkarma-citation="entities:15498:1">Bumi Serpong Damai Pt (BSDE IJ)</a> and <a href="https://www.smartkarma.com/entities/5513" target="_blank" data-smartkarma-citation="entities:5513:1">Ciputra Development Tbk Pt (CTRA IJ)</a> have also sought to increase the portion of recurrent property incomes to insulate against the volatilityin the residential property market.<a href="https://www.smartkarma.com/entities/8550" target="_blank" data-smartkarma-citation="entities:8550:1">Pakuwon Jati Tbk Pt (PWON IJ)</a> is probably the best positioned in this respect, with more than 50% of income coming from its investment properties, which are mixed use and of high quality, especially Ganderia and Cassablanca malls in jakarta. The developers are presenting a more positive picture for 2017, with more aggressive marketing sales targets. The aforementioned four stocks are all good proxies for a recovery and all trade on large discounts (&gt;50%) to NAV. SMRA and BSDE come out on top of the pile in terms of scale and profitability, with PWON good quality exposure to retail investment property.

I spent an interesting hour in Pacific Place, Jakarta with the Country Head of Jones Lang Lasalle (JLL) Indonesia, thrashing through the state of the Indonesian Property Market, top to bottom. The stellar growth at JLL reflects the strong growth in the commercial property market in Jakarta, with a total of around 700 employees today versus around 80 staff six years ago. This rapid expansion reflects the rapid growth, as well as the increase in outsourcing of property management in the commercial space, especially by foreigners in Indonesia. The office market continues to face an oversupply situation, with around two years of supply to be digested. This means rising vacancies and falling rents. Office vacancies sit around 16% but may hit 25-30% before bottoming out. Mixed-use projects are the winners in the office space and easy access is paramount, given Jakarta's love affair with traffic.The demand bright spots are coming from e-commerce and business services.The retail property market is in a much better state, given that the five-year-old moratorium on new malls in central Jakarta remains in place, choking off any major new supply. That said, it is a competitive market and the success of satellite malls in areas such as Serpong, suggests some dilution to the draw of central Jakarta offerings.Industrial property is stabilising after a period of consolidation following rapid price appreciation over the past five years. E-commerce, FMCG and Third party Logistics (3PL) customers are the drivers. Land prices rose by around 300% over the last five years. Kawasan Industri Jababeka Tbk Pt (KIJA IJ) is an interesting way to play the recovering industrial properties. 50% of the companies profits come from utilities such as power and water. It has also diversified to Central Java with a new estate in Kendal, near Semarang, a JV with Sembcorp Industries Ltd (SCI SP). The residential property market remains lackluster, given that the rapid price rises between 2011 and 2014 are still having a lingering effect on affordability, with a recovery being delayed by a period of intensive tax scrutiny (coined by some as "tax-terrorism") in early 2016 followed by whole tax amnesty period and the tax payments that had to be made. 2017 should hold better prospects with the tax issues fading somewhat and banks focusing on growing their mortgage loan books, in a falling interest rate environment.The uncertainty around who may be looking over your shoulder, should you decide to buy a new property for investment has stymied the recovery in the residential market. As a result, the listed developers have undershot on their marketing sales targets in 2016. The major developers such as Summarecon Agung Tbk Pt (SMRA IJ), Bumi Serpong Damai Pt (BSDE IJ) and Ciputra Development Tbk Pt (CTRA IJ) have also sought to increase the portion of recurrent property incomes to insulate against the volatilityin the residential property market.Pakuwon Jati Tbk Pt (PWON IJ) is probably the best positioned in this respect, with more than 50% of income coming from its investment properties, which are mixed use and of high quality, especially Ganderia and Cassablanca malls in jakarta. The developers are presenting a more positive picture for 2017, with more aggressive marketing sales targets. The aforementioned four stocks are all good proxies for a recovery and all trade on large discounts (&gt;50%) to NAV. SMRA and BSDE come out on top of the pile in terms of scale and profitability, with PWON good quality exposure to retail investment property. 

Indonesia Property - A Question of Supply and Affordability - On the Ground in J-Town

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

During the weekend, we attended a presentation by Vacharapong Potjaneenont, who is Manager for Strategy &amp; Business Development of <a href="https://www.smartkarma.com/entities/214" target="_blank" data-smartkarma-citation="entities:214:1">Siam Commercial Bank Pub Co (SCB TB)</a>, and we found it pretty interesting. Basically, his view is that fintech has been around since the 50s, and in his view, we are on the third wave...There's something with the number three. I recall someone else (maybe Microsoft CEO Nadella) saying we are on the third Industrial or Digital Revolution. Well, let's just indulge the…

During the weekend, we attended a presentation by Vacharapong Potjaneenont, who is Manager for Strategy &amp; Business Development of Siam Commercial Bank Pub Co (SCB TB), and we found it pretty interesting. Basically, his view is that fintech has been around since the 50s, and in his view, we are on the third wave...There's something with the number three. I recall someone else (maybe Microsoft CEO Nadella) saying we are on the third Industrial or Digital Revolution. Well, let's just indulge the…

Thailand

KCE Electronics Public Company Limited and its subsidiaries manufacture and export single-layered, multi-layered, and double-sided printed circuit boards (PCBs) under its KCE trademark.  Multi-layered PCBs are used mainly in high technology equipment and high precision instruments.  Double-sided PCBs are used largely in telecommunication and computing equipment.

Hana Microelectronics Public Company Limited is an electronics manufacturing service company.  The Company manufactures electronic components on behalf of its customers for shipment to them or their customers.

Cal-Comp Electronics (Thailand) PCL is an original equipment manufacturer of computer peripheral, office equipment and consumer electronic products. Its products include desktop computers, CD-ROMS, web pads, MP3 players, integrated receiver decoders, fax machines, mobile phones, cordless phones, pagers, and transceivers.  The Company is part of Kinpo Group of Taiwan.

SVI Public Company Limited provides printed circuit board contract manufacturing services.  Most of its customers are original equipment manufacturers of computer peripheral products, telecommunication equipment, and industrial equipment and instruments.

Jaymart PCL distributes mobile phones and accessories.  The Company, through its subsidiaries, provide retail management and debt collection services.

Synnex Thailand PCL distributes computer products.  The Company distributes computer components and peripherals, servers and storage devices, security products, computer software, and consumables.

Forth Corp PCL manufactures and sells telecommunications and electronic equipment. The Company also develop and install the data management system, manufactures, sells, and installs traffic light system and equipment, manufactures and sells electronic signs, as well as distributes electronic parts.

SiS Distribution (Thailand) Public Company Ltd. distributes computers and peripherals.  The Company distributes the products to resellers, retailers, system integrators, software houses, value added resellers, and original equipment manufacturers.

Samart Corporation Public Company Limited develops satellite communication systems, supplies various system types of television signals, and provides mobile multimedia content as well as enterprise network solution services. The Company also distributes telecommunication products, and provides mobile phone service and air traffic control service in Cambodia.

Muramoto Electron (Thailand) Public Company Limited manufactures electronic component parts including video deck chassis, compact disc auto changer assembly, cathode ray tube (CRT), electric appliance parts, as well as electron gun and precision metal parts.  The Company is a part of the Muramoto Group of Japan.

Samsung Electro-Mechanics Co., Ltd. manufactures a variety of electronic components used in computers, audio and video products, industrial electronics, and telecommunication equipment. The Company's products include multi-layer boards and capacitors, optical Pick Ups, deflection yokes (DY), keyboards, speakers, and light emitting diode (LED) products.

Samsung Electro Mechanics Co, Ltd. (009150 KS)

Zhejiang Dahua Technology Co., Ltd. researches, designs and manufactures security and surveillance equipments. It also modular-designs both hardware and software with flexibility for different configurations, various scales of applications and future expansion.

Jentech Precision Industrial Company Ltd. provides tooling, precision metal stamping, custom insert molding, injection molding, and assembly solutions for medical, consumer electronics, semiconductor, automotive, appliance, and micro electronic markets to a wide variety of industries.

YASKAWA Electric Corporation manufactures and markets servomotors, controllers, inverters, and industrial robots.  The Company's products include spindle controllers, computerized numerical control (CNC) systems, and system engineering.

Insight Enterprises, Inc. offers information technology hardware, software, and services to large enterprises, small to medium sized businesses, and public sector institutions in North America, Europe, the Middle East, Africa, and Asia-Pacific.

FPT Corp is an information and communication technology company. The Company provides services in mobile distribution, systems integration, software outsourcing and development, Internet and e-media content, and computer assembly.

Dolby Laboratories Inc. develops audio signal processing systems for the motion picture, broadcasting, and music recording industries, as well as the consumer market.

WUS Printed Circuit (Kunshan) Co., Ltd produces and sells electrical equipments and related products.  The Company's products include double-side circuit board, multi-layers circuit board, and connector for electrical equipments.

Wus Printed Circuit (Kunshan) Co,Ltd. (002463 CH)

LOTES Co., Ltd specialize in design and manufacture of connectors, CPU Socket, Coolers and Antenna for Notebook Computer, Personal Computer, Mobile electronic device and Ditial Video.

Arrow Electronics, Inc. distributes electronic components and computer products to industrial and commercial customers.  The Company distributes a variety of products including computer systems, peripherals, software, and mass storage products to original equipment manufacturers and commercial customers worldwide.

Fabrinet offers outsourced process engineering and manufacturing services.  The Company contracts to manufacture optical communications, automotive, industrial, and imaging components, sub-assemblies, and modules for its original equipment manufacturer customers.

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Fabrinet (FN US)

Indonesia Property - A Question of Supply and Affordability - On the Ground in J-Town

I spent an interesting hour in Pacific Place, Jakarta with the Country Head of Jones Lang Lasalle (JLL) Indonesia, thrashing through the state of...

Angus Mackintosh

Silicon Sequel: SCB on Fintech

During the weekend, we attended a presentation by Vacharapong Potjaneenont, who is Manager for Strategy & Business Development of Siam...

Athaporn Arayasantiparb, CFA

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