Indonesia

• GoTo (GOTO IJ) has legally completed the transaction to sell 75% of Tokopedia to TikTok, paving the way for higher growth and improving profitability, without the need to subsidise growth. 
• The company will continue to benefit from the new Tokopedia’s core GMV growth without having to provide funding, with the benefit of a larger total addressable market. 
• GoTo has achieved positive adjusted EBITDA in 4Q2023 beating expectations but financials should improve further in 2024 although resources will be focused on growing on-demand services, and especially food delivery.

• Ultrajaya Milk (ULTJ IJ) is back to the boil in terms of sales growth for both its dairy and carton tea businesses, which both benefit from a nominalisation of mobility. 
• The company’s margins have improved in the dairy business as cost pressure has abated with falling powdered milk prices. Competition has picked up but the overall market is growing sufficiently. 
• Ultrajaya Milk will open a new distribution centre in 1Q2024, which should help to drive growth plus it looks to launch new product categories in 2024. Valuations are attractive.

• Bank Negara Indonesia Persero (BBNI IJ) has stated its target of achieving an FY28e ROE of 20%, with ambition to join the other three big Indonesian Banks already doing it. 
• Although the current results are not on par with the other three, the bank has outlined its strategy to reach the target (1% credit cost; 37% CIR by 2028 exit)
• Projecting a gradual re-rating to align with peers by 2028 and extrapolating book value growth over the 5-year period provides a shareholder return of 30% CAGR

• Bank Central Asia (BBCA IJ) booked a strong finish to the year with PPOP rising by +15.4% YoY and zero provisioning in 4Q2023, driven by loan growth of +13.9% YoY. 
• The bank’s net interest income grew by +19.5% YoY, with a stable NIM of 5.5% in 4Q2023 and CASA growth of +4.3% YoY, bringing the CASA ratio to 80.3%.
• BCA remains a core holding amongst Indonesian banks, with conservative bank guidance of +9%-10% loan growth, stable NIMs and CoC in 2024. Valuations reflect bank returns and quality.

• Astra International has seen an aggressive sell-off on fears of increasing competition from the EV space as more operators enter the Indonesian auto market, with the most recent being BYD.
• The company has successfully held its market share at 56% in FY2023 and has launched several EV models, mostly hybrids,  as adoption levels for BEVs remain low.
• Management remains confident that FY2024 will be a stable year for both 2W and 4W, with overall EPS only set to decline slightly but valuations are now compelling.

• There are 4 changes each for the IDX30 Index and the LQ45 Index at the upcoming rebalance to be implemented at the close on 31 January.
• The largest passive inflows are expected in Indofood CBP Sukses (ICBP IJ), Merdeka Battery Materials (MBMA IJ), Indah Kiat Pulp & Paper (INKP IJ) and Pertamina Geothermal Energy (PGEO IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• On the 26th June 2023, MUFG (8306 JP) and 92.7%-held Adira Dinamika (ADMF IJ) entered into SPAs with key shareholders to acquire an 80.6% stake in Mandala Multifinance (MFIN IJ).
• Although not explicit in various company announcements, MUFG/Adira are paying an estimated IDR 3,297/share. The SPAs are subject to regulatory approvals, primarily Indonesia’s OJK.
• An EGM for MFIN’s shareholders has now been tabled for 13th Feb to vote on this change of control. Presumably, you wouldn’t progress to the EGM without OJK’s conditional approval. 

• Avia Avian (AVIA IJ) is Indonesia’s largest paint manufacturer with a strong track record, selling a wide range of architectural solutions products, with a countrywide distribution network. 
• The company continues to add to its product portfolio by adding more affordable products to cater for consumers trading down due to inflationary pressures depressing disposable incomes. 
• Avia Avian continues to add to its distribution network and has introduced express delivery that allows retailers to take more products but less inventory. Valuations are attractive with supportive dividends.

• Matahari Department Store saw a slower performance in 3Q2023 but looks well set for a recovery in 4Q2023 and early 2024 with elections, Chinese New Year and Lebaran ahead.
• The company plans to increase its store count by six in 2024, with four new format Matahari Department Stores outlets and two new concept MU&KU stores.
• Matahari Department Store continues to rollout new private label brands including Suko and Anyday to target different demographics to stimulate additional demand. Valuations are attractive on a 4.9x forward PER.

• Adi Sarana Armada (ASSA IJ) represents one of the most interesting plays on people and goods mobility and end-to-end logistics in Indonesia, being market leaders in auto leasing and auctions.
• Revenues slowed in 9M2023 due to a slowdown in Anteraja because of slower e-commerce but other areas saw strong growth, especially its auction and used car business.
• Adi Sarana Armada continues to build its renamed Cargoshare end-to-end logistics business with new customers and a move into cold chain logistics. Valuations are attractive relative to growth.

• Komunal, a fintech company offering neo-rural bank services in Indonesia, has raised US$5.5 million in a Series A extension funding round led by Sumitomo Corporation Equity Asia.
• Jafco Asia, Skystar Capital, Sovereign Capital, and Gobi Partners co-invested.
• With the Series A+ funding, the startup aims to drive financial inclusion in Indonesia by digitalising rural banks.

•  Indonesian agritech startup Semaai has secured US$4.7 million (approximately IDR 73 billion) in a mix of equity and debt financing led by CyberAgent Capital (Japan).
• New investors Sumitomo Corporation Equity Asia, Ruvento, MyAsiaVC, and Heracles Ventures, besides existing backers Peak XV’s Surge, Accion Venture Lab, and Beenext, participated.
• This brings its total funding raised to date to US$7.6 million.

In our inaugural Asian Monthly for 2024, we discuss the regional credit outlook for the year, with a focus on China, India, Indonesia as well as our favoured bonds. We also provide a review of 2023, including new Asian USD corporate bond issuances and defaults last year.

• The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
• Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
• The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.