Indonesia

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Shui On Land
2. Seazen (Formerly Future Land)
3. Yuexiu Property
4. China Hongqiao
5. Longfor Properties

and more…

Medco Energi’s tender offers are positive for existing bondholders in our view, as the early tender considerations are 2-3 pts above the last traded prices before the announcement. Conversely, we doubt the repurchases will provide significant interest savings for the company. Still, we view the proposed new notes issuance as credit positive for Medco, as it will lengthen the debt maturity profile and enable the company to finance a Middle East acquisition using long-term funding.

We recommend that holders of the MEDCIJ 6.75 25 tender before the early tender deadline, but are neutral on the tender offer for the remaining notes. We see fair value for the proposed 2029 notes at 9.2-9.7%. 

• The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
• The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
• In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS). 

• GoTo Gojek Tokopedia may see a stabilisation of the declines in GTV that it has experienced over the last 2Qs, with some of the platform’s new initiatives gaining traction.
• The closure of TikTok Shop should be positive at the margin for Tokopedia but it has also rolled back its platform fee, which has had a positive impact on growth.
• New initiatives include GoRide Transit, GoCorp, GoTo PLUS, and the GoPay app, with the latter seeing strong take-up. 3Q2023 results should reveal more details on initiatives. All-time low seems unjustified.

• MSMEs play a big role in Indonesia’s economy. In 2019, the Indonesian government reported that there were 65.4 million MSMEs in Indonesia, constituting 60.5% of its GDP.
• But for many of these small companies across the region, digitalization is still a new concept, and this provides opportunities for big tech companies as well as startups to fill the gap.
• One such player is Indonesia-based Bababos, which targets SMEs in the manufacturing space. The startup operates a platform that matches these SMEs with suppliers of raw materials like steel, polymers, and chemicals.

• Barito Renewables (2306028D IJ) raised around US$200m in its Indonesian IPO, after pricing at the top end of its IPO range at IDR780/share.
• Barito Renewables (BR) is Indonesia’s largest geothermal power producer, and the third-largest globally by installed capacity, as per the firm.
• In our previous notes, we covered the company’s performance, had undertaken a peer comparison and shared our thoughts on valuation. In this note, we will talk about the trading dynamics.

• Selamat Sempurna remains one of the most interesting industrial players in Indonesia, as an auto and heavy equipment components manufacturer, leading the replacement filter market, and exporting to 100 countries. 
• The company booked growth in sales in 1H2023, despite coming from a high post-COVID base, with margins improving due to lower raw material input prices, without any price rises.
• Selamat Sempurna (SMSM IJ) remains confident in the outlook for the rest of the year and expects sales growth to pick up in 2024 to around +15%. Valuations are attractive.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. AAC Technologies Holdings
2. Vedanta Resources
3. China Vanke
4. JSW Infrastructure
5. Medco Energi

and more…

Medco Energi’s H1/23 results were acceptable in our view. The company’s earnings were soft, weighed down by lower O&G selling prices despite higher production volumes. That said, we expect Medco’s earnings to rebound in H2, considering the recent rally in oil prices. Positively, the company’s leverage and liquidity profile remain strong. We believe Medco will be able to accommodate its USD 400-800 mn acquisition in the Middle East without breaching the 2.5x net leverage target.

In addition, we note positively Amman Mineral Nusa Tenggara’s (AMMN) successful IPO in July 2023. We note that Medco’s 21% stake in AMMN is worth USD 6.1 bn (based on AMMN’s current market cap of c. USD 29 bn), which is far larger than Medco’s own market cap of USD 2.2 bn.

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.

• Medco Energi
• Tata Motors ADR

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• Prodia is the leading diagnostics company in Indonesia, with over 40% market share as the most trusted brand in the country, given accreditation from the College of American Physicians.
• The company was a huge beneficiary of all the testing over COVID with the result of a post-pandemic correction but sales should see a strong 2H2023 with more like-for-like comparisons.
• Prodia (PRDA IJ) remains one of our top healthcare picks in Indonesia, with rising health consciousness driving higher demand for testing. Valuations are extremely attractive versus Indian peers. 

• Matahari Department Store (LPPF IJ) is the key player in the department store space in Indonesia with a significant transformation well underway to drive future growth and profitability.
• The company had a slightly disappointing Lebaran performance given some seasonal disparities but continues to make significant progress in revamping its merchandise mix, with a strong omnichannel yielding results. 
• Matahari Department Store (LPPF IJ) looks exceptionally cheap on 4.0x FY2024E PER, and with a dividend yield of 20.0% and with earnings expected to rebound in 2024E.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Vedanta Resources
2. Tata Steel Ltd
3. JSW Steel Ltd
4. China Jinmao Holdings
5. Geely Auto

and more…

• Kalbe Farma (KLBF IJ) is one of the key proxies for increasing healthcare penetration and health consciousness in Indonesia through prescription drugs, consumer health, and nutritional products.
• The company saw a solid sales performance in 1H2023 driven by prescription drugs. There was some lingering margin pressure from higher materials but this should abate in 2H2023.
• Kalbe Farma continues to develop its digital capabilities, as well as export markets helping to drive efficiencies and growth. Valuations remain below the historical average despite strong earnings recovery ahead.

• Mitra Keluarga (MIKA IJ) is in the midst of a recovery not yet reflected in headline numbers as the effects of inflated COVID revenues fade and core business takes off.
• The company is a key beneficiary of the new health bill allowing foreign doctors to practice in Indonesia given its best-in-class hospitals located in affluent catchment areas.  
• Mitra Keluarga Karyasehat continues to expand its hospital network, increase treatment intensity, and digitalise its operations. Valuations are attractive given the highest returns amongst its peers, with recovery in motion.

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.

• Agung Podomoro Land