Indonesia

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.

• Adani Ports & Special Economic Zone
• Agung Podomoro Land

• Erajaya Swasembada (ERAA IJ) had a tempestuous 3Q2023, with one-off write-downs of inventory in both Indonesia and Malaysia, despite booking strong sales and gross profit growth overall. 
• The company has also expanded its store network more aggressively in 9M2023, which meant higher opex and financing to build the new inventory, whilst stores take time to ramp up. 
• Erajaya should see a recovery in 4Q2023, given plans to limit store expansion plus a lack of write-offs. Trading on 5x FY2024E PER with forecast +25% EPS growth is attractive.

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.

• Lippo Karawaci

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.

• Lippo Karawaci
• Softbank Group
• Xiaomi Corp

• Cisarua Mountain Dairy (CMRY IJ) stands out from the overall FMCG space in Indonesia, with 21% revenue growth versus a flat to negative performance for the overall market.
• The company’s growth in 3Q2023 was predominantly driven by premium consumer foods at +46% YoY but dairy was also positive, with the company increasing promotional spending but maintaining margins.
• The outlook for 4Q2023 looks promising driven by increased distribution outlets, especially general trade plus the launch of new products for both consumer food and dairy. 

• Ace Hardware Indonesia (ACES IJ) booked an impressive set of 3Q2023 results after registering a strong improvement in SSSG over the last few months as well as increasing store count.
• The company has booked particularly strong performance outside Java, where spending power has proved to be strong, with the company’s digital promotions boosting sales significantly and complementing offline sales. 
• Ace Hardware Indonesia (ACES IJ) has regained its lustre with a more coherent set of initiatives to drive future growth from promotions to new store formats. Valuations remain reasonable.

• Sumber Alfaria Trijaya (AMRT IJ) came through a slower 3Q2023 with much stronger growth than peers, with SSSG and rapid store expansion driving growth, and margins improving concurrently.
• The company added more than 1,300 new stores for 9M2023 and looks set to add a record 1,800 by year-end, with new Alfamidi and Lawson stores driving growth.
• AMRT will see an even stronger seasonally higher 4Q2023, with SSSG likely to pick up boosted by supplier rebates and news store contributions. FY2024 looks set to be equally strong.

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.

• Delta Dunia Makmur
• ENN Natural Gas
• Greentown China

• Recovery for Multi Bintang Indonesia (MLBI IJ) has been underwhelming with revenue/PAT for Q3 2023 coming in at -3% YoY/10% YoY.
• We expect the high season (holiday/festivity season) of Q4 to be comparatively better as 9M2023 revenue/PAT tracks 7% YoY/14% YoY, below our 15% assumption. 
• We like Multi Bintang Indonesia (MLBI IJ) as we are paid to wait in the name. The correction post earnings place it at 15.4x/12.7x PE FY23e/24e and 6% dividend yield. 

• Amman Mineral Internasional (AMMN IJ) listed on the Main Board of the IDX in July by raising US$715m in the largest Indonesia IPO for the year.
• The stock did not get Fast Entry to any of the local or global indices given the low float, but there could be multiple index inclusions in the near future.
• The stock is up 3x from its IPO price and there could be supply from some of the investors that got in at the offering price.

• Astra International’s results are a testament to both the company’s resilience in the face of declining commodity prices, with autos. motorcycles and finance take up the reins of driving growth.
• Astra continues to introduce new EV models with a focus on hybrid variants, which have been selling well. It is increasingly investing in sustainable businesses including geothermal and nickel assets.
• Astra International (ASII IJ) remains a well-managed core proxy for Indonesia’s key growth drivers, with new investments aligning the company with the country’s growth drivers. Valuations are attractive versus history.

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. Evergrande
2. Logan Property Holdings
3. Japfa Comfeed Indonesia
4. Medco Energi
5. Zhenro Properties Group

and more…

• Mayora Indah (MYOR IJ) saw a significant positive surge in profitability from lower raw material prices and lower operating costs in 3Q2023, which suggests it will beat its FY2023 guidance.
• The company continues to launch new variants in both biscuits and beverages with a slant towards premiumisation and is also more aggressively attacking export markets, where its brands are strong.
• Mayora Indah (MYOR IJ) is expanding factory capacity to fuel growth in 2024 but should also benefit from pre-election spending from 4Q2023. Valuations look attractive versus historical comparisons.

In our view, Indika Energy’s 9M/23 results were weaker than expected due to a sharp decline in Kideco’s production and sales volume in Q3, lower-than-expected profitability at Kideco (which accounts for 90% of Indika’s EBITDA) and negative OCF, which came as a surprise. The balance sheet turned to a net debt position, after a few quarters of net cash. Liquidity remains sound, with a large (albeit fast shrinking) cash position.

OCF and FCF were negative, which was surprising as Indika has previously managed to generate positive FCF even when coal prices were lower than current levels. The last time the company generated negative FCF was in 2015, during a major coal downturn. We believe that the negative OCF may be due to the new businesses, which are ramping up. Indika’s key business strategy in the medium term is to diversify away from and reduce its reliance on coal-related activities, with the company aiming to derive 50% of its revenue from non-coal sources by 2025. The new businesses include a gold mine, renewable energy solutions (mainly solar power), electric scooters and several digital technology businesses.

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.

• Azure Power Global Ltd
• Evergrande
• Japfa Comfeed Indonesia
• Medco Energi
• Zhenro Properties Group

• GoTo Gojek Tokopedia’s 3Q2023 results were far more illuminating and encouraging than the last 2Qs, with more progress towards adjusted EBITDA breakeven, with much more colour on its new initiatives.
• The company’s focus on budget consumers and more affordable product offerings are already expanding its TAM and improving product density and productivity, speeding progress towards productivity. 
• GoTo will continue to invest in growth, which may mean it misses its 4Q adjusted EBITDA breakeven target but it has reduced cash burn significantly giving it more breathing space.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Indika Energy’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Bank Negara remains our top pick for its deep value attributes of low PE multiples and its very attractive PEG ratio, whilst improving post-provision returns and registering strong liquidity
• We also keep Bank Mandiri on a buy rating, for its premium returns and undemanding PE multiples; Bank Central Asia, albeit fully valued in our view, has impressive return
• Bank Rakyat again registered worsening pre-provision returns in 3Q23, along with cost of risk; its heavily MSME focused loan mix implies a high structural cost of risk going forward