Indonesia

• 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

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.

• Indika Energy
• Tata Steel Thailand

• Barito Renewables (2306028D IJ) is looking to raise around US$228m in its Indonesian IPO.
• 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 note, we covered the company’s performance. In this note, we will undertake a quick peer comparison and share our thoughts on valuation.

• Barito Renewables (2306028D IJ) is looking to raise around US$228m in its Indonesian IPO. 
• Barito Renewables (BR) is Indonesia’s largest geothermal power producer, and the third-largest globally by installed capacity, as per the firm. 
• Its revenue has been primarily driven by electricity and steam sales to PLN as PGE’s exclusive contractor and its profitability has been on the rise over the track record period.

• Bank Mandiri (BMRI IJ) continues to positively surprise on loans, NIMs, and credit costs, with a consequential improvement in returns, only non-interest income seeing a slowdown but likely temporary.
• Digital banking initiatives through Livin’ and KOPRA continue to grow and help the bank drive higher CASA and fee income whilst reducing costs, with smart branches also improving returns.
• Bank Mandiri remains a core holding as a proxy to the Indonesian economy with its digital initiatives driving higher returns. Valuations remain attractive on 2.2x FY2023 PBV with 20% ROE.

• The bank expects its 2 new for 1 old stock split to be done on 10 October
• Total shares should move from 18.6tr to 37.3tr after the stock split
• Compared with peers, BBNI has low market cap/assets, good ROA

• Global Digital Niaga (BliBli) continues to stand out from peers given a differentiated omnichannel model plus a greater portion of 1P but 3P sales are growing driven by Tiket.com.
• TPV growth surpassed revenue growth in 1H2023 driven by Tiket.com but take rates and gross margins improved, as the company cut back on promotional spending and improved cost efficiencies. 
• BliBli booked organic growth with more users and a significant pick-up in the average order value, partially driven by Tiket.com. 

• Indonesia-based Koltiva works with producers in 52 countries and boasts over 1 million producers and 6,800 businesses

• Indonesia-based sustainable farming and supply chain traceability startup Koltiva has raised an undisclosed “seven-figure” USD in a Series A financing round led by AC Ventures.

• Silverstrand Capital, Planet Rise, Development Finance Asia, Blue 7, The Meloy Fund, and an unnamed impact investor in Southeast Asia also joined.

• Maize plays a pivotal role in Indonesian agriculture, including as a prime source of animal feed. In 2022, the country’s maize production was estimated to reach 44 million tons.

• Agritech startup Kora is one of those few startups operating in this space.

• Kora aims to improve the quality and quantity of post-harvest maize.

• Multi Bintang Indonesia (MLBI IJ) and Delta Djakarta (DLTA IJ) are cheap plays on recovery in tourism to Indonesia. July 2023 data shows a 90% recovery in Bali tourism.
• We are approaching the Q3/Q4 high season, where profitability should see a dramatic improvement in revenue and profitability. 
• We prefer to play the recovery through Multi Bintang Indonesia (MLBI IJ) trading at 15.9x/13x FY23e/24e with a 6.3%/7.5% dividend yield.

• Bank Negara Indonesia (BBNI IJ)continues to focus on growing the quality end of its corporate loan book, and de-risking its smaller sized commercial loans, whilst growing consumer exposure.
• The bank’s digital initiatives remain core, with strong growth in mobile transactions by value as well as the number of users, whilst BNI Direct is driving digitisation of business customers.
• Hibank has launched, growing FMCG related loans fast, with the help of Mayora Indah. BNI valuations remain attractive, with the bank trading on 1.2x FY2023E PBV with 15% ROE.

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.

• JSW Infrastructure
• Medco Energi

• XL Axiata (EXCL IJ) continues to impress with its growth in revenues and data, driven by its 4G focus and high-quality network, with improving margins at the same time.
• The XL convergence story continues to build, with convergence penetration increasing but the real kicker wILL come once the restructuring with Link Net completes but benefits are already accruing. 
• XL Axiata remains the purest data player in Indonesia, with convergence set to be the next driver. Valuations are attractive on 4.4x FY2024E EV/EBITDA with strong growth ahead. 

• We retain Bank Negara as our top pick for its deep value attributes of low PE multiples and its attractive PEG ratio relative to sound returns and strong liquidity metrics
• We also stick with our positive call on Bank Mandiri, for its premium returns and undemanding PE multiples; Bank Central Asia, albeit fully valued, has impressive liquidity and return metrics
• Bank Rakyat again registered worsening pre-provision returns in 2Q23, even if there was QoQ cost of risk relief; its loan mix implies a high structural cost of risk going forward

• On the 26 July, Geo Energy Resources (GERL SP) announced an agreement to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
• Via an S&P, GEO intends to buy a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group for US$154.1mn.
• The completion of the S&P, which is subject to Indonesia’s OJK and Geo shareholder approval, will trigger an MTO at IDR 1,255/share.

The Asia Trade Book for September 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia HY and crossover credits.

Please reach out to our analysts to discuss any of these ideas, or other trade recommendations from our Asia coverage.