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.

• Pakuwon Jati
• Pertamina Geothermal Energy PT
• Sunny Optical Technology Group

• Astra International (ASII IJ) looks set to have another year of positive growth driven by strong performance from its Auto and 2W businesses and steady performance from United Tractors.
• The company’s move into the EV space has begun with 16 models hybrid or BEV models already launched, with 4W hybrid outperforming ICE given narrowing price differentials. 
• Astra International (ASII IJ) continues to invest in core growth areas of the Indonesian economy, with a strong sustainability bent. Valuations are attractive versus history on 8.3x FY2024E PER. 

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.

• AKR Corporindo (AKRA IJ) has secured another major land plot sale at its JIIPE industrial estate in Gresik, with an area of 67 hectares to a Chinese chemical manufacturer.
• The sale puts the company on track to exceed its full-year target sales for the estate. It has also been divulged that the Freeport Smelter is now 75% complete.
• AKR Corporindo (AKRA IJ) remains a crucial proxy for the Indonesian economy through its fuel and chemical distribution business, with JIIPE targeting the EV Battery value chain as future tenants. 

• Bank Rakyat Indonesia (BBRI IJ) continues to be the key and unique proxy for micro and ultra-micro lending in Indonesia, with 1H2023 reflecting its increasingly strategic positioning in the space.
• Microloans now account for 48% of loans and of this higher-yielding Kupedes microloans make up an increasingly larger portion, as it diversifies its KUR exposure. 
• The bank is set to see improving returns in 2H2023, with loan growth expected to pick-up and NIMs should also improve. 2.6x PBV with an ROE of 20.0% is attractive.

• PT Avia Avian is Indonesia’s leading integrated paint manufacturing company with around 20% market share. It is undergoing a strong recovery in margins as raw material inputs have stabilised. 
• The company continues to expand both its distribution centres and the range of products it offers, with a strong emphasis on below-the-line marketing, reaching 54,000 retail outlets.
• PT Avia Avian (AVIA IJ) is an interesting proxy for the strong recovery in Indonesia’s economy and property market, with the added tailwind of lower input costs. Valuations are attractive. 

• Telkom Indonesia (TLKM IJ)‘s 1H2023 results looked solid but drilling down 2Q2023 looked a lot more encouraging in terms of growth and higher ARPUs for Telkomsel.  
• Ongoing digital initiatives are yielding positive results and Indihome continues to register positive results, with its merger with Telkomsel underlining convergence strategy. Data centre consolidation looks like a future spin-off. 
• Telkom continues to enrich its digital ecosystem with services and make it more accessible to less affluent subscribers. Valuations remain attractive at less than 5.0x forward EV/EBITDA

• PrimaKu was born in 2017 out of a vision to overcome childhood stunting problems in Indonesia, according to Muhammad Aditriya Indraputra, its co-founder and CEO.
• Six years later, it has evolved into a full-stack digital platform for all parenting needs. The startup has just secured an undisclosed amount in pre-series A funding round led by Northstar Group and AppWorks.
• Other participating investors include BRI Ventures and BIG Ventures.

• PasarMIKRO, a fintech company focussing on smallholder farmers, fishermen, and traders in Indonesia, has raised an undisclosed amount in funding from German finance company DEG and Ceniarth, a single-family office dedicated to impact-first investing.
• This funding comes off the back of the startup’s seed round in November 2022, led by Trihill Capital, with participation from 1982 Ventures, Genting Ventures, Resolution Ventures, Gayo Capital, and Rabo Foundation.
• It will utilise the investment to expand its trade and trade finance service offerings and strengthen its network of smallholder farmers, fishermen, and traders.

• Ultrajaya Milk (ULTJ IJ) remains a core proxy for the under-penetration of dairy products in Indonesia, which stands at less than half of Thailand in terms of per capita consumption.
• Ultrajaya has seen a strong rebound in sales this year for its UHT milk sales but material pressure persisted in 1H2023 but will abate in 2H2023 improving margins.  
• Its carton tea products are seeing a strong rebound and a new distribution warehouse in Cikarang will improve distribution. Ultrajaya‘s growth trajectory is resuming and valuations are attractive. 

• PT Nippon Indosari Corpindo (ROTI IJ) booked a strong profit performance in 2Q2023 despite slower sales growth, as return rates normalised and raw material and packaging prices stabilised further. 
• Sales to Modern Trade led the way in 2Q2023 as post-pandemic consumption habits shifted to those formats, whilst General Trade saw pressure as hawkers and warung owners took holidays
• ROTI should continue to benefit from lower input costs together with a normalisation of its General Trade Business plus productivity is set to improve markedly in 2H2023.

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In this Insight:

1. Softbank Group
2. China Hongqiao
3. China Jinmao Holdings
4. Geely Auto
5. First Pacific Co

and more…

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

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.

• Adaro Energy