Indonesia

• XL Axiata reported a robust set of 1Q2023 results as the competitive environment remains rational allowing it to raise prices, whilst its convergence strategy is starting to gain traction. 
• XL’s convergence penetration grew in 1Q2023 but the key announcement was that Link Net will become a pure fibre player whilst the retail element of fixed broadband will fall under XL.
• XL Axiata (EXCL IJ) has seen the MAUs for its digital platform reach 26m with increased user transactions and higher spending. Valuations remain attractive on 4.1x FY2023E EV/EBITDA.

• We rate Bank Negara as our top pick for its deep value attributes of low PE multiples and PEG ratio relative to sound returns and strong liquidity metrics
• We also recommend Bank Mandiri, for its premium returns and modest PE multiples; Bank Central Asia, albeit fully valued, has impressive liquidity and return metrics
• Bank Rakyat registered worsening returns in 1Q23, with pre-provision returns declining again QoQ and cost of risk rising; its loan mix implies a high structural cost of risk going forward

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. Azure Power Global Ltd
3. Pakuwon Jati
4. Japfa Comfeed Indonesia
5. China Jinmao Holdings

and more…

• Prodia booked a softer set of numbers in 1Q2023 but reflected a higher COVID base plus 1Q2023 was impacted by the fasting month but the testing mix was positive.
• The company will significantly increase capex this year with more outlet expansion and more investment into its digital business, which is becoming an increasingly important growth driver. 
• Prodia (PRDA IJ) stands out as the unique diagnostic leader in Indonesia,  which trades at a significant discount to both local healthcare players and Indian diagnostic peers.

• Bukalapak (BUKA IJ) announced 1Q2023 results with encouragingly strong headline growth coupled with even stronger revenues as take rates increased, with its marketplace being the standout driven by specialty verticals. 
• Mitra Bukalapak also registered solid growth, with increasing active Mitra’s with greater frequency, higher take rates, and an improvement in contribution margin which should turn positive over the next 2Qs. 
• Take rates should continue to improve as the specialty businesses pick up momentum, and once the Mitra business turns CM positive, growth in that segment will also accelerate.

For our next Corporate Webinar, we are glad to welcome NFC Indonesia’s Group Head of Corporate Finance & Strategy, Stanley Tijandra.

In the upcoming webinar, Stanley will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 09 May 2023, 17:00 SGT.

About NFC Indonesia

PT NFC Indonesia Tbk (IDX: NFCX), a subsidiary of PT M Cash Integrasi Tbk (IDX: MCAS), is a digital customer experience company that offers a complete suite of services aimed at assisting the retail industry in improving customer engagement and competitiveness, in Indonesia’s growing economic biosphere, through its five main initiatives: Digital Product Aggregator, Digital Cloud Advertising, Content & Entertainment, Digital Wholesale, and Clean Energy.

• Mitra Adiperkasa (MAPI IJ) 1Q2023 numbers reflected a strong start to the New Year, with vibrant sales growth, improved profitability, and growth across all segments.
• The company maintained the momentum behind its omnichannel strategy with online sales making up 8.1% of total sales despite more offline activity as COVID restrictions were dropped.
• Mitra Adiperkasa continues to expand its footprint both in Indonesia and with selective brands in South-East Asia, most recently in the Philippines. Valuations are attractive versus historical levels.

• Pertamina Hulu Energi  is looking to raise around US$1bn in its upcoming Indonesia IPO.
• PHE is a subsidiary of  Pertamina (Persero), which operates an integrated end-to-end energy business, from upstream to downstream businesses. PHE manages the upstream oil and gas assets of its parent.
• In this note, we will talk about the positive aspects of the deal.

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
• Azure Power Global Ltd
• ENN Natural Gas
• Vedanta Resources

• Pertamina Hulu Energi  is looking to raise around US$1bn in its upcoming Indonesia IPO.
• PHE is a subsidiary of  Pertamina (Persero), which operates an integrated end-to-end energy business, from upstream to downstream businesses. PHE manages the upstream oil and gas assets of its parent.
• In this note, we will talk about the not-so-positive aspects of the deal.

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.

• The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
• Potential adds are Adaro Minerals (ADMR IJ), Bumi Resources Minerals (BRMS IJ), Panin Financial (PNLF IJ), Energi Mega Persada (ENRG IJ), Transcoal Pacific (TCPI IJ) and Pertamina Geothermal Energy (PGEO).
• Potential deletions are Japfa Comfeed Indonesia (JPFA IJ), Indocement Tunggal Prakarsa (INTP IJ), Timah Persero (TINS IJ), Bank Tabungan Negara Persero (BBTN IJ) and Chandra Asri Petrochemical (TPIA IJ). 

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.

• Central China Securities
• Japfa Comfeed Indonesia

• GoTo (GOTO IJ) 1Q2023 were impressive given the group is now contribution margin positive for all its divisions plus making good headway towards positive Adjusted EBITDA by 4Q2023. 
• This came at a cost with substantial QoQ declines in GTV for both ODS and e-commerce but better take rates offset this decline. Further significant declines may raise concerns.
• GoTo Logistics and GoPay’s lending business are key foundational focus areas to underpin a lower cost to serve and higher future growth. Valuations remain reasonable relative to peers. 

• Siloam International Hospitals (SILO IJ) booked a very strong set of 1Q2023 results, despite a seasonally slower period, with all of its ramping-up hospitals now generating positive EBITDA.
• The company saw marked improvement in its patient metric in 1Q2023, both for inpatients and outpatients plus an improving payee mix with more corporate and insurance payments.
• Siloam put through price increases in 1Q2023, which will positively impact the next few quarters. It will also focus more on diagnostics this year as a new area for growth.

• AKR Corporindo1Q2023 results demonstrated its resilience with its petroleum and chemicals division continuing to grow in 1Q2023 with the added kicker of a large land sale at JIIPE. 
• The company’s JIIPE Industrial Estate will become an increasingly important earnings contributor but chemical distribution will be driven by smelters and fuel by the BP retail JV at the margin,
• AKR Corporindo is an increasingly interesting proxy for the next stage of Indonesia’s economic growth through its exposure to smelters through its chemicals business and the overall economy through fuel. 

• Bank Negara Indonesia achieved a strong set of 1Q2023 numbers despite moderate loan growth, where the headline masked some significant growth areas, whilst asset quality improvements led to lower provisions.
• The bank continues to stride ahead with its digital initiatives with a multi-touchpoint approach, which has led to increased transactions and a positive impact on CASA and hence funding costs. 
• Bank Negara Indonesia remains an interesting proxy to the overall Indonesian economy through its high exposure to corporate and consumer lending. Valuations are attractive on 1.1x PBV for 15% ROE.

• GoTo (GOTO IJ) reported 1Q2023 results yesterday. Gross revenue increased 14.3% YoY to IDR5.98trn while adjusted EBITDA losses further declined to IDR3.52trn from IDR5.94trn in 1Q2022.
• However, all growth matrices point towards a slowdown compared to the previous quarter with gross revenues of all segments and On-demand take rate declining QoQ in 1Q2023.
• With GoTo prioritising profits over growth, we expect the company’s growth rates to further decline and wonder if the company could hold it for long?