Indonesia

• Matahari Department Store (LPPF IJ) 1Q2023 results reflected a normalization of sales growth at a sold +14.2% YoY, with normalisation of rentals plus minimum wage increase impacting margins temporarily.
• The company has resumed its store openings with seven new stores in 1Q2023 and 12-15 new stores planned for FY2023. New merchandising campaigns have made a strong impression in 1Q2023. 
• Matahari will launch its new Suko brand in May in 20 stores plus 2H2023 will see its new modern format being rolled out. Valuations are attractive with a double-digit yield.

• Mandiri delivered solid 1Q23 results, underscoring its attractive valuations with single digit prospective PE multiples and premium growth potential all backed by a strong balance sheet
• Mandiri improved 1Q23 pre-provision operating profit and net profit YoY; Mandiri’s credit quality metrics were sound in 1Q23, with strong liquidity and funding ratios
• Mandiri has an attractive PEG ratio and delivers 20%+ ROE on a strong capital base for its PBV ratio comparing well against Indonesian and big cap EM bank peers

• Bank Mandiri (BMRI IJ) released a well-balanced set of results with some pressure on NIMs more than offset by higher loan yields, lower credit risk, and great cost efficiency.
• The rapid and widespread adoption of the Livin’ app for new customers and onboarding customers has positively impacted efficiencies and helped gather more CASA.
• Bank Mandiri Persero (BMRI IJ) is optimistic about the outlook for 2023 with loans expected to grow +10%-12% with table NIMs and lower credit costs. 

• Astra International (ASII IJ) registered a strong start to the year with strong growth across most of its major divisions in 1Q2023, including 4W, 2W, Financial Services, and Heavy Equipment. 
• The company’s market share in the auto business remained stable and increased for motorcycles, whilst heavy equipment and mining benefited from higher coal prices and infrastructure improving revenues on toll-roads.
• Astra has launched a new JV with Equinix to build data centres in Indonesia, which makes an interesting addition to its digital economy exposure. Valuations are attractive relative to history. 

• Singapore-based early-stage VC firm Oriza Greenwillow Technology Fund has committed to investing US$2 million in Indonesian startup Zi.Care, which digitises medical records for hospitals.
• The Jakarta-headquartered electronic medical records (EMR) startup is eyeing a total of US$3 million in this Series A round. Several other regional VCs will also be invited to participate.
• The startup will use funds to strengthen its focus on increasing digitalisation in the health sector.

• Living a healthy lifestyle can be burdensome and expensive. Indonesian startup Fit Hub is on a mission to democratize health for middle- and low-income households in Indonesia by offering affordable gym memberships.
• In Indonesia, the average membership costs US$50 per month, while the startup charges US$17.
• Since being founded in 2020, Fit Hub has opened up 60 offline clubs across 14 cities in Indonesia. It plans to open 100 clubs by the end of the year.

• Merdeka Battery Materials (2012725D IJ) raised around US$591m in its Indonesian IPO.
• It has the largest resource globally in terms of contained nickel at the Konawe Nickel Mine (the SCM Mine), according to Wood Mackenzie. 
• In this note, we will talk about the trading dynamics and valuation.

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.

• Guangzhou R&F Properties

• Adi Sarana Armada (ASSA IJ) provides unique exposure across Indonesia’s mobility ecosystem from car leasing to auctions and omnichannel used car sales together with logistics and last-mile delivery.
• The company booked relatively strong sales growth last year, with very strong growth from used cars and logistics with slower auctions but profitability was impacted by bigger losses at Anteraja.
• The outlook for 2023 looks more positive for both sales and profitability, with the ongoing growth in used car sales, recovery in the auction business, and last mile under Anteraja. 

Alam Sutera’s (ASRI) FY 2022 results were surprisingly strong, particularly the Q4 numbers. We note the opportunistic nature of the company’s tender offer (at a discount) for its USD 2024 notes. Instead of reassuring noteholders of its improving performance, ASRI opted to take advantage of the market, apparently a typical move among Indonesian HY issuers. The financial risk profile improved significantly and is now quite modest. It is also much better than suggested by the ratings from the agencies (Caa1 (negative) and B- (stable) from Moody’s and Fitch, respectively). Liquidity is sound. The debt maturity profile has been lengthened substantially, with minimal maturities until 2025 (when the USD 241 mn 2025 notes will mature).

We move our recommendation to “Buy” from “Hold” on the ASRIIJ 8.25 25, which is trading at 83/85, yielding 20%/19.5%. The company’s debt maturity profile has been significantly extended following the tender offer in Q4/22, with minimal debt to mature before the 2025 notes. This could give ASRI time to weather the impending downturn. We foresee that the company will continue generating positive FCF, due to its low-cost land bank and high-margin sales of land lots.

• PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) priced its IPO at IDR1,250 per share to raise gross proceeds of US$660 million. The shares will start trading tomorrow.
• We previously discussed the IPO in Harita Nickel IPO: The Bull Case, Harita Nickel IPO: The Bear Case and Harita Nickel IPO: Valuation Insights.  
• Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

• PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) raised around US$660m in its Indonesian IPO.
• PT Trimegah Bangun Persada Tbk (Harita Nickel, HN) is a vertically integrated pure-play nickel company operating on Obi Island, Indonesia.
• In this note, we will talk about the trading dynamics and valuation.

• ITMG went ex-dividend yesterday, paying out a whopping 16.8% (6416 Rph/share) final dividend in addition to the interim dividend of 10.8% (4128 Rph/share), bringing the FY22 yield to >27%.
• After payment of the 474 mn USD final dividend and 223 mn USD tax liability, we estimate the company will have >1.0 bn USD net cash (~33% mkt cap). 
• At current coal prices (NEX 190 USD/ton), the Indonesian coal producer trades on a 20% dividend yield for FY23 assuming a 65% dividend payout ratio (in line with historical payout).

• Sumber Alfaria Trijaya (AMRT IJ) remains one of the most interesting proxies for retail spending in Indonesia, with a nationwide Alfamart footprint in the most popular mini-market format. 
• The company’s latest numbers confirm the momentum behind and the recovery with improving margins. Alfamart expanded its store numbers aggressively in FY2022 and will continue into 2023. 
• Sumber Alfaria Trijaya will push aggressively in expanding its Lawson convenience stores this year on top of its mini-market expansion as a future growth driver. 

• Bundamedik Tbk PT (BMHS IJ) reported 15% decline in revenue in 2022. However, non-COVID business recorded revenue growth of 17%. Contribution of core business to total revenue increased to 92%.
• All the key operating parameters improved significantly from pre-COVID level. Occupancy rate of the existing hospitals improved to 66% in 2022 from 58% in 2021. New hospitals recorded 71% occupancy.
• The company aims to achieve revenue growth of ~17% YoY and EBITDA growth of 23–24% YoY in 2023, supported by the significant development of the company’s core business.

• PT Surya Citra Media Tbk (SCMA IJ) had an exciting 2022, with a ramp-up in new audience share-winning original content along with the boost from the Word Cup rights. 
• Both SCTV and IVM gained significant audience share in 2022, and Vidio led the charge on OTT driven by killer content, finishing the year with 5m paying subscribers. 
• Profitability was hit by a sharp rise in production costs and investment in Vidio but we expect significant improvement in 2023. Valuations are attractive with SCMA on 12x FY2023E PER.