Indonesia

• PT Metrodata Electronics had a strong finish to the year with FY2022 net profit growth of +14.1% YoY driven by both its ICT distribution and Solutions & Consulting (S&C) businesses.
• The S&C business continues to thrive on Indonesia’s ongoing digitalisation, especially in the financial sector with the advent of digital banking but also in the telecom and oil&gas sectors. 
• PT Metrodata sees a slower outlook for the consumer outlook but strong momentum behind commercial sales and S&C as digitalisation continues, and new growth from the Public Sector. Valuations attractive.

• Indocement Tunggal Prakarsa (INTP IJ) released solid FY2022 results despite inclement conditions for the industry, as it utilised more low CV coal and alternative fuels and raised prices.
• The company now has much better access to cheaper DMO coal, which accounted for 60% of requirements in 2H2022, which provides a lower and more sustainable cost base for 2023.
• Indocement has continued to aggressively expand its distribution footprint across Indonesia in 2022, allowing it to access regional areas of demand. Valuations are attractive versus history.

Medco Energi’s FY 2022 results were strong, in line with expectations. This was supported by increased production following the ConocoPhillips Indonesia acquisition in March, as well as the high oil-price environment. Moreover, copper and gold mining JV AMNT has started to mature, generating healthy dividends. Leverage improved to a healthy level, with Debt/EBITDA at 2.1x and Net Debt/EBITDA at 1.6x.

We expect Medco’s earnings to increase slightly in FY 2023, assuming oil prices are maintained at current levels, as ASP from its fixed-price contracts is likely to rise from a low base. In addition, the company should deleverage further going forward, supported by strong OCF generation and debt repayments. Management said that Medco intends to acquire more assets in future, although there are no imminent plans currently.

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
• Country Garden Holdings Co
• Gajah Tunggal
• NagaCorp Ltd
• Yuexiu Property

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.

• Merdeka Battery Materials (2012725D IJ)  is looking to raise around US$580m 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 undertake a quick peer comparison, talk about our earnings assumptions, and share our thoughts on valuation.

Lippo Karawaci’s (LPKR) FY 2022 results were weak as expected. While the post-pandemic recovery has benefited the company’s malls and hotels, Siloam Hospitals (the largest contributor to revenue and earnings) no longer enjoyed the boost from COVID-19-related procedures. The second-largest segment, Real Estate, was weighed down by a very challenging operating environment, with a sharp increase in mortgage rates impacting demand. The financial risk profile continued to be weak. The only positives are LPKR’s adequate liquidity and the good pro-forma debt maturity profile.

• Merdeka Battery Materials (2012725D IJ) is looking to raise around US$580m 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. 
• MBM aims to become a vertically integrated battery materials player. Through a series of acquisitions, it owns one of the world’s largest nickel mines. 

• Siloam International Hospitals (SILO IJ) is coming out of the COVID period with guns blazing as base case revenues continue to grow, surpassing pre-pandemic levels and with margins improving. 
• 2022 was a year of two halves and 2H2022 saw a clear resumption of base case patient activity, Siloam also saw the benefits of unified pricing and improved efficiencies.
• Siloam looks well-positioned to grow its base case revenues further in the coming year, with a healthy cost base and more beneficial pricing. Valuations are attractive on 9.4x FY2023E EV/EBITDA.

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. Japfa Comfeed Indonesia
2. Yankuang Energy Group
3. Anton Oilfield
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

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

Pakuwon Jati’s (PWON) FY 2022 results were acceptable. This was despite the company missing its pre-sales and earnings targets, given the sharp deterioration in the operating environment in H2 on the back of a steep rise in interest rates. Growth in y-o-y revenue, earnings and cash-flow was expected, given the COVID-19 lockdowns in FY 2021. Positively, the balance sheet remains in great shape, with net cash and no short-term debt. The company has the best credit profile among the companies under our Indonesian real estate coverage, and is the only one that has not carried out any bond tender offer below par. PWON has the best quality portfolio of retail assets and the highest portion of recurrent rental income among peers.

• Bukalapak (BUKA IJ) may have disappointed some in missing on TPV but that is unimportant when it executes convincingly on improving take rates for both marketplace and its Mitra business. 
• The number of Mitra Bukalapak partners has increased to over 16m, with active Mitras taking increasing services and higher take rate products from Buka’s marketplace and specialty stores.
• Bukalapak beat on revenues and adjusted EBITDA and its guidance for adjusted EBITDA-positive by 4Q2023, with continuing improvements to take rates driving improvements. Valuations are attractive at <1x FY2024E EV/Sales.

• Cisarua Mountain Dairy (CMRY IJ) is one of the most interesting consumer staples players in Indonesia, with a leading position in dairy and specifically yoghurt, and increasingly premium consumer foods.
• 4Q2022 saw a slowdown in sales growth as consumers returned to the mall due to inflationary pressure but December saw a sharp recovery and 2023 should see continued recovery.
• Flavoured UHT Milk and a new Yoghurt stick aimed at the mass market will help to fuel growth and raw material cost pressures have started to alleviate. Valuations are attractive. 

• Prodia (PRDA IJ) FY2022 results saw declines in revenues and profits but from a COVID-high base and the numbers are now well-above 2019, with strong prospects ahead.
• The company is seeing a return to routine testing with tests per visit back to pre-COVID and revenues per visit also rising strongly, with a diverse customer base providing comfort.
• Prodia also has an increasing digital angle with the rising use of its app and a new app that tracks patients’ health just launched. Prodia (PRDA IJ) is too cheap.

• We rate Bank Mandiri as our top pick with its attractive valuations including PEG ratio relative to solid returns and strong balance sheet – including liquidity –  metrics
• We also continue to favour Bank Negara, but it is our secondary value pick to Mandiri; Bank Central Asia, albeit fully valued, has impressive liquidity and return metrics
• Bank Rakyat had mixed returns in 4Q22, with pre-provision returns declining sharply QoQ although cost of risk continued to improve, due to better credit quality, thereby supporting post-provision profits

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
• Meituan

• Mitra Adiperkasa continus to execute on its unified retail model that utilises multiple channels to serve customers but offline activity has picked up most, driving a very strong 4Q2022. 
• The company continues to see improving margins across the board as sales growth has picked up across all segments. Online sales also remained relevant at 9% of sales in 2022.
• Mitra Adiperkasa continues to recover, utilising its MAPCLUB members to drive sales through more effective targeted promotions and efficiencies. Valuations are attractive versus historical levels.

• Indonesian insurtech startup Qoala announced that it has raised US$7.5 million in a series B extension round led by Europe’s responsAbility Investments.
• Existing investors Eurazeo and Indogen as well as new investor AppWorks also participated in the round.
• The startup declined to comment on its valuation, but VentureCap Insights currently pegs it at US$310 million following the fundraise.

• Telekomunikasi Indonesia (TLKM IJ) results reflect a company increasingly digital in nature with legacy services fading away and an increasing focus on building both quality infrastructure and subscribers. 
• Despite losing subscribers last year, customer data consumption picked up and the ARPUs also improved reflecting a more profitable subscriber base. Indihome continues to see growth in its customer base.
• Telkom continues to strengthen its presence in the cloud business and data centres as future growth drivers. Valuations are attractive versus historical levels with strong growth prospects ahead. 

• AKR Corporindo (AKRA IJ) booked an impressive set of numbers significantly above consensus with net profit increasing +117% YoY driven by strong performance across all segments.
• Trading & Distribution will be driven by both the demand for petroleum products together with chemicals, especially from the increasing number of smelters in Indonesia, both for copper and nickel.
• JIIPE industrial estate booked 44.5 ha of sales, above guidance, with expectations for 70-75 hectares of land sales this year. Valuations are significantly below the historical average and consensus low.

• Earnings fall 80% YoY on slow revenue recognition, higher interest expense and FX loss. 1H18 presales momentum remains strong.
• TP lowered to IDR2,000, valuations look undemanding.
• With a vast and low cost landbank centred on its BSD City township, BSDE offers attractive exposure to Indonesia’s long term growth in property demand, especially in the wealthy Greater Jakarta region.

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.

• ENN Natural Gas
• Japfa Comfeed Indonesia
• Vedanta Resources

• Indosat (ISAT IJ) has come back from being the loss-making underdog amongst the Indonesian telcos and is now well and truly on the rebound, with significant potential upside.
• The acquisition of Hutchison’s “3” has propelled the company into the number two spot in terms of market share and enabled better quality coverage after a well-orchestrated merger. 
• Indosat now has a 4G footprint in Java greater than Telkomsel and with significant potential to gain share ex-Java, which provides higher returns. Valuations remain attractive. 

• Established in 1993, PT Alam Sutera Realty Tbk (Alam Sutera) is a small Indonesian property developer, focused on the development and management of large-scale townships of residential and commercial property.
• As of FY16, the company held total land bank of 1,898 hectares in gross area.
• Key source of earnings remain property development sales, with recurring income limited and derived from leases in its shopping malls.

• Net profit up 19% YoY on strong revenue growth. New order flow remains decent.
• Maintain IDR 2,300 TP, valuations look attractive
• With a diversified portfolio of private construction and public infrastructure projects, WIKA offers broad exposure to Indonesia’s infrastructure investment growth

• Net profit up 3% on higher toll revenue and operating margin expansion.
• Longer term concerns remain, maintain IDR4,900 TP.
• With 62% of Indonesia’s toll roads by length, JSMR offers exposure to Indonesia’s ongoing urbanisation and infrastructure spending plans. Near term, government intervention in toll tariffs will likely weigh on the stock.

• Headlines for GoTo 4Q2022 and FY2022 headlines do not tell the whole story, given large one-off charges for goodwill write-downs, without which significant progress has been made towards profitability. 
• GoTo significantly reduced incentive&product marketing spending in 4Q but also posted decent growth, albeit at a slower pace, with an increasing emphasis on building foundational products to drive future profitability.
• 1H2023 will see slower headline growth from a COVID base but 1Q2023 should see improving take rates and CM breakeven. This is the transient stage of the long-term GoTo story.

• Established in 1980, PT Medco Energi Internasional Tbk (Medco) is an independent oil and gas operator in Indonesia with upstream oil and gas exploration and production as its core business.
• In addition to this, the company also has investments in power generation through fully owned subsidiary PT Medco Power Indonesia (MPI) and copper, gold and coal mining through 23.1% owned PT Amman Mineral Nusa Tenggara (AMNT).
• Both the power and mining entities are outside of the restricted group and will be independently managed, with debt undertaken to be of non-recourse to Medco.