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?

• 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.