Indonesia

• Bank Central Asia came through with a strong finish to the year as it took the brakes off lending, with the advantage of the highest CASA amongst Indonesian banks. 
• Loan growth was focused on corporate borrowers, commercial & SMEs, and consumers, with mortgages and autos seeing strong growth in 4Q2022, whilst loans-at-risk continues to decline, boosting profitability. 
• Bank Central Asia is highly capitalised but continues to invest in growth without sacrificing underwriting standards and continues to embrace its digital reach with growing numbers of customers. 

• There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
• Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ). 
• With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

• Bank Negara Indonesia finished 2022 with a strong set of numbers beating guidance and consensus, as it continued to benefit from low cost of funds and strong loan growth. 
• The bank has increased its exposure to higher-quality corporate customers, and large commercial customers in their supply chain plus growing government-backed KUR loans as well as consumer loans. 
• BNI’s strategy in digital banking for consumers and business customers is driving loan growth and fee income as well as funding. Valuations are attractive with rising returns increasing the appeal. 

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.

• Adani Ports & Special Economic Zone
• Azure Power Global Ltd
• Lippo Karawaci
• Tata Motors ADR

• Kalbe Farma (KLBF IJ) remains an interesting proxy for the deepening penetration of healthcare and greater health consciousness in Indonesia through its prescription drugs, consumer health and nutritional products.
• The company continues to expand its scope if pharmaceutical products into areas such as oncology and biosimilar drugs, as well as growing its exposure BPJS with carefully selected unbranded generics. 
• Its distribution and logistics business continues to be a growth driver, it onboards new third-party principals. Valuations below 5-year historical average on a PER basis despite higher projected growth ahead. 

On 11 January 2023, Lippo Karawaci (LPKR) launched a cash tender offer for the USD 405 mn LPKRIJ 8.125% 25 and USD 417 mn LPKRIJ 6.75% 26. The early tender consideration for the 2025 and 2026 notes is USD 870 and USD 770 per USD 1,000 principal, respectively. The company will fund the tender offer with an IDR 6.0 tn (c. USD 380 mn) seven-year amortising secured credit facility by two local banks. The total tender amount will be up to the size of the credit facility (which is secured over land and some buildings).

We recommend to tender the USD LPKRIJ 2025 and 2026 notes. The amount of secured debt will increase significantly if the transaction is completed, and will likely account for the majority of LPKR’s total debt. The offering prices are somewhat in line with market prices. Hence, it is better to tender the notes, as the bonds may have lower recovery values.

• Semen Indonesia came through the worst of 2022 with flat sales, despite lower volumes, with profits rising by +18.9%, driven by cost savings, reduced debt, and use of DMO coal.
• 4Q2022 may see a slowdown given. the onset of the rainy season but the company is well-positioned to ride a recovery in 2023 with additional capacity from Semen Baturaja.
• Semen Indonesia (SMGR IJ) is well set up for a recovery in earnings for the next two years, with great synergies to come from Semen Baturaja. Valuations are well-below historic.

The Asia HY Trade Book for January 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

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. Lippo Karawaci
2. China SCE
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

• Init-6, East Ventures, 500 Southeast Asia, and a number of investors participated in this funding round for Imajin

• Founded by Chendy Jaya, Imajin is a platform that connected local manufacturers with potential customers.
• By July 2022, the startup has secured more than 400 local factory partners and 80 customers, including Japanese companies operating in 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.

• China SCE
• China Vanke
• CIFI Holdings
• Lippo Karawaci

• Jardine Cycle & Carriage (JCNC SP)‘s is currently trading tight at a ~6% discount to NAV.
• The implied stub and JCNC/Astra International (ASII IJ) ratio are the highest outside the 2008 financial crisis.
• Key catalysts for JCNC’s outperformance, such as the SIMSCI Index inclusion, have passed.  JCNC is trading rich. Look to reverse the stub.

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.

• Lippo Karawaci
• MGM China Holdings
• Sino-Ocean Service

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.