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.

• Anton Oilfield
• Japfa Comfeed Indonesia
• Sands China
• Times China

• The review period for the LQ45 Index ended on 30 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
• Potential adds are Bumi Resources Minerals Tbk (BRMS IJ), Surya Esa Perkasa (ESSA IJ), Saratoga Investama Sedaya (SRTG IJ), Adaro Minerals (ADMR IJ) and Mitratel (MTEL IJ). 
• Potential deletions are PT Wijaya Karya (Persero) Tbk (WIKA IJ), Erajaya Swasembada (ERAA IJ), Media Nusantara Citra (MNCN IJ), Chandra Asri Petrochemical (TPIA IJ) and HM Sampoerna (HMSP IJ). 

• Bank Mandiri (BMRI IJ) is seeing significant rewards already being harvested from its digital strategy as it attracts low-cost fund through both its Livin’ app and its KOPRA platform.
• The bank’s 9M2022 results reflected the changing shape of its business, with lower costs and higher returns being generated through its move to higher-yielding assets and digital strategy.
• Bank Mandiri (BMRI IJ) remains a core holding among the Indonesian banks as a proxy for the overall economy with valuations attractive given rising and sustainable returns. 

• Bank Negara Indonesia (BBNI IJ) has been a perennial underdog in terms of valuations versus its peers but as its ROE and ROA converge with those peers it should rerate.
• The bank’s 3Q2022 reflected the changing shape of its loan portfolio towards higher-quality and lower-risk exposure in corporate loans and tier 1 clients’ value chain, KUR, and payroll loans. 
• BNI management is cautiously optimistic about the outlook for FY2023 in terms of loan growth and credit quality. Valuations remain attractive and ROEs may rise faster than consensus estimates. 

• Blibli (BELI IJ) is a very different animal from its listed peers given its omnichannel approach and its large 1P business plus a substantial private-public institutional B2B business. 
• The company’s IPO was a relative success, raising US$508m in fresh funds, and the share price is still above the IPO price after listing on 8th November.
• Blibli (BELI IJ) is still loss-making but has a strong backer in the Djarum Group. Its travel business could move to profitability quite rapidly and Ranch is there already.

• Indonesia-based banking and digital finance platform Akulaku has secured a US$200 million investment from Japanese megabank Mitsubishi UFJ Financial Group (MUFG).
• The investment will support its expansion of banking services across Southeast Asia, including underserved customers and markets.
• The company’s future growth plans align with MUFG’s, and their joint expansion into new territories, markets, and products will accelerate heading into 2023.

• Adi Sarana Armada (ASSA IJ) continues to represent a unique proxy to play both transport and logistics in Indonesia through its auto business plus logistics including last-mile player Anteraja. 
• ASSA Rent is the largest car leasing leader in Indonesia, with Autopedia leading auto auctions and a leader in used car sales through Caroline, which is expanding its presence fast. 
• Anteraja has seen rapid growth and may see some slowdown from e-commerce but continues to gain share and ASSA logistics continue to diversify. Valuations are attractive on 10x FY2023E PER.

• Sumber Alfaria Trijaya through its Alfamart and Alfamidi formats is one of the largest mini-market operators in Indonesia but is now expanding aggressively into the convenience store space through Lawson.
• The company should have a strong finish to the year with an additional 1,200-1,300 new stores being added over the period plus margins improving as Alfamart adds new services.
• Sumber Alfaria Trijaya is a core proxy to the winning mini-market format in Indonesia plus it is looking to replicate its success in the Philippines in Collaboration with SM Investments.

• Telekomunikasi Indonesia (TLKM IJ) produced what looked like a decent set of 9M2022 numbers as it seeks out its future digital reincarnation. 
• Data continues to dominate revenues, making up 81% of Telkomsel revenue, with Indihome becoming increasingly important at nearly 20% of total revenue, with data centres set to become increasingly important.
• The recent sell-off looks more to do with year-end liquidity flows than fundamentals with valuations looking increasingly attractive. 

• Alami, an Indonesia-based Shariah fintech startup, has secured an undisclosed amount in a capital injection from Paragon Beneva Investama, an investment arm of local cosmetics firm ParagonCorp.
• Founded in 2018, Alami is a peer-to-peer lender that provides invoice financing to MSMEs in Indonesia.
• The company has disbursed over 3 trillion rupiah (over US$191 million) to fund over 10,000 MSME projects across various strategic sectors in the country.

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. Kawasan Industri Jababeka
2. China South City
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

We view Indika Energy as “Medium Risk” on the LARA scale, thanks to its robust balance sheet following the December 2017 acquisition of a controlling stake in PT Kideco Jaya Agung (to 91%) at a low price. We note favourably Kideco’s position as the third-largest coal producer in Indonesia, as well as the low-cost structure (first quartile; profitable even during the coal downturn in the past few years). It is one of the few HY coal credits that survived the downturn. Indika’s balance sheet appeared to be fairly levered in the past, as debt-free Kideco had not been consolidated. However, the balance sheet was transformed by the stake acquisition. The business profile also changed from that of an energy (primarily coal) services company to that of an integrated coal producer. The balance sheet is now robust, with a net cash position. In the medium term, Indika is diversifying away from coal by acquiring and investing in non-coal businesses.

Our fundamental Credit Bias on Indika is “Positive”. This is based on: [1] the strong rally in coal prices, which should further boost the company’s financial risk profile in FY 2022; and [2] Indika’s commitment to improving its business diversification and ESG standards.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

We revise our recommendation to “Hold” on the INDYIJ notes from “Buy” on the INDYIJ 8.25 25.

• The ironically named warung-tech segment in Indonesia has seen a recent spate of layoffs by a number of key players, as the path to profitability becomes the key focus. 
• One company that stands out as a potential beneficiary is Bukalapak, which is already the dominant player in this space through its Mitra business, especially outside Tier 1 cities. 
• Bukalapak saw some dramatic improvements in both take rates and contribution margins in 3Q2022, with more to come in 4Q2022 and beyond, from both its Mitra and Specialty store segments.

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 South City
• Kawasan Industri Jababeka
• Lifestyle International Holdings

• GoTo pre-IPO shareholders were released from the lockup on 1st Dec 2022, which led to a 47% slide in its share price.
• We had written about the upcoming lockup expiry in our earlier note, GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO.
• While the price appears to be settling down now, given the intra-day trading limits in Indonesia,  very little volumes have been transacted compared to the shares released from lockup.

• The firm, which provides growth funding and human resource services, went public under the ticker symbol VTNY.
• Venteny offered around 930 million shares – representing 15% of its enlarged share pool – at a price of 360 rupiah (US$0.023) apiece.
• The company raised US$21 million, pegging its valuation at around US$158 million.