Indonesia

• Blibli (1437710D IJ) priced its IPO at IDR450 per share to raise net proceeds of US$508 million. The shares will start trading on 8 November.
• We have previously discussed the IPO in Blibli IPO: The Bull Case, Blibli IPO: The Bear Case, Blibli Vs Tokopedia Vs Bukalapak Vs Lazada Vs Shopee, Blibli IPO: Valuation Insights.   
• Despite peer multiple derating, the IPO price remains unattractive compared to global and Asian-focused e-commerce peers. 

• Astra International (ASII IJ)‘s recent 9M2022 numbers confirmed its position as a well-rounded way to play Indonesia’s economic recovery through autos and commodities through its controlling stake in United Tractors.
• The company has continued to deploy its war chest of funds from the Bank Permata sale, investing in commercial vehicle leasing, hydro-power, and digital banking in 3Q2022 alone.
• Astra International (ASII IJ trades on 9.0x FY2023 PER and 8.5x FY2024E PER versus its 5-year average forward PER of 14x, making it attractive at current levels. 

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.

• ABM Investama
• NagaCorp Ltd
• Times China
• Yuexiu Property

In our view, Lippo Karawaci’s (LPKR) 9M/22 results were mixed. The Real Estate Development segment was weak due to the challenging operating environment, with rising mortgage rates. The Healthcare and Lifestyle segments performed well, albeit this was not enough to fully offset the softness from Real Estate Development. Cash flows remained dismal. Leverage deteriorated and was elevated. Liquidity appears to be adequate, but is rapidly shrinking

LPKR’s near-term direction appears to be uncertain. While management seems confident that a rebound will occur in Q4/22 due to additional launches, the real estate sector in general is suffering from rising interest rates. Thus, it is unclear if take-up rates will be positive. Lifestyle is recovering from a very low base, due to the pandemic. Although Healthcare is the best performing segment, it was affected by a high base effect (due to abnormally high pandemic-related business in 2021).

We revise our Credit Bias to “Negative” from “Stable” due to the challenging macroeconomic conditions (with rising inflation and mortgage rates), which will continue to affect Real Estate Development.

• Adaro Energy (ADRO IJ) showed a sequential decline in earnings owing to a 6.8% QoQ decrease in pricing as discounts for their coal continued to build Vs. Newcastle.
• While the stock trades at a 2.8x FY22 PE and 1.3x EV-EBTIDA FY22E with a 21% dividend yield, the market is pricing in a substantial decline in coal prices.
• Adaro offers a significant margin of safety with 25% of the market cap in cash and decent capital allocation, but we prefer ITMG for its superior grades.

• FishLog, an ecosystem enabler for the fisheries cold chain industry in Indonesia, has closed its US$3.5 million pre-Series A round

• FishLog was established in 2020 by Bayu Anggara, Reza Fahlepi, and Abdul Halim to solve the fragmentation in cold chain fisheries in Indonesia

• The agritech startup improves cold storage, processor, and distribution in Indonesia’s fisheries to enable the industry to meet global supply and demand better

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.

• Kino Indonesia (KINO IJ) is one of Indonesia’s most interesting staples players with a strong share in a number of segments within beverages and personal care which dominate its sales.
• The company has seen a decent rebound in its beverages business as mobility has improved but continues to face some headwinds from higher input costs and packaging for personal care. 
• Kino Indonesia (KINO IJ) has been selectively increasing prices to offset higher costs and is seeing an improvement in sales of some of its more discretionary products. 

• Mitra Keluarga‘s 3Q2022 results reflected the changing environment with patient volumes higher and back above COVID levels but treatment intensity came down YoY in 3Q2022 given last year’s Delta base.
• MIKA continues to expand its hospital numbers through greenfield and brownfield expansions with three new hospitals due to open in the next 12 months plus it is open to M&A.
• Mitra Keluarga’s treatment intensity should start to improve over the next few quarters given management’s focus on this plus easier YoY comparisons. Valuations remain attractive versus historical levels. 

• Bank Central Asia (BBCA IJ) released a robust set of 9M2022 results driven by loan growth across all segments together with low-cost CASA funding and falling provisioning.
• The bank demonstrated its leadership in transactional banking with total transactions growing +48% YoY, with 89% in volume terms and 59% in value terms through mobile and internet banking. 
• Bank Central Asia (BBCA IJ) continues to be a core holding and trades at a premium to its peers for good reason and it has already demonstrated its digital prowess.

• BFI Finance Indonesia (BFIN IJ) released a strong set of 3Q2022 results with record quarterly bookings and total receivables almost back to pre-pandemic levels with NPFs at less than 1%.
• Growth has been driven by non-dealer used car financing with new growth coming from both heavy equipment financing and leasing plus strong growth from used-car aggregators such as Moladin. 
• BFI Finance Indonesia (BFIN IJ) has one of the lowest cost of funds of any multi-finance company in Indonesia underpinning growth. Valuations are attractive in 2.0x PBV with 21% ROE.

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. Seazen (Formerly Future Land)
3. JSW Steel Ltd
4. China Jinmao Holdings
5. Guangzhou R&F Properties

and more…

• GoTo (GOTO IJ) confirmed that it is exploring a coordinated secondary offering of shares held by pre-IPO shareholders. The Series A shareholders’ lock-up expires on 30 November 2022. 
• The lock-up of 89.63% of the outstanding shares expires on 30 November. Within these shares, Alibaba (ADR) (BABA US) and Softbank Group (9984 JP) stakes are worth a combined US$2.6bn.
• GoTo continues to grow but with material losses and cash burn. The shares are fairly valued but the sizeable secondary offering (US$1 billion based on reports) will pressure the price. 

• Arwana Citramulia (ARNA IJ) booked yet another positive set of earnings in 3Q2022 driven by increased efficiency and cost reduction leading to 32% YoY growth in profits above consensus.
• There are a number of potential positives in 4Q related to new capacity coming on stream which should help to boost sales of the company’s higher end products.
• Consensus has caught up with the company’s projects profit growth forecast of +30% for FY2022 but this may prove conservative, with valuations looking attractive on a 9x forward PER multiple.

• Matahari Department Store remains an unappreciated transformational retail growth story in Indonesia with the new management team improving the merchandise mix and restarting the company’s store expansion in earnest. 
• The company plans to add a total of 10 new stores this year and 12-15 new stores next year, as well as adopt an increasingly omnichannel approach to expansion. 
• Matahari Department Store remains attractive from a valuation perspective trading on 8x FY23E PER with a forecast dividend of 9.9% for FY2023E, which makes it look ripe for a rerating.

• GoTo (GOTO IJ) listed on 11 April and closed at its lowest point since listing yesterday. The lock-up on pre-IPO shareholders expires on 30 November.
• GoTo (GOTO IJ) has confirmed that it is working with pre-IPO shareholders to explore a coordinated secondary offering.
• The lock-up expiry will result in a lot of shares hitting the market in December. The increased float could result in MSCI/FTSE inclusion early next year.

• Ciputra Development (CTRA IJ) is Indonesia’s most geographically diversified and land bank-rich property developers, and also the pioneer of joint operating schemes that have allowed for faster expansion.
• The company reported a solid set of 1H2022 results with strong 9M2022 marketing sales pointing towards higher growth ahead, with guidance already revised upwards. 
• Ciputra Development is a core proxy for the ongoing residential market recovery in Indonesia and valuations are significantly below the 5-year average on both PBV and PER.