Indonesia

• 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.

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. ABM Investama
2. Agile Property Holdings
3. Fosun International
4. Kawasan Industri Jababeka
5. China Jinmao Holdings

and more…

• Blibli (1437710D IJ), a leading Indonesian e-commerce player, has launched an IDR8.2 trillion (US$530 million) Indonesian IPO. Bookbuilding is from 17 to 24 October.
• We have previously discussed the IPO in Blibli IPO: The Bull Case, Blibli IPO: The Bear Case and Blibli Vs Tokopedia Vs Bukalapak Vs Lazada Vs Shopee. 
• Our valuation analysis suggests that the IPO price range is unattractive. We would give the IPO a pass.

Medco Energi has launched a cash tender offer for up to USD 250 mn of three USD bonds. If the tender is successful, we expect gross debt to be reduced by USD 100 mn, the debt maturity profile to be lengthened and interest expense to decline. Tendering the bonds would make sense if noteholders require liquidity. Otherwise, they could consider holding the notes given the improving credit fundamentals.

• PT Global Digital Trade (1437710D IJ)  (BliBli) aims to raise up to US$530m in its Indonesian IPO.
• BliBli provides e-commerce services across Indonesia to both retail consumers and institutions
• In this note, we’ll talk about the positive aspects of the deal.

• Blibli (1437710D IJ), one of Indonesia’s leading e-commerce platforms is looking to raise around $470-530m via an IPO on Indonesia Stock Exchange.
• Looking at Shopee’s struggles in the past year and Bukalapak’s rapid fall following the IPO, we think investors are unlikely to be interested in the Blibli IPO.
• This could mean that Blibli’s days are numbered as it is resting all hopes on the IPO to fund its short-term loan repayment obligations.

• Blibli (1437710D IJ), a leading Indonesian e-commerce player, has launched an IDR8.2 trillion (US$530 million) Indonesian IPO. Bookbuilding is from 17 to 24 October.
• In Blibli IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.  
• The key elements of the bear case rest on weak sector sentiment, an unclear path to profitability, and credible long-term funding to support the high cash burn.  

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.

• Agung Podomoro Land

• Blibli (1437710D IJ) is offering 17.77bn shares in its IPO at a price range of IDR 410-460/share. That could raise up to US$530m and value the company up to US$3.64bn.
• The stock will not get Fast Entry to the IDX30, LQ45, MSCI and FTSE indices, so no near-term support from passive buying.
• The stock could make it into the MSCI Small Cap Index in February and the FTSE All-World/All-Cap Index in June. Earliest inclusion in IDX30/IDX80/LQ45 indices could be in July.

• Blibli (1437710D IJ), a leading Indonesian e-commerce player, has launched an IDR8.2 trillion (US$530 million) Indonesian IPO. Bookbuilding is from 17 to 24 October.
• According to Frost & Sullivan, Blibli.com was No. 1 in the fresh food category and 1P consumer electronics in the B2C omnichannel among e-commerce players in Indonesia in 2021. 
• The key elements of the bull case rest on a large and growing addressable market, strong ecosystem, high order values, rising cohort spending and fast-paced growth. 

• Bank Rakyat Indonesia (BBRI IJ) remains the best proxy for Indonesia’s huge and underbanked MSME sector, which accounts for around 60% of the country’s economy. 
• The bank now has over 83% of loans exposed to the micro segment and has a long-track record operating in the micro space, with a sound record of managing risk. 
• Bank Rakyat continues to increasingly utilise digital channels utilise digital channels to expand its network and reduce costs. Valuations remain attractive and a an ongoing recovery in place. 

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.

• CIFI Holdings
• Fosun International
• Kawasan Industri Jababeka

We view Alam Sutera’s (ASRI) tender offer as highly credit-negative. Noteholders which hold out would end up in a much worse position, without significant compensation. Holdouts could be left with notes that have no protective covenants, no reporting requirements, and lacking certain events of default. The proposed amendments would allow the company to act as it sees fit. That said, ASRI is still bounded by the indenture of the ASRIIJ 8.25 25, as long as these remain outstanding. We believe the development could be considered a distressed exchange by the rating agencies.

We recommend that holders of the USD 2024 bonds tender their notes. We also recommend to “Hold” the USD 2025 notes.

• BRI’s margins are highest of major Asean banks at nearly 9% and growing
• Asset-Liability management (ALM), core to banking, can see NIM remain strong
• Credit costs remain high relative to the past, there is scope for a ratcheting downward

We view Pakuwon Jati (PWON) as “Low Risk” on the LARA scale, on account of the company’s prudent financial policy in recent years, strong balance sheet, good access to capital and track record of achieving growth amid challenging market conditions. PWON has strong credit metrics compared to Indonesian peers, and it has withstood the downturn in Indonesian real estate. We like the company’s high share of recurring income (slightly more than half of group revenues) and diversified property portfolio (spanning the residential, retail, office and hotel segments), which mitigate its history of debt restructuring. The key risk is a change in consumer behaviour, which might result in low mall traffic long after COVID-19 related lockdowns have ended.

Our fundamental Credit Bias is “Stable”, as the robust balance sheet should help PWON weather economic downturns.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”. The real estate industry is not exposed to many of the ESG risks common in other sectors.

• PT Metrodata Electronics booked a solid set of 1H2022 given that although revenues decline -11% its net profit grew +11.7% supported by its solutions and consulting business.
• We expect a 2H2022 recovery given 2Q2022 was impacted by Lebaran and solutions & consulting continues to recover driven by banking, oil & gas, and telecoms sectors. 
• This remains an interesting and unique play on the increasing digitalisation of the Indonesian corporate ecosystem. Valuations remain attractive on 9.5x FY2023E PER, with 2-year EPS CAGR of +over +25%.

• Bank Negara Indonesia (BBNI IJ) remains the laggard amongst the top four Indonesian banks but we see this as unjustified given improving returns and falling credit costs.
• The bank continues to focus on top-tier corporate clients and large commercial clients plus growing subsidized KUR loans as well as expanding mortgages and payroll loans in the consumer segment.  
• Bank Negara Indonesia continues to improve returns with its ROE back to 15% in 1H2022 and it trades on 1.2x FY2022 PBV. The bank will benefit from rising interest rates.

• Medikaloka Hermina (HEAL IJ) is unique in Indonesia for its focus on women and children, which makes it a resilient performer plus more than half its patients are JKN related.
• The company booked a strong set of 1H2022 results despite coming off a high COVID base, with Inpatient and outpatient numbers already above pre-pandemic levels. 
• Astra International now owns over 7% of the company in its first hospital investment and we could see this stake rising further. Valuations are attractive versus Mitra Keluarga.

• Prodia (PRDA IJ) remains the leading diagnostics company in Indonesia and was a huge beneficiary of the pandemic and hence has seen a recent slowdown.
• The number of tests per visit increased in 1H2022, as customers returned to more routine testing post COVID plus the company is increasingly employing a digital approach to its business.
• Prodia is forecast to return to growth over the next two years, with  +11% EPS growth forecast for FY2023E and FY2024E, implying a forward PER of 8.6x.

• Selamat Sempurna (SMSM IJ) is one of the most interesting industrial companies in Indonesia but also the largest filter manufacturer in South-East Asia for heavy equipment and autos. 
• The company mainly produces filters for the replacement market under its Sakura brand, with Indonesia being the major growth driver along with the US but it exports to 120 countries. 
• The company has an almost second-to-none track record for growth in both profits and dividends, with current valuations looking attractive. 

• AKR Corporindo (AKRA IJ) continues to see strong sales momentum in July and August after releasing a strong set of 1H2022 results previously with strong momentum expected to year-end.
• Both petroleum distribution and chemical distribution are seeing strong tailwinds and its gas station business should be a beneficiary of the fuel price hike.
• AKR Corporindo‘s JIIPE estate booked a large 37-hectare plot sale in August with a potential for more smelter-related buyers to come. Valuations look fair but there are potential catalysts ahead.

• Mitra Adiperkasa (MAPI IJ) has proved itself with flying colours during the pandemic and continues to do so as mobility resumes, with offline sales recovering but digital remaining firm. 
• The company continues to build out its newer brands such as Boots, Footlocker, Sketchers,  DigiMAP, and Lego, with 161 store openings in 1H2022 and more to come in 2H2022.
• Mitra Adiperkasa is starting to ramp up its regional presence in Vietnam and the Philippines especially, which represents a future growth driver. Valuations are attractive despite the recent run up.