Indonesia

• 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.

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.