Indonesia

• Arwana Citramulia‘s latest 1H2022 numbers unline its prowess in navigating a difficult operating environment with growing production volumes and better margins as it continues to improve its product mix.
• An ongoing shift to its higher-end products through line conversion to Digi Uno plus additional capacity for its ARNA porcelain tiles will underpin growth and pricing this year and next.
• Arwana Citramulia continues to expand its distribution through Catur Sentosa and now through MITRA10, which now sells ARNA tiles. Valuations are attractive and analyst forecasts look shy of the mark.

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. Central China Real Estate
2. China South City
3. Lenovo
4. Agile Property Holdings
5. China Jinmao Holdings

and more…

• PT Metrodata Electronics remains one of the key enablers for the digital economy and overall digitalisation of corporate Indonesia through both providing hardware, software, solutions, and consulting services. 
• The key driver for its ICT distribution comes from PCs, laptops, smartphones, and gaming whilst its solutions and consulting business is driven increasingly by the formation of digital banks.  
• PT Metrodata Electronics is benefitting from increasing mobility, which has started to boost its higher margin solutions and consulting business. Valuations are attractive and it’s in a net cash position.

We view Adaro as “Low Risk” on the LARA scale, due to: [1] the company’s large scale (being the second-largest coal miner in Indonesia) and low-cost position ( However, Adaro’s coal product mix has a low calorific value of 5,000 CV/kg, hence it commands lower prices (30-45% below the benchmark). Customers are primarily (c. 90%) power plants in the region which exhibit stable demand patterns. The company’s coal, Environcoal, is environmentally friendly (low ash, sulfur and nitrogen content). The main risk factors are significant operational and regulatory risks due to Adaro’s primary reliance on a single-site coal mine. 

Our Credit Bias is “Positive”, given the improving fundamentals amid a highly favourable operating environment.

Controversies are “Immaterial”, with Adaro only facing one tax issue. That said, the tax issue is a non-concern for investors. The ESG Impact on Credit is “Neutral”. 

• Adi Sarana Armada (ASSA IJ) continues to build on its three pillars of growth across transport, used car sales, and logistics including its leading last-mile delivery service under Anteraja.
• The company’s market-leading auto leasing business provides stable revenue and a source of used cars for the auction and online used car business under Caroline.
• Last-Mile delivery player Anteraja is already the largest revenue contributor and increasing profit driver, with significant upside through automation and scale. Valuations attractive after recent correction at 8.3x FY2022E EV/EBITDA.

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. Yankuang Energy Group
2. Powerlong Real Estate Holdings
3. Sawit Sumbermas Sarana
4. Vedanta Resources
5. Tata Motors Ltd

and more…

• Astra International (ASII IJ) is coming up cheap after United Tractors (UNTR IJ) positively responded to its large share buyback announcement. Yet both companies are looking attractive here. 
• Preceding my comments on Astra and United Tractor are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”). 
• The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
• Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.

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.

• Central China Securities
• Powerlong Commercial Management Holdings
• Sawit Sumbermas Sarana

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.

• Medco Energi
• Ronshine China Holdings
• Sands China Ltd
• Wynn Macau Ltd

• Despite what looked like a solid set of 1Q2022 results, Bank Rakyat Indonesia has seen a sharp correction in its share price, which looks unjustified given a positive outlook.
• The bank has 84% of its loan exposure to micro and ultra-micro customers, which generates higher returns than corporate lending plus it is improving returns through increasing digitalisation.
• Management guidance for this year remains positive, and the bank is well-positioned to take advantage of the economic recovery with abundant liquidity and a low cost of funds.

• Merdeka Copper Gold Tbk PT (MDKA IJ) moved from the Development Board to the Main Board of the IDX on 31 May. That makes the stock eligible for FTSE inclusion.
• Meeting the full market cap, free float market cap and liquidity requirements, Merdeka Copper Gold Tbk PT (MDKA IJ) could be added to the FTSE All-World Index in March 2023.
• Passive FTSE trackers are estimated to buy 615.4m shares (US$167m; 5.8 days ADV) of Merdeka Copper Gold Tbk (MDKA IJ). That is 4% of the real float of the stock.

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.

• Indo Tambangraya Megah (ITMG IJ) is a 2.3 bn USD company with ~880 mn USD net cash adding >100 mn USD of free cash flow a month.
• At a 103 USD/ton ASP the company made a 475 mn USD profit for 2021. We estimate prices are easily around 200 USD/ton for the company in the current environment.
• Indo Tambangraya Megah (ITMG IJ) has a track record of paying >70% of its profits as dividends since 2009 ( implying a yield of 37% for FY22 ). 

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
• Country Garden Holdings Co
• Powerlong Commercial Management Holdings
• Sawit Sumbermas Sarana