Indonesia

• Jet Commerce launched a Live Commerce service through its newest business unit, Lumbalumba, last July and inaugurated its live streaming centre
• Indonesia-based e-commerce enabler, Jet Commerce, has announced the completion of its Series B funding round of more than US$60 million (IDR 900 billion).
• Jet Commerce will use the funds to upgrade infrastructure, recruit more professional local talent, improve research and technology development, and strengthen its ability in brand incubation.

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
• Azure Power Global Ltd

• GoTo (GOTO IJ) reported 2Q2022 results yesterday. Gross revenue increased 45.4% YoY to IDR5.6trn while operating losses as a % of net revenue increased to 420% from 273.6% in 2Q2021.
• The company expects to make positive contribution margin by 1Q2024E, however, we don’t expect GoTo to make operating profits for the next 3-4 years given its large fixed cost base.
• Reuters reported that GoTo is planning to raise $1bn through convertible bonds. This shows that the company is burning cash to fuel growth but at the cost of margins.

• United Tractors (UNTR IJ) represents a well-rounded proxy to higher commodity prices through Komatsu heavy equipment, coal contracting and mining together with gold mining.
• It booked a strong set of 1H2022 results with net profit rising +129% YoY but heavy equipment sales momentum has continued into 1H2022 given there are still supply constraints.
• United Tractors possesses hidden value in Agincourt Resources’ gold reserves, which are worth more than the company’s market cap. Valuations are below historical averages despite the strength of the commodities.

• After Axiata  (AXIATA MK) completed the acquisition of 66.03% in Link Net (LINK IJ) on the 22 June, Axiata was obligated to undertake a mandatory offer for the remaining 33.97%. 
• The MTO commences today and concludes on the 28 September. Payment will be the 6 October.
• There are no conditions attached to the MTO. Play the spread, where available.

• Ace Hardware Indonesia (ACES IJ) 1H2022 results continued to reflect a hangover from COVID-19 in terms of slower growth although the company continues to demonstrate its resilience.
• The company’s store expansion continues with plans for 15 stores in total for 2022, whilst SSSG have seen a sharp recovery recently bringing YTD SSSG into positive territory.
• Ace Hardware is one of Indonesia’s top quality retailers with the potential for a sharp recovery and valuation looks attractive on 15x FY2023E PER versus 27x 5-year average PER.

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
• Adaro Minerals

• On 22 June, Axiata Group (AXIATA MK) and XL Axiata (EXCL IJ) completed the acquisition of a combined 63.45% interest in Link Net (LINK IJ) for approximately RM2.63 billion (IDR8.72 trillion).
• Today, Axiata announced that the mandatory tender offer (MTO) runs from 30 August to 28 September. The MTO price is IDR4,800 with no minimum acceptance condition.
• At the current price of IDR4,740 per share, the gross and annualised spread for a mid-October payment is 1.3% and 9.1%, respectively.

• This acquisition confirmed Investree as a minority stakeholder in the bank, while Tolaram Group remained a majority stakeholder

• Fintech startup Investree today announced that it had completed the acquisition of local bank Amar Bank, increasing its stake from 10.9 per cent of all issued and fully paid shares in June to 18.4 per cent.
• Investree and Amar Bank said that by utilising its “solid ecosystem”, they will build a digital bank for MSMEs, who is described by the companies as “the backbone of the country’s economy”, and utilise existing products by the two companies to support MSMEs.

• PT Surya Citra Media 1H2022 reflects a recovery in advertising activity but also a normalisation of costs and investment in future growth, especially in its leading Indonesian OTT business Vidio.
• The company continues to gain audience share, as it invests in new fresh content and its sporting content such as Liga 1, and the English Premier League kicks in.
• PT Surya Citra Media is a proxy for recovering advertising spending as the Indonesian economy recovers plus its digital strategy through Vidio has already been proving successful.

• Kalbe Farma (KLBF IJ) results reflected its resilience in the face of inflationary pressure, with decent growth across all four core divisions with some manageable margin pressure.
• The company raised prices by +3-5% in 1H2022 to offset raw material price increases and may increase a further +1%-3% in 2H2022 in a selective fashion to maintain margins. 
• Kalbe Farma remains confident in the guidance of +11%-15% growth in sales and EPS for FY2022E and remains an interesting play on increasing health consciousness in Indonesia on attractive valuations.

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. China Oil And Gas
2. Geely Auto
3. Shimao Property Holdings
4. Kwg Property Holding
5. Seazen (Formerly Future Land)

and more…

• XL Axiata 2Q2022 results reflected a better pricing environment and the success of its focus on high-quality service, with the highest data speeds, leading to higher subs and ARPUs. 
• The company continues to migrate its subscribers to 4G, and build out its 4G BTS whilst shutting down its 3G towers, which should be positive for the quality of service.
• XL Axiata (EXCL IJ) should be seen as the leader in providing converged services in Indonesia, with the acquisition of Link Net accelerating its lead, which will boost long-term profitability.

• Sido Muncul recently released its 1H2022, which reflected some impact from inflationary pressure impacting the purchasing power of its customer base, especially for herbal products.
• The company’s food and beverage division and notably energy drinks saw some impact from a slowdown due to consumers taking a longer Lebaran break this year but saw strong exports.
• Sido Muncul (SIDO IJ) saw a sharp correction post its numbers but we would expect some recovery in 1H2022 and a resumption of growth in FY2023 plus valuations are attractive.

Medco Energi’s H1/22 results were strong as expected. This was supported by increased production following the ConocoPhillips Indonesia (CIHL) acquisition in March, as well as the high oil-price environment. We expect the company to deleverage further going forward, supported by earnings growth, strong OCF generation and debt repayments. The full-year FCF deficit should also narrow to a mildly negative level. We note positively management’s intentions to reduce debt, including to fully repay the USD 850 mn in debt taken on for the CIHL acquisition by 2024. Cash/ST Debt was inadequate, but we do not foresee any near-term refinancing risks.

• FTSE announced the results of the September SAIR for the FTSE All-World/All-Cap indices on Friday. There are 243 changes (adds, deletes, migrations across AW/AC) across Asia-Pac.
• The largest inflows will go to PSMC (6770 TT), Sumber Alfaria Trijaya (AMRT IJ),  Daqo New Energy (DQ US) and Tianqi Lithium (002466 CH).
• FTSE will switch index membership from the US ADRs to the HK listings for New Oriental Education & Technology Group (9901 HK) and XPeng (9868 HK). 

• Indo Tambangraya Megah (ITMG IJ) reported strong Q2 2022, with profits of 247 mn USD up 225% YoY, and coal prices averaging 202 USD/ton for the quarter (inline). 
• The only disappointment was volumes which came in at 3.9 mn tons, down 20.5% YoY. The company guided sequential improvement in coal production for Q3 2022 to 4.6 mn tons. 
• Indo Tambangraya Megah (ITMG IJ) is 2.6x PE FY22e, with 28% of its market capitalization in cash and a dividend yield of 28% based on a 70% payout ratio.

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
• Kawasan Industri Jababeka
• Sino-Ocean Service
• Times China
• Xiaomi Corp

• GoTo (GOTO IJ)‘s announcement last week of the integration of GoFood into the Tokopedia app is a further signal of continuing synergies taking place across the ecosystem.
• This latest move follows GoPay’s integration into Tokopedia, which exceeded expectations plus further integration with Bank Jago, and the introduction of GoPay coins common rewards all providing growing synergies.
• GoTo is a unique proxy to the Indonesian digital economy covering more verticals than any other player, with huge potential for ongoing synergies potentially throwing off higher returns.