Indonesia

• Erajaya Swasembada (ERAA IJ) booked a solid set of 1H2024 results driven by the availability of affordable handsets, with volumes driving growth despite lower prices. 
• The company’s Erablue consumer electronics JV with Mobile World Investment (MWG VN) now has 61 outlets and is set to break even in 2024, with 80 stores expected by year-end. 
• The other growth drivers will come from private-label accessories and its Grand Lucky supermarket expansion. Valuations look attractive will the company trading on a 6x forward PER multiple.

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.

• Greentown China
• Medco Energi

• Ace Hardware Indonesia has been rebranded to Aspirasi Hidup Indonesia after the franchise agreement with ACE US was not renewed. Given ACES’s long-standing independence, we see this as an opportunity. 
• The new names for the company will not be the brand names for the stores and Ace Hardware products are a tiny portion of the Indonesian company’s SKUs anyway.
• Concerns over the separation look overblown with ACES seeing a strong YTD performance above guidance with valuations looking attractive after recent share price weakness, with new store rollout ongoing.

• Bank Negara Indonesia (BBNI IJ) presented an optimistic picture from 2Q2024, with management upgrading the loan growth forecast range for the year by a notch with an improving liquidity backdrop.
• Credit costs remain low with the SME segment the only segment with lingering problems from vintage pre-2022 loans but otherwise, LAR are in decline with room to cut coverage ratios.
• BNI made a big fanfare of the launch of its brand new “wondr” banking app which is already off to a strong start with more active users. Valuations are attractive. 

• Bank Mandiri’s recent results reflect the success of the bank’s strategy to grow higher-yielding loans and its strength in corporate, commercial, and consumer loans, with micro showing slower growth.
• The bank funding base remains solid with strong CASA growth, helping it to maintain NIMs. Mandiri’s mobile banking under Livin’ continues to drive its transactional banking, loan and deposit growth.
• Bank Mandiri‘s upgrade to its loan growth projects speaks volumes about its confidence. With credit costs at less than 1% and ample liquidity, the bank is well-positioned for growth.

• HM Sampoerna (HMSP IJ) has been announced as a deletion from the Large cap of the Global Index at the September 2024 review.
• The reason for the security’s removal is due to a change of listing from an eligible to an ineligible exchange segment of the Indonesian Stock Exchange (IDX).
• Forecasted passive fund supply is ~$24.6m and ~11.9 ADV at the close of 20 September 2024. The significant ADV is because of the security’s low free float.

• Prodia (PRDA IJ) is starting to see its growth strategy gain traction with a QoQ increase in 2Q2024 revenues driven by more esoteric testing and promotions driving growth. 
• The company has started to roll out physical outlets more aggressively, especially points of collection, with new clinical labs also providing a wider array of tests including genomic testing.
• Prodia continues to drive its omnichannel strategy through U by Prodia and its ProdiaLink for Doctors, with capex for Prodia Digital in decline. Valuations remain extremely attractive versus Indian comparables.

• BFI Finance Indonesia (BFIN IJ) adopted a cautious stance to new bookings in 2Q2024 given domestic and geopolitical risks but total receivables remained steady as did credit costs.
• The company remained focused on non-dealer 4W financing, increased heavy equipment, and reduced 2W exposure, with a move towards dealer-used 4W financial and generally loans with higher value collateral. 
• BFIN maintains solid funding from banks at a lower cost than its peers and it is expected to start to move to higher-yielding assets in 2H2024. Valuations remain attractive.

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
• Nickel Industries
• Road King Infrastructure

• Bank Rakyat Indonesia booked flat earnings in 1H2024 despite healthy loan and fee income growth, with a shift towards corporate loans, as it sought to address its problem microloans.
• The bank front-loaded provisions in 1H2024 but recoveries have seen a steep improvement, with 2H2024 to see lower credit costs. Strong loan corporate loan growth is offsetting slower micro.
• Bank Rakyat Indonesia remains a unique proxy for micro-lending in Indonesia, with a depositor base of 176m and the skillset to manage risk in this space. Valuations remain attractive. 

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Medco Energi’s ESG as “Adequate”, in line with its scores for the Environmental, Social and Governance pillars. Controversies are “Immaterial” and Disclosure is “Adequate”.

• GoTo (GOTO IJ)“‘s 2Q2024 reflected an ongoing focus on growth as the company invested in both its On Demand Services and its Fintech segments driven by its product-led initiatives.
• The company’s growth was driven by the mass market, subscription products, and premium offerings such as express deliveries, which helped to boost both frequency and retention on the platform. 
• GoTo will continue to benefit from the service fee from Tokopedia, which can be used to drive its core ODS and Fintech businesses. The stock overhang is a temporary drag.

• • A drilling rig is scheduled to be mobilize on site in August.
• The two-well infill program, targeting a previously undrilled section of the MGH Field, is anticipated to commence in early September with the wells expected to come on production in early November at a forecasted combined rate of 300 bbl/d.
• • While this is a bit later than we anticipated, we continue to forecast that Criterium will exit 2024 with ~1,250 boe/d production.

• Ace Hardware Indonesia (ACES IJ) reported an impressive set of 1H2024 results with continuing momentum behind SSSG driven by promotional campaigns but margins remained stable at the same time.
• The company continues to open new format stores and renovate existing ones. It has also introduced new private label brands to drive growth and will introduce 15% new SKUs. 
• The company will be renamed PT Aspirasi Hidup Indonesia to reflect the separation from ACE US but we see the impact as minimal. Valuations remain attractive on 12.6x FY2025E PER.

• Astra International (ASII IJ) saw a slight decline in its core earnings in 1H2024, which was an admirable performance given the weakness in the auto market and commodities divisions.
• Offsetting the weakness in autos, Astra saw strong performances from its financing businesses for 4W, 2W, heavy equipment, and consumer finance, which booked +8% YoY growth in 1H2024. 
• Astra remains a key proxy for the overall Indonesian economy, with the diversity of its earnings exposure underpinning its resilience. Valuations are attractive, supported by a 9% FY2024E dividend yield. 

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.

• Greentown China
• Medco Energi
• Vedanta Resources