Indonesia

This month, we provide an update on developments related to the Indonesian bankruptcy regime since November 2017.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• GoTo announced its much-anticipated FY2021 and 1Q2022 results, which did not disappoint, with improvements in a number of different metrics across its main verticals.  
• 1Q2022 saw a QoQ increase for on-demand, e-commerce, and fintech versus a seasonally strong 4Q plus the group improved take rates and contribution margin in 1Q2022 versus 4Q2021.
• GoTo‘s guidance for 2Q2022 is positive and it should be boosted by higher commission rates plus continuing synergies across the group, helping to improve profitability and growth.

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.

• Kawasan Industri Jababeka
• Softbank Group

For our next Corporate Webinar with Siloam International Hospitals (SILO IJ), we are glad to welcome Daniel Phua, CFO, and Varun Khanna, Senior Director of Healthcare Business, Corporate Strategy, and Investments.

In the upcoming webinar, Daniel and Varun will share a short company presentation, after which they will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 21 June 2022, 17:00 SGT.

PT Siloam International Hospitals Tbk (ticker: SILO) is recognised as a reputable and leading operator of private hospital network in Indonesia, with 41 hospitals spread across several islands, namely Java, Sumatra, Kalimantan, Sulawesi, Bali, and Nusa Tenggara. Siloam’s medical team of more than 3,000 general practitioners and specialist doctors, and 8,000 nurses and support staff, offers international quality healthcare services to around two million patients annually.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• PT Surya Citra Media 1Q2022 were more about the future than the past given that its investment in new content and sporting rights depressed margins but should help drive growth.
• It has been gaining FTA TV audience share, helping to drive ad revenues. Vidio is seeing strong growth in paying subscribers with 2.5m in 1Q2022 with 4m targeted by December.
• PT Surya Citra Media Tbk (SCMA IJ) looks cheap versus history and should benefit from the economic recovery, with an increasingly diversified exposure across FTA TV and digital through Vidio. 

• Sariguna Primatirta Tbk PT (CLEO IJ) is Indonesia’s only pure water brand (CLEO), using US-nanotechnology and eco-friendly packaging with a market share of around 5%.
• The company has co-branded with both Alfamart and Indomaret and is launching new health-driven products such as alkaline oxygenated water as well as expanding with new factories.
• Sariguna Primatirta Tbk PT (CLEO IJ) is an uncovered yet high-quality and high growth consumer company owned by the Tanoko Family, which also owns PT Avia Avian (AVIA IJ). 

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Thailand and Chinese ADRs.
• This week, the highest gross spreads are Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU), True Corp Pcl (TRUE TB). 
• Lowest gross spreads are Yancoal Australia (3668 HK), Hwa Hong Corp (HWAH SP), AKM Industrial (1639 HK), Virtus Health (VRT AU), Irongate Group (IAP AU), Uniti Group Ltd (UWL AU).

• PT Avia Avian (AVIA IJ) is the leading decorative paint and coatings player in Indonesia listing last December and trading 20% below its IPO price but with an institutional following.
• 1Q2022 results were weaker due to a high base last year but has seen a strong pick-up since. It has raised prices twice to offset higher raw material prices. 
• PT Avia Avian is an interesting proxy for the recovery in the domestic economy together with the property market plus M&A could be a further catalyst this year.

• The six Indonesian banks have strong capital adequacy ratios, healthy credit quality and good NPL coverage; also, GDP recovery supports positive cost of risk trends and the bank earnings outlook
• We believe that Bank Mandiri screens best, with its attractive pre-provision profitability and steadily improving cost of risk, whilst trading on undemanding multiples versus peers; we also like Bank Rakyat
• We see Bank Permata as a potential “turn around” stock, especially if management can improve credit quality, and keep lowering its cost of risk to boost returns

• Mitra Adiperkasa‘s recent 1Q2022 results and a follow up conversation with management confirmed continuing momentum in the recovery with a lot more to come in the next few quarters.
• Sports, digital, and F&B are leading the recovery with greater mobility boosting sales but online sales remain strong reflecting changing consumer habits and the success of the company’s strategy there.
• Mitra Adiperkasa is back on an expansion tack both in Indonesia and in Thailand, Vietnam, and the Philippines, with capex forecast at 2019 levels this year. Valuations are attractive.

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. Adani Ports & Special Economic Zone
2. Yanzhou Coal Mining Company Limited H
3. Vedanta Resources
4. Indika Energy
5. Pakuwon Jati

and more…

• The Axiata Group (AXIATA MK) EGM narrowly approved the ordinary resolution relating to the proposed acquisition of Link Net (LINK IJ) shares and the proposed MTO. 
• The next catalyst is the First Media (KBLV IJ)’s EGM to approve the transaction on 6 June. The proposed MTO at IDR4,800 per share is targeted to complete by 3Q. 
• BNM regulatory approval was received on 12 April. At the last close, the gross and annualised spread of the MTO price for a 3Q completion is 4.6% and 13.1%, respectively.

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.

• Delta Dunia Makmur
• Indika Energy
• JSW Steel Ltd
• Medco Energi
• Pakuwon Jati
• UPL Ltd

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.

• Alam Sutera Realty
• Evergrande
• Greenland Holdings Corp
• Indika Energy

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

• Ultrajaya Milk Industry & Trading saw continued growth momentum in 1Q2022 both for its core UHT milk business (No.1) and its carton tea business as mobility restrictions were lifted.
• The company also sources more of its milk requirements locally, which means less exposure to imported milk power but prices there have started to come off. 
• Management remains optimistic that the company can achieve double-digit growth this year plus it has increased ASPs by +3% in April. Valuations at a discount to staple peers.