Indonesia

• Link Net (LINK IJ)’s two largest shareholders (66.03% of the outstanding shares) have signed a SPA to sell their stakes to Axiata Investments and XL Axiata (EXCL IJ) at IDR4,800.
• Post-Completion, Axiata Investments and XL Axiata will then be required to launch a mandatory tender offer to acquire the remaining 33.97% Link Net shares at IDR4,800 per share
• The tender offer is expected to be completed in 3Q2022. At the last close price of IDR4,430, the shares are trading at an 8.4% gross spread to the offer.

• Bank Mandiri (BMRI IJ) booked a strong set of results driven by operational improvements, lower credit costs, and lower cost of funds plus an increasing focus on digitalisation.
• The bank is moving more aggressively into higher-yielding assets plus driving its consumer and wholesale digital strategies to improve returns with significant potential upside. 
• We are more optimistic on the prospects for Bank Mandiri (BMRI IJ) after the recent numbers given its drive towards enhancing future returns supported by a very low-cost funding base. 

• Adi Sarana Armada (ASSA IJ)  has successfully spun off its Auto trading subsidiary Autopedia Sukses Lestari (ASLC IJ) through an IPO reducing debt and raising capital to grow the business.
• Autopedia will focus on growing its online O2O business through Caroline, with a captive supply of used cars from its auction and car leasing businesses plus offline infrastructure in place.
• Adi Sarana Armada (ASSA IJ) also looks attractive for its logistics and last-mile business, which is close to profitability and now more than 50% of its revenues and growing fast.

Expecting earnings recovery back to pre-pandemic level

• BNI posted a poor set of 4Q21 results, given the generally ignored continued credit deterioration;
• Results were heavily reliant on a negative 10.0% tax rate for 4Q21, which goes away in 2022; and
• BNI recently announced a “me too” deal to acquire a 63.9% stake in Bank Mayora at 2x book, at a time when BNI’s own house is a dumpster fire.

• Sirclo, an Indonesia-based ecommerce enabler, has announced that it is set to acquire Warung Pintar
• The value of the deal is undisclosed, but the process is expected to be completed within the first quarter of this year
• Sirclo said that the deal helps its plan to offer more comprehensive online and offline commerce solutions for its clients

Premium valuation justified by the premium profitability and strong earnings growth trajectory

• PT Metrodata Electronics (MTDL IJ) continues to be an increasingly interesting play on the growth in Indonesia’s digital economy and digitalisation, especially for banks and fintech.
• The company’s distribution business saw strong growth in 2021, offsetting the slower growth in Solutions & Consulting, which was impacted by project delays but will rebound in 2022.
• Management remains optimistic on the growth outlook for 2022, driven by strong momentum behind digitalisation and economic recovery driving ICT demand. Valuations are attractive given its exposure to growth segments.

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. Sunac China Holdings
2. Anton Oilfield
3. Olam International
4. Times China
5. Shimao Property Holdings

and more…

• Bank Mandiri stands out amongst the top 4 banks in that it has chosen to push its digital services through Livin’ rather than a stand-alone digital bank.
• The bank has already made significant progress with Livin’ with 6m active users out of 30m customers and it is also developing wholesale digital banking through Kopra.
• Bank Mandiri remains a core proxy for the recovery in Indonesian economic recovery with an increasing digital edge and valuations are attractive versus historical levels.

Short-term downfall creates an attractive investment opportunity

Operational improvement ahead

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.

• Anton Oilfield
• Delta Dunia Makmur
• Yuzhou Group

Outlook stays rosy

• PT Surya Citra Media Tbk (SCMA IJ) looks undervalued despite its increasing digital credentials through Vidio.com which continue to increase paying subscribers and MAUs
• Advertising spend continues to see a strong recovery, even through PT Surya Citra Media Tbk (SCMA IJ) has lost some audience share to Media Nusantara Citra (MNCN IJ). 
• The company has a significant local content pipeline for 2022, especially for Vidio.com and valuations look attractive versus history plus there is now a market value for Vidio.com.

• For KoinWorks, an Indonesian digital lending company, the Covid-19 period has been a pivotal moment that has enabled it to surge forward in the right direction
• KoinWorks’ main borrower are small and medium enterprises (SMEs) who have digital footprints, such as those who own online shops on Tokopedia and Shopee
• Amid the pandemic, the company reached US$15 million in loan disbursements per month, and logged positive cash flow

• The company’s main product, filers, are no longer key features in Electric Vehicles thus earnings will be pressured. 
• Venture into air-purifying business is commendable yet it may not plug the hole immediately.
• Foreign investors in the company are mainly looking for exposure in the auto-related business, so the change into air purifier may cause them to sell. 

• Akulaku Inc is working with advisers on a potential deal and is in early talks with Catcha Investment Corp (CHAA)
• ReKTGlobal, an esports startup, is in talks to go public through a merger with Baron Davis’s blank-check firm Bull Horn Holdings Corp. (BHSE)
• Dog-walking startup Wag Labs Inc. is in talks to go public through a merger with CHW Acquisition Corp. (CHWA)

4Q21F preview: Q

• The recent Allo Bank Indonesia Tbk PT (BBHI IJ) transaction exemplifies the rush to build digital banking capabilities in Indonesia with strong shareholder ecosystem now in place
• Mainstream banks are not standing still on digital banking capabilities building internal capabilities and in some cases standalone digital banks presenting tough competition for newcomers.
• From a consumer digital banking perspective we see blu, Bank Jago (ARTO IJ) , SeaBank, and Allo Bank (BBHI IJ) as having the greatest chance of success.

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. Shui On Land
2. Logan Property Holdings
3. Sino Ocean Land
4. Tata Motors Ltd
5. Yuzhou Group

and more…

Get the ball rolling, preparing for the next big thing