Indonesia

In this briefing:

1. Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text
2. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)
3. Petrus Doubles Down On Ophir Energy
4. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
5. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia

1. Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text

Prabowo again squandered a chance in a debate to gain ground, as Widodo appeared more confident and in command.  Prabowo’s incessant efforts to sow fear of foreigners does little to weaken his opponent.  Widodo’s lead was intact as of late January, despite claims from two pollsters (Indomatrik, Median) who are demonstrably unreliable or even fraudulent.  Lippo Group owner James Riady suffered repudiation: after having testified in court that he met the Bekasi District chief by coincidence and did not discuss his Meikarta project with her, KPK prosecutors played a phone recording that shows otherwise.  BI has held rates steady, citing the current account deficit after a gaping January trade deficit.  The government continues its efforts to sack more than 2,000 civil servants who are corruption convicts.  Repsol discovered gas in South Sumatra. 

Politics: The second of five debates in the presidential election marked another missed opportunity for Gerindra Chair Prabowo Subianto to gain ground on President Joko Widodo.  Instead, the incumbent again landed blows that hurt the retired general, highlighting his unfamiliarity with e-commerce jargon and drawing attention to his land assets measuring 340,000 ha.  For his part, Prabowo pointedly projected a conciliatory demeanor, perhaps to dispel perceptions that he is temperamental, but it squandered a chance to assail the incumbent and thereby persuade voters to opt for change.  Prabowo adhered to form by advocating protectionism and expansion of state involvement in the economy.  He used nearly every answer to disparage foreigners, which is an error: sowing suspicion of foreigners does little to weaken his opponent (Page 2) (Transcript translated by Ref Wkly, p. 8).  Hard‑line Islamic groups convened again in Jakarta (p. 3). 

Surveys: In the July 2014 election, the Center for Strategic Development and Policy Studies (Puskaptis) performed a Quick Count survey of ballot‑station results that declared Prabowo the winner, and the Association of Polling Firms (Persepsi) ousted Puskaptis from its ranks.  But the head, Hasan Yazid, has re‑emerged as the founder of Indomatrik, another purported polling firm.  Yazid claims to have findings showing Prabowo’s support on par with Widodo’s.  Along with supposed findings from another obscure agency, Median, this is injecting confusion into perceptions of the presidential election.  In fact, two reputable agencies determined in late January that Widodo’s lead was intact (p. 4).   

Justice: In the Meikarta‑Lippo bribery scandal, prosecutors dispute the testimony provided in court last month by group owner James Riady (p. 5).  Information Minister Rudiantara faced questioning from the Election Oversight Agency (Bawaslu) for having jested, in an event with ministry personnel, about preferences for presidential tickets (p. 7).

Policy News: Cabinet members are preparing measures that will finally force regional officials to sack civil servants convicted of corruption (p. 7). 

Energy: Spain’s Repsol announced the largest gas discovery in 18 years – a reservoir in Musi Banyuasin, South Sumatra measuring two trillion cubic feet (p. 8).

Economics: Bank Indonesia (BI) kept its benchmark rate unchanged at 6.0% (p. 9).

Appendix: The presidential candidates debated the topics of infrastructure, the environment and natural resources on 17 February (transcript and analysis, p. 9).

2. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)

• China implements coal import caps specifically targeting Australian producers
• Unclear as to how widespread these restrictions will eventually be
• Thermal and metallurgical coal exports affected
• Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income
• Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income
• Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP 
• Actions appear to be a response to blocking Huawei bidding for the 5G network
• Recent Chinese cyber-attacks harden Australian Government’s resolve
• Expect similar Chinese measures (in time) to be applied to other commodities and industries

3. Petrus Doubles Down On Ophir Energy

Petrus Advisors (3.5% shareholder) has dialled up the pressure on its opposition to Medco Energi Internasional T (MEDC IJ)‘s £0.55/share offer for Ophir Energy (OPHR LN), specifically calling into question Bill Schrader (Ophir’s Chairman) “unprofessionalism”.

Petrus (again) highlighted the premature termination of the Fortuna licence. Ophir announced a $300mn non-cash impairment in early January following the denial of the license extension for the Fortuna project in Equatorial Guinea (EG), having previously written down $310mn back in September. Ophir had invested ~US$700mn in the licence. Petrus accused Schrader of dropping the ball after the departure of CEO Nick Cooper in April 2018, who held key businesses relationships in EQ.

In its prior letter to Ophir on the 14 January, Petrus recommended selling the South-East Asian (SEA) assets to Medco, with a low-end fair value, before synergies, of £0.64/share, through to £1.42/share on a blue sky basis.

Furthermore, Petrus reckons no marketing effort has been for the Mexican license and the 20% ownership in Blocks 1 & 2 in Tanzania, which together have low-end value of $60mn (£0.065/share).  Petrus added that Schrader had not actively solicited and considered alternative offers from other buyers; together with stonewalling demands for Ophir to return capital to shareholders.

Petrus signed off its latest salvo with a cordial “This is your final reminder to preserve and build value. We reserve all our legal rights in this situation“.

Further stirring the pot is alternative hedge fund Sand Grove, who has increased its exposure, via cash-settled derivatives, to 17.28% (as at13 February), up from 6.79% on the 1st February. I have heard, but yet to confirm, there are other shareholders seeking to disrupt this Offer.  Ian Hannam, who advised Ophir’s board on its 2013 right issue, is understood to have also written to Ophir’s interim CEO Alan Booth and the board saying Medco’s offer is too low.

Trading marginally through terms. Medco’s Offer is conditional on 75%+ approval from Ophir’s shareholders, which appears tenuous.

Medco has the option to switch into a Takeover Offer, which in theory could be conditional on a 50% acceptance level, if Medco was in any way inclined to maintain Ophir’s listing. And a switch to a Tender Offer with a reduced shareholder condition, may further flesh out an alternative bidder to come over the top.

Ophir appears a worthwhile punt up at or just below terms. The next key event is the expected issuance of the Scheme booklet on the 28 February.

4. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

5. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia

Repsol SA (REP SM)‘s discovery is very significant for the companies involved and others around the area, which we discuss in detail below. It is also important for Indonesia, which requires more gas to supply domestic and export demand. It is also positive for exploration sentiment globally, to see a material discovery (Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps) and this may encourage further M&A in Indonesia such as this deal: (Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies).

In this briefing:

1. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)
2. Petrus Doubles Down On Ophir Energy
3. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
4. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia
5. Free Money Has Flown

1. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)

• China implements coal import caps specifically targeting Australian producers
• Unclear as to how widespread these restrictions will eventually be
• Thermal and metallurgical coal exports affected
• Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income
• Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income
• Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP 
• Actions appear to be a response to blocking Huawei bidding for the 5G network
• Recent Chinese cyber-attacks harden Australian Government’s resolve
• Expect similar Chinese measures (in time) to be applied to other commodities and industries

2. Petrus Doubles Down On Ophir Energy

Petrus Advisors (3.5% shareholder) has dialled up the pressure on its opposition to Medco Energi Internasional T (MEDC IJ)‘s £0.55/share offer for Ophir Energy (OPHR LN), specifically calling into question Bill Schrader (Ophir’s Chairman) “unprofessionalism”.

Petrus (again) highlighted the premature termination of the Fortuna licence. Ophir announced a $300mn non-cash impairment in early January following the denial of the license extension for the Fortuna project in Equatorial Guinea (EG), having previously written down $310mn back in September. Ophir had invested ~US$700mn in the licence. Petrus accused Schrader of dropping the ball after the departure of CEO Nick Cooper in April 2018, who held key businesses relationships in EQ.

In its prior letter to Ophir on the 14 January, Petrus recommended selling the South-East Asian (SEA) assets to Medco, with a low-end fair value, before synergies, of £0.64/share, through to £1.42/share on a blue sky basis.

Furthermore, Petrus reckons no marketing effort has been for the Mexican license and the 20% ownership in Blocks 1 & 2 in Tanzania, which together have low-end value of $60mn (£0.065/share).  Petrus added that Schrader had not actively solicited and considered alternative offers from other buyers; together with stonewalling demands for Ophir to return capital to shareholders.

Petrus signed off its latest salvo with a cordial “This is your final reminder to preserve and build value. We reserve all our legal rights in this situation“.

Further stirring the pot is alternative hedge fund Sand Grove, who has increased its exposure, via cash-settled derivatives, to 17.28% (as at13 February), up from 6.79% on the 1st February. I have heard, but yet to confirm, there are other shareholders seeking to disrupt this Offer.  Ian Hannam, who advised Ophir’s board on its 2013 right issue, is understood to have also written to Ophir’s interim CEO Alan Booth and the board saying Medco’s offer is too low.

Trading marginally through terms. Medco’s Offer is conditional on 75%+ approval from Ophir’s shareholders, which appears tenuous.

Medco has the option to switch into a Takeover Offer, which in theory could be conditional on a 50% acceptance level, if Medco was in any way inclined to maintain Ophir’s listing. And a switch to a Tender Offer with a reduced shareholder condition, may further flesh out an alternative bidder to come over the top.

Ophir appears a worthwhile punt up at or just below terms. The next key event is the expected issuance of the Scheme booklet on the 28 February.

3. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

4. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia

Repsol SA (REP SM)‘s discovery is very significant for the companies involved and others around the area, which we discuss in detail below. It is also important for Indonesia, which requires more gas to supply domestic and export demand. It is also positive for exploration sentiment globally, to see a material discovery (Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps) and this may encourage further M&A in Indonesia such as this deal: (Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies).

5. Free Money Has Flown

The world will soon discover that debt matters.

The announcement of each round of QE increased asset prices, but the effect on Treasury bond prices began to fade when central bank purchases began. This unexpected behaviour revealed a little-known fact: asset prices react more to the expectation of changes in liquidity than to the experience of greater liquidity in financial markets. By contrast, economic growth is subject to the fluctuating standards of commercial bank lending, which follow variations in the demand for credit. Consequently, financial markets lead the economy. Meanwhile, central banks focus on lagging indicators, so they’re followers, not leaders. Bond markets usually predict more accurately than stock markets. To work, central bank easing policies require real risk-adjusted interest rates. However, with those rates below zero in many countries, further reductions would penalise lenders without helping borrowers. Thus, only rising inflation can save stressed debtors.

In this briefing:

1. Petrus Doubles Down On Ophir Energy
2. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
3. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia
4. Free Money Has Flown
5. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data

1. Petrus Doubles Down On Ophir Energy

Petrus Advisors (3.5% shareholder) has dialled up the pressure on its opposition to Medco Energi Internasional T (MEDC IJ)‘s £0.55/share offer for Ophir Energy (OPHR LN), specifically calling into question Bill Schrader (Ophir’s Chairman) “unprofessionalism”.

Petrus (again) highlighted the premature termination of the Fortuna licence. Ophir announced a $300mn non-cash impairment in early January following the denial of the license extension for the Fortuna project in Equatorial Guinea (EG), having previously written down $310mn back in September. Ophir had invested ~US$700mn in the licence. Petrus accused Schrader of dropping the ball after the departure of CEO Nick Cooper in April 2018, who held key businesses relationships in EQ.

In its prior letter to Ophir on the 14 January, Petrus recommended selling the South-East Asian (SEA) assets to Medco, with a low-end fair value, before synergies, of £0.64/share, through to £1.42/share on a blue sky basis.

Furthermore, Petrus reckons no marketing effort has been for the Mexican license and the 20% ownership in Blocks 1 & 2 in Tanzania, which together have low-end value of $60mn (£0.065/share).  Petrus added that Schrader had not actively solicited and considered alternative offers from other buyers; together with stonewalling demands for Ophir to return capital to shareholders.

Petrus signed off its latest salvo with a cordial “This is your final reminder to preserve and build value. We reserve all our legal rights in this situation“.

Further stirring the pot is alternative hedge fund Sand Grove, who has increased its exposure, via cash-settled derivatives, to 17.28% (as at13 February), up from 6.79% on the 1st February. I have heard, but yet to confirm, there are other shareholders seeking to disrupt this Offer.  Ian Hannam, who advised Ophir’s board on its 2013 right issue, is understood to have also written to Ophir’s interim CEO Alan Booth and the board saying Medco’s offer is too low.

Trading marginally through terms. Medco’s Offer is conditional on 75%+ approval from Ophir’s shareholders, which appears tenuous.

Medco has the option to switch into a Takeover Offer, which in theory could be conditional on a 50% acceptance level, if Medco was in any way inclined to maintain Ophir’s listing. And a switch to a Tender Offer with a reduced shareholder condition, may further flesh out an alternative bidder to come over the top.

Ophir appears a worthwhile punt up at or just below terms. The next key event is the expected issuance of the Scheme booklet on the 28 February.

2. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

3. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia

Repsol SA (REP SM)‘s discovery is very significant for the companies involved and others around the area, which we discuss in detail below. It is also important for Indonesia, which requires more gas to supply domestic and export demand. It is also positive for exploration sentiment globally, to see a material discovery (Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps) and this may encourage further M&A in Indonesia such as this deal: (Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies).

4. Free Money Has Flown

The world will soon discover that debt matters.

The announcement of each round of QE increased asset prices, but the effect on Treasury bond prices began to fade when central bank purchases began. This unexpected behaviour revealed a little-known fact: asset prices react more to the expectation of changes in liquidity than to the experience of greater liquidity in financial markets. By contrast, economic growth is subject to the fluctuating standards of commercial bank lending, which follow variations in the demand for credit. Consequently, financial markets lead the economy. Meanwhile, central banks focus on lagging indicators, so they’re followers, not leaders. Bond markets usually predict more accurately than stock markets. To work, central bank easing policies require real risk-adjusted interest rates. However, with those rates below zero in many countries, further reductions would penalise lenders without helping borrowers. Thus, only rising inflation can save stressed debtors.

5. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data

In this briefing:

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
2. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia
3. Free Money Has Flown
4. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
5. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

2. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia

Repsol SA (REP SM)‘s discovery is very significant for the companies involved and others around the area, which we discuss in detail below. It is also important for Indonesia, which requires more gas to supply domestic and export demand. It is also positive for exploration sentiment globally, to see a material discovery (Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps) and this may encourage further M&A in Indonesia such as this deal: (Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies).

3. Free Money Has Flown

The world will soon discover that debt matters.

The announcement of each round of QE increased asset prices, but the effect on Treasury bond prices began to fade when central bank purchases began. This unexpected behaviour revealed a little-known fact: asset prices react more to the expectation of changes in liquidity than to the experience of greater liquidity in financial markets. By contrast, economic growth is subject to the fluctuating standards of commercial bank lending, which follow variations in the demand for credit. Consequently, financial markets lead the economy. Meanwhile, central banks focus on lagging indicators, so they’re followers, not leaders. Bond markets usually predict more accurately than stock markets. To work, central bank easing policies require real risk-adjusted interest rates. However, with those rates below zero in many countries, further reductions would penalise lenders without helping borrowers. Thus, only rising inflation can save stressed debtors.

4. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data

5. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

Xl Axiata’s  (EXCL IJ) 4Q18 results triggered a very strong rally last week that continues this week. The market has been very concerned about competitive pressures in Indonesia and extremely low data prices. We believe that Indonesia is now past the worst and there is evidence that data pricing is starting to rise modestly. That is delivering a powerful tail wind for Indonesian telcos in 2019, with XL Axiata likely to report several very strong quarters.

XL Axiata now reporting strong sequential revenue growth (% QoQ)

In this briefing:

1. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia
2. Free Money Has Flown
3. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
4. XL Axiata Results Show a Strong Turnaround Underway in Indonesia
5. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers

1. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia

Repsol SA (REP SM)‘s discovery is very significant for the companies involved and others around the area, which we discuss in detail below. It is also important for Indonesia, which requires more gas to supply domestic and export demand. It is also positive for exploration sentiment globally, to see a material discovery (Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps) and this may encourage further M&A in Indonesia such as this deal: (Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies).

2. Free Money Has Flown

The world will soon discover that debt matters.

The announcement of each round of QE increased asset prices, but the effect on Treasury bond prices began to fade when central bank purchases began. This unexpected behaviour revealed a little-known fact: asset prices react more to the expectation of changes in liquidity than to the experience of greater liquidity in financial markets. By contrast, economic growth is subject to the fluctuating standards of commercial bank lending, which follow variations in the demand for credit. Consequently, financial markets lead the economy. Meanwhile, central banks focus on lagging indicators, so they’re followers, not leaders. Bond markets usually predict more accurately than stock markets. To work, central bank easing policies require real risk-adjusted interest rates. However, with those rates below zero in many countries, further reductions would penalise lenders without helping borrowers. Thus, only rising inflation can save stressed debtors.

3. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data

4. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

Xl Axiata’s  (EXCL IJ) 4Q18 results triggered a very strong rally last week that continues this week. The market has been very concerned about competitive pressures in Indonesia and extremely low data prices. We believe that Indonesia is now past the worst and there is evidence that data pricing is starting to rise modestly. That is delivering a powerful tail wind for Indonesian telcos in 2019, with XL Axiata likely to report several very strong quarters.

XL Axiata now reporting strong sequential revenue growth (% QoQ)

5. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers

Macro Insights

In Indonesia: Waiting To Unleash The Potential, our friends at River Valley Asset Management cast their learned eye over the prospects for the Indonesian Stock market. 

In Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week. 

Equity Bottom-Up Insights

In Valuetronics (VALUE SP): Trade War Uncertainty Continues, Downside Supported by Large Cash Position, CrossASEAN Insight Provider Nicolas Van Broekhoven circles back to this consumer electronics player and highlights the risks from the US-China Trace War. 

In Puregold Price Club: Steady Grower with Provincial Expansion Story, Johannes Salim, CFA comments on this leading Philippines consumer play. 

in Silverlake Axis (SILV SP): 2Q19 Results Again Confirm New 3-Year Growth Cycle; HNA Overhang Removed, Nicolas Van Broekhoven revisits Silverlake Axis (SILV SP) and sees blue skies ahead post its recent results. 

In Delta’s Less-Than-Straightforward Tender Offer, events specialist David Blennerhassett comments on Delta Electronics Thai (DELTA TB) following a tender offer for the company. 

In Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies, Anish Kapadia examines the recent sale of a stake in Mako gas field in Indonesia and its implication for other SE Asian energy plays such as Medco Energi Internasional T (MEDC IJ). 

In Catch-Up Session with Intuch Group, Thai guru Athaporn Arayasantiparb, CFA revisits Intouch Holdings (INTUCH TB) following a meeting with management. 

In GPSC To Proceed With Glow Takeover, But At What Price?, events specialist David Blennerhassett looks at the ongoing takeover of Glow Energy Pcl (GLOW TB) by Global Power Synergy Company Ltd (GPSC TB). 

In UG Healthcare: Weak 2Q19 Driven by One-Off Issue, If 10% NPM Achieved in FY20 Trades at 4x FY20 P/E, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits UG Healthcare (UGHC SP) after some weak results but remains positive on the long term story.  

In M1 Ltd (M1 SP): Axiata Throws in the Towel, Delisting Looms, Arun George circles back to the acquisition of M1 Ltd (M1 SP) by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP) after Axiata Group (AXIATA MK) decided to accept the offer. 

In OUE C-REIT – Beware of the CPPU Timebomb, Royston Foo revisits this REIT and highlights some potential DPU dilution ahead for minorities.  

in MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well, Sumeet Singh zeros in on a recent placement by Mapletree Industrial Trust (MINT SP).  

Sector and Thematic Insights

In Top Consumer Themes in Vietnam, Dylan Waller looks at this high growth sector and highlights his top picks.

In Singapore Property – January Developers’ Sales Data Continues to Point Towards a Bleak Outlook, Royston Foo revisits the sector after January’s sales data. 

In Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris, Anni Kum looks at a recent white site launch in Pasir Ris.

In this briefing:

1. Free Money Has Flown
2. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
3. XL Axiata Results Show a Strong Turnaround Underway in Indonesia
4. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers
5. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

1. Free Money Has Flown

The world will soon discover that debt matters.

The announcement of each round of QE increased asset prices, but the effect on Treasury bond prices began to fade when central bank purchases began. This unexpected behaviour revealed a little-known fact: asset prices react more to the expectation of changes in liquidity than to the experience of greater liquidity in financial markets. By contrast, economic growth is subject to the fluctuating standards of commercial bank lending, which follow variations in the demand for credit. Consequently, financial markets lead the economy. Meanwhile, central banks focus on lagging indicators, so they’re followers, not leaders. Bond markets usually predict more accurately than stock markets. To work, central bank easing policies require real risk-adjusted interest rates. However, with those rates below zero in many countries, further reductions would penalise lenders without helping borrowers. Thus, only rising inflation can save stressed debtors.

2. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data

3. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

Xl Axiata’s  (EXCL IJ) 4Q18 results triggered a very strong rally last week that continues this week. The market has been very concerned about competitive pressures in Indonesia and extremely low data prices. We believe that Indonesia is now past the worst and there is evidence that data pricing is starting to rise modestly. That is delivering a powerful tail wind for Indonesian telcos in 2019, with XL Axiata likely to report several very strong quarters.

XL Axiata now reporting strong sequential revenue growth (% QoQ)

4. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers

Macro Insights

In Indonesia: Waiting To Unleash The Potential, our friends at River Valley Asset Management cast their learned eye over the prospects for the Indonesian Stock market. 

In Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week. 

Equity Bottom-Up Insights

In Valuetronics (VALUE SP): Trade War Uncertainty Continues, Downside Supported by Large Cash Position, CrossASEAN Insight Provider Nicolas Van Broekhoven circles back to this consumer electronics player and highlights the risks from the US-China Trace War. 

In Puregold Price Club: Steady Grower with Provincial Expansion Story, Johannes Salim, CFA comments on this leading Philippines consumer play. 

in Silverlake Axis (SILV SP): 2Q19 Results Again Confirm New 3-Year Growth Cycle; HNA Overhang Removed, Nicolas Van Broekhoven revisits Silverlake Axis (SILV SP) and sees blue skies ahead post its recent results. 

In Delta’s Less-Than-Straightforward Tender Offer, events specialist David Blennerhassett comments on Delta Electronics Thai (DELTA TB) following a tender offer for the company. 

In Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies, Anish Kapadia examines the recent sale of a stake in Mako gas field in Indonesia and its implication for other SE Asian energy plays such as Medco Energi Internasional T (MEDC IJ). 

In Catch-Up Session with Intuch Group, Thai guru Athaporn Arayasantiparb, CFA revisits Intouch Holdings (INTUCH TB) following a meeting with management. 

In GPSC To Proceed With Glow Takeover, But At What Price?, events specialist David Blennerhassett looks at the ongoing takeover of Glow Energy Pcl (GLOW TB) by Global Power Synergy Company Ltd (GPSC TB). 

In UG Healthcare: Weak 2Q19 Driven by One-Off Issue, If 10% NPM Achieved in FY20 Trades at 4x FY20 P/E, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits UG Healthcare (UGHC SP) after some weak results but remains positive on the long term story.  

In M1 Ltd (M1 SP): Axiata Throws in the Towel, Delisting Looms, Arun George circles back to the acquisition of M1 Ltd (M1 SP) by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP) after Axiata Group (AXIATA MK) decided to accept the offer. 

In OUE C-REIT – Beware of the CPPU Timebomb, Royston Foo revisits this REIT and highlights some potential DPU dilution ahead for minorities.  

in MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well, Sumeet Singh zeros in on a recent placement by Mapletree Industrial Trust (MINT SP).  

Sector and Thematic Insights

In Top Consumer Themes in Vietnam, Dylan Waller looks at this high growth sector and highlights his top picks.

In Singapore Property – January Developers’ Sales Data Continues to Point Towards a Bleak Outlook, Royston Foo revisits the sector after January’s sales data. 

In Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris, Anni Kum looks at a recent white site launch in Pasir Ris.

5. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

Singtel (ST SP) recent 3Q18 results were relatively lackluster. Singapore revenue trends were encouraging, but EBITDA remains under pressure esp in the Enterprise segment. Optus saw good net subscriber additions, but this came at a cost – lower ARPU and mobile service revenue (MSR). We have lowered our forecast to reflect pressure on EBITDA and continued losses in Group Digital Life (GDL) but maintain a BUY on the stock with a target price of S$4.00. The near 6% dividend yield is the key support and we believe it can continue to be paid without resorting to increased leverage. Longer term, the fate of key associates (India and Indonesia in particular) are key to the stock’s performance

In this briefing:

1. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
2. XL Axiata Results Show a Strong Turnaround Underway in Indonesia
3. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers
4. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

1. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data

2. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

Xl Axiata’s  (EXCL IJ) 4Q18 results triggered a very strong rally last week that continues this week. The market has been very concerned about competitive pressures in Indonesia and extremely low data prices. We believe that Indonesia is now past the worst and there is evidence that data pricing is starting to rise modestly. That is delivering a powerful tail wind for Indonesian telcos in 2019, with XL Axiata likely to report several very strong quarters.

XL Axiata now reporting strong sequential revenue growth (% QoQ)

3. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers

Macro Insights

In Indonesia: Waiting To Unleash The Potential, our friends at River Valley Asset Management cast their learned eye over the prospects for the Indonesian Stock market. 

In Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week. 

Equity Bottom-Up Insights

In Valuetronics (VALUE SP): Trade War Uncertainty Continues, Downside Supported by Large Cash Position, CrossASEAN Insight Provider Nicolas Van Broekhoven circles back to this consumer electronics player and highlights the risks from the US-China Trace War. 

In Puregold Price Club: Steady Grower with Provincial Expansion Story, Johannes Salim, CFA comments on this leading Philippines consumer play. 

in Silverlake Axis (SILV SP): 2Q19 Results Again Confirm New 3-Year Growth Cycle; HNA Overhang Removed, Nicolas Van Broekhoven revisits Silverlake Axis (SILV SP) and sees blue skies ahead post its recent results. 

In Delta’s Less-Than-Straightforward Tender Offer, events specialist David Blennerhassett comments on Delta Electronics Thai (DELTA TB) following a tender offer for the company. 

In Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies, Anish Kapadia examines the recent sale of a stake in Mako gas field in Indonesia and its implication for other SE Asian energy plays such as Medco Energi Internasional T (MEDC IJ). 

In Catch-Up Session with Intuch Group, Thai guru Athaporn Arayasantiparb, CFA revisits Intouch Holdings (INTUCH TB) following a meeting with management. 

In GPSC To Proceed With Glow Takeover, But At What Price?, events specialist David Blennerhassett looks at the ongoing takeover of Glow Energy Pcl (GLOW TB) by Global Power Synergy Company Ltd (GPSC TB). 

In UG Healthcare: Weak 2Q19 Driven by One-Off Issue, If 10% NPM Achieved in FY20 Trades at 4x FY20 P/E, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits UG Healthcare (UGHC SP) after some weak results but remains positive on the long term story.  

In M1 Ltd (M1 SP): Axiata Throws in the Towel, Delisting Looms, Arun George circles back to the acquisition of M1 Ltd (M1 SP) by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP) after Axiata Group (AXIATA MK) decided to accept the offer. 

In OUE C-REIT – Beware of the CPPU Timebomb, Royston Foo revisits this REIT and highlights some potential DPU dilution ahead for minorities.  

in MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well, Sumeet Singh zeros in on a recent placement by Mapletree Industrial Trust (MINT SP).  

Sector and Thematic Insights

In Top Consumer Themes in Vietnam, Dylan Waller looks at this high growth sector and highlights his top picks.

In Singapore Property – January Developers’ Sales Data Continues to Point Towards a Bleak Outlook, Royston Foo revisits the sector after January’s sales data. 

In Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris, Anni Kum looks at a recent white site launch in Pasir Ris.

4. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

Singtel (ST SP) recent 3Q18 results were relatively lackluster. Singapore revenue trends were encouraging, but EBITDA remains under pressure esp in the Enterprise segment. Optus saw good net subscriber additions, but this came at a cost – lower ARPU and mobile service revenue (MSR). We have lowered our forecast to reflect pressure on EBITDA and continued losses in Group Digital Life (GDL) but maintain a BUY on the stock with a target price of S$4.00. The near 6% dividend yield is the key support and we believe it can continue to be paid without resorting to increased leverage. Longer term, the fate of key associates (India and Indonesia in particular) are key to the stock’s performance

In this briefing:

1. XL Axiata Results Show a Strong Turnaround Underway in Indonesia
2. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers
3. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

1. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

Xl Axiata’s  (EXCL IJ) 4Q18 results triggered a very strong rally last week that continues this week. The market has been very concerned about competitive pressures in Indonesia and extremely low data prices. We believe that Indonesia is now past the worst and there is evidence that data pricing is starting to rise modestly. That is delivering a powerful tail wind for Indonesian telcos in 2019, with XL Axiata likely to report several very strong quarters.

XL Axiata now reporting strong sequential revenue growth (% QoQ)

2. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers

Macro Insights

In Indonesia: Waiting To Unleash The Potential, our friends at River Valley Asset Management cast their learned eye over the prospects for the Indonesian Stock market. 

In Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week. 

Equity Bottom-Up Insights

In Valuetronics (VALUE SP): Trade War Uncertainty Continues, Downside Supported by Large Cash Position, CrossASEAN Insight Provider Nicolas Van Broekhoven circles back to this consumer electronics player and highlights the risks from the US-China Trace War. 

In Puregold Price Club: Steady Grower with Provincial Expansion Story, Johannes Salim, CFA comments on this leading Philippines consumer play. 

in Silverlake Axis (SILV SP): 2Q19 Results Again Confirm New 3-Year Growth Cycle; HNA Overhang Removed, Nicolas Van Broekhoven revisits Silverlake Axis (SILV SP) and sees blue skies ahead post its recent results. 

In Delta’s Less-Than-Straightforward Tender Offer, events specialist David Blennerhassett comments on Delta Electronics Thai (DELTA TB) following a tender offer for the company. 

In Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies, Anish Kapadia examines the recent sale of a stake in Mako gas field in Indonesia and its implication for other SE Asian energy plays such as Medco Energi Internasional T (MEDC IJ). 

In Catch-Up Session with Intuch Group, Thai guru Athaporn Arayasantiparb, CFA revisits Intouch Holdings (INTUCH TB) following a meeting with management. 

In GPSC To Proceed With Glow Takeover, But At What Price?, events specialist David Blennerhassett looks at the ongoing takeover of Glow Energy Pcl (GLOW TB) by Global Power Synergy Company Ltd (GPSC TB). 

In UG Healthcare: Weak 2Q19 Driven by One-Off Issue, If 10% NPM Achieved in FY20 Trades at 4x FY20 P/E, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits UG Healthcare (UGHC SP) after some weak results but remains positive on the long term story.  

In M1 Ltd (M1 SP): Axiata Throws in the Towel, Delisting Looms, Arun George circles back to the acquisition of M1 Ltd (M1 SP) by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP) after Axiata Group (AXIATA MK) decided to accept the offer. 

In OUE C-REIT – Beware of the CPPU Timebomb, Royston Foo revisits this REIT and highlights some potential DPU dilution ahead for minorities.  

in MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well, Sumeet Singh zeros in on a recent placement by Mapletree Industrial Trust (MINT SP).  

Sector and Thematic Insights

In Top Consumer Themes in Vietnam, Dylan Waller looks at this high growth sector and highlights his top picks.

In Singapore Property – January Developers’ Sales Data Continues to Point Towards a Bleak Outlook, Royston Foo revisits the sector after January’s sales data. 

In Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris, Anni Kum looks at a recent white site launch in Pasir Ris.

3. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

Singtel (ST SP) recent 3Q18 results were relatively lackluster. Singapore revenue trends were encouraging, but EBITDA remains under pressure esp in the Enterprise segment. Optus saw good net subscriber additions, but this came at a cost – lower ARPU and mobile service revenue (MSR). We have lowered our forecast to reflect pressure on EBITDA and continued losses in Group Digital Life (GDL) but maintain a BUY on the stock with a target price of S$4.00. The near 6% dividend yield is the key support and we believe it can continue to be paid without resorting to increased leverage. Longer term, the fate of key associates (India and Indonesia in particular) are key to the stock’s performance

In this briefing:

1. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers
2. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

1. The Week that Was in ASEAN@Smartkarma -Indonesia’s Potential, Pure Gold, and Vietnam’s Consumers

Macro Insights

In Indonesia: Waiting To Unleash The Potential, our friends at River Valley Asset Management cast their learned eye over the prospects for the Indonesian Stock market. 

In Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week. 

Equity Bottom-Up Insights

In Valuetronics (VALUE SP): Trade War Uncertainty Continues, Downside Supported by Large Cash Position, CrossASEAN Insight Provider Nicolas Van Broekhoven circles back to this consumer electronics player and highlights the risks from the US-China Trace War. 

In Puregold Price Club: Steady Grower with Provincial Expansion Story, Johannes Salim, CFA comments on this leading Philippines consumer play. 

in Silverlake Axis (SILV SP): 2Q19 Results Again Confirm New 3-Year Growth Cycle; HNA Overhang Removed, Nicolas Van Broekhoven revisits Silverlake Axis (SILV SP) and sees blue skies ahead post its recent results. 

In Delta’s Less-Than-Straightforward Tender Offer, events specialist David Blennerhassett comments on Delta Electronics Thai (DELTA TB) following a tender offer for the company. 

In Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies, Anish Kapadia examines the recent sale of a stake in Mako gas field in Indonesia and its implication for other SE Asian energy plays such as Medco Energi Internasional T (MEDC IJ). 

In Catch-Up Session with Intuch Group, Thai guru Athaporn Arayasantiparb, CFA revisits Intouch Holdings (INTUCH TB) following a meeting with management. 

In GPSC To Proceed With Glow Takeover, But At What Price?, events specialist David Blennerhassett looks at the ongoing takeover of Glow Energy Pcl (GLOW TB) by Global Power Synergy Company Ltd (GPSC TB). 

In UG Healthcare: Weak 2Q19 Driven by One-Off Issue, If 10% NPM Achieved in FY20 Trades at 4x FY20 P/E, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits UG Healthcare (UGHC SP) after some weak results but remains positive on the long term story.  

In M1 Ltd (M1 SP): Axiata Throws in the Towel, Delisting Looms, Arun George circles back to the acquisition of M1 Ltd (M1 SP) by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP) after Axiata Group (AXIATA MK) decided to accept the offer. 

In OUE C-REIT – Beware of the CPPU Timebomb, Royston Foo revisits this REIT and highlights some potential DPU dilution ahead for minorities.  

in MINT Placement – Well Flagged Placement but Only Marginally Accretive, Past Deals Have Done Well, Sumeet Singh zeros in on a recent placement by Mapletree Industrial Trust (MINT SP).  

Sector and Thematic Insights

In Top Consumer Themes in Vietnam, Dylan Waller looks at this high growth sector and highlights his top picks.

In Singapore Property – January Developers’ Sales Data Continues to Point Towards a Bleak Outlook, Royston Foo revisits the sector after January’s sales data. 

In Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris, Anni Kum looks at a recent white site launch in Pasir Ris.

2. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

Singtel (ST SP) recent 3Q18 results were relatively lackluster. Singapore revenue trends were encouraging, but EBITDA remains under pressure esp in the Enterprise segment. Optus saw good net subscriber additions, but this came at a cost – lower ARPU and mobile service revenue (MSR). We have lowered our forecast to reflect pressure on EBITDA and continued losses in Group Digital Life (GDL) but maintain a BUY on the stock with a target price of S$4.00. The near 6% dividend yield is the key support and we believe it can continue to be paid without resorting to increased leverage. Longer term, the fate of key associates (India and Indonesia in particular) are key to the stock’s performance

In this briefing:

1. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

1. Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates

Singtel (ST SP) recent 3Q18 results were relatively lackluster. Singapore revenue trends were encouraging, but EBITDA remains under pressure esp in the Enterprise segment. Optus saw good net subscriber additions, but this came at a cost – lower ARPU and mobile service revenue (MSR). We have lowered our forecast to reflect pressure on EBITDA and continued losses in Group Digital Life (GDL) but maintain a BUY on the stock with a target price of S$4.00. The near 6% dividend yield is the key support and we believe it can continue to be paid without resorting to increased leverage. Longer term, the fate of key associates (India and Indonesia in particular) are key to the stock’s performance