Indonesia

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
• Lippo Karawaci
• MGM China Holdings

• BMRI is more profitable than BBNI, less cyclical than BBRI  and less expensive than BBCA. This combination makes it an attractive play on the Indonesia credit growth story.
• BMRI’s FY23 results are a strong beat with industry-leading loan growth and strong ROE; BMRI also has the potential to aggressively grow its retail portfolio which still is likely under-appreciated
• BMRI still trades at a discount to BBRI and has the potential to re-rate by another 20% in the near term, apart from the compounding driven by strong loan growth.

• Bank Mandiri (BMRI IJ) stood out from its peers with higher loan growth and lower cost of credit with PPOP growth of +17.3% YoY and its ROE reaching 23%. 
• The bank experienced a slight decline in NIM in 4Q2023 but asset quality remains solid and its digital initiatives continue to reduce costs and attract new users.
• Bank Mandiri‘s guidance for 2024 is more positive than peers for loan growth, as it continues to push out its value chain lending strategy into higher-yielding segments. Valuations remain attractive.

• Bank Rakyat Indonesia’s results reflected its ability to offset a tighter liquidity environment with a higher margin loan mix as it continues to shift to commercial Kupedes microloans. 
• The bank has also seen the benefit of increasing digitalisation benefitting costs with more BRILink agents and users of mobile banking through BRIMO, which has also helped to grow CASA.
• Guidance for 2024 remains positive on loan growth, NIMs,  increasing leverage, and rising loan yields, with stable credit quality. Valuations look attractive relative to a forecast ROE of above 20%. 

• Singapore-based agritech startup DayaTani has raised US$2.3 million in a seed funding round led by Ascent Venture Group with participation from KBI Investment, MDI Ventures, Northstar Ventures, BRI Ventures, and Gentree Fund.
• Founded in 2023, DayaTani works to enhance yields for Indonesian farmers, operating research and development sites across the Java island that focus on horticulture and grain crops.
• The company is developing hardware and software including data science models for more accurate recommendations, such as what fertilizer to use, based on real-world conditions.

• GoTo (GOTO IJ) has legally completed the transaction to sell 75% of Tokopedia to TikTok, paving the way for higher growth and improving profitability, without the need to subsidise growth. 
• The company will continue to benefit from the new Tokopedia’s core GMV growth without having to provide funding, with the benefit of a larger total addressable market. 
• GoTo has achieved positive adjusted EBITDA in 4Q2023 beating expectations but financials should improve further in 2024 although resources will be focused on growing on-demand services, and especially food delivery.

• Ultrajaya Milk (ULTJ IJ) is back to the boil in terms of sales growth for both its dairy and carton tea businesses, which both benefit from a nominalisation of mobility. 
• The company’s margins have improved in the dairy business as cost pressure has abated with falling powdered milk prices. Competition has picked up but the overall market is growing sufficiently. 
• Ultrajaya Milk will open a new distribution centre in 1Q2024, which should help to drive growth plus it looks to launch new product categories in 2024. Valuations are attractive.

• Bank Negara Indonesia Persero (BBNI IJ) has stated its target of achieving an FY28e ROE of 20%, with ambition to join the other three big Indonesian Banks already doing it. 
• Although the current results are not on par with the other three, the bank has outlined its strategy to reach the target (1% credit cost; 37% CIR by 2028 exit)
• Projecting a gradual re-rating to align with peers by 2028 and extrapolating book value growth over the 5-year period provides a shareholder return of 30% CAGR

• Bank Central Asia (BBCA IJ) booked a strong finish to the year with PPOP rising by +15.4% YoY and zero provisioning in 4Q2023, driven by loan growth of +13.9% YoY. 
• The bank’s net interest income grew by +19.5% YoY, with a stable NIM of 5.5% in 4Q2023 and CASA growth of +4.3% YoY, bringing the CASA ratio to 80.3%.
• BCA remains a core holding amongst Indonesian banks, with conservative bank guidance of +9%-10% loan growth, stable NIMs and CoC in 2024. Valuations reflect bank returns and quality.

• Astra International has seen an aggressive sell-off on fears of increasing competition from the EV space as more operators enter the Indonesian auto market, with the most recent being BYD.
• The company has successfully held its market share at 56% in FY2023 and has launched several EV models, mostly hybrids,  as adoption levels for BEVs remain low.
• Management remains confident that FY2024 will be a stable year for both 2W and 4W, with overall EPS only set to decline slightly but valuations are now compelling.

• There are 4 changes each for the IDX30 Index and the LQ45 Index at the upcoming rebalance to be implemented at the close on 31 January.
• The largest passive inflows are expected in Indofood CBP Sukses (ICBP IJ), Merdeka Battery Materials (MBMA IJ), Indah Kiat Pulp & Paper (INKP IJ) and Pertamina Geothermal Energy (PGEO IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• On the 26th June 2023, MUFG (8306 JP) and 92.7%-held Adira Dinamika (ADMF IJ) entered into SPAs with key shareholders to acquire an 80.6% stake in Mandala Multifinance (MFIN IJ).
• Although not explicit in various company announcements, MUFG/Adira are paying an estimated IDR 3,297/share. The SPAs are subject to regulatory approvals, primarily Indonesia’s OJK.
• An EGM for MFIN’s shareholders has now been tabled for 13th Feb to vote on this change of control. Presumably, you wouldn’t progress to the EGM without OJK’s conditional approval.