In this briefing:
- China – Eurozone Negative Feedback Loop.
- The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee
- Blue Bird (BIRD IJ) – Transport Wizzard with a Twist – On the Ground in J-Town
- Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
- Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town
1. China – Eurozone Negative Feedback Loop.
Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit, this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China.
2. The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee
This week’s offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
Macro Insights
In Widodo’s Generals Take Fire / Anti-Foreign Rhetoric Takes Toll / Land Hampers Adhi’s LRT / MRT Near, CrossASEAN Insight Provider Kevin O’Rourke provides his value-added views on political and economic developments in Indonesia over the last week.
In Asia’s External Balances Signal Safety for Investors, Dr Jim Walker takes a close look at Asian currencies, their performance over the last year and highlights some interesting misperceptions.
Equity Bottom-Up Insights
In the second company piece in a Smartkarma Originals series, Indonesia Property – In Search of the End of the Rainbow – Part 2 – Bumi Serpong Damai (BSDE IJ), CrossASEAN Insight ProviderAngus Mackintosh looks in detail at leading township developer Bumi Serpong Damai (BSDE IJ), which has exposure ranging from landed housing, shophouses, condominiums, as well as the defensive and growing buffer of nearly 20% of revenues coming from recurrent rental income.
In Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA, CrossASEAN Insight provider Nicolas Van Broekhoven revisits Procurri Corporation (PROC SP) and finds an overhang lifted for the stock.
In Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring, Angus Mackintosh revisits this leading Indonesian media company and finds it on the cusp of a more digital future.
In Blue Bird (BIRD IJ) – Transport Wizzard with a Twist, Angus Mackintosh revisits Indonesia’s leading taxi company after a meeting with management and comes back with some positive newsflow.
In Sea Ltd: Further Share Re-Rating After a 35% Daily Gain? Why Not?, Johannes Salim, CFA circles back to Sea Ltd (SE US) after the post-results call with management.
In Bank Danamon Goes Ex-Rights, Travis Lundy circles back to the ongoing merger between Bank Danamon Indonesia (BDMN IJ) and Mitsubishi Ufj Financial (8306 JP).
In BIMB: Market Gives Thumbs-Up to Results, Paul Hollingworth takes a close look at this Malaysian Bank. Bimb Holdings (BIMB MK) or BHB commands two subsidiaries, Bank Islam and Takaful Malaysia.
In Golden Land: Less An Offer, More A Consolidation Of Interests, event-driven specialist David Blennerhassett revisits this ongoing takeover situation.
In Ho Bee Land – 4Q Earnings Hit by Unexpected Tax Provision, Royston Foo revisits the company post recent results.
In SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019, our friend at Country Group comment on Synnex Thailand (SYNEX TB) following recent numbers.
In PRM: Thai Largest Tanker Fleets Assured of Consistent Growth, Country Group initiates coverage on Prima Marine PCL (PRM TB) with a BUY rating.
Sector and Thematic Insights
In INDO Snippets: Second Presidential Debate, BNLI & PNBN – This Time Is Real?, CrossASEAN Insight provider Jessica Irene provides us with substantive and significant on the ground chatter that may potentially have a meaningful impact on the Indonesian Equity Market. This week she comments on the second presidential debate, Bank Permata (BNLI IJ) stake sale rumours, as well as ANZ’s potential disposal of its stake in Bank Pan Indonesia (PNBN IJ).
In Jakarta Trip – On the Ground Insight Feb 2019, CrossASEAN Insight Provider Henry Soediarko provides us with his value-added on the ground comments following a trip to Jakarta.
In Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class, Anni Kum puts out her fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, she examines Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign workforce policy.
3. Blue Bird (BIRD IJ) – Transport Wizzard with a Twist – On the Ground in J-Town
A visit in Jakarta to the Blue Bird (BIRD IJ) office was well-timed as the company is close to the conclusion of two corporate actions, as well as an interesting extension to its relationship with Go-Jek Indonesia (1379371D IJ).
Both acquisitions are synergistic with its existing business and represent long-term opportunities rather than an immediate significant boost to earnings.
The company’s underlying fundamentals continue to improve with fleet utilisation up versus last year in 4Q18, as was the average revenue per taxi.
The company continues to see the benefits of its tie-up with Go-Jek, which will soon morph into something even more significant.
Blue Bird (BIRD IJ) remains an interesting way to play the rising levels of affluence amongst the rising middle classes in Indonesia. the company is close to completing two corporate actions including a new venture into the car auction business with Mitsubishi UFJ and the acquisition of an intercity bus company. It is also close to signing an extension and expansion of its relationship with Go-Jek, which will help to cement its position in the online ride-hailing space. Underlying fundamentals continue to improve both in terms of fleet utilisation and average revenue per taxi. According to Capital IQ consensus, the company trades on 14.9x FY19E PER and 13.7x FY20E PER, with forecast EPS growth of +16.2% and +8.9% for FY19E and FY20E respectively. The near-term completion of two corporate actions and an extension of its agreement with Go-Jek Indonesia (1379371D IJ) should provide positive catalysts for the share price coupled with improving ridership, average revenue per taxi, and fleet utilisation.
4. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
In the past month, positive announcements from both sides stoked hopes for a trade deal between the US and China. Meanwhile, global security deteriorated, with two more regions finding themselves on a brink of war. A major terrorist act in Kashmir provoked a sharp increase in tensions between India and Pakistan. Venezuela’s opposition leader has called for foreign powers to intervene after deadly clashes on the Colombian border. On the other hand, investors should be relieved by the relatively calm situation in Nigeria where incumbent president Buhari won the election last weekend. In Brazil, newly elected president Bolsonaro hopes to push through radical pension reform.
5. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town
A meeting Surya Citra Media Pt Tbk (SCMA IJ) in Jakarta found management in a relatively ebullient mood. The share price performance has been slightly perplexing the fact that its digital strategy is close to coming to fruition, with upcoming acquisitions representing a positive catalyst.
The company will move forward on acquiring controlling stakes in digital streaming player www.vidio.com, internet company www.kapanlagi.com, and out of home media advertising player EYE Indonesia.
Total revenues from the digital and non-TV space will grow from less than 5% of SCMA’s total revenue to nearly 20% of the total, making it the biggest player in both free-to-air and a major player in digital adverting in Indonesia.
Vidio.com is especially interesting given how fragmented that market is currently. Iy=t already has 22m active users viewing its sport and local content but is looking to bring in a major global player to help finance original content and bring in more international content.
Internet companies represent the biggest and fastest growing advertising customers outside FMCG. They are increasingly paying above market rates for up to two-hour exclusive slots on prime time, where they air their own programming which allows them to engage with the audience.
The recent Kraft Heinz Co (KHC US) debacle may signal the end of zero-based budgeting, which may mean global players such as Unilever Indonesia (UNVR IJ) start to spend more on advertising. in the meantime, local FMCG players remain more aggressive on advertising their products on TV.
Surya Citra Media Pt Tbk (SCMA IJ) remains the best quality proxy to the advertising market in Indonesia. The upcoming acquisitions in the digital space represent strong potential catalysts for the stock, which have not yet been factored into valuations. Its core business continues to register stable and rising growth, especially from local FMCG players, with the re-entry of the tobacco companies potentially representing another boon for this year, given there has been no excise tax increase. According to Capital IQ consensus, the company is trading on 15.3x FY19E PER and 13.8x FY20E PER, with forecasts EPS growth of +8.5% and +10.5% for FY19E and FY20E respectively. The company is forecast to achieve an ROE of 33% in 2019, with a dividend yield of 4.2%.
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