In this briefing:
- RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
- Indonesia Property – In Search of the End of the Rainbow – Part 2 – Bumi Serpong Damai (BSDE IJ)
- The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy
- Asia’s External Balances Signal Safety for Investors
- Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.
1. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
- Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
- Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
- South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.
2. Indonesia Property – In Search of the End of the Rainbow – Part 2 – Bumi Serpong Damai (BSDE IJ)
In this series under Smartkarma Originals, CrossASEAN Research insight providers Angus Mackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The second company we explore is leading township developer Bumi Serpong Damai (BSDE IJ), with 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.
Bumi Serpong Damai (BSDE IJ) has one of the largest land banks of any developer, with a land bank of over 4,000 ha, more than half of which is in its flagship township of BSD City in Serpong.
Given its breadth of exposure to the property segment, the company has the flexibility to switch its exposure between different segments depending on the health of the overall market.
Its projects are well connected by toll-roads and railway but it is well positioned to benefit from new infrastructure such as the new MRT, LRT, as well as new toll road extensions, which will enhance the attractiveness of its developments.
Management suggests that they will take a cautious start to the year ahead of the election but see a window for a pick-up in marketing sales in May, with the potential for a much better 2H19.
Despite a run-up in the share price since the start of the year, valuations do not look challenging from a historical basis especially looking at its PBV. It also trades at a significant discount to NAV of 67%, as well as being below its 5 yr historical mean on a forward PER basis.
Catalysts ahead include a post-election pick-up in activity leading to more project launches, completion of infrastructure projects, aggressive mortgage lending by the banks, and a more dovish interest rate outlook. Valuations are already attractive but a rise in property market activity should also lead to earnings upgrades, which if sustained, may lead to property prices moving upwards.
3. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy
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.
Highlights this week include the first individual company report in a Smartkarma Originals series on Indonesian Property from CrossASEAN Insight Provider Jessica Irene on Ciputra Development (CTRA IJ) and the potential for a strong data-driven turnaround over the coming few quarters for Xl Axiata (EXCL IJ) in an Insight from our friends at New Street Research. On the Macro front CrossASEAN economist Prasenjit K. Basu presents some insightful thoughts on the Singapore Economy.
Macro Insights
In Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness, CrossASEAN Economist Prasenjit K. Basu zooms in on the Singapore economy and despite expectations of slower growth this year, sees ample room for fiscal stimulus should the global economy weaken further.
In US Dollar Demand – Fading Appetite, Dr. Jim Walker discusses the less than voracious appetite for the US Dollar.
In Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text, Kevin O’Rourke provides his value-added commentary on political and economic developments in Indonesia over the past week.
In Philippines: Institutional Reforms that Promote Macro Stability, Phipillines economist Jun Trinidad zeros in on institutional reforms which he sees are providing a stable platform for growth.
Equity Bottom-Up Insights
In the first insight on a company in a Smartkarma Originals series, Indonesia Property – In Search of the End of the Rainbow – Part 1 – Ciputra Development (CTRA IJ), CrossASEAN Insight Provider Jessica Irene takes a detailed look at this leading developer and finds significant upside to the stock.
In XL Axiata Results Show a Strong Turnaround Underway in Indonesia, our friends at New Street Research revisit Xl Axiata (EXCL IJ) post its most recent results and see the potential for a strong data-driven turnaround over the coming few quarters.
In Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates, New Street Research circle back to Singtel (ST SP) post results and remains constructive on the stock.
In M1 Offer Unconditional as Axiata Tenders, Events Specialist Travis Lundy revisits the ongoing M1 Ltd (M1 SP) deal which seems to have reached a conclusion following Axiata Group (AXIATA MK) ‘s acceptance.
In Best World (BEST SP): Not the Best Financials to Disprove The Business Times Allegations, Arun George takes a look at the company following an article in the local press casting dispersions on its China sales.
In Delta Thailand’s Tender Offer: Updated Timetable, David Blennerhassett circles back to the ongoing tender offer for Delta Electronics Thai (DELTA TB).
In Sing Holdings – Surge in Full-Year Earnings with a Surprise Hike in Dividend. 67% Upside. BUY., Royston Foo comments on the company following a strong set of results.
In MAJOR: Impressive 4Q18 Earnings, our friends at Country Group comment on Major Cineplex Group (MAJOR TB) following stellar numbers. MAJOR’s 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ).
Sector and Thematic Insights
In this week’s REIT Discover: The Three R’s Driving Starhill Global REIT (SGREIT SP), Anni Kum zeros in on Starhill Global Reit (SGREIT SP) and finds an interesting story.
4. Asia’s External Balances Signal Safety for Investors
Asian currencies are, in general, well supported by economic fundamentals in the form of external surpluses and interest rate differentials. Indeed, most Asian currencies display an appreciating bias, contrary to perceptions in 2018 when all of them lost ground to the US dollar. Over the last year the underlying external strength has been reflected in Asian currency appreciation against the US dollar.
5. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.
According to SEMI, North American (NA) WFE sales for January 2019 fell to $1.9 billion, down ~10% sequentially and ~20% YoY. This was an abrupt reversal of the recovery trend implied by the December 2018 sales of $2.1 billion and is the biggest monthly sales YoY decline since June 2013.
Just as declining monthly WFE sales preceded the current semiconductor downturn by some six months, the continuation of December’s MoM WFE decline reversal trend was a prerequisite for a second half recovery in the broader semiconductor sector. With that trend well and truly broken, we now anticipate a more delayed, gradual and prolonged recovery, one which is now unlikely to materialise until late third, early fourth quarter 2019.
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