Equity SNAPSHOT Monday, May 08, 2017 Danareksa Sekuritas – Equity SNAPSHOT FROM EQUITY RESEARCH Erajaya Swasembada: Poised for growth (ERAA IJ. IDR640. BUY. TP IDR1,100) We initiate coverage on ERAA with a BUY call and a TP of IDR 1,100. The expectation of higher quarterly revenues from recent product launches – which would lead to strong earnings growth - should support the share price performance going forward. At the current share price, ERAA is trading at an attractive valuation of just 6.1x 2017 P/E, below the average 3-year PE of 10.6x. BUY! To see the full version of this report, please click here MARKET NEWS Sector Pharmaceutical: GP Farmasi targets 7.5% revenues growth this year Poultry: Unfavorable outlook Retail: Expectation of 900VA tariff adjustment after Lebaran Corporate Bank Mandiri: to issue bonds Surya Semesta records land marketing sales of 3.8ha Nusa Raya Cipta records IDR1tn of new contracts Unilever Indonesia: Seeking EGM to obtain a IDR 3tn new loans facility KEY INDEX Close Chg Ytd Vol (%) (%) (US$ m) Asean - 5 Indonesia 5,683 0.2 7.3 491 Thailand 1,569 (0.3) 1.7 1,067 Philippines 7,842 1.1 14.6 198 Malaysia 1,763 0.2 7.4 666 Singapore 3,230 0.0 12.1 815 Regional China 3,103 (0.8) (0.0) 36,787 Hong Kong 24,476 (0.8) 11.3 10,433 Japan 19,735 1.5 3.2 1,642 Korea 2,248 0.3 10.9 4,219 Taiwan 9,900 (0.7) 7.0 2,459 India 29,859 (0.9) 12.1 704 NASDAQ 6,101 0.4 13.3 75,934 Dow Jones 21,007 0.3 6.3 6,720 CURRENCY AND INTEREST RATE Rate w-w m-m ytd (%) (%) (%) Rupiah Rp/1US$ 13,330 0.1 (0.5) 1.2 SBI rate % 5.90 - - (1.3) 10y Gov Indo bond 7.09 0.0 0.0 (0.9) HARD COMMODITY Unit Price d-d m-m ytd (%) (%) (%) Coal US$/ton 78 - (12.8) (11.8) Gold US$/toz 1,232 0.8 (1.8) 6.9 Nickel US$/mt.ton 9,108 1.5 (11.0) (8.6) Tin US$/mt.ton 19,657 (1.3) (2.4) (7.3) SOFT COMMODITY Unit Price d-d m-m ytd (%) (%) (%) Cocoa US$/mt.ton 1,875 3.2 (11.5) (12.7) Corn US$/mt.ton 135 1.2 0.6 4.3 Oil (WTI) US$/barrel 47 1.4 (10.3) (12.8) Oil (Brent) US$/barrel 50 1.4 (9.8) (12.3) Palm oil MYR/mt.ton 2,712 0.7 (5.9) (15.2) Rubber USd/kg 149 (2.3) (19.4) (23.0) Pulp US$/tonne 845 N/A 2.3 4.5 Coffee US$/60kgbag 123 0.5 (5.5) (18.2) Sugar US$/MT 441 (0.3) (4.9) (15.8) Wheat US$/ton 120 (0.3) 1.1 1.6 Source: Bloomberg
We initiate coverage on ERAA with a BUY call and a TP of IDR 1,100. The expectation of higher quarterly revenues from recent product launches – which would lead to strong earnings growth - should support the share price performance going forward. At the current share price, ERAA is trading at an attractive valuation of just 6.1x 2017 P/E, below the average 3-year PE of 10.6x. BUY!
Recent product launches to lead to higher revenues in 2Q17 onward. Indonesia is experiencing rapid growth in mobile data usage, 4G LTE. This, we believe, offers the national leading mobile phone distributor, ERAA, ample room for business expansion going forward. Based on our recent discussions with the management, the recent product launches combined with cash back programs with telco operators have met with a positive response. This should translate into a higher top line in the coming quarters, we believe. We forecast higher revenues growth of 9.5% yoy in 2017F.
Continuing to expand its retail mid-low end concept to sustain margins. The management has continued its focus on the Asus, Lenovo and Xiaomi brands, which generally enjoy better margins, along with the continued expansion of retail stores. This will sustain margins going forward. Meanwhile, ERAA is committed toward boosting productivity and efficiency through its focus on regional decentralization in product distribution in a bid to enhance productivity for direct delivery. This should help to sustain gross and operating margins at 8.7% and 2.4%, respectively.
Financing costs may ease, healthier balance sheet. We expect pretax profits to grow by 11.1% yoy in 2017 due to possibly lower financing costs. Operationally, meanwhile, the management seeks to improve working capital efficiency through better inventory control (AR and AP days). This, in turn, may reduce gearing and give rise to a better cash position. Meanwhile, inventory days are expected to trend down slightly.
Attractive valuation with ample room for grow, BUY with a TP of IDR 1,100. We initiate coverage on ERAA with a BUY recommendation and a TP of IDR 1,100, implying 10.6x PE 2017F at a 3-year historical mean. Stripping out the one-time tax fiscal adjustment in 4Q16, we estimate that the net margin will remain stable at 1.3% in 2017 with EPS growth of 14.9% yoy and ROAE of 8.5%. Risks to our call include continued soft purchasing power.
SECTOR Pharmaceutical: GP Farmasi targets 7.5% revenues growth this year
The Association of Pharmaceutical companies in Indonesia (GP Farmasi) stated that the industry’s turnover might
grow by 7.5% yoy to Rp66tn this year, underpinned by demand from the country’s national health program (JKN). Historically, demand for pharma products increases from 2Q onward. Kalbe Farma (KLBF) shares a similarly
optimistic view and expects to post better quarterly results going forward. In the prescription segment, the e-catalog from JKN will contribute around 10-15% to that segment’s revenues. (Kontan)
Poultry: Unfavorable outlook
Charoen Pokphand (CPIN), Japfa Comfeed Indonesia (JPFA), and Malindo Feedmill (MAIN) all recorded weak bottom
line results in 1Q17. With DOC and broiler oversupply in 1Q17, DOC and broiler gross margins have fallen significantly. Furthermore, higher corn prices have put additional pressure on the animal feed gross margin.
According to Anton J. Supit, the head of the Poultry Association in Indonesia, the government should impose a regulation that can help the poultry business to grow in the future. For example, he believes that the recent
government regulation to ban corn imports hurt the poultry business in 1Q17. (Kontan)
Retail: Expectation of 900VA tariff adjustment after Lebaran
Electricity tariff for 900VA will be adjusted on July 1 2017, after lebaran. This money will be used to build electricity infrastructure. On a positive note, purchasing power during Lebaran should not be impacted. (Kontan)
CORPORATE
Bank Mandiri: to issue bonds
Rohan Hafas, the Corporate Secretary of Bank Mandiri, said that the bank would issue bonds to finance loans expansion, particularly to support the availability of national infrastructure. The bonds with coupon payments will
have five, seven and ten year tenors while the zero coupon bond will have a three-year tenor. (Bisnis Indoesia)
Surya Semesta records land marketing sales of 3.8ha
Surya Semesta Internusa (SSIA) has recorded marketing sales of 3.8ha of industrial land with a price of USD150/sqm in 4M17. This is inline with the full year target of 20ha with a price of USD150/sqm.
Regarding the bonds repayment, the company has not yet decided the repayment scheme for the IDR550bn of
bonds due on 6 November 2017. The company may either issue new bonds or use internal cash.
In addition, SSIA plans to conduct a buyback of shares (a maximum of 9.2% of the total shares outstanding). For
the buyback, SSIA has prepared IDR440bn. The maximum buyback price is set at IDR1,000/share.
SSIA is also exploring Joint Venture opportunities with a strategic partner to acquire 300ha of new land bank in Karawang. The partner owns 140ha of land bank in the area. In the first phase, the JV will acquire 50ha of land
bank. (Bisnis Indonesia, Investor Daily, Kontan)
Nusa Raya Cipta records IDR1tn of new contracts
Nusa Raya Cipta (NRCA) has recorded new contracts of IDR1tn in 4M17, or equivalent to 30.3% of this year’s new contracts target of IDR3.3tn. The main contributor to new contracts was commercial buildings (including hotels and
offices), such as Synthesis Apartment, Solis Ubud Hotel Bali, Srikandi Hotel and Showroom, Mason Pine Hotel
Padalarang, Yogya Sumber Sari Junction Bandung, and Apsara Tower. Besides these projects, the company is also eying two infrastructure projects. This year, the company hopes to record revenues of IDR2.9tn (up 20.8%yoy) and
net profits of IDR179bn (up 77.2%yoy).
NRCA also plans to expand its property business. Currently, NRCA is negotiating with several potential partners regarding potential joint operation projects.
Meanwhile, the shareholders of NRCA have agreed to distribute dividends of IDR73.25bn (a 72.5% payout ratio). This is equivalent to IDR30/share. The dividends will be paid on 7 June 2017. (Kontan, Investor Daily)
MARKET NEWS
Equity SNAPSHOT Monday, May 08, 2017
Danareksa Sekuritas – Equity SNAPSHOT
Unilever Indonesia: Seeking EGM to obtain a IDR 3tn new loans facility Unilever Indonesia (UNVR) is seeking EGM’s approval to obtain total worth of IDR 3tn of multiple drawdown –
revolving loans facility from Unilever Finance International (UFI). The terms of the loans facility for each withdrawal
are a minimum 1 month and maximum of 1 year, within the period from June 15th, 2017 to June 14th, 2022. The interest rate on the loans will be a minimum of 0.15% lower than the lowest alternative offered rates ( or interest
rates offered by up to 5 banks, where the company still has available loan facilities), without collateral. (Company)
Automotive Sector: IIMS 2017: Fewer new car launches, Summarecon Agung: Solid 1Q17 results, Ace Hardware Indonesia: 1Q17 result in-line with our expectations, Adhi Karya: 1Q17 earnings reach only 1.9% of our full year
target, Aneka Tambang: Weak production volume dragged down quarterly net, Charoen Pokphand Indonesia: Weak 1Q17 results, Erajaya Swasembada: Good 1Q17 results, Harum Energy: 1Q17- Sturdy coal prices improved
earnings, Kino Indonesia: Poor 1Q17 earnings on negative top line growth with continued high opex, Mayora Indah:
1Q17 earnings grow 12% thanks to lower forex losses, Pakuwon Jati: Solid revenues growth but lower profits, Pembangunan Perumahan: 1Q17 net income grew 32.6%yoy, Ramayana Lestari Sentosa: 1Q17 below
Jl. Medan Merdeka Selatan No. 14 Jakarta 10110 Indonesia Tel (62 21) 29 555 888 Fax (62 21) 350 1709
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