Equity SNAPSHOT Friday, September 27, 2019 Danareksa Sekuritas – Equity SNAPSHOT FROM EQUITY RESEARCH Bank Tabungan Negara: Finally, a better clarity (BBTN.IJ IDR. 2,160 BUY TP. IDR. 2,700) With new guidance from BBTN’s management on assets quality and the future implementation of PSAK 71 on January 1st 2020, net profits are expected to decline to IDR1.25tn this year. Our net profit projection is based on the assumption of 3.2% gross NPLs and a 77.1% coverage ratio by the end of the year. We assume the conservative guidance figures already indicate limited downside for BBTN going forward. BUY with a lower GGM-derived TP of IDR2,700 (implying 1.08x 2020F PBV). To see the full version of this report, please click here Phapros: A prescription for growth (PEHA.IJ IDR. 1,380 BUY TP. IDR. 1,800) We expect Phapros to book solid earnings growth ahead supported by: (1) consolidation with KAEF that leads to greater economies of scale and a more extensive distribution network and (2) ongoing expansion with 12 new products in the pipeline coupled with new facilities to tap the growing pharmaceuticals market. The company trades at an attractive valuation of FY20F PE of 12.8x. We initiate coverage on the stock with a BUY. To see the full version of this report, please click here MARKET NEWS MACROECONOMY ▪ Government prepares fiscal buffer and encourages VAT refunds ▪ Government: Regional transfer funds are proposed to support the new capital city CORPORATE ▪ Linknet (LINK:IJ) August update, in-line with higher 2019 targets ▪ Waskita Karya: 2019 new contracts target revised down by 19% PREVIOUS REPORT ▪ Property : Let`s get moving! ▪ Telco price tracker: Not everything is what it seems ▪ United Tractors: Better monthly Komatsu volume in Aug 2019 ▪ Media Nusantara: Showing Marked Improvements ▪ Media: Hedging their Position ▪ Strategy: Opportune Mix of Macro Prudential Policies ▪ Banking: More policies relaxation to boost growth ▪ Bank Central Asia: Limited upside ▪ Consumer Internet: Amazon & Gojek, a potential strategic fit ▪ Astra International: Maintains market share of above 50% KEY INDEX Close Chg Ytd Vol (%) (%) (US$ m) Asean - 5 Indonesia 6.230 1,4 0,6 472 Thailand 1.637 0,5 1,9 1.534 Philippines 7.896 0,0 (5,8) 87 Malaysia 1.593 0,2 17,5 387 Singapore 3.126 (0,0) 0,8 559 Regional China 2.929 (0,9) 0,8 45.522 Hong Kong 26.042 0,4 5,8 8.987 Japan 22.048 0,1 11,8 13.784 Korea 2.075 0,1 1,6 4.323 Taiwan 10.872 (0,0) 8,1 3.667 India 38.990 1,0 21,0 753 Nasdaq 8.031 (0,6) 15,3 96.617 Dow Jones 26.891 (0,3) 15,3 9.910 CURRENCY AND INTEREST RATE Rate w-w m-m ytd (%) (%) (%) Rupiah Rp/1US$ 14.165 (0,7) 0,5 1,6 BI7DRRR % 5,25 (0,3) (0,5) (0,8) 10y Gov Indo bond 7,32 0,1 0,0 (0,7) HARD COMMODITY Unit Price d-d m-m ytd (%) (%) (%) Coal US$/ton 65 (0,4) (0,9) (36,2) Gold US$/toz 1.507 0,1 (2,3) 17,5 Nickel US$/mt.ton 17.340 (0,8) 10,3 63,5 Tin US$/mt.ton 16.270 (1,5) 2,3 (16,6) SOFT COMMODITY Unit Price d-d m-m ytd (%) (%) (%) Cocoa US$/mt.ton 2.409 1,1 10,3 1,9 Corn US$/mt.ton 134 (0,9) 3,3 0,9 Oil (WTI) US$/barrel 56 (0,1) 2,6 24,1 Oil (Brent) US$/barrel 63 0,6 6,9 16,6 Palm oil MYR/mt.ton 2.050 - (5,0) 5,0 Rubber USd/kg 128 (2,7) (0,8) 2,5 Pulp US$/tonne 1.205 N/A 2,8 20,5 Coffee US$/60kgbag 69 0,2 3,6 (2,7) Sugar US$/MT 340 0,1 9,5 2,2 Wheat US$/ton 132 1,5 1,9 (10,7) Soy Oil US$/lb 29 (0,1) 2,4 5,3 Soy Bean US$/by 889 (0,1) 4,1 0,7
Transcript
Equity SNAPSHOT Friday, September 27, 2019
Danareksa Sekuritas – Equity SNAPSHOT
FROM EQUITY RESEARCH
Bank Tabungan Negara: Finally, a better clarity
(BBTN.IJ IDR. 2,160 BUY TP. IDR. 2,700)
With new guidance from BBTN’s management on assets quality and the future implementation of PSAK 71 on January 1st 2020, net
profits are expected to decline to IDR1.25tn this year. Our net profit projection is based on the assumption of 3.2% gross NPLs and a
77.1% coverage ratio by the end of the year. We assume the conservative guidance figures already indicate limited downside for
BBTN going forward. BUY with a lower GGM-derived TP of IDR2,700
(implying 1.08x 2020F PBV). To see the full version of this report, please click here
Phapros: A prescription for growth
(PEHA.IJ IDR. 1,380 BUY TP. IDR. 1,800)
We expect Phapros to book solid earnings growth ahead supported by: (1) consolidation with KAEF that leads to greater economies of
scale and a more extensive distribution network and (2) ongoing expansion with 12 new products in the pipeline coupled with new
facilities to tap the growing pharmaceuticals market. The company trades at an attractive valuation of FY20F PE of 12.8x. We initiate
coverage on the stock with a BUY.
To see the full version of this report, please click here
MARKET NEWS
MACROECONOMY ▪ Government prepares fiscal buffer and encourages VAT
refunds
▪ Government: Regional transfer funds are proposed to support the new capital city
CORPORATE ▪ Linknet (LINK:IJ) August update, in-line with higher 2019
targets ▪ Waskita Karya: 2019 new contracts target revised down by 19%
PREVIOUS REPORT
▪ Property : Let`s get moving! ▪ Telco price tracker: Not everything is what it seems
▪ United Tractors: Better monthly Komatsu volume in Aug 2019
▪ Media Nusantara: Showing Marked Improvements ▪ Media: Hedging their Position
▪ Strategy: Opportune Mix of Macro Prudential Policies ▪ Banking: More policies relaxation to boost growth
▪ Bank Central Asia: Limited upside
▪ Consumer Internet: Amazon & Gojek, a potential strategic fit ▪ Astra International: Maintains market share of above 50%
www.danareksa.com See important disclosure at the back of this report 1
Equity Research Company Update
Friday,27 September 2019
Bank Tabungan Negara (BBTN IJ) BUY
Maintain Finally, a better clarity
With new guidance from BBTN’s management on assets quality and the future implementation of PSAK 71 on January 1st 2020, net profits are expected to decline to IDR1.25tn this year. Our net profit projection is based on the assumption of 3.2% gross NPLs and a 77.1% coverage ratio by the end of the year. We assume the conservative guidance figures already indicate limited downside for BBTN going forward. BUY with a lower GGM-derived TP of IDR2,700 (implying 1.08x 2020F PBV).
New guidance, more conservative figures. BBTN’s management shared its new guidance which is more conservative in our view. Loans growth is expected to range between 8% and 12% this year, which, we believe, should come in at the higher bound (we assume 12.3% yoy loans growth this year). Funding should be easier for BBTN following the 75bps policy rate cuts and the relaxation policy on RIM introduced by BI last week. The key point from the new guidance concerns the assets quality, including the higher gross NPLs ratio guidance at 3.1-3.2% at year-end vs. 2.3-2.5% previously, and a flat 76% coverage ratio. Another point is the subordinated debt issuance plan as tier 2 capital. Please note that an extraordinary AGM will be held on October 18th 2019 with the appointment of the new CEO as one of the main agendas. Higher gross NPLs, lower net profits. Based on the new guidance on assets quality, we adjust our gross NPLs ratio assumption to 3.2% (previously 2.6%) and assume a 77.1% coverage ratio by year-end. Hence, provisioning expenses should reach IDR3.7tn in FY19F. Ceteris paribus, net profits would drop by 55.6% yoy to IDR1.25tn this year. Despite this, the new guidance is comforting at it provides more clarity on BBTN’s direction going forward. Issuance of a subdebt instrument to elevate its CAR. With delays in the formation of the financial holding company, BBTN needs to increase its capital following PSAK 71 implementation on January 1, 2020. As we already highlighted in our previous report, BBTN plans to issue IDR3-5tn of subdebt instruments (USD and IDR) as tier-2 capital. Assuming IDR3tn of proceeds from the subdebt issuance with Taspen and SMF as the standby buyers, CAR would reach 18.7% by December 2019F based on our model. BUY: new TP of IDR2,700. Maintain BUY with a GGM-derived TP of IDR2,700 assuming a CoE of 11.0%, a sustainable ROAE of 11.6% and 3% long-term growth. Our TP implies 1.08x 2020F PBV (-0.5SD of 10-yrs mean).
www.danareksa.com See important disclosure at the back of this report
1
Equity Research Initiation Report
Friday,27 September 2019
Phapros (PEHA IJ) BUY
Innitiation A prescription for growth
We expect Phapros to book solid earnings growth ahead supported by: (1) consolidation with KAEF that leads to greater economies of scale and a more extensive distribution network and (2) ongoing expansion with 12 new products in the pipeline coupled with new facilities to tap the growing pharmaceuticals market. The company trades at an attractive valuation of FY20F PE of 12.8x. We initiate coverage on the stock with a BUY. Positive catalyst from consolidation with Kimia Farma. Post consolidation with KAEF, it is estimated that the two companies will have total combined market share of around 4-5% in the prescription drugs market. With 14 plants (3 owned by Phapros and subsidiaries, the rest belonging to KAEF), we believe the company will have greater capacity to tap the increasing demand from BPJS Kesehatan. Bear in mind that the e-catalog tender has been continued for the second time in a 2-year period. On the costs side, the consolidation should lead to greater bargaining power to secure better prices of Active Pharmaceutical Ingredients (API) and raw materials in the future. Kimia Farma’s extensive distribution network coupled with having the largest pharmacies chain in Indonesia will also support higher top line growth for Phapros going forward. Expansion mode; 12 new products in the pipeline & the development of new facilities. The greater coverage of BPJS Kesehatan will lead to higher demand for drugs and the supported medical devices in Indonesia. Therefore, Phapros plans to launch 12 new drugs on an annual basis, mostly in the Ethical category – to tap the market for widely-used drugs to treat common diseases in the country. Phapros also plans to develop new facilities to produce intravenous liquid for CAPD, for coronary angioplasty, cartridge ampoule pehacain for dental anesthesia and other facilities to support product innovation that will sustain margins. Solid growth and attractive valuation, we initiate coverage with a BUY. Higher production capacity should support the FY19-20 top line growth of 27.9% and 23.7% yoy, respectively. With a maintained contribution from generic medicine of around 50% to total revenues, we estimate FY19-20 earnings growth of 11.9% and 24.5% yoy, or FY18-20 CAGR of 13.7%. We initiate coverage on the stock with a BUY call and TP of IDR1,800 – based on DCF (WACC: 10.4%, Terminal Growth 3%). At the current share price, PEHA is trading at FY20F PE of 12.8x, a 56% discount to the average FY20F PE of Kalbe Farma and Kimia Farma.
MACROECONOMY Government prepares fiscal buffer and encourages VAT refunds
The Ministry of Finance has prepared a fiscal buffer of IDR10tn in 2020 to anticipate a higher budget deficit. The fiscal buffer is used in case macroeconomic assumptions in the government budget cannot be realized, and also to
overcome tax shortfall. In 2019, the government prepared IDR7-10tn for the fiscal buffer to reduce the budget deficit. Besides preparing the fiscal buffer, the government is also offering tax incentives to foreign tourists by
encouraging VAT refunds through the issuance of Finance Ministry Regulation No.120/PMK.03/2019, effective on 1
Oct 2019. From this regulation, the government seeks to expand the scope of VAT refunds from around 600 stores as of Sep19 to 1,000 stores. (Kontan, Investor Daily)
Government: Regional transfer funds are proposed to support the new capital city
The Ministry of Finance has proposed the use of regional transfer funds as the source of financing to move the new
capital city to Kalimantan. The proposal suggests that the government can use Physical Special Allocation Funds (DAK Fisik) from the regional transfer funds to build supporting infrastructure such as roads and healthcare and
educational facilities. The funds will be given to the government of Kabupaten Kutai Kartanegara and Penajam Paser Utara. In the 2020 Budget, the allocation for Physical DAK funds is IDR72.2tn. (Bisnis Indonesia)
CORPORATE
Linknet (LINK:IJ) August update, in-line with higher 2019 targets Link Net hosted an analyst call yesterday evening to provide an update on the operational front and financials in
August. The firm posted revenues of Rp320.6bn (+11%mom). EBITDA rose 1% to Rp172.1bn, with a noticeably
lower EBITDA margin of 54% from 59% in Aug 18. The company has embarked on expansion into new cities and expects to build 250,000 home passes by YE2019. To push sales, LINK employs promotional offers. As such, ARPU
slipped from Rp422k at end 2018 to Rp410k as of YTD Aug’19. LINK is confident that net adds will reach 65,000 vs. 24,549 in FY18 (41,719 YTD Aug’19) - testament to the ongoing expansion. In that regard, the company increased
the size of the salesforce to boost retention rates and net adds. Furthermore, the company is tapping further the
business segment targeting the government, hospitality, financial services, property, e-commerce and others. LINK also has a new initiative to sell hardware to its customers, creating additional revenue streams.
Waskita Karya: 2019 new contracts target revised down by 19%
Waskita Karya (WSKT) has cut its 2019 new contracts target by 19.4% from IDR55.8tn to IDR45.0tn (+65.3%yoy)
given the soft new contracts secured in 8M19. WSKT only managed to book IDR9.7tn of new contracts in 8M19. This accounts for 21.6% of the new target. WSKT is eyeing new contracts from the Bawen – Yogyakarta toll road
(71km) in 4Q19. The investment needed for construction of the toll road is around IDR12.1tn. Furthermore, WSKT seeks to receive IDR22.2tn of receivable repayments by Dec19 from finished projects. The amount does not include
IDR3.4tn of land clearing costs under WSKT’s receivables. The receivables payments will come from the Jakarta – Cikampek II elevated toll road (IDR4.5tn), the Trans Sumatra toll road (IDR13.0tn), the Kunciran – Parigi toll road
(IDR1.4tn), the Semarang – Batang toll road (IDR2.2tn) and the Cinere – Serpong section I toll road (IDR1.1tn).
WSKT plans to use IDR16.0tn of the proceeds to repay its debts. WSKT targets a DER of 2.2x by Dec19, lower than 2.68x as of Jun19. Meanwhile, WSKT delayed plans to issue IDR3.5tn of bonds. (Kontan, Investor Daily)
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