Equity Research Monday, August 31, 2015 Danareksa Sekuritas – Equity Research FROM EQUITY RESEARCH SIDO: Enticing valuation on this producer of herbal products (SIDO IJ. Rp 473. Not Rated) Heavy reliance on two products is the main risk faced by Sido Muncul, we believe. Despite this, its flagship herbal product (Tolak Angin) continues to show solid performance, recording 17% y-y sales growth in 1H15. Nonetheless, its beverages segment (where sales are mainly of its energy drink product – Kuku Bima) has been showing weakening performance since 2012 due to stiffer competition. New product launches of herbal products are expected to drive stronger sales volume, while the newly-launched RTD energy drink could be the game changer in the beverages segment if it’s correctly executed, in our view. All in all, we think the stock’s current valuation is attractive, with the shares trading at 14.4x annualized FY15F P/E, a hefty 59% discount to Kalbe Farma’s FY15F P/E. FROM DANAREKSA RESEARCH INSTITUTE Has the bear gone home or in hiding? After one of the bleakest days in recent stock market history, the question on most of our minds is: is this the beginning or the end of the bearish pressure. The answer: we are not out of the woods yet. Forces that lined up to result in Black Monday are still present. They may or may not appear all at once again. But investors had better prepare for greater volatility ahead. Previous Reports: BBRI: A safe bet in troubled times-Snapshot20150828 MIKA: Maintaining solid profitability-Snapshot20150827 MYOR: In sweet spot-Snapshot20150826 Automotive: Gaikindo Auto Show 2015: challenging times- Snapshot20150825 MARKET NEWS *Analysts’ comment inside BNI projecting portion of foreign currency loans at 14% (ID) Cut on Electricity subsidies (ID) Coal Price Will be Revised (BI) Govt to release Property Tax for certain region (ID) KRAS to streamline its subsidiaries (ID) NRCA to buyback IDR 108bn (BI) Transaction GIIAS & IIMS reach IDR 6.7tn (BI) SSIA reviewing issuance of SGD 100mn bonds (BI) WIKA approached China Nuclear Engineering (ID) IDX ANNOUNCEMENT Cash Announcement Code Ex-Date Date Payable Amount (Rp) HMSP 19-Aug-15 9-Sep-15 1,033 APII 26-Aug-15 9-Sep-15 5.94143 Source: KSEI MORNING HIGHLIGHT Key Index Close Chg Ytd Vol (%) (%) (US$ m) Asean - 5 Indonesia 4,446 0.4 (14.9) 365 Thailand 1,366 0.6 (8.8) 1,256 Philippines 7,099 1.1 (1.8) 195 Malaysia 1,613 0.7 (8.4) 552 Singapore 2,956 0.4 (12.2) 1,036 Regional China 3,232 4.8 (0.1) 56,692 Hong Kong 21,612 (1.0) (8.4) 14,665 Japan 19,136 3.0 9.7 16,422 Korea 1,934 (0.2) 0.9 5,687 Taiwan 8,019 2.5 (13.8) 3,177 India 26,392 0.6 (4.0) 543 NASDAQ 4,828 0.3 1.9 75,697 Dow Jones 16,643 (0.1) (6.6) 10,200 Currency and Interest Rate Rate w-w m-m ytd (%) (%) (%) Rupiah Rp/1US$ 14,015 0.8 (3.9) (12.7) SBI rate % 6.75 0.1 0.1 (0.5) 10y Gov Indo bond 8.79 (0.1) 0.3 1.0 Hard Commodities Unit Price d-d m-m ytd (%) (%) (%) Coal US$/ton 58 0.7 (3.1) (6.3) Gold US$/toz 1,132 (0.2) 3.3 (4.5) Nickel US$/mt.ton 10,033 0.0 (11.0) (33.4) Tin US$/mt.ton 14,410 2.9 (11.7) (25.8) Soft Commodities Unit Price d-d m-m ytd (%) (%) (%) Cocoa US$/mt.ton 3,153 0.2 (3.1) 6.1 Corn US$/mt.ton 135 0.1 (1.3) (5.5) Crude Oil US$/barrel 50 (1.1) (5.2) (13.6) Palm oil MYR/mt.ton 1,806 (0.3) (15.8 ) (21.4) Rubber USd/kg 131 1.5 (6.5) (13.9) Pulp US$/tonne 846 N/A (0.7) (9.2) Coffee US$/60kgbag 89 0.1 4.7 21.0 Sugar US$/MT 341 (0.4) (2.3) (12.7) Wheat US$/ton 132 (1.2) (7.0) (21.3) Source: Bloomberg
Transcript
Equity Research
Monday, August 31, 2015
Danareksa Sekuritas – Equity Research
FROM EQUITY RESEARCH SIDO: Enticing valuation on this producer of herbal products (SIDO IJ. Rp 473. Not Rated) Heavy reliance on two products is the main risk faced by Sido Muncul, we believe. Despite this, its flagship herbal product (Tolak Angin) continues to show solid performance, recording 17% y-y sales growth in 1H15. Nonetheless, its beverages segment (where sales are mainly of its energy drink product – Kuku Bima) has been showing weakening performance since 2012 due to stiffer competition. New product launches of herbal products are expected to drive stronger sales volume, while the newly-launched RTD energy drink could be the game changer in the beverages segment if it’s correctly executed, in our view. All in all, we think the stock’s current valuation is attractive, with the shares trading at 14.4x annualized FY15F P/E, a hefty 59% discount to Kalbe Farma’s FY15F P/E.
FROM DANAREKSA RESEARCH INSTITUTE
Has the bear gone home or in hiding?
After one of the bleakest days in recent stock market history, the question on most of our minds is: is this the beginning or the end of the bearish pressure. The answer: we are not out of the woods yet. Forces that lined up to result in Black Monday are still present. They may or may not appear all at once again. But investors had better prepare for greater volatility ahead.
Previous Reports:
BBRI: A safe bet in troubled times-Snapshot20150828 MIKA: Maintaining solid profitability-Snapshot20150827 MYOR: In sweet spot-Snapshot20150826 Automotive: Gaikindo Auto Show 2015: challenging times-
Snapshot20150825
MARKET NEWS *Analysts’ comment inside
BNI projecting portion of foreign currency loans at 14% (ID) Cut on Electricity subsidies (ID) Coal Price Will be Revised (BI) Govt to release Property Tax for certain region (ID) KRAS to streamline its subsidiaries (ID) NRCA to buyback IDR 108bn (BI) Transaction GIIAS & IIMS reach IDR 6.7tn (BI) SSIA reviewing issuance of SGD 100mn bonds (BI) WIKA approached China Nuclear Engineering (ID)
SIDO MUNCUL Enticing valuation on this producer of herbal products
Heavy reliance on two products is the main risk faced by Sido Muncul, we believe. Despite this, its flagship herbal product (Tolak Angin) continues to show solid performance, recording 17% y-y sales growth in 1H15. Nonetheless, its beverages segment (where sales are mainly of its energy drink product – Kuku Bima) has been showing weakening performance since 2012 due to stiffer competition. New product launches of herbal products are expected to drive stronger sales volume, while the newly-launched RTD energy drink could be the game changer in the beverages segment if it’s correctly executed, in our view. All in all, we think the stock’s current valuation is attractive, with the shares trading at 14.4x annualized FY15F P/E, a hefty 59% discount to Kalbe Farma’s FY15F P/E.
Herbal products as the main engine growth Sido Muncul’s herbal segment (dominated by Tolak Angin) continues to show solid performance, recording 17% y-y sales growth in 1H15. Note that the sales growth has been driven by higher sales volume, given that the company has not made any ASP increases over the past two years. In our view, the solid performance of the herbal segment has been underpinned by its strong brand image, helping the company to maintain market share of around 75% despite stiffer competition in this business segment. Going forward, as the company believes that the penetration rate of its herbal products is still low nationally, it is currently undertaking capacity expansion of its new extraction plant. The new plant will increase the herbs extraction capacity up to three times, from 4,500kg/day to 13,500kg/day. This will allow the company to add to its herbal products portfolio having just released three new herbal products, namely: Tolak Linu, Tolak Angin less sugar, and Tolak Angin Care (aromatherapy ointment).
No signs of improvement from Kuku Bima, but new RTD could be the game changer Unlike the herbal segment, Sido Muncul’s beverages segment (dominated by Kuku Bima) saw a 17.7% y-y contraction in sales in 1H15, despite 6-7% ASP increases in May 2015. Lower sales volume has continued to weigh on Kuku Bima’s performance, which, we believe, has been hit by stiffer competition from Extra Joss. The weakening streak in energy drink performance since 2012 was continued in 1H15. Looking forward, we don’t envisage a turnaround in the energy drink segment in the foreseeable future as we expect Sido Muncul’s competitors to be more aggressive in their A&P and products innovation. In regard to the latter, Sido Muncul has just launched new RTD products under the Ener-G drink brand. The products will compete in the RTD segment along with Pocari Sweat, Mizone, and Kalbe’s Fatigon-Hydro. It will take sometimes for the product to gain market share in this segment, in our view.
Valuation: attractive below -1std dev While the weak beverages segment continues to drag down overall performance, the performance of the herbal segment has been much more encouraging, in our view. On top of this, the launch of new products earlier in 2H15 should bode well for the company and translate into better overall performance in 2H15, we believe. All in all, we think the company’s current valuation is very attractive at 14.4x 2015F P/E (earnings derived from annualized EPS), below its -1 standard deviation. The current valuation offers a hefty 32% discount to the average in the consumer sector and a 59% discount to Kalbe Farma.
Year end Dec (Rp bn) 2012 2013 2014 1H14 1H15
Revenue (Rp bn) 2,392 2,372 2,198 1,120 1,141
EBITDA (Rp bn) 542 493 496 265 313
EBITDA growth (%) 15.8 (9.1) 0.7 na 18.0
Net profi t (Rp bn) 388 406 415 239 246
Core profi t (Rp bn) 382 329 407 216 236
EPS (Rp) 25.8 27.1 27.7 16.0 16.4
EPS growth (%) 14.0 4.7 2.3 na 2.8
Net Gearing (%) net cash net cash net cash net cash net cash
PER (x) 27.1 25.9 22.0 29.6 28.8
PBV (x) 8.0 4.0 3.5 2.7 2.8
EV/EBITDA (x) 19.2 18.6 16.7 23.5 20.0
Not Rated
SIDO IJ/SIDO.JK
Last Price, Rp 473
No. of shares (bn) 15
Market Cap, Rp bn 7,095 (US$ mn) 506
3M T/O, US$mn 0.29
SIDO relative to JCI Index
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Second is the Fed’s dithering. Renormalization from the biggest monetary easing in history is certainly no small matter,
both for the US economy itself and the global financial markets. Better sooner rather than later. Otherwise the cloud
of uncertainty lingers.
Third is the global oil glut. As Saudi Arabia concedes the role of swing producer to the US, the well-established analysis
on how it behaves to prop up global oil prices no longer applies. The US, which is also one of the largest oil consumers,
plays by different rules. Hence the continuation of low oil prices is probably the best guess at the moment. The
implications for other commodities are equally dire.
Until these factors recede it is difficult to discount further volatility ahead.
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BBNI projecting portion of foreign currency loans at 14% (ID)
Bank Negara Indonesia (BBNI) projecting portion of foreign currency loans in the range of 14% for FY2015, same portion per 1H15, due to foreign currency loans slowed as a result of the increase of customers' needs for rupiah cash flow and the different exchange rate position. To stress tests conducted by BBNI, with the worst conditions rupiah was at IDR 17,000, NPL position is expected to remain in the range of 3%.
Cut on Electricity subsidies (ID)
Government plans to reduce the amount of electricity subsidy for next year to IDR39.39 trillion, or equivalent to 55.4% -58.7% from the previous agreement of IDR67-71 trillion. This subsidy reduction along with trimming on number of subsidized electricity customers in accordance with the list of National Team to Accelerate Poverty’s Countermeasures (TNP2K). According to the Director General of Electricity of EMR, in accordance to TNP2K list, number of poor and vulnerable poor reaches 40% of the total population, yet the number of electricity customers who enjoy subsidies are beyond this number. This policy was launched to follow agreement with Budget Agency of House of Rep.
Coal Price Will be Revised (BI)
The new price of coal for mine mouth power plant from revision results will be published this week. One of changes is for the establishment of the upper limit, whereas previously cost applied coal price plus fixed margin of 25%. Later on, with the adoption of cost and margin of 25% as the upper limit, it is expected to make a more competitive bidding process. The price of coal for mine mouth power plant integrated with mines and who are not, will also be clarified.
Govt to release Property Tax for certain region (ID)
Government will provide new incentives in the form of exemption Property Tax (PBB) for the benefit of investment in certain region by replacing Minister of Finance Decree No. 748/KMK.04/1990 with the Minister of Finance Regulation No. 161/PMK.010/ 2015. Should taxpayers still have property tax payable that refer to KMK, they must satisfy its obligation up to expiration period of the facility. This policy has been in effect since August 20, 2015.
KRAS to streamline its subsidiaries (ID)
Krakatau Steel (KRAS) will restructure number of subsidiaries in September 2015 as part of its efficiency amid weaken steel commodity prices. The restructuring process will be carried out in accordance to the study from PT Bahana Securities as the consultant of firm. Form of restructuring could be: (i) grouping of subsidiary operated in similar businesses, (ii) IPO of its subsidiary, (iii) divestment.
NRCA to buyback IDR 108bn (BI)
Nusa Raya Cipta (NRCA) plans to do buy back worth IDR 108bn, or assuming a maximum of 120mn shares purchase, with a maximum price of IDR 900 per share. On Friday (28/8), NRCA closed at IDR 675.
Transaction GIIAS & IIMS reach IDR 6.7tn (BI)
The value of transactions on GIIAS and IIMS 2015 expected to reach IDR 5.4tn and IDR 1.33tn, respectively. GIIAS is still waiting for closure on the next two days, but is projected to exceed the last year’s achievement, which up to last Saturday the number of visitors has reached 402k visitors. For the IIMs, during the 12-day exhibition, it has posted IDR 1.33tn transaction with 356,648 visitors.
SSIA reviewing issuance of SGD 100mn bonds (BI)
Surya Semesta Internusa (SSIA) was reviewing the issuance of bonds worth SGD 100mn as an alternative to funding the company's expansion in the next month, after previously canceled a planned issuance of USD bonds. SSIA is also considering the issuance of bonds worth IDR 100tn at the end of this year as another option if the Singapore dollar market is considered not conducive. In addition, SSIA also reviewing IDR 500bn bank loan option that still can not be explained in more detail. Proceeds will be used to acquire industrial land in Subang with a total area of 500 ha and also in Karawang.
WIKA approached China Nuclear Engineering (ID)
Wijaya Karya (WIKA) continues to finalize the bidding preparation for coal fired power plant (PLTU) Java 5 with capacity of 2x1,000MW located Banten. WIKA will collaborate with China Nuclear Engineering Group Corporation Ltd. (CNEC) and PT Sumber Segara Primadaya. In this mega projects that worth USD3 billion, WIKA is targeting a 15% ownership.
Pembangunan Perumahan PTPP 3,200 3,295 (2.9) (7.2) (18.4) (10.5) BUY
Adhi Karya ADHI 1,920 1,970 (2.5) 0.3 (25.9) (44.8) BUY
Sources: Bloomberg
COVERAGE PERFORMANCE
Equity Research
Monday, August 31, 2015
Danareksa Sekuritas – Equity Research
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