Pan-Asia Equity Bottom-up, Wickhams Hill

Lloyd Moffatt

Pan-Asia Equity Bottom-up

Equity Bottom-Up

Cisarua Mountain Dairy / Equity Bottom-Up

<ul><li>A deeper look into Cisarua Mountain Dairy – Cimory (CMRY IJ) since we initially highlighted the deal in Issue 8 revealed that is business is not nearly attractive as it appeared</li><li>Cosco’s spin-off of liquor distribution subsidiary Keepers (KEEPR PM) has received strong investor demand following a move to reprice the offering 25% below the low end of the original range</li><li>Robinsons Land (RLC PM) announced a P3bn buyback that’s equivalent to around 3% of their market cap</li></ul>

A deeper look into Cisarua Mountain Dairy – Cimory (CMRY IJ) since we initially highlighted the deal in Issue 8 revealed that is business is not nearly attractive as it appearedCosco’s spin-off of liquor distribution subsidiary Keepers (KEEPR PM) has received strong investor demand following a move to reprice the offering 25% below the low end of the original rangeRobinsons Land (RLC PM) announced a P3bn buyback that’s equivalent to around 3% of their market cap

Wickhams Hill Research | Under-The-Radar Issue 12

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Indonesia's leading low-cost tile producer <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> released a strong set of results for 1H2021, with revenues increasing by +25.2% YoY driven by decent organic growth, new capacity plus continuing improvements in product mix.
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> continues to increase its production capacity whilst operating at very high rates of capacity utilisation above 100%. 
The company has started production of its new higher-end ARNA brand 60cmx60cm tiles, which compete for head-on with Chinese imports but where Arwana has cost advantages, faster turnaround times, and can provide better terms for customers.
<section class="figure">Apart from the increase in new capacity for the higher-end porcelain tiles, <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> also continues to shift its product mix towards its higher-end ceramic tiles under the UNO brand name, whilst reducing the production of cheaper products, helping to support margins.</section>
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The company saw its gross profit increase by +60% YoY and gross profit margin to 35.4% versus 27.5% the previous year, mainly helped by lower gas prices, which were reduced by -30% last April
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We continue to view <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> as one of the best quality industrial companies in Indonesia, which will continue to see the positive tailwind of better product mix and lower gas prices in 2H2021, suggesting more to come on margin improvements in the second half.

Indonesia's leading low-cost tile producer Arwana Citramulia (ARNA IJ) released a strong set of results for 1H2021, with revenues increasing by +25.2% YoY driven by decent organic growth, new capacity plus continuing improvements in product mix.
Arwana Citramulia (ARNA IJ) continues to increase its production capacity whilst operating at very high rates of capacity utilisation above 100%. 
The company has started production of its new higher-end ARNA brand 60cmx60cm tiles, which compete for head-on with Chinese imports but where Arwana has cost advantages, faster turnaround times, and can provide better terms for customers.
Apart from the increase in new capacity for the higher-end porcelain tiles, Arwana Citramulia (ARNA IJ) also continues to shift its product mix towards its higher-end ceramic tiles under the UNO brand name, whilst reducing the production of cheaper products, helping to support margins.


The company saw its gross profit increase by +60% YoY and gross profit margin to 35.4% versus 27.5% the previous year, mainly helped by lower gas prices, which were reduced by -30% last April

We continue to view Arwana Citramulia (ARNA IJ) as one of the best quality industrial companies in Indonesia, which will continue to see the positive tailwind of better product mix and lower gas prices in 2H2021, suggesting more to come on margin improvements in the second half.

Arwana Citramulia (ARNA IJ) - Glazed Porcelain

Indonesia's largest ceramic tile manufacturer <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" rel="noopener">Arwana Citramulia (ARNA IJ)</a> recently announced its 2020 results with net profit increasing by +49.9% YoY from an increase in revenue of +2.8% YoY to IDR 2.21tn, as the company benefited from a lower gas price and greater production efficiencies.
The reduction in gas prices from US$9 to US$6/ MMbtu has reduced the production costs for <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" rel="noopener">Arwana Citramulia (ARNA IJ)</a> significantly with a -6% fall in costs on an MMBtu / sqm basis.
The company finished the year with a capacity utilization of 103% despite the impact of COVID-19 in 2Q2020, as it expanded its distribution by around 2,000 outlets last year.
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> is targeting a ceramics tile volume growth of  +10% YoY and revenue growth of +15% YoY in 2021 and also projects the net profit to grow to around 30% YoY. 
The company will see a full-year impact of the lower gas price as well as potential further efficiency gains, through an even lower rejection rate. 
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> will expand capacity in 2021 into the production of higher-end ceramic porcelain tiles, which will potentially provide the company with its next leg of growth. 
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> trades on 13.5x FY21E PER and 11.3x FY22E PER, with forecast EPS growth of +20.5% and +16.7% for FY221E and FY22E respectively. We continue to see the company as one of the best quality industrials in Indonesia and these results clearly demonstrate the company's ability to weather an unprecedented environment.

Indonesia's largest ceramic tile manufacturer Arwana Citramulia (ARNA IJ) recently announced its 2020 results with net profit increasing by +49.9% YoY from an increase in revenue of +2.8% YoY to IDR 2.21tn, as the company benefited from a lower gas price and greater production efficiencies.
The reduction in gas prices from US$9 to US$6/ MMbtu has reduced the production costs for Arwana Citramulia (ARNA IJ) significantly with a -6% fall in costs on an MMBtu / sqm basis.
The company finished the year with a capacity utilization of 103% despite the impact of COVID-19 in 2Q2020, as it expanded its distribution by around 2,000 outlets last year.
Arwana Citramulia (ARNA IJ) is targeting a ceramics tile volume growth of  +10% YoY and revenue growth of +15% YoY in 2021 and also projects the net profit to grow to around 30% YoY. 
The company will see a full-year impact of the lower gas price as well as potential further efficiency gains, through an even lower rejection rate. 
Arwana Citramulia (ARNA IJ) will expand capacity in 2021 into the production of higher-end ceramic porcelain tiles, which will potentially provide the company with its next leg of growth. 
Arwana Citramulia (ARNA IJ) trades on 13.5x FY21E PER and 11.3x FY22E PER, with forecast EPS growth of +20.5% and +16.7% for FY221E and FY22E respectively. We continue to see the company as one of the best quality industrials in Indonesia and these results clearly demonstrate the company's ability to weather an unprecedented environment. 

Arwana Citramulia (ARNA IJ) - Fired Up Top Quality Industrial

<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ),</a> Indonesia's largest and most efficient ceramic tile manufacturer, continues to go from strength to strength in FY2020, after a short lull in 2Q2020, benefiting from the lowering on the gas price in April 2020, together with continuing improvements in its product mix and cost structure. A conversation with management further unpinned our positive view on the company.
The next significant move by the company will be its move into the higher-end glazed porcelain tile market versus its current lower end ceramic red-bodied tiles. Here it will compete head-on with Chinese imports but management is confident that <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> produces a better quality product, with a significant advantage on lead times, and providing much more attractive working capital terms to its customers. 
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> operated at 103% capacity utilization last year and plans to grow volumes by +10% in 2021, as well as improving its product mix further towards its Uno Digi brands, as well as its newer high-end offering, which should mean higher ASPs. 
Management sees further potential improvements in efficiencies in 2021, with even lower rejection rates in the production process and lower gas usage, which should help to drive better margins, along with the full-year impact on a lower gas price. 
<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> trades on 12.3x FY21E PER and 10.6x FY21E PER, compared to its 3-year average forward PER of 15.4x. We see the company as one of the best-managed industrials in Indonesia and this move into the higher-end tile market has the potential to drive the next leg of growth. 
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Arwana Citramulia (ARNA IJ), Indonesia's largest and most efficient ceramic tile manufacturer, continues to go from strength to strength in FY2020, after a short lull in 2Q2020, benefiting from the lowering on the gas price in April 2020, together with continuing improvements in its product mix and cost structure. A conversation with management further unpinned our positive view on the company.
The next significant move by the company will be its move into the higher-end glazed porcelain tile market versus its current lower end ceramic red-bodied tiles. Here it will compete head-on with Chinese imports but management is confident that Arwana Citramulia (ARNA IJ) produces a better quality product, with a significant advantage on lead times, and providing much more attractive working capital terms to its customers. 
Arwana Citramulia (ARNA IJ) operated at 103% capacity utilization last year and plans to grow volumes by +10% in 2021, as well as improving its product mix further towards its Uno Digi brands, as well as its newer high-end offering, which should mean higher ASPs. 
Management sees further potential improvements in efficiencies in 2021, with even lower rejection rates in the production process and lower gas usage, which should help to drive better margins, along with the full-year impact on a lower gas price. 

Arwana Citramulia (ARNA IJ) trades on 12.3x FY21E PER and 10.6x FY21E PER, compared to its 3-year average forward PER of 15.4x. We see the company as one of the best-managed industrials in Indonesia and this move into the higher-end tile market has the potential to drive the next leg of growth. 


Arwana Citramulia (ARNA IJ) - Garuda Versus Dragon

Indonesia's most efficient tile manufacturer, <a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> has a habit of showing its true quality in times of trouble and this time is no different.  A conversation with management revealed that the company continues to improve its product mix and operate at high utilisation levels, with 2Q2020 likely to remain above 85%, despite COVID-19. 
The company published strong 1Q2020 numbers, with sales up 18% and net margins significantly above last year on better product mix, with its higher-end Digi UNO tiles now around 60% of production. 
The company has adjusted its expectations for sales this year and expects a decline but remains confident it can achieve profits at the same level. 
The real game-changer for the company is the reduction in the gas price to US$6/mmbtu which came into force at the start of April. This will reduce costs and boost margins significantly and is not yet reflected in the share price. 
There will be some negative drag from the weaker currency on costs of imported materials but this should not be overly burdensome given the reduced gas price. 
<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/arwana-citramulia-tbk-pt" target="_blank" data-smartkarma-citation="entities:17042:1" rel="noopener">Arwana Citramulia (ARNA IJ)</a> continues to demonstrate its resilience in the face of a renewed challenge from COVID-19 and should come out all the stronger, given the potential fallout for some of the competition. Management expects flat earnings this year but we expect a sharp rebound in FY21E and FY22E. This is a high-quality small-cap industrial with positive catalysts ahead, most notably the cut in the gas price, which happened 1st April but will drive higher margins going forward. 
</div>

Indonesia's most efficient tile manufacturer, Arwana Citramulia (ARNA IJ) has a habit of showing its true quality in times of trouble and this time is no different.  A conversation with management revealed that the company continues to improve its product mix and operate at high utilisation levels, with 2Q2020 likely to remain above 85%, despite COVID-19. 
The company published strong 1Q2020 numbers, with sales up 18% and net margins significantly above last year on better product mix, with its higher-end Digi UNO tiles now around 60% of production. 
The company has adjusted its expectations for sales this year and expects a decline but remains confident it can achieve profits at the same level. 
The real game-changer for the company is the reduction in the gas price to US$6/mmbtu which came into force at the start of April. This will reduce costs and boost margins significantly and is not yet reflected in the share price. 
There will be some negative drag from the weaker currency on costs of imported materials but this should not be overly burdensome given the reduced gas price. 

Arwana Citramulia (ARNA IJ) continues to demonstrate its resilience in the face of a renewed challenge from COVID-19 and should come out all the stronger, given the potential fallout for some of the competition. Management expects flat earnings this year but we expect a sharp rebound in FY21E and FY22E. This is a high-quality small-cap industrial with positive catalysts ahead, most notably the cut in the gas price, which happened 1st April but will drive higher margins going forward. 


Arwana Citramulia (ARNA IJ) - Jumping Jack Flash

Indonesia

PT Arwana Citramulia Tbk manufactures and distributes ceramic and porcelain tiles in Indonesia and internationally. The company offers a diverse product portfolio under brands such as Arna, Arwana Ceramics, and UNO. It was founded in 1993 and is headquartered in Jakarta, Indonesia.

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Arwana Citramulia (ARNA IJ)

Wickhams Hill Research | Under-The-Radar Issue 12

A deeper look into Cisarua Mountain Dairy – Cimory (CMRY IJ) since we initially highlighted the deal in Issue 8 revealed that is business is not...

Lloyd Moffatt