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

Equity Bottom-Up

A call with Indonesia's largest handset manufacturer <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ),</a> revealed a relatively resilient message about the "normalisation" of sales volumes since end of 2Q2020. The outlook is not that certain but the company looks well-equipped to benefit from a recovery. 
A key positive highlighted by management was confirmation of the implementation and enforcement of mandatory IMEI number registration from 16th September. This should go some way to killing off the rampant black market in Indonesia to the benefit of <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a>.  
At the peak of PSBB measures, the company had to close around 300 out of its 1,100 odd stores, which had some impact on volumes in 2Q2020 but volumes were back to pre-COVID levels in June and July.
Given the closure of a number of stores, <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a> has been pushing hard into other channels, such as its own online sales through <a href="http://www.eraspace.com" target="_blank" rel="noopener">www.eraspace.com</a> but also through official stores on e-commerce sites such as <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ),</a> <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group (LAZADA SP)</a>, and Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> but it deals with all e-commerce players. This has yielded very positive results with sales growing significantly through these channels. 
The overall market continues to be dominated by Chinese brands, with VIVO at number one followed by OPPO, Samsung, Xiaomi, and Realme. Working and learning from home has also boosted sales of tablets. ASPs have also risen slightly in 2Q2020, which suggests some upgrading. 
<a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a>'s valuations look very reasonable with the company trading on 11x FY21E PER given the prospect of a strong recovery over the next two years.

A call with Indonesia's largest handset manufacturer Erajaya Swasembada (ERAA IJ), revealed a relatively resilient message about the "normalisation" of sales volumes since end of 2Q2020. The outlook is not that certain but the company looks well-equipped to benefit from a recovery. 
A key positive highlighted by management was confirmation of the implementation and enforcement of mandatory IMEI number registration from 16th September. This should go some way to killing off the rampant black market in Indonesia to the benefit of Erajaya Swasembada (ERAA IJ).  
At the peak of PSBB measures, the company had to close around 300 out of its 1,100 odd stores, which had some impact on volumes in 2Q2020 but volumes were back to pre-COVID levels in June and July.
Given the closure of a number of stores, Erajaya Swasembada (ERAA IJ) has been pushing hard into other channels, such as its own online sales through www.eraspace.com but also through official stores on e-commerce sites such as Tokopedia PT (1087142D IJ), Lazada Group (LAZADA SP), and Shopee (Sea Ltd (SE US) but it deals with all e-commerce players. This has yielded very positive results with sales growing significantly through these channels. 
The overall market continues to be dominated by Chinese brands, with VIVO at number one followed by OPPO, Samsung, Xiaomi, and Realme. Working and learning from home has also boosted sales of tablets. ASPs have also risen slightly in 2Q2020, which suggests some upgrading. 
Erajaya Swasembada (ERAA IJ)'s valuations look very reasonable with the company trading on 11x FY21E PER given the prospect of a strong recovery over the next two years. 

Erajaya Swasembada (ERAA IJ) - Goodbye Blackmarket

<a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> released a decent set of 1H2020 results with net profit of IDR12,240bn versus IDR12,862bn in IH19 or -4.8%% decline YoY, especially given the full impact of COVID-19 in 2Q2020. The second quarter saw a greater impact with net profit down -14% YoY, as PSBB measures took hold. <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> booked solid pre-provisioning operating profit growth of +15.8% for 1H2020 and +13.0% in 2Q2020, with an increase in provisions denting the bottom line. The bank saw loan growth of +5.3% in 1H2020 bring the YTD number to June -1.4% with 2Q2020 seeing a decline of -2.8%. The key driver for loan growth came from corporate lending with +17.2% YoY growth in 1H2020. Other areas such as consumer, commercial, and SME saw some slippage, as well as increased run-offs. At the same time, <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> strengthened its funding base with a +13.0% increase in 3rd party funds and CASA growth of +12.8% YoY.The strong growth in its CASA, which might have been expected to slow in this environment, is a positive surprise. Even though loan demand is weak, the excess funds can be used to enhance returns through holding bonds or commercial papers. <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> continues to grow its internet and especially mobile banking, increasing the number of new accounts significantly, supported by the bank's online account opening service. This is helping to reinforce its lead in transactional banking as well as underpinning liquidity.  <div class="content-highlight"><a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> remains the most defensive banking name amongst the top four banks and the most flush with liquidity. It is trading in line with its 3-year average PBV but still at a discount to its pre-pandemic valuation. It remains a core holding that should be bought on weakness. </div>

Bank Central Asia (BBCA IJ) released a decent set of 1H2020 results with net profit of IDR12,240bn versus IDR12,862bn in IH19 or -4.8%% decline YoY, especially given the full impact of COVID-19 in 2Q2020. The second quarter saw a greater impact with net profit down -14% YoY, as PSBB measures took hold. Bank Central Asia (BBCA IJ) booked solid pre-provisioning operating profit growth of +15.8% for 1H2020 and +13.0% in 2Q2020, with an increase in provisions denting the bottom line. The bank saw loan growth of +5.3% in 1H2020 bring the YTD number to June -1.4% with 2Q2020 seeing a decline of -2.8%. The key driver for loan growth came from corporate lending with +17.2% YoY growth in 1H2020. Other areas such as consumer, commercial, and SME saw some slippage, as well as increased run-offs. At the same time, Bank Central Asia (BBCA IJ) strengthened its funding base with a +13.0% increase in 3rd party funds and CASA growth of +12.8% YoY.The strong growth in its CASA, which might have been expected to slow in this environment, is a positive surprise. Even though loan demand is weak, the excess funds can be used to enhance returns through holding bonds or commercial papers. Bank Central Asia (BBCA IJ) continues to grow its internet and especially mobile banking, increasing the number of new accounts significantly, supported by the bank's online account opening service. This is helping to reinforce its lead in transactional banking as well as underpinning liquidity.  Bank Central Asia (BBCA IJ) remains the most defensive banking name amongst the top four banks and the most flush with liquidity. It is trading in line with its 3-year average PBV but still at a discount to its pre-pandemic valuation. It remains a core holding that should be bought on weakness. 

Bank Central Asia (BBCA IJ) - Liability Protection

Leading South-East Asia gaming and e-commerce player <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> continues to rise to new highs as analysts revise up target prices to around the US$135 mark. The reports come on the back of continued positive momentum for both its gaming and e-commerce businesses in 2020, as consumers in SE Asia have rapidly shifted their shopping and entertainment preferences online due to the impact of COVID-19. Recent feedback from industry sources, including competitors, suggest that the company continues to lead the charge in terms of gaining market share.
Its ability to generate significant cash from its gaming business which can be redirected to bankroll the cash burn in e-commerce put the company at a significant advantage to its competitors such as <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> and <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group (LAZADA SP)</a> in terms of funding.
The company also took the lead on free delivery last year, especially in Indonesia, as well as the increasing trend for "live-streaming" events to promote products. It is also the most popular site with women and younger consumers (attracted by gaming).
Despite its stratospheric rise, this is a dangerous stock to short, even though it continues to make losses and is unlikely to make a profit until 2022, given it is the market leader and the only listed proxy for the vibrant growth in the SE Asian gaming and e-commerce market.
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> trades on a premium to global comparables from the most basic EV/Sales basis on 6.6x FY21E but it is also forecast to register much higher rates of growth, given it operates in higher-growth markets. It is also at an earlier stage of development on the road to probability, which also goes some way to justifying the higher multiples. Measures such as falling EBITDA losses per order in e-commerce, as well as higher monetisation rates are positive signs along the road to profitability.

Leading South-East Asia gaming and e-commerce player Sea Ltd (SE US) continues to rise to new highs as analysts revise up target prices to around the US$135 mark. The reports come on the back of continued positive momentum for both its gaming and e-commerce businesses in 2020, as consumers in SE Asia have rapidly shifted their shopping and entertainment preferences online due to the impact of COVID-19. Recent feedback from industry sources, including competitors, suggest that the company continues to lead the charge in terms of gaining market share.
Its ability to generate significant cash from its gaming business which can be redirected to bankroll the cash burn in e-commerce put the company at a significant advantage to its competitors such as Tokopedia PT (1087142D IJ) and Lazada Group (LAZADA SP) in terms of funding.
The company also took the lead on free delivery last year, especially in Indonesia, as well as the increasing trend for "live-streaming" events to promote products. It is also the most popular site with women and younger consumers (attracted by gaming).
Despite its stratospheric rise, this is a dangerous stock to short, even though it continues to make losses and is unlikely to make a profit until 2022, given it is the market leader and the only listed proxy for the vibrant growth in the SE Asian gaming and e-commerce market.
Sea Ltd (SE US) trades on a premium to global comparables from the most basic EV/Sales basis on 6.6x FY21E but it is also forecast to register much higher rates of growth, given it operates in higher-growth markets. It is also at an earlier stage of development on the road to probability, which also goes some way to justifying the higher multiples. Measures such as falling EBITDA losses per order in e-commerce, as well as higher monetisation rates are positive signs along the road to profitability. 

Sea Ltd (SE US) - Gaming Its Way to the Top

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Angus did an excellent job in uncovering investment opportunity in <a href="https://www.smartkarma.com/entities/18869" target="_blank" data-smartkarma-citation="entities:18869:1">Erajaya Swasembada (ERAA IJ)</a> pre-2018 and has done very well since. With the increasing manufacturing and assembling capabilities, it is a matter of time before more smartphones components can be labeled "made in Indonesia" which then shorten lead time between production and market launch as well as encourage smartphone brand owner to launch more models in Indonesia; which in turn creates an opportunity for <a href="https://www.smartkarma.com/entities/18869" target="_blank" data-smartkarma-citation="entities:18869:1">Erajaya Swasembada (ERAA IJ)</a> with its growing presence to record a sustainably higher revenue. In this report, we aim to cover the following:<ol>
<li>the government-backed initiative that gives assurance for smartphone producer to have a presence in Indonesia</li>
<li>offline to online or online to offline</li>
<li>sales booster activities</li>
<li>buy, sell or hold?</li>
</ol>

Angus did an excellent job in uncovering investment opportunity in Erajaya Swasembada (ERAA IJ) pre-2018 and has done very well since. With the increasing manufacturing and assembling capabilities, it is a matter of time before more smartphones components can be labeled "made in Indonesia" which then shorten lead time between production and market launch as well as encourage smartphone brand owner to launch more models in Indonesia; which in turn creates an opportunity for Erajaya Swasembada (ERAA IJ) with its growing presence to record a sustainably higher revenue. In this report, we aim to cover the following:
the government-backed initiative that gives assurance for smartphone producer to have a presence in Indonesia
offline to online or online to offline
sales booster activities
buy, sell or hold?


Since the announcement of the 10% service charge withholding tax, <a href="https://www.smartkarma.com/entities/10946" target="_blank" data-smartkarma-citation="entities:10946:1">Lippo Malls Indonesia Retail Trust (LMRT SP)</a> has come off 15.8% in 10 days which caused dividend yield to spike to 10.5%. On a 3-year basis, LMRT current share price at 0.34 is still 13% higher than its low at 0.3. On a phone conversation with the CEO, Ms. Chan Lie Ling, she explained that for many years the service charge and utility recovery withholding tax have always been there but an unclear explanation led to a non-existent…

Since the announcement of the 10% service charge withholding tax, Lippo Malls Indonesia Retail Trust (LMRT SP) has come off 15.8% in 10 days which caused dividend yield to spike to 10.5%. On a 3-year basis, LMRT current share price at 0.34 is still 13% higher than its low at 0.3. On a phone conversation with the CEO, Ms. Chan Lie Ling, she explained that for many years the service charge and utility recovery withholding tax have always been there but an unclear explanation led to a non-existent…

Singapore

Lazada Group SA provides online shopping services. The Company offers consumer electronics, household, toys, fashion, and sports equipment. Lazada Group serves customers worldwide.   

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Lazada Group (LAZADA SP)

Erajaya Swasembada (ERAA IJ) - Goodbye Blackmarket

Indonesia's laregst Erajaya Swasembada (ERAA IJ)

Angus Mackintosh

Bank Central Asia (BBCA IJ) - Liability Protection

Bank Central Asia (BBCA IJ) released a decent set of 1H2020 results with net profit of IDR12,240bn versus IDR12,862bn in IH19 or -4.8%% decline...

Angus Mackintosh

Sea Ltd (SE US) - Gaming Its Way to the Top

Leading South-East Asia gaming and e-commerce player Sea Ltd (SE US) continues to rise to new highs as analysts revise up target prices to around...

Angus Mackintosh

Erajaya (ERAA): The New Era Will Last

Angus did an excellent job in uncovering investment opportunity in Erajaya Swasembada (ERAA IJ) pre-2018 and has done very well since. With the...

Henry Soediarko

Lippo Mall REIT: Downside Priced-In

Since the announcement of the 10% service charge withholding tax, Lippo Malls Indonesia Retail Trust (LMRT SP) has come off 15.8% in 10 days which...

Henry Soediarko

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