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

Indonesia's largest pharmaceutical company <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" rel="noopener">Kalbe Farma (KLBF IJ)</a> is currently in talks with the Indonesian government to distribute the COVID-19 vaccine. A call with the company shed more light on this, as well as the prospects for 2021 for its core business.
<a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" rel="noopener">Kalbe Farma (KLBF IJ)</a> is also developing a COVID-19 vaccine with Genexine of Korea, which has already cleared the first clinical trial phase and is preparing for the second clinical trial.
The distribution of the government-sponsored COVID-19 vaccine will be done through the subsidiary <a href="https://www.smartkarma.com/entities/enseval-putera-megatrading-tbk-pt" target="_blank" rel="noopener">Enseval Putera Megatrading (EPMT IJ)</a>, which is <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a>'s 95%-owned distribution arm.
<a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" rel="noopener">Kalbe Farma (KLBF IJ)</a> is preparing a number of expansion plans at home and abroad, with a planned capex of IDR1tn for 2021, paid out of internally generated funds.
Capex will also be used to complete the construction of an OTC drug factory in Myanmar, where there is strong demand for OTC drugs.
<a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a> scores quite highly from an ESG perspective and has just become the only company in Indonesia to achieve a "AA" rating from MSCI having previously been rated A.
<a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" rel="noopener">Kalbe Farma (KLBF IJ)</a> is forecast to see EPS increase by +7.5% in FY21E and +24.2% in FY22E and trades on 25.7x FY21E PER and 23.6x FY22E PER and trades on 15.4x FY21E EV/EBITDA and 14.4x FY22E EV/EBITDA, which are both below historical averages, making the company look attractive with a recovery ahead and in light of this latest vaccine news.

Indonesia's largest pharmaceutical company Kalbe Farma (KLBF IJ) is currently in talks with the Indonesian government to distribute the COVID-19 vaccine. A call with the company shed more light on this, as well as the prospects for 2021 for its core business.
Kalbe Farma (KLBF IJ) is also developing a COVID-19 vaccine with Genexine of Korea, which has already cleared the first clinical trial phase and is preparing for the second clinical trial.
The distribution of the government-sponsored COVID-19 vaccine will be done through the subsidiary Enseval Putera Megatrading (EPMT IJ), which is Kalbe Farma (KLBF IJ)'s 95%-owned distribution arm.
Kalbe Farma (KLBF IJ) is preparing a number of expansion plans at home and abroad, with a planned capex of IDR1tn for 2021, paid out of internally generated funds.
Capex will also be used to complete the construction of an OTC drug factory in Myanmar, where there is strong demand for OTC drugs.
Kalbe Farma (KLBF IJ) scores quite highly from an ESG perspective and has just become the only company in Indonesia to achieve a "AA" rating from MSCI having previously been rated A.
Kalbe Farma (KLBF IJ) is forecast to see EPS increase by +7.5% in FY21E and +24.2% in FY22E and trades on 25.7x FY21E PER and 23.6x FY22E PER and trades on 15.4x FY21E EV/EBITDA and 14.4x FY22E EV/EBITDA, which are both below historical averages, making the company look attractive with a recovery ahead and in light of this latest vaccine news. 

Kalbe Farma (KLBF IJ) - Vaccinated for Future Growth

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

<a href="https://www.smartkarma.com/entities/kimia-farma-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:8524:1" rel="noopener">Kimia Farma Persero (KAEF IJ)</a> share price astronomic rise has benefited from the COVID-19 panic reaction and its position of being the government distributor for surgical masks throughout the country. Investors were expecting that the surgical masks to be sold at a premium price but the reality is the government instructed the company to sell at Rp 100,000 per box, instead of the overhyped price at Rp 500,000 to 850,000 previously. 
Since its lows (Rp 600) on the 19th of March 2020, the share price has increased by 458% when it reached its high of Rp 3,350. After a couple of days of profit-taking, investors who bought at Rp 600 still made 3x at today's close price. 
At the beginning of the pandemic, people made their own masks from cloth. As surgical masks' availability has improved, some people still like cloth-based masks although clearly, this is not as effective as surgical masks. <a href="https://www.smartkarma.com/entities/sri-rejeki-isman-tbk-pt" target="_blank" data-smartkarma-citation="entities:20178:1" rel="noopener">Sri Rejeki Isman (SRIL IJ)</a> launched non-surgical but anti-microbial and water-resistant masks based on their own technology with a history of manufacturing army uniform with the same functionalities that I discussed in <a href="https://www.smartkarma.com/insights/sritex-sril-undervalued-with-more-products-and-b2c" target="_blank" data-smartkarma-citation="insights:43490" rel="noopener">Sritex (SRIL): Undervalued with More Products and B2C</a> .
The most expensive stock in LQ45, <a href="https://www.smartkarma.com/entities/perusahaan-gas-negara-perser" target="_blank" data-smartkarma-citation="entities:1584:1" rel="noopener">Perusahaan Gas Negara Perser (PGAS IJ)</a> , is trading at 81x PER so Kimia Farma is really expensive at 190x PER on the back of the surgical mask distributors across Indonesia although the margin is very questionable given the market price for surgical masks have plummeted. 
For existing shareholder - it is really time to get out before the stock price plummets
For long-short investors - the stock is worth shorting for short term gains if there is borrow. Given the small market capitalization, borrow may be tough but the liquidity has improved (USD 5 million ADTV) thus there is a chance for borrow availability.

Kimia Farma Persero (KAEF IJ) share price astronomic rise has benefited from the COVID-19 panic reaction and its position of being the government distributor for surgical masks throughout the country. Investors were expecting that the surgical masks to be sold at a premium price but the reality is the government instructed the company to sell at Rp 100,000 per box, instead of the overhyped price at Rp 500,000 to 850,000 previously. 
Since its lows (Rp 600) on the 19th of March 2020, the share price has increased by 458% when it reached its high of Rp 3,350. After a couple of days of profit-taking, investors who bought at Rp 600 still made 3x at today's close price. 
At the beginning of the pandemic, people made their own masks from cloth. As surgical masks' availability has improved, some people still like cloth-based masks although clearly, this is not as effective as surgical masks. Sri Rejeki Isman (SRIL IJ) launched non-surgical but anti-microbial and water-resistant masks based on their own technology with a history of manufacturing army uniform with the same functionalities that I discussed in Sritex (SRIL): Undervalued with More Products and B2C .
The most expensive stock in LQ45, Perusahaan Gas Negara Perser (PGAS IJ) , is trading at 81x PER so Kimia Farma is really expensive at 190x PER on the back of the surgical mask distributors across Indonesia although the margin is very questionable given the market price for surgical masks have plummeted. 
For existing shareholder - it is really time to get out before the stock price plummets
For long-short investors - the stock is worth shorting for short term gains if there is borrow. Given the small market capitalization, borrow may be tough but the liquidity has improved (USD 5 million ADTV) thus there is a chance for borrow availability. 

Kimia Farma (KAEF): National Service Is Charity

Expand when your peers retreat. That is what <a href="https://www.smartkarma.com/entities/sri-rejeki-isman-tbk-pt" target="_blank" data-smartkarma-citation="entities:20178:1" rel="noopener">Sri Rejeki Isman (SRIL IJ)</a> management has done in this COVID-19 period. It has launched more products from daily wear to COVID-19 related products such as non-medical masks (B2C) and PPE (B2B). It has won a mandate to become a PPE supplier to chain hospitals such as <a href="https://www.smartkarma.com/entities/siloam-international-hospital" target="_blank" data-smartkarma-citation="entities:878:1" rel="noopener">Siloam International Hospital (SILO IJ)</a> and <a href="https://www.smartkarma.com/entities/mitra-keluarga-karyasehat-tbk" target="_blank" data-smartkarma-citation="entities:288:1" rel="noopener">Mitra Keluarga Karyasehat Tbk (MIKA IJ)</a> .
Among LQ45 constituents, Sritex has the lowest PER while other COVID-19 related stocks such as <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a> and <a href="https://www.smartkarma.com/entities/mitra-keluarga-karyasehat-tbk" target="_blank" data-smartkarma-citation="entities:288:1" rel="noopener">Mitra Keluarga Karyasehat Tbk (MIKA IJ)</a> trade at 27x and 50x PER respectively. Compared to other PPE and gloves manufacturers in Malaysia such as <a href="https://www.smartkarma.com/entities/top-glove-corp-bhd" target="_blank" data-smartkarma-citation="entities:20759:1" rel="noopener">Top Glove Corp (TOPG MK)</a> and <a href="https://www.smartkarma.com/entities/hartalega-holdings-bhd" target="_blank" data-smartkarma-citation="entities:10230:1" rel="noopener">Hartalega Holdings (HART MK)</a> , Sritex is trading at a deep discount.

Expand when your peers retreat. That is what Sri Rejeki Isman (SRIL IJ) management has done in this COVID-19 period. It has launched more products from daily wear to COVID-19 related products such as non-medical masks (B2C) and PPE (B2B). It has won a mandate to become a PPE supplier to chain hospitals such as Siloam International Hospital (SILO IJ) and Mitra Keluarga Karyasehat Tbk (MIKA IJ) .
Among LQ45 constituents, Sritex has the lowest PER while other COVID-19 related stocks such as Kalbe Farma (KLBF IJ) and Mitra Keluarga Karyasehat Tbk (MIKA IJ) trade at 27x and 50x PER respectively. Compared to other PPE and gloves manufacturers in Malaysia such as Top Glove Corp (TOPG MK) and Hartalega Holdings (HART MK) , Sritex is trading at a deep discount. 

Sritex (SRIL): Undervalued with More Products and B2C

The company benefits from its ties in MT with Alfamart and Indomart as it has higher hygiene perception and less chance of contact with another person which is appreciated during COVID-19. <a href="https://www.smartkarma.com/entities/industri-jamu-dan-farmasi-sido-muncul-tbk-pt" target="_blank" data-smartkarma-citation="entities:6033:1" rel="noopener">Sido Muncul (SIDO IJ)</a> Q2 2020 had a nice surprise where consumers switched from Tolak Angin to other products such as Vitamin C 1000 powder drink and Ginger-flavor beverages.Bintang Toedjoe's clinical trial on red ginger may have a negative impact in the short term but it presents a long term opportunity in the long run that Tolak Angin and other SIDO's products have an improved global acceptance, therefore, easier to sell in other countries. Post a share price increase from IDR 500 to 1400 in the past three years, the management feels that a 1 to 2 stock split is appropriate and it will happen sometime this month. This will create more liquidity and a share price that is affordable for retail investors (around IDR 700) thus a new entry point for investors who think they missed out on SIDO as the share price was deemed too expensive.

The company benefits from its ties in MT with Alfamart and Indomart as it has higher hygiene perception and less chance of contact with another person which is appreciated during COVID-19. Sido Muncul (SIDO IJ) Q2 2020 had a nice surprise where consumers switched from Tolak Angin to other products such as Vitamin C 1000 powder drink and Ginger-flavor beverages.Bintang Toedjoe's clinical trial on red ginger may have a negative impact in the short term but it presents a long term opportunity in the long run that Tolak Angin and other SIDO's products have an improved global acceptance, therefore, easier to sell in other countries. Post a share price increase from IDR 500 to 1400 in the past three years, the management feels that a 1 to 2 stock split is appropriate and it will happen sometime this month. This will create more liquidity and a share price that is affordable for retail investors (around IDR 700) thus a new entry point for investors who think they missed out on SIDO as the share price was deemed too expensive.

Sido Muncul (SIDO): Switch, Competitor and Split

It was reported last week the South East Asia's largest pharmaceuticals company <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a> is looking to spin-off its Nutritionals business at a total value of US$500m. This would be Indonesia's largest IPO of 2020. We take a closer look at this segment and whether a separate listing would add value.
As at June, 2020 Nutritionals made up 28% of the company's revenues and around 40% of EBITDA, as its share is boosted by the much lower margin distribution business which is 32% of sales.
The division covers a wide range of products including powdered milk products covering all age ranges from expectant mother to babies, kids, and adults under a number different brands, as well as producing supplements for diabetics to stabilise blood sugar, a cholesterol a sliming milk, and a weight-loss product called Slim &amp; Fit. 
<a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a> also sells the popular Fit Bar and Fit Chips snacks under this division, which are very accessible and popular snacks found across modern trade and has the license to sell Blackmores Vitamins in Indonesia, where it has a leading market share.
Though there are scant details available on this potential spin-off, we attempt to ascertain whether this will be value accretive for shareholders of <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ).</a>
The company distributes its nutritional products through its extensive network under <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)'</a>s distribution subsidiary<a href="https://www.smartkarma.com/entities/enseval-putera-megatrading-tbk-pt" target="_blank" data-smartkarma-citation="entities:12291:1" rel="noopener"> Enseval Putera Megatrading (EPMT IJ),</a> which cover the whole of Indonesia.
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We await further details on this but continue to see <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a> as a key defensive holding in Indonesia, which will benefit from more health-conscious Indonesians as well as a rebound in its pharmaceuticals business as PSBB measures are relaxed. It is also involved in testing for COVID-19 and in the development of a vaccine with Korean company Genexine, which could provide further catalysts. <a href="https://www.smartkarma.com/entities/kalbe-farma-tbk-pt" target="_blank" data-smartkarma-citation="entities:6303:1" rel="noopener">Kalbe Farma (KLBF IJ)</a>  is trading at a slight discount to its 5-year average forward PER of 27.5x currently on 26.4x but with a number of potential catalysts ahead.
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It was reported last week the South East Asia's largest pharmaceuticals company Kalbe Farma (KLBF IJ) is looking to spin-off its Nutritionals business at a total value of US$500m. This would be Indonesia's largest IPO of 2020. We take a closer look at this segment and whether a separate listing would add value.
As at June, 2020 Nutritionals made up 28% of the company's revenues and around 40% of EBITDA, as its share is boosted by the much lower margin distribution business which is 32% of sales.
The division covers a wide range of products including powdered milk products covering all age ranges from expectant mother to babies, kids, and adults under a number different brands, as well as producing supplements for diabetics to stabilise blood sugar, a cholesterol a sliming milk, and a weight-loss product called Slim &amp; Fit. 
Kalbe Farma (KLBF IJ) also sells the popular Fit Bar and Fit Chips snacks under this division, which are very accessible and popular snacks found across modern trade and has the license to sell Blackmores Vitamins in Indonesia, where it has a leading market share.
Though there are scant details available on this potential spin-off, we attempt to ascertain whether this will be value accretive for shareholders of Kalbe Farma (KLBF IJ).
The company distributes its nutritional products through its extensive network under Kalbe Farma (KLBF IJ)'s distribution subsidiary Enseval Putera Megatrading (EPMT IJ), which cover the whole of Indonesia.

We await further details on this but continue to see Kalbe Farma (KLBF IJ) as a key defensive holding in Indonesia, which will benefit from more health-conscious Indonesians as well as a rebound in its pharmaceuticals business as PSBB measures are relaxed. It is also involved in testing for COVID-19 and in the development of a vaccine with Korean company Genexine, which could provide further catalysts. Kalbe Farma (KLBF IJ)  is trading at a slight discount to its 5-year average forward PER of 27.5x currently on 26.4x but with a number of potential catalysts ahead.


Kalbe Farma (KLBF IJ) - A Nutritional Spin-Off?

Indonesia

Kalbe Farma is an Indonesian pharmaceutical, healthcare, and nutrition company. It specializes in the development, manufacturing, and distribution of prescription drugs, over-the-counter medications, nutritional supplements, and consumer health items. The company was founded on September 10, 1966, and is headquartered in Jakarta, Indonesia.

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Kalbe Farma (KLBF IJ)