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. 

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Equity Bottom-Up

Ultrajaya Milk Industry & Trading Co. / Equity Bottom-Up

Ultrajaya Milk Industry & Trading Co. (ULTJ IJ)

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<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-industry-trading-company" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Industry &amp; Trading (ULTJ IJ)</a> remains a high-quality proxy to the rising demand for dairy products in Indonesia, with a nearly 40% market share of the UHT market through its Ultra Milk brand.  The company is also the number one producer in ready to drink (RTD) tea drinks in cartons where it has a 77% market share with various different carton packaging options. </p>
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<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-industry-trading-company" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Industry &amp; Trading (ULTJ IJ)</a> also has various tolling agreements for the production of powdered milk and UHT drinks, with customers such as <a href="https://www.smartkarma.com/entities/unilever-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:231:1" rel="noopener">Unilever Indonesia (UNVR IJ)</a>.</p>
<p>The industry fundamentals in Indonesia are strong with relatively low rates of consumption per capita versus other South-East Asian Countries. has a low per capita consumption of milk versus its South-East Asian neighbours</p>
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<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-industry-trading-company" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Industry &amp; Trading (ULTJ IJ)</a> continues to source more than half its powdered milk requirements from overseas in the form of powdered skimmed milk and whole milk but is increasing sourcing its requirements locally together with building up its own dairy herds</p>
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<p>The company continued to face some pressure from COVID-19 restrictions in 1H2021 but the more positive trend that started in 1Q2021 continued into 2Q2021, especially for its core flavoured milk and carton tea products.</p>
<p>From a distribution perspective, the company continues to push more into the under-penetrated areas of Kalimantan and Sumatra. It is also increasingly helping distributors to secure financing and achieving IT connectivity with all distributors. </p>
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<section class="figure"><a href="https://www.smartkarma.com/entities/ultrajaya-milk-industry-trading-company" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Industry &amp; Trading (ULTJ IJ)</a> is also continuing to focus on developing new products and has recently signed a JV with Ito En. It will also consider launching yoghurt drinks and pasteurised milk products, when the time is right, as we move into a post-COVID world. The company remains one of Indonesia's least appreciated consumer staple players, with super-strong brands and a good long term growth track record as well as good governance. </section>
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Ultrajaya Milk Industry &amp; Trading (ULTJ IJ) remains a high-quality proxy to the rising demand for dairy products in Indonesia, with a nearly 40% market share of the UHT market through its Ultra Milk brand.  The company is also the number one producer in ready to drink (RTD) tea drinks in cartons where it has a 77% market share with various different carton packaging options. 

Ultrajaya Milk Industry &amp; Trading (ULTJ IJ) also has various tolling agreements for the production of powdered milk and UHT drinks, with customers such as Unilever Indonesia (UNVR IJ).
The industry fundamentals in Indonesia are strong with relatively low rates of consumption per capita versus other South-East Asian Countries. has a low per capita consumption of milk versus its South-East Asian neighbours

Ultrajaya Milk Industry &amp; Trading (ULTJ IJ) continues to source more than half its powdered milk requirements from overseas in the form of powdered skimmed milk and whole milk but is increasing sourcing its requirements locally together with building up its own dairy herds



The company continued to face some pressure from COVID-19 restrictions in 1H2021 but the more positive trend that started in 1Q2021 continued into 2Q2021, especially for its core flavoured milk and carton tea products.
From a distribution perspective, the company continues to push more into the under-penetrated areas of Kalimantan and Sumatra. It is also increasingly helping distributors to secure financing and achieving IT connectivity with all distributors. 


Ultrajaya Milk Industry &amp; Trading (ULTJ IJ) is also continuing to focus on developing new products and has recently signed a JV with Ito En. It will also consider launching yoghurt drinks and pasteurised milk products, when the time is right, as we move into a post-COVID world. The company remains one of Indonesia's least appreciated consumer staple players, with super-strong brands and a good long term growth track record as well as good governance. 












Ultrajaya Milk Industry & Trading (ULTJ IJ) - Growth in a Small Carton

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

<p>The vaccination has already started in Indonesia and although it may take 15 months to complete, it could be an early catalyst for investors to start booking profit on SIDO especially after it made 25% last year. The business will still grow as Tolak Angin remains the most affordable solution for an immune system compared to the other local and imported brands such as <a href="https://www.smartkarma.com/entities/health-and-happiness-h-h-int" target="_blank" data-smartkarma-citation="entities:20582:1" rel="noopener">Health And Happiness (H&amp;H) (1112 HK)</a> Swisse, which are especially important when the health care system is already overwhelmed. </p>
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<p>Despite a 25% increase in 2020, Sido is still trading at 5%, 14%, and 26% EV/EBITDA, PER, and PBR discount respectively to the peers. </p>
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The vaccination has already started in Indonesia and although it may take 15 months to complete, it could be an early catalyst for investors to start booking profit on SIDO especially after it made 25% last year. The business will still grow as Tolak Angin remains the most affordable solution for an immune system compared to the other local and imported brands such as Health And Happiness (H&amp;H) (1112 HK) Swisse, which are especially important when the health care system is already overwhelmed. 

Despite a 25% increase in 2020, Sido is still trading at 5%, 14%, and 26% EV/EBITDA, PER, and PBR discount respectively to the peers. 


Sido Muncul (SIDO): Still the Most Affordable Solution in the Pandemic

<p>Indonesia’s biggest milk company <a href="https://www.smartkarma.com/entities/ultrajaya-milk-industry-trading-company" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Industry &amp; Trading (ULTJ IJ)</a> recently announced its 3Q2020 results, which saw a resilient performance from its dairy business and less so from packet tea. We caught up with management to garner a bit more colour on the simmering recovery that is taking place. </p>
<p>In the dairy division white milk in larger packet sizes has been doing especially well, given the large portion of the population working and schooling from home. </p>
<p>Smaller packet flavoured milks and packet tea under the Teh Sosroh brand continue to be under pressure given these are often picked up on the move but we expect a decent recovery as the economy opens up. </p>
<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-ind-trading" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Ind &amp; Trading (ULTJ IJ)</a> is likely to see a marginally slower growth performance this year but a continued rebound in earnings should be expected in 4Q2020, driven by a move to a "new normal" in Indonesia and a gradual opening up of the economy. </p>
<p>The company has opened a new Tetrapak line for larger packets to satisfy the growing demand for family packs. It is also investing in two large-sized dairy farms to ensure local supply.</p>
<p>Next year the company will invest in a new production and distribution centre closer to Jakarta, which will diversify its operations geographically. It has successfully secured IDR3tn in medium-term notes to finance its expansion. </p>
<p>Valuations remain attractive with the company trading on 15.5x FY21E PER versus its peer group average of 26x forward PER. <a href="https://www.smartkarma.com/entities/ultrajaya-milk-ind-trading" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Ind &amp; Trading (ULTJ IJ)</a> remains a core staple holding in Indonesia and one of our top long-term consumer picks. </p>

Indonesia’s biggest milk company Ultrajaya Milk Industry &amp; Trading (ULTJ IJ) recently announced its 3Q2020 results, which saw a resilient performance from its dairy business and less so from packet tea. We caught up with management to garner a bit more colour on the simmering recovery that is taking place. 
In the dairy division white milk in larger packet sizes has been doing especially well, given the large portion of the population working and schooling from home. 
Smaller packet flavoured milks and packet tea under the Teh Sosroh brand continue to be under pressure given these are often picked up on the move but we expect a decent recovery as the economy opens up. 
Ultrajaya Milk Ind &amp; Trading (ULTJ IJ) is likely to see a marginally slower growth performance this year but a continued rebound in earnings should be expected in 4Q2020, driven by a move to a "new normal" in Indonesia and a gradual opening up of the economy. 
The company has opened a new Tetrapak line for larger packets to satisfy the growing demand for family packs. It is also investing in two large-sized dairy farms to ensure local supply.
Next year the company will invest in a new production and distribution centre closer to Jakarta, which will diversify its operations geographically. It has successfully secured IDR3tn in medium-term notes to finance its expansion. 
Valuations remain attractive with the company trading on 15.5x FY21E PER versus its peer group average of 26x forward PER. Ultrajaya Milk Ind &amp; Trading (ULTJ IJ) remains a core staple holding in Indonesia and one of our top long-term consumer picks. 

Ultrajaya Milk Industry & Trading (ULTJ IJ) - Simmering Recovery

<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-ind-trading" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Ind &amp; Trading (ULTJ IJ)</a> saw a more pronounced impact from COVID-19 in 2Q2020, with a decline in growth for UHT milk with UHT white milk seeing better performance than flavoured products. This can be attributed to people working and breakfasting from home with PSBB measures in place, which also drove higher demand for larger size packets.</p>
<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-ind-trading" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Ind &amp; Trading (ULTJ IJ)</a> did not see the usual benefits this year from Lebaran with packaged tea hit particularly hard, given far fewer people travelling due to the Mudik ban (return to home village). Normally Teh Kotak is a popular drink to pick up for long journeys. </p>
<p>July saw a slight pick-up in milk sales with some relaxation of PSBB measures from mid-June but it is too soon to read the performance for August. We would suggest a continuing rebound in sales of flavoured milk, as the population start to become more mobile again.</p>
<p>We also expect a gradual pick up in sales of Teh Kotak packet tea sales as employees return to working from the office again, albeit at a reduced intensity to start with.</p>
<p>Increased capacity for large size packets will also help to drive UHT white and flavoured milk growth, given greater demand due to WFH and schooling from home, especially for breakfasting.  </p>
<p><a href="https://www.smartkarma.com/entities/ultrajaya-milk-ind-trading" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Ind &amp; Trading (ULTJ IJ)</a> is likely to see a marginally slower growth performance this year but a rebound in earnings should be expected in 2H2020, driven by a move to a "new normal" in Indonesia and a gradual opening up of the economy. It is unlikely that it will adjust prices higher in September this year, which may slow growth prospects slightly. Valuations remain attractive with the company trading on 16.4x FY21E PER versus its peer group average of 26x forward PER. <a href="https://www.smartkarma.com/entities/ultrajaya-milk-ind-trading" target="_blank" data-smartkarma-citation="entities:13892:1" rel="noopener">Ultrajaya Milk Ind &amp; Trading (ULTJ IJ)</a> remains a core staple holding in Indonesia. </p>

Ultrajaya Milk Ind &amp; Trading (ULTJ IJ) saw a more pronounced impact from COVID-19 in 2Q2020, with a decline in growth for UHT milk with UHT white milk seeing better performance than flavoured products. This can be attributed to people working and breakfasting from home with PSBB measures in place, which also drove higher demand for larger size packets.
Ultrajaya Milk Ind &amp; Trading (ULTJ IJ) did not see the usual benefits this year from Lebaran with packaged tea hit particularly hard, given far fewer people travelling due to the Mudik ban (return to home village). Normally Teh Kotak is a popular drink to pick up for long journeys. 
July saw a slight pick-up in milk sales with some relaxation of PSBB measures from mid-June but it is too soon to read the performance for August. We would suggest a continuing rebound in sales of flavoured milk, as the population start to become more mobile again.
We also expect a gradual pick up in sales of Teh Kotak packet tea sales as employees return to working from the office again, albeit at a reduced intensity to start with.
Increased capacity for large size packets will also help to drive UHT white and flavoured milk growth, given greater demand due to WFH and schooling from home, especially for breakfasting.  
Ultrajaya Milk Ind &amp; Trading (ULTJ IJ) is likely to see a marginally slower growth performance this year but a rebound in earnings should be expected in 2H2020, driven by a move to a "new normal" in Indonesia and a gradual opening up of the economy. It is unlikely that it will adjust prices higher in September this year, which may slow growth prospects slightly. Valuations remain attractive with the company trading on 16.4x FY21E PER versus its peer group average of 26x forward PER. Ultrajaya Milk Ind &amp; Trading (ULTJ IJ) remains a core staple holding in Indonesia. 

Ultrajaya Milk Ind & Trading (ULTJ IJ) - A Wholesome Performance

<p><a href="https://www.smartkarma.com/entities/kino-indonesia" target="_blank" data-smartkarma-citation="entities:1083:1" rel="noopener">Kino Indonesia (KINO IJ)</a> is a less well-covered but very interesting consumer player in Indonesia, with an interesting stable of brands spanning beverages, personal care, baby products, foods, and pharmaceuticals. </p>
<p>The company was quick to adapt to the changing COVID-19 landscape by rapidly switching to production of hand-sanitiser in 1Q2020 and increasing output for handwash products.</p>
<p><a href="https://www.smartkarma.com/entities/kino-indonesia" target="_blank" data-smartkarma-citation="entities:1083:1" rel="noopener">Kino Indonesia (KINO IJ)</a> saw some impact on its sales in 1H2020, with sales declining by -1.3% after an +11% increase in 1Q2020 but it improved margins through increased efficiencies together with price increases for its products leading to +21% growth in net profit. </p>
<p>Its focus on switching production to hand sanitiser and letting distributors run down inventory in other areas had a positive impact on overall sales. Its Instance hand sanitiser is one of the market leaders in Indonesia after the company increased capacity more than 10x early in the year. </p>
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<p><a href="https://www.smartkarma.com/entities/kino-indonesia" target="_blank" data-smartkarma-citation="entities:1083:1" rel="noopener">Kino Indonesia (KINO IJ)</a> is already experiencing a post PSBB recovery albeit a relatively slow one but its change in product mix has saved it from any sharp decline in sales.</p>
<p>Management suggests that the recovery will continue towards the end of the year but we would expect mid-single-sales growth this year, slower than previous guidance but with improved margins, so profits should increase at a greater pace.</p>
<p>This is not a bad result and next year should see a sharper recovery across the board, just with hand sanitiser also a new core product. If we conservatively assume +10% growth in core earnings this year and next then valuations attractive, with the stock trading on 14.3x FY21E PER versus its 3-year average forward PER of 18x.</p>
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Kino Indonesia (KINO IJ) is a less well-covered but very interesting consumer player in Indonesia, with an interesting stable of brands spanning beverages, personal care, baby products, foods, and pharmaceuticals. 
The company was quick to adapt to the changing COVID-19 landscape by rapidly switching to production of hand-sanitiser in 1Q2020 and increasing output for handwash products.
Kino Indonesia (KINO IJ) saw some impact on its sales in 1H2020, with sales declining by -1.3% after an +11% increase in 1Q2020 but it improved margins through increased efficiencies together with price increases for its products leading to +21% growth in net profit. 
Its focus on switching production to hand sanitiser and letting distributors run down inventory in other areas had a positive impact on overall sales. Its Instance hand sanitiser is one of the market leaders in Indonesia after the company increased capacity more than 10x early in the year. 

Kino Indonesia (KINO IJ) is already experiencing a post PSBB recovery albeit a relatively slow one but its change in product mix has saved it from any sharp decline in sales.
Management suggests that the recovery will continue towards the end of the year but we would expect mid-single-sales growth this year, slower than previous guidance but with improved margins, so profits should increase at a greater pace.
This is not a bad result and next year should see a sharper recovery across the board, just with hand sanitiser also a new core product. If we conservatively assume +10% growth in core earnings this year and next then valuations attractive, with the stock trading on 14.3x FY21E PER versus its 3-year average forward PER of 18x.


Kino Indonesia (KINO IJ) - Sanitised Recovery

Indonesia

PT Kino Indonesia Tbk is an Indonesian multinational consumer goods company specializing in the manufacturing of personal care, hygiene, health care, confectionery, pastry, beverages, and pet care products. The company offers a wide range of brands across these categories. It is headquartered in Tangerang, Banten, Indonesia, and was founded in 1999.

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Kino Indonesia (KINO IJ)

Ultrajaya Milk Industry & Trading (ULTJ IJ) - Growth in a Small Carton

Ultrajaya remains one of Indonesia's least appreciated consumer staple players, with super-strong brands and a good long term growth track record...

Angus Mackintosh

Sido Muncul (SIDO): Still the Most Affordable Solution in the Pandemic

The vaccination already started in Indonesia and although it takes 15 months to complete, it could be an early catalyst for investors to book...

Henry Soediarko

Ultrajaya Milk Industry & Trading (ULTJ IJ) - Simmering Recovery

Ultrajaya Milk Ind & Trading (ULTJ IJ) is the leading dairy company in Indonesia, dominating the UHT market. It continues to expand capacity and...

Angus Mackintosh

Ultrajaya Milk Ind & Trading (ULTJ IJ) - A Wholesome Performance

Ultrajaya Milk Ind Trading (ULTJ IJ) saw a more pronounced impact from COVID-19 in 2Q2020 than expected...

Angus Mackintosh

Kino Indonesia (KINO IJ) - Sanitised Recovery

Kino Indonesia (KINO IJ) is a less well-covered but very interesting consumer player in Indonesia, with an interesting stable of brands spanning...

Angus Mackintosh

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