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 cement company <a href="https://www.smartkarma.com/entities/semen-indonesia-persero-tbk" target="_blank" data-smartkarma-citation="entities:11161:1" rel="noopener">Semen Indonesia (SMGR IJ)</a> released a solid set of FY2020 results with a -12.9% decrease in revenues but a +4.3% increase in EBITDA, and a +16.7% increase in net profit with a focus on lowering costs and implementing greater efficiencies.
The company also managed to improve its financial position over 2020 by reducing its overall debt and by refinancing its existing debt at lower interest rates, saving on interest costs and boosting the bottom line. 
<a href="https://www.smartkarma.com/entities/semen-indonesia-persero-tbk" target="_blank" data-smartkarma-citation="entities:11161:1" rel="noopener">Semen Indonesia (Gresik) (SMGR IJ)</a> is the largest cement company in Indonesia with a total capacity of 52.6m tonnes per annum and with more than 50% market share. It has suffered more than its competitors due to the decline in bulk cement demand but at the same time will see a greater benefit from the rebound driven by increased infrastructure spending. 
The stock now trades on 9.7x FY21E EV/EBITDA and 8.4x FY22E EV/EBITDA versus its 5-year average forward EV/EBITDA of 10.72x. EPS is forecast to grow by +20.2% in FY21E and +13.1% in FY22E, suggesting a strong recovery in earnings in line with the overall economy and especially the bulk cement market.

Indonesia's largest cement company Semen Indonesia (SMGR IJ) released a solid set of FY2020 results with a -12.9% decrease in revenues but a +4.3% increase in EBITDA, and a +16.7% increase in net profit with a focus on lowering costs and implementing greater efficiencies.
The company also managed to improve its financial position over 2020 by reducing its overall debt and by refinancing its existing debt at lower interest rates, saving on interest costs and boosting the bottom line. 
Semen Indonesia (Gresik) (SMGR IJ) is the largest cement company in Indonesia with a total capacity of 52.6m tonnes per annum and with more than 50% market share. It has suffered more than its competitors due to the decline in bulk cement demand but at the same time will see a greater benefit from the rebound driven by increased infrastructure spending. 
The stock now trades on 9.7x FY21E EV/EBITDA and 8.4x FY22E EV/EBITDA versus its 5-year average forward EV/EBITDA of 10.72x. EPS is forecast to grow by +20.2% in FY21E and +13.1% in FY22E, suggesting a strong recovery in earnings in line with the overall economy and especially the bulk cement market. 

Semen Indonesia (SMGR IJ) - Catch the Infrastructure Wave?

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

The fee increase, traffic recovery, and potential (still) low contribution from the construction business due to the pandemic are the three key elements that will drive the share price even higher for <a href="https://www.smartkarma.com/entities/jasa-marga-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:12747:1" rel="noopener">Jasa Marga (Persero) (JSMR IJ)</a> . Traffic recovery is an important piece of the puzzle that will bring PER lower and makes Jasa Marga optically not that pricey compared to the peers. With an expected low CAPEX in 2021, the company's blended margin will be as good as 2020 and not revert back to the level from previous years. Another future catalyst, although the timing is yet unclear, is the spin-off of the construction division then Jasa Marga will be a high-margin toll road operator that could potentially pay some higher dividend too.

The fee increase, traffic recovery, and potential (still) low contribution from the construction business due to the pandemic are the three key elements that will drive the share price even higher for Jasa Marga (Persero) (JSMR IJ) . Traffic recovery is an important piece of the puzzle that will bring PER lower and makes Jasa Marga optically not that pricey compared to the peers. With an expected low CAPEX in 2021, the company's blended margin will be as good as 2020 and not revert back to the level from previous years. Another future catalyst, although the timing is yet unclear, is the spin-off of the construction division then Jasa Marga will be a high-margin toll road operator that could potentially pay some higher dividend too. 

Jasa Marga (JSMR):Recovery Play and Low Capex

Indocement Tunggal Prakarsa / Equity Bottom-Up

The stars are aligning for a pick up in demand for cement in Indonesia in 2021, as the government prepares to accelerate fiscal spending in the coming year to kick-start the economy. 
The government has also brought forward a large number of infrastructure procurement packages in order to help the economy recover more quickly from the pandemic.
<a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a>  is targeting cement sales growth of +4% in 2021. This target assumes construction and property sectors can start to pick up as we enter 2021 post the government's COVID-19 vaccination program.
<a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> also sees positive catalysts from the financial industry and the completion of the construction of several toll road projects to stimulate the economy.
In terms of geographic segmentation, <a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> 's sales focus this year will still target the Jabodetabek and West Java areas, whilst still looking for new export opportunities.
<a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> saw the proportion of the bag market increase quite significantly from 72.8% to 77.7% in 9M2020 due to a significant slowdown in infrastructure and other projects, which would normally drive the bulk market.
The Government has mandated that essential sectors related to basic needs including construction projects can operate at 100% capacity with the implementation of health protocols during the most recent PSBB measures, with the current roll-out of the vaccination program in Indonesia expected to help facilitate a gradual economic recovery as we progress into 2021.
<a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> remains a core proxy for the recovery in the overall economy and increased spending on infrastructure, which was severely affected by COVID-19 in 2020.  <a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> trades on FY21E EV/EBITDA of 14.6x and 12.9x FY22E EV/EBITDA versus its 3-year average forward EV/EBITDA of 17.4x. The company is forecast to see EPS growth of +19% and +16% for FY21E and FY22E respectively, reflecting the recovery.

The stars are aligning for a pick up in demand for cement in Indonesia in 2021, as the government prepares to accelerate fiscal spending in the coming year to kick-start the economy. 
The government has also brought forward a large number of infrastructure procurement packages in order to help the economy recover more quickly from the pandemic.
Indocement Tunggal Prakarsa (INTP IJ)  is targeting cement sales growth of +4% in 2021. This target assumes construction and property sectors can start to pick up as we enter 2021 post the government's COVID-19 vaccination program.
Indocement Tunggal Prakarsa (INTP IJ) also sees positive catalysts from the financial industry and the completion of the construction of several toll road projects to stimulate the economy.
In terms of geographic segmentation, Indocement Tunggal Prakarsa (INTP IJ) 's sales focus this year will still target the Jabodetabek and West Java areas, whilst still looking for new export opportunities.
Indocement Tunggal Prakarsa (INTP IJ) saw the proportion of the bag market increase quite significantly from 72.8% to 77.7% in 9M2020 due to a significant slowdown in infrastructure and other projects, which would normally drive the bulk market.
The Government has mandated that essential sectors related to basic needs including construction projects can operate at 100% capacity with the implementation of health protocols during the most recent PSBB measures, with the current roll-out of the vaccination program in Indonesia expected to help facilitate a gradual economic recovery as we progress into 2021.
Indocement Tunggal Prakarsa (INTP IJ) remains a core proxy for the recovery in the overall economy and increased spending on infrastructure, which was severely affected by COVID-19 in 2020.  Indocement Tunggal Prakarsa (INTP IJ) trades on FY21E EV/EBITDA of 14.6x and 12.9x FY22E EV/EBITDA versus its 3-year average forward EV/EBITDA of 17.4x. The company is forecast to see EPS growth of +19% and +16% for FY21E and FY22E respectively, reflecting the recovery.

Indocement Tunggal Prakarsa (INTP IJ) - Solidifying Demand Ahead

The Indonesian cement market for June grew by +32.3% due to the lower base last year as Lebaran fell earlier this year. YTD cement volumes contracted by -6.4%, with the Bag market falling -3.2% and Bulk of -15.1%, mainly due to delays on larger size projects. 
<a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> saw growth of +30.4% YoY, supported by overall Western Java growth of +37.8%, where the company saw its home market share increase +130bps to 46.4%.
It continues to gain efficiencies through lower coal costs, greater use of low CV coal as well as a greater portion of alternative energy. It is also focused on sustainability with an ongoing program to reduce dust emissions. 
The company continues to focus on building its Tiga Roda brand and promoting its new grey mortar cement, using digital channels as well as TV. 
The company foresees a continuing recovery for the rest of the year but expects cement volumes to drop -5%-10% YoY for FY20, with a loosening of PSBB restrictions, a restarting of existing infrastructure projects as well as some new infra projects starting in 2H2020.
<a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> trades on 12.8x FY20E EV/EBITDA and 10.5x FY21E EV/EBITDA well below its 5-year average forward EV/EBITDA of 14.4x.

The Indonesian cement market for June grew by +32.3% due to the lower base last year as Lebaran fell earlier this year. YTD cement volumes contracted by -6.4%, with the Bag market falling -3.2% and Bulk of -15.1%, mainly due to delays on larger size projects. 
Indocement Tunggal Prakarsa (INTP IJ) saw growth of +30.4% YoY, supported by overall Western Java growth of +37.8%, where the company saw its home market share increase +130bps to 46.4%.
It continues to gain efficiencies through lower coal costs, greater use of low CV coal as well as a greater portion of alternative energy. It is also focused on sustainability with an ongoing program to reduce dust emissions. 
The company continues to focus on building its Tiga Roda brand and promoting its new grey mortar cement, using digital channels as well as TV. 
The company foresees a continuing recovery for the rest of the year but expects cement volumes to drop -5%-10% YoY for FY20, with a loosening of PSBB restrictions, a restarting of existing infrastructure projects as well as some new infra projects starting in 2H2020.
Indocement Tunggal Prakarsa (INTP IJ) trades on 12.8x FY20E EV/EBITDA and 10.5x FY21E EV/EBITDA well below its 5-year average forward EV/EBITDA of 14.4x. 

Indocement (INTP IJ) - The Dust Begins to Settle

<a href="https://www.smartkarma.com/entities/semen-indonesia-persero-tbk" target="_blank" data-smartkarma-citation="entities:11161:1" rel="noopener">Semen Indonesia Persero Tbk (SMGR IJ)</a> hosted a call to run through its 1Q2020 results, which saw a marginal impact from COVID-19. What was more interesting were the company's views on the outlook for the Indonesian cement market, which is likely to have a choppy few months. 
The achieved positive volume growth in 1Q2020 mainly due to the inclusion of <a href="https://www.smartkarma.com/entities/pt-solusi-bangun-indonesia-tbk" target="_blank" data-smartkarma-citation="entities:3671:1" rel="noopener">PT Solusi Bangun Indonesia Tbk (SMCB IJ)</a> and strong performance from the company's Vietnamese operations. 
It saw profitability improve due to synergies and scale benefits on logistics and procurement specifically on <a href="https://www.smartkarma.com/entities/pt-solusi-bangun-indonesia-tbk" target="_blank" data-smartkarma-citation="entities:3671:1" rel="noopener">PT Solusi Bangun Indonesia Tbk (SMCB IJ). </a> The company expects to maintain margins in 2020 versus FY19. 
COVID-19 has started to impact volume in April but even more so in May. Smaller operators are concentrating on their home markets and customers with solid credit record. This has opened up some gaps and opportunities which <a href="https://www.smartkarma.com/entities/semen-indonesia-persero-tbk" target="_blank" data-smartkarma-citation="entities:11161:1" rel="noopener">Semen Indonesia Persero Tbk (SMGR IJ)</a> will look to fill. 
The company has improved its debt structure in 2H19, bring the average interest rates down and It is also looking to sell a 15% stake in <a href="https://www.smartkarma.com/entities/pt-solusi-bangun-indonesia-tbk" target="_blank" data-smartkarma-citation="entities:3671:1" rel="noopener">PT Solusi Bangun Indonesia Tbk (SMCB IJ)</a> to Japanese cement company Teiheiyo Cement Corporation. 
<a href="https://www.smartkarma.com/entities/semen-indonesia-persero-tbk" target="_blank" data-smartkarma-citation="entities:11161:1" rel="noopener">Semen Indonesia Persero Tbk (SMGR IJ)</a> is trading on 7.8x FY21E EV/EBITDA is the 10-year average of 9.8x and a high of 14x forward EV/EBITDA. This a key recovery play once the government starts to reopen the economy.

Semen Indonesia Persero Tbk (SMGR IJ) hosted a call to run through its 1Q2020 results, which saw a marginal impact from COVID-19. What was more interesting were the company's views on the outlook for the Indonesian cement market, which is likely to have a choppy few months. 
The achieved positive volume growth in 1Q2020 mainly due to the inclusion of PT Solusi Bangun Indonesia Tbk (SMCB IJ) and strong performance from the company's Vietnamese operations. 
It saw profitability improve due to synergies and scale benefits on logistics and procurement specifically on PT Solusi Bangun Indonesia Tbk (SMCB IJ).  The company expects to maintain margins in 2020 versus FY19. 
COVID-19 has started to impact volume in April but even more so in May. Smaller operators are concentrating on their home markets and customers with solid credit record. This has opened up some gaps and opportunities which Semen Indonesia Persero Tbk (SMGR IJ) will look to fill. 
The company has improved its debt structure in 2H19, bring the average interest rates down and It is also looking to sell a 15% stake in PT Solusi Bangun Indonesia Tbk (SMCB IJ) to Japanese cement company Teiheiyo Cement Corporation. 
Semen Indonesia Persero Tbk (SMGR IJ) is trading on 7.8x FY21E EV/EBITDA is the 10-year average of 9.8x and a high of 14x forward EV/EBITDA. This a key recovery play once the government starts to reopen the economy.

Semen Indonesia Persero Tbk (SMGR IJ) - Its Not All Bad News After All

Indonesia

PT Semen Indonesia (Persero) Tbk, also known as SIG, is an Indonesian state-owned holding company providing building material solutions. The company's main business is in the cement sector and its derivative products such as concrete, mortar, precast, and aggregate, with additional services including construction, logistics, and industrial estate management. It was founded in 1957 and is headquartered in Jakarta, Indonesia.

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Semen Indonesia Group (SMGR IJ)

Semen Indonesia (SMGR IJ) - Catch the Infrastructure Wave?

Semen Indonesia remains a key proxy for the recovery in the Indonesian economy and especially as infrastructure spending picks up driving renewed...

Angus Mackintosh

Jasa Marga (JSMR):Recovery Play and Low Capex

The price increase, traffic recovery, and potential low contribution from the construction business are the three key elements that will drive the...

Henry Soediarko

Indocement Tunggal Prakarsa (INTP IJ) - Solidifying Demand Ahead

Indocement (INTP IJ) remains a core proxy for the recovery in the overall economy and increased spending on infrastructure, which was severely...

Angus Mackintosh

Indocement (INTP IJ) - The Dust Begins to Settle

The Indonesian cement market for June grew by +32.3% due to the lower base last year as Lebaran fell earlier this year. YTD cement volumes...

Angus Mackintosh

Semen Indonesia Persero Tbk (SMGR IJ) - Its Not All Bad News After All

Semen Indonesia Persero Tbk (SMGR IJ) hosted a call to run through its 1Q2020 results, which saw a marginal impact from COVID-19. What was more...

Angus Mackintosh

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