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

Indocement Tunggal Prakarsa / Equity Bottom-Up

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<p><span data-preserver-spaces="true">Given we are now coming out of Indonesia's latest wave of COVID-19 and mobility and economic activity is resuming , we see <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> as an interesting proxy for the recovery, given its exposure to West Java, infrastructure spending, and the recovering residential property market </span></p>
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<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"><span data-preserver-spaces="true">Indocement Tunggal Prakarsa (INTP IJ)</span></a><span data-preserver-spaces="true"> released a solid set of 1H2021 results, with an increase in revenue of +8.0% YoY on the back of an increase in cement volume.  </span><span data-preserver-spaces="true">EBITDA margins improved from 15.5% to 19.2% due to savings in operating expenses and gains in other operating income, leading to an EBITDA increase of +33.6% YoY to IDR1,280.6bn. <a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"></a></span><span data-preserver-spaces="true"> </span></p>
<section class="figure">One major cost pressure comes from rising coal prices, which have increased significantly over the past year and the company has been continually both increasing its usage of low calorific coal and alternative fuels over the past 5-years to offset this.</section>
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<p><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> has a strong focus on improving its emissions, with assistance from the Heidelberg Cement Technology Centre, with a road map in place for energy efficiency and CO2 reductions.</p>
<p>The fact that around 78% of cement sales at <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 in bags makes branding all the more important and as a result the company is quite focused on promoting the brand through TV and social media channels.</p>
<section class="figure">The company continues with its digitalisation and has developed a fully digitalised ordering system with real time data which helps the company's sales to achieve better results both on ordering as well as on pricing.</section>
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<p><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> estimates that national cement domestic growth will increase by +5% for FY2021 with the resumption of more infrastructure projects and private projects in 2H2021 plus more activity in residential property.</p>
<p>The company's expansion will be focused on expanding its distribution channels through possible new terminals and barge or vessel ownership, as well as potentially exploring M&amp;A opportunities. </p>
<p><span data-preserver-spaces="true"><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 11.1x FY21E EV/EBITDA and 9.9x FY22E EV/EBITDA versus its 5-year average forward EV/EBITDA of 15x, making the company look attractive from a valuation perspective. </span></p>


Given we are now coming out of Indonesia's latest wave of COVID-19 and mobility and economic activity is resuming , we see Indocement Tunggal Prakarsa (INTP IJ) as an interesting proxy for the recovery, given its exposure to West Java, infrastructure spending, and the recovering residential property market 

Indocement Tunggal Prakarsa (INTP IJ) released a solid set of 1H2021 results, with an increase in revenue of +8.0% YoY on the back of an increase in cement volume.  EBITDA margins improved from 15.5% to 19.2% due to savings in operating expenses and gains in other operating income, leading to an EBITDA increase of +33.6% YoY to IDR1,280.6bn.  
One major cost pressure comes from rising coal prices, which have increased significantly over the past year and the company has been continually both increasing its usage of low calorific coal and alternative fuels over the past 5-years to offset this.



Indocement Tunggal Prakarsa (INTP IJ) has a strong focus on improving its emissions, with assistance from the Heidelberg Cement Technology Centre, with a road map in place for energy efficiency and CO2 reductions.
The fact that around 78% of cement sales at Indocement Tunggal Prakarsa (INTP IJ) is in bags makes branding all the more important and as a result the company is quite focused on promoting the brand through TV and social media channels.
The company continues with its digitalisation and has developed a fully digitalised ordering system with real time data which helps the company's sales to achieve better results both on ordering as well as on pricing.





Indocement Tunggal Prakarsa (INTP IJ) estimates that national cement domestic growth will increase by +5% for FY2021 with the resumption of more infrastructure projects and private projects in 2H2021 plus more activity in residential property.
The company's expansion will be focused on expanding its distribution channels through possible new terminals and barge or vessel ownership, as well as potentially exploring M&amp;A opportunities. 
Indocement Tunggal Prakarsa (INTP IJ) trades on 11.1x FY21E EV/EBITDA and 9.9x FY22E EV/EBITDA versus its 5-year average forward EV/EBITDA of 15x, making the company look attractive from a valuation perspective. 

Indocement Tunggal Prakasa (INTP IJ) - Bulky Recovery in Place

<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"><span data-preserver-spaces="true">Indocement Tunggal Prakarsa (INTP IJ)</span></a><span data-preserver-spaces="true"> released results last week with an -11%  decrease in sales to IDR 14,184.3bn but only a -1.6% decrease in net profit to IDR1,803.3bn, with a number of cost reduction initiatives baring fruit in 2020 and we see these initiative continuing into 2021 on top of higher sales.</span></p><p><span data-preserver-spaces="true">The company saw resilient performance last year from its bag cement sales but bulk cement demand suffered as infrastructure projects stalled but we expect this situation to reverse this year.</span></p><p><span data-preserver-spaces="true">The cost of revenues decreased last year due to lower volumes and continuous savings on fuel and power with lower coal prices but with greater use of LCV coal, alternative fuels, and other operational cost savings, plus the ongoing digitalization at the company. </span></p><p><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> will continue to push these cost initiatives in 2021, with the potential to further increase the use of LCV coal and alternative fuels.</p><p>The company has seen a slow start to the year due to heavy rains but we should expect a strong rebound from April onwards as projects get underway.</p><p><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> continues to improve its sustainability credentials with lower emissions and new environmentally friendly products. </p><p><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 13.2x FY21E EV/EBITDA and 12.0x FY22E EV/EBITDA versus its 5-year average of 14.4x forward EV/EBITDA, making the company look relatively attractive from a valuation standpoint.</p>

Indocement Tunggal Prakarsa (INTP IJ) released results last week with an -11%  decrease in sales to IDR 14,184.3bn but only a -1.6% decrease in net profit to IDR1,803.3bn, with a number of cost reduction initiatives baring fruit in 2020 and we see these initiative continuing into 2021 on top of higher sales.The company saw resilient performance last year from its bag cement sales but bulk cement demand suffered as infrastructure projects stalled but we expect this situation to reverse this year.The cost of revenues decreased last year due to lower volumes and continuous savings on fuel and power with lower coal prices but with greater use of LCV coal, alternative fuels, and other operational cost savings, plus the ongoing digitalization at the company. Indocement Tunggal Prakarsa (INTP IJ) will continue to push these cost initiatives in 2021, with the potential to further increase the use of LCV coal and alternative fuels.The company has seen a slow start to the year due to heavy rains but we should expect a strong rebound from April onwards as projects get underway.Indocement Tunggal Prakarsa (INTP IJ) continues to improve its sustainability credentials with lower emissions and new environmentally friendly products. Indocement Tunggal Prakarsa (INTP IJ) trades on 13.2x FY21E EV/EBITDA and 12.0x FY22E EV/EBITDA versus its 5-year average of 14.4x forward EV/EBITDA, making the company look relatively attractive from a valuation standpoint.

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>Last Week in Event <strong>SPACE</strong> ...</p>
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<strong><a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp Ltd (KEP SP)</a></strong> is still trading cheap to its index and earning comps. It is trading relatively cheap to an O&amp;M or Asset Base basket, and there is no embedded premium for any restructuring that Temasek might undertake.</li>
<li>Starwood tabling an Offer for <strong><a href="https://www.smartkarma.com/entities/australian-unity-office-fund" target="_blank" data-smartkarma-citation="entities:24077:1" rel="noopener">Australian Unity Office Fund (AOF AU)</a></strong> that was destined to fail, points to an improved Offer.</li>
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<strong><a href="https://www.smartkarma.com/entities/jardine-matheson-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Hldgs (JM SP)</a></strong> is cashed up and further buybacks are likely. However, at the current levels, the ratio is tilted in favour of <strong><a href="https://www.smartkarma.com/entities/jardine-strategic-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Hldgs (JS SP)</a></strong>.</li>
<li>The spread in the <strong><a href="https://www.smartkarma.com/entities/ingenico-group-sa" target="_blank" data-smartkarma-citation="entities:21487:1" rel="noopener">Ingenico Group Sa (ING FP)</a></strong> deal is negligible as the market expects a counterbid and is comfortable with other risks. But the market may be underpricing anti-trust risk.  </li>
<li>Why are <strong><a href="https://www.smartkarma.com/entities/borgwarner-inc" target="_blank" data-smartkarma-citation="entities:18392:1" rel="noopener">Borgwarner Inc (BWA US)</a></strong>'s shareholders unhappy and what does that mean for the <strong><a href="https://www.smartkarma.com/entities/delphi-technologies-plc" target="_blank" data-smartkarma-citation="entities:27835:1" rel="noopener">Delphi Technologies PLC (DLPH US)</a></strong> deal?</li>
<li>As widely expected, the HKEx has proposed allowing companies to hold shares with extra voting rights for new Hong Kong listings in a move to lure more tech companies - primarily US-listed Mainland China stocks - to list on the bourse.</li>
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<li>Plus, other events, CCASS movements and Mood Spins.</li>
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<p><em>(This insight covers specific insights &amp; comments involving <strong>S</strong>tubs, <strong>P</strong>airs, <strong>A</strong>rbitrage, share <strong>C</strong>lassifications, and <strong>E</strong>vents - or <strong>SPACE</strong> - in the past week)</em></p>
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Last Week in Event SPACE ...




Keppel Corp Ltd (KEP SP) is still trading cheap to its index and earning comps. It is trading relatively cheap to an O&amp;M or Asset Base basket, and there is no embedded premium for any restructuring that Temasek might undertake.
Starwood tabling an Offer for Australian Unity Office Fund (AOF AU) that was destined to fail, points to an improved Offer.

Jardine Matheson Hldgs (JM SP) is cashed up and further buybacks are likely. However, at the current levels, the ratio is tilted in favour of Jardine Strategic Hldgs (JS SP).
The spread in the Ingenico Group Sa (ING FP) deal is negligible as the market expects a counterbid and is comfortable with other risks. But the market may be underpricing anti-trust risk.  
Why are Borgwarner Inc (BWA US)'s shareholders unhappy and what does that mean for the Delphi Technologies PLC (DLPH US) deal?
As widely expected, the HKEx has proposed allowing companies to hold shares with extra voting rights for new Hong Kong listings in a move to lure more tech companies - primarily US-listed Mainland China stocks - to list on the bourse.




Plus, other events, CCASS movements and Mood Spins.


(This insight covers specific insights &amp; comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)










Last Week in Event SPACE: Keppel, Aussie Unity, Jardines, Delphi, Hong Kong's WVRs, Ingenico

<p>Back on the 9 May last year, <a href="https://www.smartkarma.com/entities/san-miguel-corporation" target="_blank" data-smartkarma-citation="entities:22728:1" rel="noopener">San Miguel (SMC PM)</a> ​and <a href="https://www.smartkarma.com/entities/lafargeholcim-ltd" target="_blank" data-smartkarma-citation="entities:27916:1" rel="noopener">LafargeHolcim Ltd (LHN SW)</a> entered into a <a href="http://edge.pse.com.ph/downloadHtml.do?file_id=582973" target="_blank" rel="noopener">share purchase agreement</a> whereby SMC (via wholly-owned subsidiary First Stronghold) would acquire 85.73% in <a href="https://www.smartkarma.com/entities/holcim-philippines-inc" target="_blank" data-smartkarma-citation="entities:22702:1" rel="noopener">Holcim Philippines (HLCM PM)</a>. This followed Lafarge's divestment of Holcim Indonesia the previous year.</p>
<p>The key hurdle for this deal centred on competition concerns. This was validated with the <a href="https://phcc.gov.ph/wp-content/uploads/2019/09/SMC-Holcim_Statement-on-the-Opening-of-Phase-II_06Sept2019.pdf" target="_blank" rel="noopener">launch</a> of a Phase II review by the Philippine Competition Commission (PCC) on the 6 September.</p>
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<p>The PCC flagged six areas where the transaction may affect competition: Northeast Luzon, Northwest Luzon , Central Luzon and National Capital Region, Southern Luzon, Northern Mindanao, and the Southern Mindanao Markets.</p>
<p>According to <a href="https://www.cemnet.com/News/story/166741/san-miguel-corp-and-holcim-philippines-face-opposition-to-merger-deal.html" target="_blank" rel="noopener">Cemnet</a>, there was/is considerable pushback to the merger from industry players. </p>
<p>In a statement of concerns released on the <a href="https://phcc.gov.ph/wp-content/uploads/2020/01/FINAL-PCC_ExecSummary_SMC-Holcim_Cement_31Jan2020.pdf" target="_blank" rel="noopener">31 January</a>, the PCC determined that the merger will lead to a monopoly in Northwest Luzon; imports are not sufficient to constrain this monopoly, and on account of high barriers to entry, neither can new entrants.</p>
<p>This conclusion was reached despite voluntary commitments proposed by Top Frontier, SMC's holding company. Such commitments were not made public.</p>
<p>This PCC announcement should not come as a surprise. As previously discussed here (<em><a href="https://skr.ma/JRfAm" target="_blank" rel="noopener">SMC Pursues A Ready-Mixed Fortune With Holcim</a></em>) from the onset, if this transaction was not taking place in the Philippines and not involving the Ang family, then anti-trust approval would (in my opinion) be unlikely. Evidently, the clout of the Ang family did not sway the regulator.</p>
<p>The merger is not dead, and PCC and San Miguel remain in discussions. Precedents would suggest a final decision is likely months away. </p>
<p>HLCM's shares are off 3% since the launch of Phase II, compared to +8% for peers, and -35% for listed Filipino peers. Bear in mind HLCM is up 119% since rumours of a deal first started doing the rounds in January last year.</p>
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Back on the 9 May last year, San Miguel (SMC PM) ​and LafargeHolcim Ltd (LHN SW) entered into a share purchase agreement whereby SMC (via wholly-owned subsidiary First Stronghold) would acquire 85.73% in Holcim Philippines (HLCM PM). This followed Lafarge's divestment of Holcim Indonesia the previous year.
The key hurdle for this deal centred on competition concerns. This was validated with the launch of a Phase II review by the Philippine Competition Commission (PCC) on the 6 September.

The PCC flagged six areas where the transaction may affect competition: Northeast Luzon, Northwest Luzon , Central Luzon and National Capital Region, Southern Luzon, Northern Mindanao, and the Southern Mindanao Markets.
According to Cemnet, there was/is considerable pushback to the merger from industry players. 
In a statement of concerns released on the 31 January, the PCC determined that the merger will lead to a monopoly in Northwest Luzon; imports are not sufficient to constrain this monopoly, and on account of high barriers to entry, neither can new entrants.
This conclusion was reached despite voluntary commitments proposed by Top Frontier, SMC's holding company. Such commitments were not made public.
This PCC announcement should not come as a surprise. As previously discussed here (SMC Pursues A Ready-Mixed Fortune With Holcim) from the onset, if this transaction was not taking place in the Philippines and not involving the Ang family, then anti-trust approval would (in my opinion) be unlikely. Evidently, the clout of the Ang family did not sway the regulator.
The merger is not dead, and PCC and San Miguel remain in discussions. Precedents would suggest a final decision is likely months away. 
HLCM's shares are off 3% since the launch of Phase II, compared to +8% for peers, and -35% for listed Filipino peers. Bear in mind HLCM is up 119% since rumours of a deal first started doing the rounds in January last year.



PCC Concludes Merger-To-Monopoly In Holcim/San Miguel Tie-Up

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in December and the changes will be effective from 2 January 2020. Passive funds and index arb desks will need to trade at (or by) the close on 30 December 2019.</p><p>We see a possibility of <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" rel="noopener" data-smartkarma-citation="entities:12409:1">VGI Global Media (VGI TB)</a> being added to the SET50 index in this review and <a href="https://www.smartkarma.com/entities/banpu-power-pcl" target="_blank" rel="noopener" data-smartkarma-citation="entities:23631:1">Banpu Power PCL (BPP TB)</a> as a possible deletion candidate.</p><p>This Insight covers the SET50 index methodology, our expected changes, historical impact on additions/deletions to the index and suggest trades for this rebalance.</p>

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in December and the changes will be effective from 2 January 2020. Passive funds and index arb desks will need to trade at (or by) the close on 30 December 2019.We see a possibility of VGI Global Media (VGI TB) being added to the SET50 index in this review and Banpu Power PCL (BPP TB) as a possible deletion candidate.This Insight covers the SET50 index methodology, our expected changes, historical impact on additions/deletions to the index and suggest trades for this rebalance.

SET50 Index Rebalance Preview - Better Early Than Late

Thailand

Siam City Cement is a leading Thai manufacturer and distributor of cement and construction materials, including ready-mixed concrete, aggregates, and light building materials such as fiber cement and lightweight concrete blocks. The company also engages in waste management, industrial services, and energy production. It was established on May 16, 1969, and is headquartered in Bangkok, Thailand.

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Siam City Cement (SCCC TB)

Indocement Tunggal Prakasa (INTP IJ) - Bulky Recovery in Place

We see Indocement as an interesting and high-quality proxy to the recovery in the Indonesian economy, given its exposure to infrastructure through...

Angus Mackintosh

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

Indocement is a high-quality core holding for exposure to the recovery in cement demand this year and next, with lower costs and digitalization...

Angus Mackintosh

Last Week in Event SPACE: Keppel, Aussie Unity, Jardines, Delphi, Hong Kong's WVRs, Ingenico

Last Week in Event SPACE ... Keppel Corp Ltd (KEP SP) is still trading cheap to its index and earning comps. It is trading relatively cheap...

David Blennerhassett

PCC Concludes Merger-To-Monopoly In Holcim/San Miguel Tie-Up

Back on the 9 May last year, San Miguel (SMC PM) and LafargeHolcim Ltd (LHN SW) entered into a share purchase agreement whereby SMC (via...

David Blennerhassett

SET50 Index Rebalance Preview - Better Early Than Late

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in December and the changes will be...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Indocement Tunggal Prakasa (INTP IJ) - Bulky Recovery in Place

We see Indocement as an interesting and high-quality proxy to the recovery in the Indonesian economy, given its exposure to infrastructure through...

Angus Mackintosh

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

Indocement is a high-quality core holding for exposure to the recovery in cement demand this year and next, with lower costs and digitalization...

Angus Mackintosh

Last Week in Event SPACE: Keppel, Aussie Unity, Jardines, Delphi, Hong Kong's WVRs, Ingenico

Last Week in Event SPACE ... Keppel Corp Ltd (KEP SP) is still trading cheap to its index and earning comps. It is trading relatively cheap...

David Blennerhassett

PCC Concludes Merger-To-Monopoly In Holcim/San Miguel Tie-Up

Back on the 9 May last year, San Miguel (SMC PM) ​and LafargeHolcim Ltd (LHN SW) entered into a share purchase agreement whereby SMC (via...

David Blennerhassett

SET50 Index Rebalance Preview - Better Early Than Late

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the SET50 index in December and the changes will be...

Brian Freitas

Back on the 9 May last year, San Miguel (SMC PM) and LafargeHolcim Ltd (LHN SW) entered into a share purchase agreement whereby SMC (via...