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

Mitra Keluarga Karyasehat / Equity Bottom-Up

<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> just released its 9M2020 results which saw revenues and EBITDA decline by -4.1% and -3.9% respectively but the key positive was a sharp rebound in 3Q2020, where revenues were flat versus 1Q2020 but EBITDA saw a +14.5% increase in 3Q2020 versus 1Q2020. Revenue in 3Q2020 was up by +54% versus 2Q2020 and EBITDA increased in 3Q2020 by +143.6% compared to 2Q 2020. These numbers demonstrate that a recovery is well underway. 
The better result was despite patient volumes declining -22.4% YoY in 3Q2020, as both revenue per inpatient and revenue per outpatient increased by +11.9% and +16.9% YoY respectively, with medication and diagnostic testing to treat COVID-19 patients helping to increase the revenue intensity. 
These look like a positive set of numbers, especially looking at the 3Q2020 versus 2Q2020, which showed a significant rebound and testament to the quality of the management, with costs also kept under control and a rock-solid balance sheet.
<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> trades on 27x FY21E EV/EBITDA versus its 5-year average of 30.5x. This positive set of results should be strong evidence of an ongoing recovery in its hospital business, with patients becoming more profitable as revenue intensity improves.

Mitra Keluarga Karyasehat Tbk (MIKA IJ) just released its 9M2020 results which saw revenues and EBITDA decline by -4.1% and -3.9% respectively but the key positive was a sharp rebound in 3Q2020, where revenues were flat versus 1Q2020 but EBITDA saw a +14.5% increase in 3Q2020 versus 1Q2020. Revenue in 3Q2020 was up by +54% versus 2Q2020 and EBITDA increased in 3Q2020 by +143.6% compared to 2Q 2020. These numbers demonstrate that a recovery is well underway. 
The better result was despite patient volumes declining -22.4% YoY in 3Q2020, as both revenue per inpatient and revenue per outpatient increased by +11.9% and +16.9% YoY respectively, with medication and diagnostic testing to treat COVID-19 patients helping to increase the revenue intensity. 
These look like a positive set of numbers, especially looking at the 3Q2020 versus 2Q2020, which showed a significant rebound and testament to the quality of the management, with costs also kept under control and a rock-solid balance sheet.
Mitra Keluarga Karyasehat Tbk (MIKA IJ) trades on 27x FY21E EV/EBITDA versus its 5-year average of 30.5x. This positive set of results should be strong evidence of an ongoing recovery in its hospital business, with patients becoming more profitable as revenue intensity improves. 

Mitra Keluarga Karyasehat Tbk (MIKA IJ) - A Recovery Fully Under Way

<a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)</a> is the leading diagnostic lab and clinic operator in Indonesia, providing a wide range of testing services both for individuals, as well as doctor referrals and hospitals. It stands out as the only diagnostic company in Indonesia to have College of American Physicians (CAP) accreditation.
The company is heavily involved in COVID-19 testing with around 4-5% of revenues now coming from PCR tests but this has not been enough to offset the downturn in patient numbers, especially for walk-in customers. This does seem to be changing and we expect a pick up in patient numbers in 3Q2020.
Corporate health check-ups have also been delayed with most of the testing taking place for corporates for COVID-19.  This may take more time to recover according to management. 
June and July have seen customers start to come back with traffic better and revenue per patient has picking up from the average in 1H2020 at IDR679,000 per visit. 
<a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)</a> is also increasingly focused on developing digital and online channels and provides a variety of services through its Prodia App.
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<a href="https://www.smartkarma.com/entities/prodia-widyahusada" target="_blank" data-smartkarma-citation="entities:23663:1" rel="noopener">Prodia Widyahusada (PRDA IJ)</a> looks attractive from a valuation perspective, trading on 5.8x FY21E  versus its 5-year average of 8.0x forward EV/EBITDA, especially with the prospect of an ongoing recovery over the next few quarters. Healthcare and especially rising demand for preventative medicine plays into the company's strengths. 
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Prodia Widyahusada (PRDA IJ) is the leading diagnostic lab and clinic operator in Indonesia, providing a wide range of testing services both for individuals, as well as doctor referrals and hospitals. It stands out as the only diagnostic company in Indonesia to have College of American Physicians (CAP) accreditation.
The company is heavily involved in COVID-19 testing with around 4-5% of revenues now coming from PCR tests but this has not been enough to offset the downturn in patient numbers, especially for walk-in customers. This does seem to be changing and we expect a pick up in patient numbers in 3Q2020.
Corporate health check-ups have also been delayed with most of the testing taking place for corporates for COVID-19.  This may take more time to recover according to management. 
June and July have seen customers start to come back with traffic better and revenue per patient has picking up from the average in 1H2020 at IDR679,000 per visit. 
Prodia Widyahusada (PRDA IJ) is also increasingly focused on developing digital and online channels and provides a variety of services through its Prodia App.

Prodia Widyahusada (PRDA IJ) looks attractive from a valuation perspective, trading on 5.8x FY21E  versus its 5-year average of 8.0x forward EV/EBITDA, especially with the prospect of an ongoing recovery over the next few quarters. Healthcare and especially rising demand for preventative medicine plays into the company's strengths. 


Prodia Widyahusada (PRDA IJ) - Keeping Indonesia Diagnosed and Healthy

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 finding of the COVID-19 vaccine is not a risk to the company's expanding EBITDA margin (from 35% to between 45-50%) as the demand for COVID-19 specific testing and medical service will continue for a few years longer. The Ministry of Health capped the price but it is still at a premium compared to the non-COVID-19 service rate. 
Trading at a 15% PER premium to the domestic peers, the company is valued at a 39% EV/EBITDA discount to the regional peers (thus it is still favorable to ASEAN investors) despite being the most profitable and pristine balance sheet. BUY.

The finding of the COVID-19 vaccine is not a risk to the company's expanding EBITDA margin (from 35% to between 45-50%) as the demand for COVID-19 specific testing and medical service will continue for a few years longer. The Ministry of Health capped the price but it is still at a premium compared to the non-COVID-19 service rate. 
Trading at a 15% PER premium to the domestic peers, the company is valued at a 39% EV/EBITDA discount to the regional peers (thus it is still favorable to ASEAN investors) despite being the most profitable and pristine balance sheet. BUY.

Mitra Keluarga (MIKA): Margin Expansion from COVID-19

Indonesia

Siloam International Hospitals is Indonesia's largest private hospital network, operating over 41 hospitals and numerous clinics across various provinces. The company offers an integrated healthcare ecosystem, providing comprehensive medical services including general and specialized treatments, emergency care, and health education, with centers of excellence in areas like oncology and neurosurgery. Headquartered in Tangerang, Indonesia, the company was founded on August 3, 1996.

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Siloam International Hospitals (SILO IJ)

Mitra Keluarga Karyasehat Tbk (MIKA IJ) - A Recovery Fully Under Way

Mitra Keluarga is the highest quality healthcare proxy in Indonesia, with exposure to both mainstream private hospitals and BPJS. 3Q2020 results...

Angus Mackintosh

Prodia Widyahusada (PRDA IJ) - Keeping Indonesia Diagnosed and Healthy

Prodia is a high-quality proxy for the recovery in demand for diagnostic testing in Indonesia, as well as for increasing health-consciousness.

Angus Mackintosh

Kimia Farma (KAEF): National Service Is Charity

•Get a mandate to distribute mask throughout Indonesia - Estimated revenues and margin, How much compared to the last year’s earnings •Share Price...

Henry Soediarko

Sritex (SRIL): Undervalued with More Products and B2C

Expand when your peers retreat. That is what Sri Rejeki Isman (SRIL IJ)

Henry Soediarko

Mitra Keluarga (MIKA): Margin Expansion from COVID-19

The finding of the COVID

Henry Soediarko

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