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

A call with Indonesia's largest handset manufacturer <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ),</a> revealed a relatively resilient message about the "normalisation" of sales volumes since end of 2Q2020. The outlook is not that certain but the company looks well-equipped to benefit from a recovery. 
A key positive highlighted by management was confirmation of the implementation and enforcement of mandatory IMEI number registration from 16th September. This should go some way to killing off the rampant black market in Indonesia to the benefit of <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a>.  
At the peak of PSBB measures, the company had to close around 300 out of its 1,100 odd stores, which had some impact on volumes in 2Q2020 but volumes were back to pre-COVID levels in June and July.
Given the closure of a number of stores, <a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a> has been pushing hard into other channels, such as its own online sales through <a href="http://www.eraspace.com" target="_blank" rel="noopener">www.eraspace.com</a> but also through official stores on e-commerce sites such as <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ),</a> <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group (LAZADA SP)</a>, and Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> but it deals with all e-commerce players. This has yielded very positive results with sales growing significantly through these channels. 
The overall market continues to be dominated by Chinese brands, with VIVO at number one followed by OPPO, Samsung, Xiaomi, and Realme. Working and learning from home has also boosted sales of tablets. ASPs have also risen slightly in 2Q2020, which suggests some upgrading. 
<a href="https://www.smartkarma.com/entities/erajaya-swasembada-tbk-pt" target="_blank" data-smartkarma-citation="entities:18869:1" rel="noopener">Erajaya Swasembada (ERAA IJ)</a>'s valuations look very reasonable with the company trading on 11x FY21E PER given the prospect of a strong recovery over the next two years.

A call with Indonesia's largest handset manufacturer Erajaya Swasembada (ERAA IJ), revealed a relatively resilient message about the "normalisation" of sales volumes since end of 2Q2020. The outlook is not that certain but the company looks well-equipped to benefit from a recovery. 
A key positive highlighted by management was confirmation of the implementation and enforcement of mandatory IMEI number registration from 16th September. This should go some way to killing off the rampant black market in Indonesia to the benefit of Erajaya Swasembada (ERAA IJ).  
At the peak of PSBB measures, the company had to close around 300 out of its 1,100 odd stores, which had some impact on volumes in 2Q2020 but volumes were back to pre-COVID levels in June and July.
Given the closure of a number of stores, Erajaya Swasembada (ERAA IJ) has been pushing hard into other channels, such as its own online sales through www.eraspace.com but also through official stores on e-commerce sites such as Tokopedia PT (1087142D IJ), Lazada Group (LAZADA SP), and Shopee (Sea Ltd (SE US) but it deals with all e-commerce players. This has yielded very positive results with sales growing significantly through these channels. 
The overall market continues to be dominated by Chinese brands, with VIVO at number one followed by OPPO, Samsung, Xiaomi, and Realme. Working and learning from home has also boosted sales of tablets. ASPs have also risen slightly in 2Q2020, which suggests some upgrading. 
Erajaya Swasembada (ERAA IJ)'s valuations look very reasonable with the company trading on 11x FY21E PER given the prospect of a strong recovery over the next two years. 

Erajaya Swasembada (ERAA IJ) - Goodbye Blackmarket

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

<a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> released a decent set of 1H2020 results with net profit of IDR12,240bn versus IDR12,862bn in IH19 or -4.8%% decline YoY, especially given the full impact of COVID-19 in 2Q2020. The second quarter saw a greater impact with net profit down -14% YoY, as PSBB measures took hold. <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> booked solid pre-provisioning operating profit growth of +15.8% for 1H2020 and +13.0% in 2Q2020, with an increase in provisions denting the bottom line. The bank saw loan growth of +5.3% in 1H2020 bring the YTD number to June -1.4% with 2Q2020 seeing a decline of -2.8%. The key driver for loan growth came from corporate lending with +17.2% YoY growth in 1H2020. Other areas such as consumer, commercial, and SME saw some slippage, as well as increased run-offs. At the same time, <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> strengthened its funding base with a +13.0% increase in 3rd party funds and CASA growth of +12.8% YoY.The strong growth in its CASA, which might have been expected to slow in this environment, is a positive surprise. Even though loan demand is weak, the excess funds can be used to enhance returns through holding bonds or commercial papers. <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> continues to grow its internet and especially mobile banking, increasing the number of new accounts significantly, supported by the bank's online account opening service. This is helping to reinforce its lead in transactional banking as well as underpinning liquidity.  <div class="content-highlight"><a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> remains the most defensive banking name amongst the top four banks and the most flush with liquidity. It is trading in line with its 3-year average PBV but still at a discount to its pre-pandemic valuation. It remains a core holding that should be bought on weakness. </div>

Bank Central Asia (BBCA IJ) released a decent set of 1H2020 results with net profit of IDR12,240bn versus IDR12,862bn in IH19 or -4.8%% decline YoY, especially given the full impact of COVID-19 in 2Q2020. The second quarter saw a greater impact with net profit down -14% YoY, as PSBB measures took hold. Bank Central Asia (BBCA IJ) booked solid pre-provisioning operating profit growth of +15.8% for 1H2020 and +13.0% in 2Q2020, with an increase in provisions denting the bottom line. The bank saw loan growth of +5.3% in 1H2020 bring the YTD number to June -1.4% with 2Q2020 seeing a decline of -2.8%. The key driver for loan growth came from corporate lending with +17.2% YoY growth in 1H2020. Other areas such as consumer, commercial, and SME saw some slippage, as well as increased run-offs. At the same time, Bank Central Asia (BBCA IJ) strengthened its funding base with a +13.0% increase in 3rd party funds and CASA growth of +12.8% YoY.The strong growth in its CASA, which might have been expected to slow in this environment, is a positive surprise. Even though loan demand is weak, the excess funds can be used to enhance returns through holding bonds or commercial papers. Bank Central Asia (BBCA IJ) continues to grow its internet and especially mobile banking, increasing the number of new accounts significantly, supported by the bank's online account opening service. This is helping to reinforce its lead in transactional banking as well as underpinning liquidity.  Bank Central Asia (BBCA IJ) remains the most defensive banking name amongst the top four banks and the most flush with liquidity. It is trading in line with its 3-year average PBV but still at a discount to its pre-pandemic valuation. It remains a core holding that should be bought on weakness. 

Bank Central Asia (BBCA IJ) - Liability Protection

<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/industri-jamu-dan-farmasi-sd-mncl-tbk-pt" target="_blank" data-smartkarma-citation="entities:6033:1" rel="noopener">Sido Muncul (SIDO IJ)'</a>s herbal medicine products under its Tolak Angin brand are a household name in Indonesia, given they are a remedy for the country's most well known and widespread complaint of "masuk angin". The onset of COVID-19 has provided the catalyst for strong growth outside its core products as well as the development of new variants. A recent call with management confirmed a positive outlook despite the pandemic. 
</div>
The onset of COVID-19 has provided a boost in demand for Tolak Angin products domestically but it saw some drag from slower general trade and sluggish export sales to the Philippines.
On the flip side, <a href="https://www.smartkarma.com/entities/industri-jamu-dan-farmasi-sd-mncl-tbk-pt" target="_blank" data-smartkarma-citation="entities:6033:1" rel="noopener">Sido Muncul (SIDO IJ)</a> saw very strong growth in its F&amp;B division with vibrant demand for its powdered vitamin and ginger-based drinks. 
The pandemic has also spurred management to develop more new products and variants designed to boost the immune system.  
The company has shifted emphasis to modern trade as well as selling online and through third-party market places, as general trade saw more of a slowdown. 
It has also reduced promotional activity significantly, which has helped the company improve margins and had stocked up on raw materials and packaging early to avoid any potential cost pressures.
<a href="https://www.smartkarma.com/entities/industri-jamu-dan-farmasi-sd-mncl-tbk-pt" target="_blank" data-smartkarma-citation="entities:6033:1" rel="noopener">Sido Muncul (SIDO IJ)</a> remains a high-quality Indonesian consumer play with a strong track record of sales and profits, as well as producing a healthy return for shareholders and a decent dividend yield. The company has the potential to generate higher growth by the introduction of new consumer health products in F&amp;B space with a greater demand for products to boost health and natural immunity. We would suggest that this could be the catalyst for the company to command higher valuations.


Sido Muncul (SIDO IJ)'s herbal medicine products under its Tolak Angin brand are a household name in Indonesia, given they are a remedy for the country's most well known and widespread complaint of "masuk angin". The onset of COVID-19 has provided the catalyst for strong growth outside its core products as well as the development of new variants. A recent call with management confirmed a positive outlook despite the pandemic. 

The onset of COVID-19 has provided a boost in demand for Tolak Angin products domestically but it saw some drag from slower general trade and sluggish export sales to the Philippines.
On the flip side, Sido Muncul (SIDO IJ) saw very strong growth in its F&amp;B division with vibrant demand for its powdered vitamin and ginger-based drinks. 
The pandemic has also spurred management to develop more new products and variants designed to boost the immune system.  
The company has shifted emphasis to modern trade as well as selling online and through third-party market places, as general trade saw more of a slowdown. 
It has also reduced promotional activity significantly, which has helped the company improve margins and had stocked up on raw materials and packaging early to avoid any potential cost pressures.
Sido Muncul (SIDO IJ) remains a high-quality Indonesian consumer play with a strong track record of sales and profits, as well as producing a healthy return for shareholders and a decent dividend yield. The company has the potential to generate higher growth by the introduction of new consumer health products in F&amp;B space with a greater demand for products to boost health and natural immunity. We would suggest that this could be the catalyst for the company to command higher valuations. 

Sido Muncul (SIDO IJ) - Health Beyond Herbal

<div class="content-highlight">
A recent conversation with <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> management confirmed the company's resilience in a COVID-19 world, with its core pharmaceutical division seeing stable growth and its OTC consumer health products doing especially well.  Its direct involvement with testing and ongoing work on a COVID-19 vaccine could provide further upside.
</div>
1Q2020 numbers were stable with +8% growth in sales and +12% in net profit, April was within estimates, whilst May was a bit weaker and June saw some recovery as PSBB measures were relaxed.
<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> saw strong demand for multivitamins, as well as its herbal-based medicinal products, as consumers have sought to boost immunity during the pandemic. 
The company has also been actively involved in processing COVID-19 swab tests and is now processing around 20,000 per day as well as being involved in developing a COVID-19 vaccine for Indonesia in partnership with Korean company Genexin.
The company's valuations look reasonable in light of its defensive nature trading well-below its 5-year average PER. Despite its strong performance during the pandemic, we continue to take a positive view 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>given its unique exposure to pharmaceutical and consumer staples.


A recent conversation with Kalbe Farma (KLBF IJ) management confirmed the company's resilience in a COVID-19 world, with its core pharmaceutical division seeing stable growth and its OTC consumer health products doing especially well.  Its direct involvement with testing and ongoing work on a COVID-19 vaccine could provide further upside.

1Q2020 numbers were stable with +8% growth in sales and +12% in net profit, April was within estimates, whilst May was a bit weaker and June saw some recovery as PSBB measures were relaxed.
Kalbe Farma (KLBF IJ) saw strong demand for multivitamins, as well as its herbal-based medicinal products, as consumers have sought to boost immunity during the pandemic. 
The company has also been actively involved in processing COVID-19 swab tests and is now processing around 20,000 per day as well as being involved in developing a COVID-19 vaccine for Indonesia in partnership with Korean company Genexin.
The company's valuations look reasonable in light of its defensive nature trading well-below its 5-year average PER. Despite its strong performance during the pandemic, we continue to take a positive view of Kalbe Farma (KLBF IJ) given its unique exposure to pharmaceutical and consumer staples. 

Kalbe Farma (KLBF IJ) - Still a Healthy Choice

Indonesia

Tokopedia PT provides e-commerce services. The Company owns and operates an online e-commerce platform that allows individuals and small-to-mid-sized business owners to start their online stores.

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Tokopedia PT (1087142D IJ)

Erajaya Swasembada (ERAA IJ) - Goodbye Blackmarket

Indonesia's laregst Erajaya Swasembada (ERAA IJ)

Angus Mackintosh

Sido Muncul (SIDO): Switch, Competitor and Split

Structure: sales does not go as planned?

Henry Soediarko

Bank Central Asia (BBCA IJ) - Liability Protection

Bank Central Asia (BBCA IJ) released a decent set of 1H2020 results with net profit of IDR12,240bn versus IDR12,862bn in IH19 or -4.8%% decline...

Angus Mackintosh

Sido Muncul (SIDO IJ) - Health Beyond Herbal

Sido Muncul (SIDO IJ)'s herbal medicine products under its Tolak Angin brand are a household name in Indonesia, given they are a remedy for the...

Angus Mackintosh

Kalbe Farma (KLBF IJ) - Still a Healthy Choice

A recent conversation with Kalbe Farma (KLBF IJ) management confirmed the company's resilience in a COVID-19 world, with its core pharmaceutical...

Angus Mackintosh

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