Indonesia

• We view Perusahaan Listrik Negara (PLN) as “Low Risk” on our LARA scale, primarily driven by the company’s strategic importance to Indonesia and SOE status (100% owned by the government).
• PLN controls a 62% share of Indonesia’s upstream power generation, and is also the country’s sole downstream electric utility.
• The company plays a critical role in ensuring affordable and reliable access to electricity for the population, as well as helping Indonesia transition to cleaner energy in the upstream sector (away from coal).

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Cikarang Listrindo
• In the US, January new home sales fell 10.5% m-o-m to a three-month low of 657 k annualised units (680 k e / 734 k p). The decline reflects weather conditions (as several regions experienced record snowfall in January), as well as affordability concerns amid high prices and mortgage rates. Separately, building permits fell 0.6% (-0.7% p) in the same month.
• Atlanta Fed President Raphael Bostic said the US central bank should hold interest rates where they are and retain a “restrictive posture”. He added: “You can say that we are hitting our employment mandate, and now we have to get the price stability mandate under control.”

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Pt Cikarang Listrindo Tbk
• New World Development

• Negara’s attractive valuations, its low PEG ratio and efficiency ratio should drive the share re-rating; pre- and post-provision were flat QoQ, but profitability ratios edged higher over the medium term
• We like Mandiri for its attractive PE multiples and its robust credit quality, despite the 4Q24 returns blip; Mandiri has the second-best efficiency ratio and with further scope for gains
• Rakyat’s high structural cost of risk remains a drag on its post-provision returns, with eroded further in 4Q24; although declining, returns are high but Rakyat valuations are not yet compelling

• XL Axiata 4Q2024 results were solid despite lingering price competition in 4Q2024, especially from Telkomsel but this now looks to have abated with higher data pricing likely in 2025.
• The company saw its revenues driven by increasing data traffic and higher ARPUs but XL also grew its subscriber numbers last year despite increasing data pricing ahead of competitors.
• The FREN merger is ongoing with the completion due by end1H2025, with its Link Net restructuring complete, boosting its fixed broadband business. Valuations attractive with easing competition in 2025.

• Bank Rakyat Indonesia management painted a relatively positive picture of improvements across its microloan portfolio in 2H2024, with strong growth in recoveries during the year.  
• Loan growth was driven by corporate and consumer loans, as the bank slowed micro and small-sized loan growth with ongoing restructuring, which will continue in 2025 and front-loaded in 1Q2025. 
• Bank Rakyat Indonesia remains unique in its exposure to micro and ultra-micro lending in Indonesia, where growth should resume in 2025. Foreign ownership and valuations stand at 15-year lows. 

• Kalbe Farma (KLBF IJ) booked an impressive set of FY2024 results, booking healthy growth driven by pharmaceuticals, distribution & Logistics, and consumer health, with slower growth from its nutritionals segment. 
• The company continues to pursue growth in oncology and biologic drugs in its pharmaceutical segment, whilst pursuing strategic collaborations and pursuing National Health exposure. 
• Kalbe Farma is pursuing wellness products in consumer health and repositioning toward more affordable products in the nutritional space. Valuations are attractive on 17x FY2025E PER. 

•  FY25 oil production is expected to be 1,000-1,200 bbl/d with 8-12 work-overs costing US$0.04-0.07 mm per well (total of US$0.32-US$0.84 mm).
• This in line with our expectations (1,150 bbl/d production and ~US$1 mm capex).
• The capex requirement to reach first gas in 1Q26 at SE MGH based on modular LNG is now estimated at US$3-5 mm (we assumed US$5 mm).

• Indosat (ISAT IJ) booked 4Q2024 results below estimates, despite improving ARPUs and headline revenues, as margins were depressed with a greater focus on its B2B business. 
• There was also continuing aggressive competition in starter packs during the quarter, although this abated somewhat in early December but the company also lost non-productive subscribers as a result.
• Indosat continues to build on its AI edge both around its mobile strategies and as a standalone AI-as-a-service business. Valuations are attractive after sharp correction. 

• Bank Syariah Indonesia Tbk PT (BRIS IJ) reported 11% QoQ net profit in 4Q24
• Credit costs are down nearly 75% QoQ and annually, there are improving figures
• Fee income growth is relatively new, ROA expansion can continue, to even >3% from this

• Bank Mandiri saw a slower finish to the year despite strong loan growth and solid CASA growth, as expenses rose in 4Q2024 and slower recoveries impacted non-interest income.  
• Strong loan growth was driven by corporate and commercial lending with diverse sector exposure, as it continues to exploit wholesale relationships rather than increase risk, supported by CASA growth.
• The recent correction looks overdone given the outlook for 2024 looks positive, with loans expected to follow deposit growth in 2025, with credit costs under control. Valuations below historic levels.

• Low free float market cap has kept PT Petrindo Jaya Kreasi Tbk (CUAN IJ) out of a major global index so far.
• An increase in float recently to just above 15% could result in the inclusion of the stock in the index in February and that will trigger large passive buying.
• There is positioning in the stock, and the future stock path will depend on whether it is added to the index or not.