Indonesia

• Unique Business Model with Social Impact: BTPS is the only Syariah bank in Indonesia focused exclusively on the productive poor/ultra-micro segment, specifically empowering women entrepreneurs. This high-touch, group-based lending model fosters financial inclusion for a large ‘unbankable’ population, creating a distinct market niche.
• Deteriorating Asset Quality and Profitability: The bank has faced significant challenges post-pandemic, with rising Non-Performing Financing (NPF) and higher credit costs (Cost of Credit – CoC). This has led to a sharp decline in profitability (ROE dropping from 23% to ~12%) and a significant de-rating of its valuation.
• Cautious Outlook with a Focus on Recovery: Management is prioritizing asset quality improvement over aggressive growth. While recent quarters show signs of stabilizing NPF and lower provisions, the recovery is expected to be gradual. The bank’s future performance hinges on its ability to manage credit risk within its vulnerable client base amidst macroeconomic uncertainties.

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• Company incurred a loss of 90 bn Rupiah in 3rq quarter or loss of 21.6 Rupiah per share. 
• Even though sales have declined for the first 9 months – inventory and receivables have increased indicating stress in working capital. 
• GP Margin is flat, selling expense as %ge of sales have increased as we think company is pushing economy products to compete with local players and maintain market share

• There are 2 constituent changes for the IDX30 Index, 5 changes for the LQ45 Index, and 7 changes for IDX80 Index to be implemented at the close on 31 October.
• The largest passive flows are expected in Dian Swastatika Sentosa, Bank Central Asia, Bank Mandiri, Emtek, Bumi Resources, Bank Syariah Indonesia, XLSMART Telecom Sejahtera and Medikaloka Hermina.
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

Key points (machine generated)

• United Tractors, founded in 1972 and listed in 1991, is Indonesia’s largest heavy equipment distributor with exclusive rights for brands like Komatsu and Scania.
• The company provides sales, parts, assembly, and repair services, and has diversified into mining and renewable energy sectors.
• Its subsidiary PAMA leads in mining services, while United Tractors manages coal and gold mining assets and invests in renewable energy projects.

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• Barito Renewables Energy (BREN IJ)‘s stock price has been buffeted by expectations of index inclusion and then an unwind of that positioning a few times over the last year.
• With selling from some big shareholders, free float appears to have increased to a point where the stock could be added to a global index in November.
• There is also a possibility of being added to another global index in March, but that is a question for the next year.

• Uni-Charm Indonesia stands as the market leader in Indonesia’s hygiene products sector, particularly in diapers and feminine care, supported by strong brand recognition for products like ‘MamyPoko’ and ‘Charm’.
• The company is trading at an attractive valuation, with a low EV/EBITDA multiple and a substantial cash position, presenting a compelling case for value-oriented investors.
• Despite its market leadership, the company faces significant headwinds from intense competition, leading to margin compression, declining profitability, and pressure on its market share.

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• Indo Tambangraya Megah (ITMG IJ) recently announced a 10% buyback, reaffirming our bullish stance on the company. With 67% of its market capitalization in cash, it can be easily accomplished. 
• The company can also maintain its 65% payout ratio, which equates to an 8% yield on net profits of $180-200 million USD for FY25. 
• We now look to November 3rd, 2025, as the next catalyst, when the shareholder meeting (GMS) will be held to vote on the buyback, among other decisions.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Bukit Makmur Mandiri
• UST yields fell 2-4 bps across the curve yesterday, on the back of a strong auction of 3Y notes. The yield on the 2Y UST declined 2 bps to 3.56%, while that on the 10Y UST was down 3 bps at 4.12%.
• Equities retreated from record-high levels, weighed down by tech stocks. The S&P 500 dropped 0.4% to 6,715 and the Nasdaq slumped 0.7% to 22,788.

• Market Leader with Strong Growth Potential: PT Mulia Boga Raya Tbk, through its flagship brand ‘Prochiz’, is the market leader in the Indonesian retail cheese segment with a 27.75% market share. The company is well-positioned to capitalize on the burgeoning Indonesian cheese market, which is projected to grow at a CAGR of over 5% annually, driven by rising incomes, urbanization, and the growing influence of Western cuisine.
• Robust Financial Performance and Margin Expansion: The company has demonstrated strong financial results, with significant double-digit sales growth and notable profit margin expansion in the first half of 2025. This performance is attributed to a favorable sales mix skewed towards higher-margin premium block cheese and achieving economies of scale.
• Strategic Synergies and Expansion Focus: As a subsidiary of PT Garudafood Putra Putri Jaya Tbk, KEJU benefits from significant operational and distribution synergies. The company is strategically focused on expanding its distribution network and growing its presence in the rapidly expanding food service sector, which is outpacing retail growth post-pandemic.

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• eFishery, once a celebrated Indonesian agritech unicorn valued at over USD 1.4 billion, has collapsed following the discovery of a massive financial fraud scandal in late 2024.
• Investigations revealed that the company had grossly inflated its revenue and user metrics for years, leading to the suspension and arrest of its co-founders and the appointment of interim management to oversee the company’s remnants.
• The company is now considered commercially unviable in its current form, with investors facing near-total loss and the firm’s future highly uncertain. The scandal serves as a stark cautionary tale regarding corporate governance and due diligence within the regional startup ecosystem.

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• United Tractors (UNTR) is a market leader in Indonesia’s heavy equipment and mining contracting sectors, but faces significant near-term headwinds from weak coal prices and weather-related production shortfalls in its contracting business.
• Despite challenges in the coal sector, the Construction Machinery segment shows robust growth, driven by strong demand for Komatsu equipment, particularly from the forestry and construction sectors. This diversification provides a partial hedge against coal market volatility.
• The company maintains a strong financial position characterized by robust free cash flow generation and a commitment to shareholder returns through dividends. Management is actively pursuing a diversification strategy into non-coal minerals like gold and nickel, and renewable energy to ensure long-term sustainable growth.

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• Dominant Market Position with Caveats: As the sole producer of calcium carbide in Indonesia, Emdeki Utama holds a strategic position. However, the company faces significant competition from cheaper imports, particularly from China, which pressures pricing and profitability.
• Challenging Financial Performance: The company has experienced a notable decline in revenue and net income over the past three years, with negative growth rates across key metrics. While recent quarters show some margin improvement, the overall trend points to significant headwinds.
• Attractive Valuation but High Uncertainty: Trading at a low Price-to-Book ratio, the stock appears undervalued. This is balanced by a high uncertainty rating, driven by volatile financial performance, reliance on a single core product, and intense competition from imports.

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